J.

Consequences of Dismissal

• Composite Enterprises v. Caparoso, August 8, 2007

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Resolution1 dated November 18, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 73791
which dismissed the Petition for Certiorari of Composite Enterprises, Inc. (petitioner) and the CA
Resolution dated September 4, 2003 which denied petitioner's Motion for Reconsideration.2

The facts:

Petitioner is engaged in the distribution and/or supply of confectioneries to various retail establishments
within the Philippines. Emilio Caparoso and Joeve P. Quindipan (respondents) were employed as its
deliverymen until they were terminated on October 8, 1999.

Respondents filed a complaint for illegal dismissal against petitioner with the National Labor Relations
Commission (NLRC). Petitioner denied that respondents were illegally dismissed, alleging that they were
employed on a month-to-month basis and that they were terminated as a result of the expiration of
their contracts of employment.

On June 15, 2000, Labor Arbiter Napoleon M. Menese (Labor Arbiter) rendered a Decision3 in favor of
the respondents, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants to have been
illegally dismissed from employment and consequently, respondent COMPOSITE ENTERPRISES
CORPORATION is hereby ordered to immediately reinstate complainants to their respective former
position without loss of seniority rights and other privileges, with full backwages from the date of
dismissal up to the actual date of reinstatement which, as of this date, amounts to P93,155.36, as above
computed.

SO ORDERED.4

On July 6, 2000, petitioner filed its Appeal with the NLRC. It also filed a Manifestation with Motion
manifesting that it cannot reinstate respondents to their former positions since their previous positions
were no longer available. Accordingly, petitioner moved that it be allowed to pay respondents separation
pay in lieu of reinstatement.5

On November 8, 2000, while petitioner's appeal was pending, respondents filed with the Labor Arbiter a
Motion to Pay Complainants their Salary with Prayer for Issuance of A Writ of Execution.6

On December 19, 2000, petitioner filed with the NLRC a Motion to Resolve its motion to be allowed to
pay separation pay in lieu of reinstatement.7

On January 26, 2001, the Labor Arbiter issued a Writ of Execution directing the Sheriff to effect
respondent's reinstatement. Consistent with its stand that physical reinstatement was no longer
possible, petitioner reinstated respondents into its payroll, conditioned on the NLRC's ruling on its
motion to be allowed to pay separation pay in lieu of reinstatement.

On February 21, 2001, respondents filed an Ex-Parte Motion for Recomputation of Backwages with the
Labor Arbiter.

Meanwhile, in a Decision dated May 9, 2001, the NLRC set aside the Decision of the Labor Arbiter,
holding that there was no illegal dismissal since respondents' contracts of employment were for a fixed
period.8

On May 15, 2001, petitioner filed an Ex-Parte Manifestation with the Labor Arbiter, manifesting that
there was no basis to sustain respondents' claim for reinstatement in view of the NLRC's Decision dated
May 9, 2001 finding no illegal dismissal.

In an Order dated June 14, 2001, the Labor Arbiter directed petitioner to pay respondents' accrued
salaries amounting to P143,355.52, covering the period from June 26, 2000, the date petitioner received
the Labor Arbiter's Decision, to May 9, 2001, the date of said decision's reversal by the NLRC.9

On July 23, 2001, petitioner filed an Appeal/Petition for Review For Issuance of Temporary Restraining
Order and Preliminary Injunction before the NLRC, insisting on the payment of separation pay to
respondents in lieu of reinstatement.

In an Order dated June 28, 2002, the NLRC affirmed the Labor Arbiter's Order dated June 14, 2001,
holding that the reversal on appeal of the Labor Arbiter's Decision dated June 15, 2000 did not affect
respondents' entitlement to accrued salaries pending appeal, pursuant to Article 223 of the Labor Code;
that only respondent's entitlement to backwages was forfeited; and that there was no merit to
petitioner's insistence on paying separation pay to respondents, since that there was no strong basis for
petitioner's contention that reinstatement was physically impossible due to petitioner's implementation
of a retrenchment program.10

Petitioner filed a Motion for Reconsideration11 but it was denied by the NLRC in a Resolution dated
September 26, 2002.12 Petitioner received said Resolution on October 7, 2002.13

Four days later, or on October 11, 2002, petitioner filed a Petition for Certiorari with the CA, docketed as
CA-G.R. SP No. 73269.

In a Resolution14 dated October 24, 2002, the CA's Special Sixteenth Division15 dismissed the petition
for petitioner's failure to present proof that its General Manager was duly authorized to sign the
petition's Verification and Certification of Non-Forum Shopping, in violation of Section 5, Rule 7 of the
Revised Rules of Court.16

Within the 60-day reglementary period from date of receipt of the NLRC Resolution denying the motion
for reconsideration, petitioner, instead of filing a motion for reconsideration with the CA's Special
Sixteenth Division, filed on November 12, 2002, a second Petition for Certiorari, docketed as CA-G.R. SP
No. 73791.17

In a Resolution dated November 18, 2002, the CA's Twelfth Division dismissed the petition for
petitioner's failure to attach the required affidavit of service, pursuant to the last paragraph of Section 3,
Rule 46 of the Revised Rules of Court.18

On November 26, 2002, petitioner filed a Motion for Reconsideration, attaching the affidavit of service
which was omitted in the petition.19

In a Resolution20 dated September 4, 2003, the CA denied petitioner's Motion for Reconsideration,
holding that resort to the second petition for certiorari was no longer available due to res judicata, since
the dismissal order dated October 24, 2002 in the first petition for certiorari had already become final
and executory; that minute resolutions of the court denying due course to petitions, or dismissing cases
summarily for failure to comply with the formal or substantial requirements laid down therefor by law,
were actually dispositions on the merits constituting res judicata, citing Bernarte v. Court of Appeals.21

Hence, the present petition.

Petitioner contends that the dismissal of the first petition was not a judgment on the merits as to
constitute res judicata; that Bernarte v. Court of Appeals finds no application to the instant case; and
that the dismissal of the first petition was not a dismissal with prejudice as provided by Section 5, Rule 7
of the Revised Rules of Court.

Respondents, on the other hand, contend that petitioner's procedural lapses in filing the first and second
special civil actions for certiorari are irreversible and there is nothing on record to show that the
petitioner at least attempted or subsequently made a substantial compliance with the formal or
substantial requirements laid down by law; and that petitioner's gross and utter disregard of the rules
cannot justly be rationalized by harking on the policy of liberal construction.

The petition is impressed with merit.

Contrary to the CA's ruling, failure to comply with the non-forum shopping requirements in Section 5,
Rule 7 of the Revised Rules of Court, does not automatically warrant the dismissal of the case with
prejudice. The second paragraph of Section 5, Rule 7, is pertinent:

Section 5. Certification against forum shopping. – x x x

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after hearing. The submission of a false certification or
non-compliance with any of the undertakings therein shall constitute indirect contempt of court,
without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative
sanctions. (Emphasis supplied)
The Rule clearly states that the dismissal is without prejudice unless otherwise stated by the court;22
and the dismissal may be deemed with prejudice only upon proper motion and hearing. Since the
dismissal was without prejudice, it did not bar petitioner from refiling the petition for so long as it was
made within the 60-day reglementary period for filing the petition for certiorari.

Furthermore, Bernarte v. Court of Appeals finds no application to the instant case. Bernarte is cast under
an entirely different factual milieu. There, the Court denied the first petition for non-compliance with
Section 4 of Circular No. 1-88, which requires a verified statement of material dates; and the second
petition was filed one year after the dismissal of the first petition. Unlike in Bernarte, the second petition
in the present case was refiled immediately after the first petition was dismissed and within the 60-day
reglementary period.

With respect to the non-attachment of the affidavit of service in the second petition, it was not fatal to
the petition. The registry receipts attached to the petition clearly show that respondents were served
copies of the petition and its annexes.23 Thus, the demands of substantial justice were satisfied by the
actual receipt of the petition.24

Verily, litigation is not a game of technicalities. While the swift unclogging of court dockets is a laudable
objective, granting substantial justice is an even more urgent ideal.25 Indeed, on numerous occasions,
this Court has relaxed the rigid application of the rules to afford the parties the opportunity to fully
ventilate their cases on the merits. This is in line with the time-honored principle that cases should be
decided only after giving all parties the chance to argue their causes and defenses. Technicality and
procedural imperfection should thus not serve as basis of decisions.26 Technicalities should never be
used to defeat the substantive rights of the other party.27 Every party-litigant must be afforded the
amplest opportunity for the proper and just determination of his cause, free from the constraints of
technicalities.28 In that way, the ends of justice would be better served.29 For, indeed, the general
objective of procedure is to facilitate the application of justice to the rival claims of contending parties,
bearing always in mind that procedure is not to hinder but to promote the administration of justice.30

Ordinarily, the case should be remanded to the CA for proper disposition of the petition for certiorari on
the merits;31 but that would further delay the case. Considering that the lone issue raised can be readily
resolved in this instance, the Court deems it more practical and in the greater interest of justice not to
remand the case to the CA but, instead, to resolve this case once and for all.32

Petitioner anchored its Petition for Certiorari before the CA on the ground that the NLRC gravely abused
its discretion in affirming the Order dated June 14, 2001 of the Labor Arbiter which directed petitioner to
pay respondents' accrued salaries. Petitioner insists that the NLRC should have ordered the payment of
separation pay since respondents' reinstatement to their former positions was physically impossible due
to petitioner's implementation of a retrenchment program.

The Court is not persuaded.

Article 223 (3rd paragraph) of the Labor Code,33 as amended by Section 12 of Republic Act (R.A.) No.
6715,34 and Section 2 of the NLRC Interim Rules on Appeals under R.A. No. 6715, Amending the Labor
Code,35 provide that an order of reinstatement by the Labor Arbiter is immediately executory even
pending appeal. The Court explained the rationale of the law in Aris (Phil.) Inc. v. National Labor
Relations Commission:36

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy
which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the
working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force,
which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for
the nation’s progress and stability.

xxxx

x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that
saving act is designed to stop, although temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated
employee and his family.37

Reinstatement is the restoration to a state or condition from which one has been removed or
separated.38 The intent of the law in making a reinstatement order immediately executory is much like a
return-to-work order, i.e., to restore the status quo in the workplace in the meantime that the issues
raised and the proofs presented by the contending parties have not yet been finally resolved.39 It is a
legal provision which is fair to both labor and management because while execution of the order cannot
be stayed by the posting of a bond by the employer, the workers also cannot demand their physical
reinstatement if the employer opts to reinstate them only in the payroll.40

Payment of separation pay as a substitute for reinstatement is allowed only under exceptional
circumstances, viz: (1) when reasons exist which are not attributable to the fault or are beyond the
control of the employer, such as when the employer -- who is in severe financial strait, has suffered
serious business losses, and has ceased operations -- implements retrenchment, or abolishes the
position due to the installation of labor-saving devices; (2) when the illegally dismissed employee has
contracted a disease and his reinstatement will endanger the safety of his co-employees; or, (3) where a
strained relationship exists between the employer and the dismissed
employee.41

As regards retrenchment, it is a management prerogative consistently recognized and affirmed by this

Court. It is, however, subject to faithful compliance with the substantive and procedural requirements
laid down by law and jurisprudence.42 For retrenchment to be considered valid, the following
substantial requirements must be met: (a) the losses expected should be substantial and not merely de
minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be
perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already
incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence.43

In the discharge of these requirements, it is the employer who has the onus, this being in the nature of
an affirmative defense.44 In other words, it is not enough for a company to merely declare that it has
implemented a retrenchment program. It must produce adequate proof that such is the actual situation
to justify the retrenchment of employees. Normally, the condition of business losses is shown by audited
financial documents like yearly balance sheets, profit and loss statements and annual income tax
returns. The financial statements must be prepared and signed by independent auditors, failing which
these can be assailed as self-serving documents.45

In this case, petitioner sought to justify the payment of separation pay instead of reinstatement on the
basis of its implementation of a retrenchment program for "serious and persistent financial
difficulties."46 However, petitioner only submitted as evidence the notice of its intention to implement a
retrenchment program, which it sent to the Department of Labor and Employment on July 25, 2000.47 It
did not submit its financial statements duly audited by an independent external auditor. Its failure to do
so seriously casts doubt on its claim of losses and insistence on the payment of separation pay.

The Court finds that the NLRC did not commit any grave abuse of discretion in issuing the Order dated
June 28, 2002, affirming the Order of the Labor Arbiter dated June 14, 2001.

WHEREFORE, the petition is GRANTED insofar as the Resolutions of the Court of Appeals dated
November 18, 2002 and September 4, 2003 are concerned, which are hereby REVERSED and SET ASIDE.
However, in the absence of grave abuse of discretion, the Order dated June 28, 2002 of the National
Labor Relations Commission affirming the Labor Arbiter’s Order dated June 14, 2001 is REINSTATED.

No costs.

SO ORDERED.

• Sagum v. CA, May 26, 2005

PUNO, J.:

Petitioner Marilyn T. Sagum is another hapless employee whose dismissal was ruled to be illegal but,
without her reinstatement forthcoming, is still on the outside looking in.1
At bar is a Petition for Review on Certiorari2 assailing the Decision and the Resolution of the Court of
Appeals in CA-G.R. SP No. 68790 dated June 28, 2002 and April 2, 2003, respectively. The appellate court
declared the dismissal of petitioner as illegal and ordered the payment of her full backwages but did not
decree her reinstatement and denied her claim for damages.

The instant case arose from the complaint of petitioner for illegal dismissal3 against private respondents
Institute of Integrated Electrical Engineers of the Philippines, Inc. (IIEE), Engrs. Edward L. Mendoza,
Amador C. Calado, Jr., Antonio S. Herrera, Jr., and Fe M. Barrientos. Private respondent institute, a
professional organization duly existing under Philippine laws, is the association of all licensed electrical
engineers in the country. Private respondents Mendoza, Calado, Herrera and Barrientos were duly
elected for the positions of President, Vice-President-Internal Affairs, National Treasurer and National
Secretary, respectively, in 1996.4 The officers of private respondent institute are elected annually by its
members and are supported administratively by a permanent staff.5 Petitioner was a member of the
permanent staff for sixteen (16) years.

Petitioner was hired as a Recording/Filing Clerk in June 1980. By her efficiency, loyalty and dedication to
the service, she was promoted as Membership Secretary in April 1981, Acting Executive Secretary in
February 1986, and Executive Secretary in September 1986. As Executive Secretary, she has served
eleven (11) National Presidents.

After eight (8) years, or on September 17, 1994, petitioner was appointed as Office Manager6 in
concurrent capacity as Executive Secretary. With her dual position, she was tasked to oversee the daily
operations of private respondent institute, supervise the office staff, take the minutes of the officers'
meetings and inform the staff of policies approved by the officers during board meetings. Petitioner was
also in charge of the purchase of materials and the printing requirements of the association, a member
of the bidding committee, and recommended approval for all purchases to the National Secretary.7

The following year, on May 23, 1995, petitioner was appointed as Officer-in-Charge for the Executive
Director.8 She had two (2) immediate subordinates to assist her in her functions: Maan Dela Torre (Dela
Torre) as Administrative Secretary and Jude Magayones as Clerk/Stenographer.9

Barely after a year, on July 30, 1996, petitioner was preventively suspended for thirty (30) days. She was
served two (2) written notices10 demanding her explanation for the imputed offenses and indiscretions,
subjected to an administrative investigation, and dismissed by private respondent institute on
September 1, 1996 for gross negligence and loss of trust and confidence.11

Petitioner contends that her travails started on July 2, 1996 - when private respondent Mendoza and the
members of the Executive Committee (EXCOM) discussed the participation of DBR Prints and General
Services (DBR) as a bidder for the printing of Part I of the Philippine Electrical Code (Code). Private
respondent Calado, a member of the EXCOM, questioned DBR's participation in the bidding. According
to Calado, DBR was prohibited to bid in all the printing jobs of respondent institute due to the alleged
live-in relationship of its owner, Diosdado del Rosario (del Rosario), with Dela Torre, petitioner's
immediate subordinate.
Petitioner, who was present in the EXCOM Meeting as Executive Secretary, clarified that there was no
official order banning DBR from bidding and the award of printing jobs to the latter was approved by the
Board of Directors, the EXCOM and/or the Committee Head. She attached purchase orders as proof of
such approval. She also explained that the live-in relationship of del Rosario and Dela Torre was known
to the public and did not affect the efficiency of Dela Torre and the quality of service of DBR to private
respondent institute.

Petitioner states that she again earned the ire of private respondents when she gave an unsolicited
advice to the members of the EXCOM during a Committee Meeting. The EXCOM had allegedly decided to
demote Dela Torre, her immediate subordinate, from her position as Administrative Secretary to a Clerk.
Petitioner commented that it would be illegal to demote an employee.

On July 30, 1996, a stranger arrived at the IIEE Head Office. He turned out to be a newly-hired security
guard. After an hour, private respondent Mendoza gave petitioner a notice of thirty-day suspension
effective immediately.12 Private respondent Mendoza also ordered her to surrender the keys to the
vault, drawer, cabinet and petty cash. An on-the-spot accounting of the contents of the vault was
conducted. Finally, upon private respondent Mendoza's order, the newly-hired security guard thoroughly
checked her bag before she left the premises.

On July 31, 1996, petitioner submitted a written explanation13 denying her involvement in the imputed
charges. On August 6, 1996, Mendoza again wrote petitioner for the return of all office files, properties
and diskettes still in her possession. On August 12, 1996, petitioner received two (2) more letters from
private respondents: one for the turn-over of office properties;14 the other for her attendance in an
administrative investigation.15 She was given the option to bring one (1) representative. Petitioner
claims that the supposed investigation turned out to be an interrogation designed to elicit information to
be used against her.

On August 31, 1996, after the expiration of her thirty-day suspension, petitioner called up private
respondent Mendoza to ask when she could go back to work. The latter told her that she could not
report for work anymore and advised her to wait for a call. On the same day, a Memo16 was issued to
petitioner dismissing her effective September 1, 1996 on the ground of gross negligence and loss of trust
and confidence.

Private respondents tell another tale. They insist that petitioner was dismissed for cause.

On the latter part of 1995, private respondent Calado, then National Treasurer, noticed that one
company, DBR, had been consistently awarded majority of the printing contracts of respondent institute.
He relayed this observation to the incoming national officers for 1996 - herein private respondents.

On June 27, 1996, during the bidding for the printing of Part I of the Code, the Board of Directors
declared a bidding failure due to violation of bidding procedures. Though DBR turned out to be the
lowest bidder, its bid was allegedly received after the lapse of the period of submission of bids and on
the same day the bids were opened. Further, it was allegedly not opened in the presence of the
Committee Members and the National Secretary.17 This triggered a company-wide audit of all printing
transactions in the previous years. The audit revealed two major irregularities: the printing requirements
of respondent institute were overpriced at 20%-100% for the years 1994-1996;18 and, the printing jobs
were consistently awarded to DBR despite the lack of necessary bidding requirements.19 Petitioner was
preventively suspended pending investigation of the charges.

The administrative investigation of petitioner allegedly yielded the following findings:20

1. [Petitioner] repeatedly denied having [any] knowledge as to [a] board policy requiring a canvass of at
least three companies for the printing requirements or for requirements over P10,000.00;

2. [She] denied knowledge if the memo she issued dated 12 March 1996 was being followed by her
subordinates;

3. She has no knowledge of the By-Laws of the Institute (regarding mailing of ballots); and,

4. She admits that she does not conduct canvass of the printing requirements being handled by her.21

After the summary hearing, the Board of Directors deliberated and found justifiable cause to dismiss
petitioner and Dela Torre. Private respondents conducted further investigations after the dismissals and
allegedly uncovered more serious anomalies.

On November 12, 1999, Labor Arbiter Donato G. Quinto, Jr. ruled that petitioner's dismissal was illegal
and ordered, viz.:

WHEREFORE, premises above considered, the dismissal of complainant Marilyn Sagum is hereby
declared illegal. Since the reinstatement would not bring harmony between complainant and
respondent[,] Institute of Integrated Electrical Engineers of the Philippines, Inc. is ordered to pay
complainant separation pay of P195,168.00 plus backwages for one (1) year in the amount of
P146,376.00 plus attorney's fees equivalent to ten percent (10[%]) of the money award, all in the
aggregate of three hundred seventy[-]five thousand six hundred ninety[-]eight pesos and 40/100
centavos ([P]375,698.40).22

Petitioner filed a Partial Appeal23 with the NLRC for reinstatement and the payment of full backwages.
She argued that the decision of the Labor Arbiter did not show a case of irretrievable estrangement
between her and private respondents as to preclude her reinstatement. She also questioned the denial
of her claim for damages.24 Private respondents, on the other hand, moved for a reversal of the decision
and the dismissal of the case.25

The NLRC reversed the decision of the Labor Arbiter and ruled, viz.:

Logically, the issues raised by complainant in its (sic) partial appeal becomes (sic) moot and academic. As
reinstatement has no place for an employee validly dismissed - neither can damages be a necessary
consequence thereof.

ACCORDINGLY, premises considered, the decision appealed from is hereby reversed and set aside and a
new [one] entered dismissing [the] case for want of merits.26
Petitioner's motion for reconsideration was denied for lack of merit. She filed a Petition for Review with
the Court of Appeals.

The Court of Appeals found the decision of the Labor Arbiter to be more conformable with the evidence
and the law and granted the petition. It ruled, viz.:

WHEREFORE, premises considered, the decision of the NLRC is hereby annulled and SET ASIDE. The
Decision of the Labor Arbiter dated November 12, 1999 is affirmed with the MODIFICATION that the
petitioner shall be awarded full backwages.27

Respondent court ratiocinates its order on the payment of separation pay in lieu of petitioner's
reinstatement, viz.:

Considering that the dismissal was without basis, reinstatement with payment of backwages is in order.
However, due to the strained relations which would not bring harmony between the parties brought
about by the litigation and private respondents' consistent stand that there was a just cause for
petitioner Sagum's dismissal for loss of trust and confidence and gross negligence, we find that
separation pay should be awarded as an alternative to reinstatement.28

In a Motion for Partial Reconsideration, petitioner argued that the appellate court's denial of her
reinstatement and claim for damages despite its finding of illegal dismissal violates the Labor Code.
Respondent court denied the Motion for lack of merit.29

Petitioner raises the same issue in this petition, viz.:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN CONTRADICTING THE EXPRESS
MANDATE OF ARTICLE 279 OF THE LABOR CODE; x x x

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ITS FACTUAL FINDING OF
STRAINED RELATIONS WITHOUT CITING ANY SPECIFIC EVIDENCE ON WHICH THE SAME IS BASED
CONTRADICTING THE APPLICABLE JURISPRUDENCE DECIDED BY THIS HONORABLE SUPREME COURT.30

We find for the petitioner on the issue of reinstatement.

Article 279 of the Labor Code provides the law on reinstatement, viz.:

Article 279. Security of Tenure. - - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.

Corollarily, the Omnibus Rules Implementing the Labor Code state, viz.:

Section 2. Security of Tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause as provided in the Labor Code or when authorized by
existing laws.

Sec. 3. Reinstatement. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and to backwages.31

The existence of strained relations is a factual finding and should be initially raised, argued and proven
before the Labor Arbiter.32 Petitioner is correct that the finding of strained relations does not have any
basis on the records. Indeed, nowhere was the issue raised in private respondents' pleadings before the
Labor Arbiter and the NLRC. Sieving through the records, private respondents first raised the issue in
their Comment to Petitioner's Motion for Partial Reconsideration before the Court of Appeals.33 In
Globe-Mackay Cable and Radio Corporation v. NLRC,34 we emphasized that the principle of strained
relations cannot be applied indiscriminately. Otherwise, an illegally dismissed employee can never be
reinstated because invariably, some hostility is engendered between litigants. As a rule, no strained
relations should arise from a valid and legal act of asserting one's right; otherwise, an employee who
asserts his right could be easily separated from the service by merely paying his separation pay on the
pretext that his relationship with his employer had already become strained.35

We reiterated the rule in Quijano v. Mercury Drug Corporation, viz.:

[A]n illegally dismissed employee is entitled to reinstatement as a matter of right. Over the years,
however, the case law developed that where reinstatement is not feasible, expedient or practical, as
where reinstatement would only exacerbate the tension and strained relations between the parties, or
where the relationship between the employer and [the] employee has been unduly strained by reason of
their irreconcilable differences, particularly where the illegally dismissed employee held a managerial or
key position in the company, it would be more prudent to order payment of separation pay instead of
reinstatement. Some unscrupulous employers, however, have taken advantage of the overgrowth of this
doctrine of "strained relations" by using it as a cover to get rid of its employees and thus defeat their
right to job security.

To protect labor's security of tenure, we emphasize that the doctrine of "strained relations" should be
strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. Every
labor dispute almost always results in "strained relations," and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can never be reinstated.

xxx

[T]he alleged antagonism between the petitioner and the private respondent is a mere conclusion bereft
of evidentiary support. To be sure, the private respondent did not raise the defense of strained
relationship with the petitioner before the labor arbiter. Consequently, this issue which is factual in
nature, was not the subject of evidence on the part of both the petitioner and the respondent. There is
thus no competent evidence upon which to base the conclusion that the relationship between the
petitioner and the respondent has reached the point where it is now best to sever their employment
relationship. We therefore hold that the NLRC's ruling on the alleged brewing antagonism between the
petitioner and the respondent is a mere guesswork and cannot justify the non-reinstatement of
petitioner x x x.36 (footnotes and emphases omitted) chanroblesvirtuallawlibrary

In the case at bar, there are no hard facts upon which to base the application of the doctrine of strained
relationship. Petitioner is correct that mere persistency in argument does not amount to proof,37 and to
deny an employee's right to be reinstated on the basis of the mere consistency of the employer's stand
that the dismissal was for cause is to make a mockery of the right of reinstatement under Article 279 of
the Labor Code.

Be that as it may, we reject petitioner's claim for moral and exemplary damages. The award of moral and
exemplary damages is proper when an illegally dismissed employee had been harassed and arbitrarily
terminated by the employer, as when the latter committed an anti-social and oppressive abuse of its
right to investigate and dismiss an employee. The person claiming moral damages must prove the
existence of bad faith by clear and convincing evidence for the law always presumes good faith. It is not
enough that one merely suffered sleepless nights, mental anguish or serious anxiety as the result of the
actuations of the other party.38

In the case at bar, we are not convinced that private respondents acted in a wanton or oppressive
manner. The measures undertaken were relevant to the company-wide audit and investigation
conducted within the institute. The suspension of petitioner without prior investigation is akin to
preventive suspension which was necessary pending investigation of company records which she had
access to. Nor can the posting of security guards inside the petitioner's room while the on-the-spot
accounting was being conducted and the inspection of her bag and personal effects in the presence of
her subordinates be characterized as oppressive. Despite the presence of security guards, petitioner did
not even allege that there was use of force, abusive language or any species of violence. Lastly, we do
not find the articles published in private respondent institute's publication, The Electrical Engineer, to be
malicious as they were fact-based.

IN VIEW WHEREOF, the assailed Decision and the Resolution of the Court of Appeals in CA-G.R. SP No.
68790 dated June 28, 2002 and April 2, 2003, respectively, are AFFIRMED with the MODIFICATION that
petitioner Marilyn T. Sagum is entitled to REINSTATEMENT. Private respondents are ORDERED to
immediately reinstate petitioner to her previous position without loss of seniority rights. In case the
former position of petitioner is no longer available, private respondent institute is directed to create an
equivalent position and immediately reinstate petitioner without loss of seniority rights.

SO ORDERED.

• Agabon v. NLRC, November 17, 2004

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision1 of the Court of Appeals dated January 23, 2003, in
CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-
NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing
ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as
gypsum board and cornice installers on January 2, 19922 until February 23, 1999 when they were
dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims3 and on December
28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private
respondent to pay the monetary claims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly,
respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service
from date of hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay
for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio
Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00)
Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY
EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND
EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached
computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.

SO ORDERED.4

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned
their work, and were not entitled to backwages and separation pay. The other money claims awarded by
the Labor Arbiter were also denied for lack of evidence.5

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court
of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had
abandoned their employment but ordered the payment of money claims. The dispositive portion of the
decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it
dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for
four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said
years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of
P2,150.00.
SO ORDERED.6

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7

Petitioners assert that they were dismissed because the private respondent refused to give them
assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February
23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that private respondent did not comply with the
twin requirements of notice and hearing.8

Private respondent, on the other hand, maintained that petitioners were not dismissed but had
abandoned their work.9 In fact, private respondent sent two letters to the last known addresses of the
petitioners advising them to report for work. Private respondent's manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific
Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not
report for work because they had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted,
petitioners stopped reporting for work and filed the illegal dismissal case.10

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only
respect but even finality if the findings are supported by substantial evidence. This is especially so when
such findings were affirmed by the Court of Appeals.11 However, if the factual findings of the NLRC and
the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and
examine for itself the questioned findings.12

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was
for a just cause. They had abandoned their employment and were already working for another employer.

To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins
the employer to give the employee the opportunity to be heard and to defend himself.13 Article 282 of
the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the latter's representative
in connection with the employee's 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 his 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.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is
a form of neglect of duty, hence, a just cause for termination of employment by the employer.15 For a
valid finding of abandonment, these two factors should be present: (1) the failure to report for work or
absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more intention to work. The intent to discontinue
the employment must be shown by clear proof that it was deliberate and unjustified.16

In February 1999, petitioners were frequently absent having subcontracted for an installation work for
another company. Subcontracting for another company clearly showed the intention to sever the
employer-employee relationship with private respondent. This was not the first time they did this. In
January 1996, they did not report for work because they were working for another company. Private
respondent at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in determining the penalty that
should be meted out to him.17

In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work
without leave or permission from his employer, for the purpose of looking for a job elsewhere, is
considered to have abandoned his job. We should apply that rule with more reason here where
petitioners were absent because they were already working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On
the other hand, the law also recognizes the right of the employer to expect from its workers not only
good performance, adequate work and diligence, but also good conduct19 and loyalty. The employer
may not be compelled to continue to employ such persons whose continuance in the service will
patently be inimical to his interests.20

After establishing that the terminations were for a just and valid cause, we now determine if the
procedures for dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules
Implementing the Labor Code:

Standards 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 circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee's last known address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the employer
to terminate employees. A termination for an authorized cause requires payment of separation pay.
When the termination of employment is declared illegal, reinstatement and full backwages are
mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust,
separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee
before terminating the employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the
employer must give the employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons
under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just or authorized cause and there was no
due process; and (4) the dismissal is for just or authorized cause but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the
time the compensation was not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be held liable for non-compliance
with the procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent,
however, did not follow the notice requirements and instead argued that sending notices to the last
known addresses would have been useless because they did not reside there anymore. Unfortunately for
the private respondent, this is not a valid excuse because the law mandates the twin notice
requirements to the employee's last known address.21 Thus, it should be held liable for non-compliance
with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the
various rulings on employment termination in the light of Serrano v. National Labor Relations
Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any
notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,23 we reversed this
long-standing rule and held that the dismissed employee, although not given any notice and hearing,
was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and
insubordination, a just ground for termination under Article 282. The employee had a violent temper
and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that
reinstating the employee and awarding backwages "may encourage him to do even worse and will
render a mockery of the rules of discipline that employees are required to observe."24 We further held
that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained.
He has no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent
his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The
dismissal of an employee must be for just or authorized cause and after due process. Petitioner
committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to
give a formal notice and conduct an investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must indemnify the private
respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and
the gravity of the omission committed by the employer.25

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow
the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an
indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the
violation by the employer of the notice requirement in termination for just or authorized causes was not
a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the
employer must pay full backwages from the time of termination until it is judicially declared that the
dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of
cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way
of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now
required payment of full backwages from the time of dismissal until the time the Court finds the
dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full
backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the
Labor Code which states:
ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified or authorized causes
provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if
the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has
prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights
based on moral principles so deeply imbedded in the traditions and feelings of our people as to be
deemed fundamental to a civilized society as conceived by our entire history. Due process is that which
comports with the deepest notions of what is fair and right and just.26 It is a constitutional restraint on
the legislative as well as on the executive and judicial powers of the government provided by the Bill of
Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the
valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the
manner of dismissal. Procedural due process requirements for dismissal are found in the Implementing
Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I,
Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due process requirements
violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply
with constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights in
criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and
Implementing Rules protects employees from being unjustly terminated without just cause after notice
and hearing.

In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid cause but
the employee was not accorded due process. The dismissal was upheld by the Court but the employer
was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the
facts of each case and the gravity of the omission committed by the employer.

In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given
due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for
just cause, albeit without due process, did not entitle the employee to reinstatement, backwages,
damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations
Commission,30 which opinion he reiterated in Serrano, stated:

C. Where there is just cause for dismissal but due process has not been properly observed by an
employer, it would not be right to order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in
terminating the services of the employee, the employer must be deemed to have opted or, in any case,
should be made liable, for the payment of separation pay. It might be pointed out that the notice to be
given and the hearing to be conducted generally constitute the two-part due process requirement of law
to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be no more than a useless formality and
where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of
separation pay, nominal damages to the employee. x x x.31

After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the twin
requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to follow
Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer. Such
sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able
to achieve a fair result by dispensing justice not just to employees, but to employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not
complying with statutory due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are
rewarded by invoking due process. This also creates absurd situations where there is a just or authorized
cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case
where the employee is caught stealing or threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious business losses demand that operations be
ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also
discourage investments that can generate employment in the local economy.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the
employer when it is in the right, as in this case.32 Certainly, an employer should not be compelled to pay
employees for work not actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The
law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer.33

It must be stressed that in the present case, the petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due process were complied with, would undoubtedly result
in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the
Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to
correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the
recognition of the necessity of interdependence among diverse units of a society and of the protection
that should be equally and evenly extended to all groups as a combined force in our social and economic
life, consistent with the fundamental and paramount objective of the state of promoting the health,
comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number."34

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related
cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and
circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management
relations and dispense justice with an even hand in every case:

We have repeatedly stressed that social justice – or any justice for that matter – is for the deserving,
whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable
doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly extends its
sympathy and compassion. But never is it justified to give preference to the poor simply because they
are poor, or reject the rich simply because they are rich, for justice must always be served for the poor
and the rich alike, according to the mandate of the law.35

Justice in every case should only be for the deserving party. It should not be presumed that every case of
illegal dismissal would automatically be decided in favor of labor, as management has rights that should
be fully respected and enforced by this Court. As interdependent and indispensable partners in nation-
building, labor and management need each other to foster productivity and economic growth; hence,
the need to weigh and balance the rights and welfare of both the employee and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should
not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the
employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage the abhorrent practice of
"dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the
nature of indemnification or penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.37

As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer is liable
to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting
such dismissal, the employer fails to comply with the requirements of due process. The Court, after
considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the
employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate
or recognize the employee's right to statutory due process which was violated by the employer.39

The violation of the petitioners' right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the
sound discretion of the court, taking into account the relevant circumstances.40 Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this
form of damages would serve to deter employers from future violations of the statutory due process
rights of employees. At the very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules.

Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners'
holiday pay, service incentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for
petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee must
allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather
than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel
files, payrolls, records, remittances and other similar documents – which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid – are not in the
possession of the worker but in the custody and absolute control of the employer.41

In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave
pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims
of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash
vouchers showing payments of the benefit in the years disputed.42 Allegations by private respondent
that it does not operate during holidays and that it allows its employees 10 days leave with pay, other
than being self-serving, do not constitute proof of payment. Consequently, it failed to discharge the onus
probandi thereby making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month
pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to
grant an additional income in the form of the 13th month pay to employees not already receiving the
same43 so as "to further protect the level of real wages from the ravages of world-wide inflation."44
Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f)
of the Labor Code, to wit:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money whether fixed or ascertained on a time, task, piece , or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee…"

from which an employer is prohibited under Article 11345 of the same Code from making any
deductions without the employee's knowledge and consent. In the instant case, private respondent
failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further
bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims
against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the
private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to
1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of
P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of
P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned
their work, and ordering private respondent to pay each of the petitioners holiday pay for four regular
holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period
in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the
amount of P2,150.00 is AFFIRMED with the MODIFICATION that private respondent Riviera Home
Improvements, Inc. is further ORDERED to pay each of the petitioners the amount of P30,000.00 as
nominal damages for non-compliance with statutory due process.

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona,
Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.

SEPARATE OPINION

TINGA, J:

I concur in the result, the final disposition of the petition being correct. There is no denying the
importance of the Court's ruling today, which should be considered as definitive as to the effect of the
failure to render the notice and hearing required under the Labor Code when an employee is being
dismissed for just causes, as defined under the same law. The Court emphatically reaffirms the rule that
dismissals for just cause are not invalidated due to the failure of the employer to observe the proper
notice and hearing requirements under the Labor Code. At the same time, The Decision likewise
establishes that the Civil Code provisions on damages serve as the proper framework for the appropriate
relief to the employee dismissed for just cause if the notice-hearing requirement is not met. Serrano v.
NLRC,1 insofar as it is controlling in dismissals for unauthorized causes, is no longer the controlling
precedent. Any and all previous rulings and statements of the Court inconsistent with these
determinations are now deemed inoperative.

My views on the questions raised in this petition are comprehensive, if I may so in all modesty. I offer
this opinion to discuss the reasoning behind my conclusions, pertaining as they do to questions of
fundamental importance.

Prologue

The factual backdrop of the present Petition for Review is not novel. Petitioners claim that they were
illegally dismissed by the respondents, who allege in turn that petitioners had actually abandoned their
employment. There is little difficulty in upholding the findings of the NRLC and the Court of Appeals that
petitioners are guilty of abandonment, one of the just causes for termination under the Labor Code. Yet,
the records also show that the employer was remiss in not giving the notice required by the Labor Code;
hence, the resultant controversy as to the legal effect of such failure vis-à-vis the warranted dismissal.

Ostensibly, the matter has been settled by our decision in Serrano2, wherein the Court ruled that the
failure to properly observe the notice requirement did not render the dismissal, whether for just or
authorized causes, null and void, for such violation was not a denial of the constitutional right to due
process, and that the measure of appropriate damages in such cases ought to be the amount of wages
the employee should have received were it not for the termination of his employment without prior
notice.3 Still, the Court has, for good reason, opted to reexamine the so-called Serrano doctrine through
the present petition

Antecedent Facts

Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in the manufacture and
installation of gypsum board and cornice. In January of 1992, the Agabons were hired in January of 1992
as cornice installers by Riviera Home. According to their personnel file with Riviera Home, the Agabon
given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk Subdivision, P-II Parañaque City, Metro
Manila.4

It is not disputed that sometime around February 1999, the Agabons stopped rendering services for
Riviera Home. The Agabons allege that beginning on 23 February 1999, they stopped receiving
assignments from Riviera Home.5 When they demanded an explanation, the manager of Riviera Homes,
Marivic Ventura, informed them that they would be hired again, but on a "pakyaw" (piece-work) basis.
When the Agabons spurned this proposal, Riviera Homes refused to continue their employment under
the original terms and agreement.6 Taking affront, the Agabons filed a complaint for illegal dismissal
with the National Labor Relations Commission ("NLRC").
Riviera Homes adverts to a different version of events leading to the filing of the complaint for illegal
dismissal. It alleged that in the early quarter of 1999, the Agabons stopped reporting for work with
Riviera. Two separate letters dated 10 March 1999, were sent to the Agabons at the address indicated in
their personnel file. In these notices, the Agabons were directed to report for work immediately.7
However, these notices were returned unserved with the notation "RTS Moved." Then, in June of 1999,
Virgilio Agabon informed Riviera Homes by telephone that he and Jenny Agabon were ready to return to
work for Riviera Homes, on the condition that their wages be first adjusted. On 18 June 1999, the
Agabons went to Riviera Homes, and in a meeting with management, requested a wage increase of up to
Two Hundred Eighty Pesos (P280.00) a day. When no affirmative response was offered by Riviera Homes,
the Agabons initiated the complaint before the NLRC.8

In their Position Paper, the Agabons likewise alleged that they were required to work even on holidays
and rest days, but were never paid the legal holiday pay or the premium pay for holiday or rest day. They
also asserted that they were denied Service Incentive Leave pay, and that Virgilio Agabon was not given
his thirteenth (13th) month pay for the year 1998.9

After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered a Decision dated 28 December
1999, finding the termination of the Agabons illegal, and ordering Riviera Homes to pay backwages in the
sum of Fifty Six Thousand Two Hundred Thirty One Pesos and Ninety Three Centavos (P56,231.93) each.
The Labor Arbiter likewise ordered, in lieu of reinstatement, the payment of separation pay of one (1)
month pay for every year of service from date of hiring up to 29 November 1999, as well as the payment
of holiday pay, service incentive leave pay, and premium pay for holiday and restday, plus thirteenth
(13th) month differential to Virgilio Agabon.10

In so ruling, the Labor Arbiter declared that Riviera Homes was unable to satisfactorily refute the
Agabons' claim that they were no longer given work to do after 23 February 1999 and that their rehiring
was only on "pakyaw" basis. The Labor Arbiter also held that Riviera Homes failed to comply with the
notice requirement, noting that Riviera Homes well knew of the change of address of the Agabons,
considering that the identification cards it issued stated a different address from that on the personnel
file.11 The Labor Arbiter asserted the principle that in all termination cases, strict compliance by the
employer with the demands of procedural and substantive due process is a condition sine qua non for
the same to be declared valid.12

On appeal, the NLRC Second Division set aside the Labor Arbiter's Decision and ordered the dismissal of
the complaint for lack of merit.13 The NLRC held that the Agabons were not able to refute the assertion
that for the payroll period ending on 15 February 1999, Virgilio and Jenny Agabon worked for only two
and one-half (2½) and three (3) days, respectively. It disputed the earlier finding that Riviera Homes had
known of the change in address, noting that the address indicated in the

identification cards was not the Agabons, but that of the persons who should be notified in case of
emergency concerning the employee.14 Thus, proper service of the notice was deemed to have been
accomplished. Further, the notices evinced good reason to believe that the Agabons had not been
dismissed, but had instead abandoned their jobs by refusing to report for work.
In support of its conclusion that the Agabons had abandoned their work, the NLRC also observed that
the Agabons did not seek reinstatement, but only separation pay. While the choice of relief was
premised by the Agabons on their purported strained relations with Riviera Homes, the NLRC pointed
out that such claim was amply belied by the fact that the Agabons had actually sought a conference with
Riviera Homes in June of 1999. The NLRC likewise found that the failure of the Labor Arbiter to justify the
award of extraneous money claims, such as holiday and service incentive leave pay, confirmed that there
was no proof to justify such claims.

A Petition for Certiorari was promptly filed with the Court of Appeals by the Agabons, imputing grave
abuse of discretion on the part of the NLRC in dismissing their complaint for illegal dismissal. In a
Decision15 dated 23 January 2003, the Court of Appeals affirmed the finding that the Agabons had
abandoned their employment. It noted that the two elements constituting abandonment had been
established, to wit: the failure to report for work or absence without valid justifiable reason, and; a clear
intention to sever the employer-employee relationship. The intent to sever the employer-employee
relationship was buttressed by the Agabon's choice to seek not reinstatement, but separation pay. The
Court of Appeals likewise found that the service of the notices were valid, as the Agabons did not notify
Riviera Homes of their change of address, and thus the failure to return to work despite notice
amounted to abandonment of work.

However, the Court of Appeals reversed the NLRC as regards the denial of the claims for holiday pay,
service incentive leave pay, and the balance of Virgilio Agabon's thirteenth (13th) month pay. It ruled
that the failure to adduce proof in support thereof was not fatal and that the burden of proving that
such benefits had already been paid rested on Riviera Homes.16 Given that Riviera Homes failed to
present proof of payment to the Agabons of their holiday pay and service incentive leave pay for the
years 1996, 1997 and 1998, the Court of Appeals chose to believe that such benefits had not actually
been received by the employees. It also ruled that the apparent deductions made by Riviera Homes on
the thirteenth (13th) month pay of Virgilio Agabon violated Section 10 of the Rules and Regulations
Implementing Presidential Decree No. 851.17 Accordingly, Riviera Homes was ordered to pay the
Agabons holiday for four (4) regular holidays in 1996, 1997 and 1998, as well as their service incentive
leave pay for said years, and the balance of Virgilio Agabon's thirteenth (13th) month pay for 1998 in the
amount of Two Thousand One Hundred Fifty Pesos (P2,150.00).18

In their Petition for Review, the Agabons claim that they had been illegally dismissed, reasserting their
version of events, thus: (1) that they had not been given new assignments since 23 February 1999; (2)
that they were told that they would only be re-hired on a "pakyaw" basis, and; (3) that Riviera Homes
had knowingly sent the notices to their old address despite its knowledge of their change of address as
indicated in the identification cards.19 Further, the Agabons note that only one notice was sent to each
of them, in violation of the rule that the employer must furnish two written notices before termination
— the first to apprise the employee of the cause for which dismissal is sought, and the second to notify
the employee of the decision of dismissal.20 The Agabons likewise maintain that they did not seek
reinstatement owing to the strained relations between them and Riviera Homes.

The Agabons present to this Court only one issue, i.e.: whether or not they were illegally dismissed from
their employment.21 There are several dimensions though to this issue which warrant full consideration.

The Abandonment Dimension

Review of Factual Finding of Abandonment

As the Decision points out, abandonment is characterized by the failure to report for work or absence
without valid or justifiable reason, and a clear intention to sever the employer-employee relationship.
The question of whether or not an employee has abandoned employment is essentially a factual
issue.22 The NLRC and the Court of Appeals, both appropriate triers of fact, concluded that the Agabons
had actually abandoned their employment, thus there is little need for deep inquiry into the correctness
of this factual finding. There is no doubt that the Agabons stopped reporting for work sometime in
February of 1999. And there is no evidence to support their assertion that such absence was due to the
deliberate failure of Riviera Homes to give them work. There is also the fact, as noted by the NLRC and
the Court of Appeals, that the Agabons did not pray for reinstatement, but only for separation

pay and money claims.23 This failure indicates their disinterest in maintaining the employer-employee
relationship and their unabated avowed intent to sever it. Their excuse that strained relations between
them and Riviera Homes rendered reinstatement no longer feasible was hardly given credence by the
NLRC and the Court of Appeals.24

The contrary conclusion arrived at by the Labor Arbiter as regards abandonment is of little bearing to the
case. All that the Labor Arbiter said on that point was that Riviera Homes was not able to refute the
Agabons' claim that they were terminated on 23 February 1999.25 The Labor Arbiter did not explain why
or how such finding was reachhy or how such finding was reachhe Agabons was more credible than that
of Riviera Homes'. Being bereft of reasoning, the conclusion deserves scant consideration.

Compliance with Notice Requirement

At the same time, both the NLRC and the Court of Appeals failed to consider the apparent fact that the
rules governing notice of termination were not complied with by Riviera Homes. Section 2, Book V, Rule
XXIII of the Omnibus Rules Implementing the Labor Code (Implementing Rules) specifically provides that
for termination of employment based on just causes as defined in Article 282, there must be: (1) written
notice served on the employee specifying the grounds for termination and giving employee reasonable
opportunity to explain his/her side; (2) a hearing or conference wherein the employee, with the
assistance of counsel if so desired, is given opportunity to respond to the charge, present his evidence or
rebut evidence presented against him/her; and (3) written notice of termination served on the employee
indicating that upon due consideration of all the circumstances, grounds have been established to justify
termination.

At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules does not require strict
compliance with the above procedure, but only that the same be "substantially observed."

Riviera Homes maintains that the letters it sent on 10 March 1999 to the Agabons sufficiently complied
with the notice rule. These identically worded letters noted that the Agabons had stopped working
without permission that they failed to return for work despite having been repeatedly told to report to
the office and resume their employment.26 The letters ended with an invitation to the Agabons to
report back to the office and return to work.27

The apparent purpose of these letters was to advise the Agabons that they were welcome to return back
to work, and not to notify them of the grounds of termination. Still, considering that only substantial
compliance with the notice requirement is required, I am prepared to say that the letters sufficiently
conform to the first notice required under the Implementing Rules. The purpose of the first notice is to
duly inform the employee that a particular transgression is being considered against him or her, and that
an opportunity is being offered for him or her to respond to the charges. The letters served the purpose
of informing the Agabons of the pending matters beclouding their employment, and extending them the
opportunity to clear the air.

Contrary to the Agabons' claim, the letter-notice was correctly sent to the employee's last known
address, in compliance with the Implementing Rules. There is no dispute that these letters were not
actually received by the Agabons, as they had apparently moved out of the address indicated therein.
Still, the letters were sent to what Riviera Homes knew to be the Agabons' last known address, as
indicated in their personnel file. The Agabons insist that Riviera Homes had known of the change of
address, offering as proof their company IDs which purportedly print out their correct new address. Yet,
as pointed out by the NLRC and the Court of Appeals, the addresses indicated in the IDs are not the
Agabons, but that of the person who is to be notified in case on emergency involve either or both of the
Agabons.

The actual violation of the notice requirement by Riviera Homes lies in its failure to serve on the Agabons
the second notice which should inform them of termination. As the Decision notes, Riviera Homes'
argument that sending the second notice was useless due to the change of address is inutile, since the
Implementing Rules plainly require that the notice of termination should be served at the employee's
last known address.

The importance of sending the notice of termination should not be trivialized. The termination letter
serves as indubitable proof of loss of employment, and its receipt compels the employee to evaluate his
or her next options. Without such notice, the employee may be left uncertain of his fate; thus, its service
is mandated by the Implementing Rules. Non-compliance with the notice rule, as evident in this case,
contravenes the Implementing Rules. But does the violation serve to invalidate the Agabons' dismissal
for just cause?

The So-Called Constitutional Law Dimension

Justices Puno and Panganiban opine that the Agabons should be reinstated as a consequence of the
violation of the notice requirement. I respectfully disagree, for the reasons expounded below.

Constitutional Considerations

Of Due Process and the Notice-Hearing

Requirement in Labor Termination Cases

Justice Puno proposes that the failure to render due notice and hearing prior to dismissal for just cause
constitutes a violation of the constitutional right to due process. This view, as acknowledged by Justice
Puno himself, runs contrary to the Court's pronouncement in Serrano v. NLRC28 that the absence of due
notice and hearing prior to dismissal, if for just cause, violates statutory due process.

The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent overview of the history of
the doctrine:

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which
gave either party to the employer-employee relationship the right to terminate their relationship by
giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month. This provision was repealed by Art. 2270 of
the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise
known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was
amended by R.A. No. 1787 providing for the giving of advance notice for every year of service.29

Under Section 1 of the Termination Pay Law, an employer could dismiss an employee without just cause
by serving written notice on the employee at least one month in advance or one-half month for every
year of service of the employee, whichever was longer.30 Failure to serve such written notice entitled
the employee to compensation equivalent to his salaries or wages corresponding to the required period
of notice from the date of termination of his employment.

However, there was no similar written notice requirement under the Termination Pay Law if the dismissal
of the employee was for just cause. The Court, speaking through Justice JBL Reyes, ruled in Phil. Refining
Co. v. Garcia:31

[Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes the right of the employer to
dismiss his employees (hired without definite period) whether for just case, as therein defined or
enumerated, or without it. If there be just cause, the employer is not required to serve any notice of
discharge nor to disburse termination pay to the employee. xxx32

Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive to the notion that
termination for just cause without notice or hearing violated the constitutional right to due process.
Nonetheless, the Court recognized an award of damages as the appropriate remedy. In Galsim v. PNB,33
the Court held:

Of course, the employer's prerogative to dismiss employees hired without a definite period may be with
or without cause. But if the manner in which such right is exercised is abusive, the employer stands to
answer to the dismissed employee for damages.34

The Termination Pay Law was among the repealed laws with the enactment of the Labor Code in 1974.
Significantly, the Labor Code, in its inception, did not require notice or hearing before an employer could
terminate an employee for just cause. As Justice Mendoza explained:

Where the termination of employment was for a just cause, no notice was required to be given to the
employee. It was only on September 4, 1981 that notice was required to be given even where the
dismissal or termination of an employee was for cause. This was made in the rules issued by the then
Minister of Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code. And it
was still much later when the notice requirement was embodied in the law with the amendment of Art.
277(b) by R.A. No. 6715 on March 2, 1989.35

It cannot be denied though that the thinking that absence of notice or hearing prior to termination
constituted a constitutional violation has gained a jurisprudential foothold with the Court. Justice Puno,
in his Dissenting Opinion, cites several cases in support of this theory, beginning with Batangas Laguna
Tayabas Bus Co. v. Court of Appeals36 wherein we held that "the failure of petitioner to give the private
respondent the benefit of a hearing before he was dismissed constitutes an infringement on his
constitutional right to due process of law.37

Still, this theory has been refuted, pellucidly and effectively to my mind, by Justice Mendoza's
disquisition in Serrano, thus:

xxx There are three reasons why, on the other hand, violation by the employer of the notice requirement
cannot be considered a denial of due process resulting in the nullity of the employee's dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It
does not apply to the exercise of private power, such as the termination of employment under the Labor
Code. This is plain from the text of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of
life, liberty, or property without due process of law. . . ." The reason is simple: Only the State has
authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause is
to ensure that the exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the
power of organized society are brought to bear upon the individual. This is obviously not the case of
termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not
to afford him an opportunity to be heard on any charge against him, for there is none. The purpose
rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to
determine whether economic causes do exist justifying the termination of his employment.

xxx

The third reason why the notice requirement under Art. 283 can not be considered a requirement of the
Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of
his own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e.,
serious misconduct or willful disobedience by the employee of the lawful orders of the employer, gross
and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime
against the employer or the latter's immediate family or duly authorized representatives, or other
analogous cases).38

The Court in the landmark case of People v. Marti39 clarified the proper dimensions of the Bill of Rights.

That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private
individuals finds support in the deliberations of the Constitutional Commission. True, the liberties
guaranteed by the fundamental law of the land must always be subject to protection. But protection
against whom? Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the query
which he himself posed, as follows:

"First, the general reflections. The protection of fundamental liberties in the essence of constitutional
democracy. Protection against whom? Protection against the state. The Bill of Rights governs the
relationship between the individual and the state. Its concern is not the relation between individuals,
between a private individual and other individuals. What the Bill of Rights does is to declare some
forbidden zones in the private sphere inaccessible to any power holder." (Sponsorship Speech of
Commissioner Bernas; Record of the Constitutional Commission, Vol. 1, p. 674; July 17,1986; Italics
supplied)40

I do not doubt that requiring notice and hearing prior to termination for just cause is an admirable
sentiment borne out of basic equity and fairness. Still, it is not a constitutional requirement that can
impose itself on the relations of private persons and entities. Simply put, the Bill of Rights affords
protection against possible State oppression against its citizens, but not against an unjust or repressive
conduct by a private party towards another.

Justice Puno characterizes the notion that constitutional due process limits government action alone as
"passé," and adverts to nouvelle vague theories which assert that private conduct may be restrained by
constitutional due process. His dissent alludes to the American experience making references to the
post-Civil War/pre-World War II era when the US Supreme Court seemed overly solicitous to the rights of
big business over those of the workers.

Theories, no matter how entrancing, remain theoretical unless adopted by legislation, or more
controversially, by judicial opinion. There were a few decisions of the US Supreme Court that, ostensibly,
imposed on private persons the values of the constitutional guarantees. However, in deciding the cases,
the American High Court found it necessary to link the actors to adequate elements of the "State" since
the Fourteenth Amendment plainly begins with the words "No State shall…"41

More crucially to the American experience, it had become necessary to pass legislation in order to
compel private persons to observe constitutional values. While the equal protection clause was deemed
sufficient by the Warren Court to bar racial segregation in public facilities, it necessitated enactment of
the Civil Rights Acts of 1964 to prohibit segregation as enforced by private persons within their property.
In this jurisdiction, I have trust in the statutory regime that governs the correction of private wrongs.
There are thousands of statutes, some penal or regulatory in nature, that are the source of actionable
claims against private persons. There is even no stopping the State, through the legislative cauldron,
from compelling private individuals, under pain of legal sanction, into observing the norms ordained in
the Bill of Rights.

Justice Panganiban's Separate Opinion asserts that corporate behemoths and even individuals may now
be sources of abuses and threats to human rights and liberties.42 The concern is not unfounded, but
appropriate remedies exist within our statutes, and so resort to the constitutional trump card is not
necessary. Even if we were to engage the premise, the proper juristic exercise should be to examine
whether an employer has taken the attributes of the State so that it could be compelled by the
Constitution to observe the proscriptions of the Bill of Rights. But the strained analogy simply does not
square since the attributes of an employer are starkly incongruous with those of the State. Employers
plainly do not possess the awesome powers and the tremendous resources which the State has at its
command.

The differences between the State and employers are not merely literal, but extend to their very
essences. Unlike the State, the raison d'etre of employers in business is to accumulate profits. Perhaps
the State and the employer are similarly capacitated to inflict injury or discomfort on persons under their
control, but the same power is also possessed by a school principal, hospital administrator, or a religious
leader, among many others. Indeed, the scope and reach of authority of an employer pales in
comparison with that of the State. There is no basis to conclude that an employer, or even the employer
class, may be deemed a de facto state and on that premise, compelled to observe the Bill of Rights.
There is simply no nexus in their functions, distaff as they are, that renders it necessary to accord the
same jurisprudential treatment.

It may be so, as alluded in the dissent of Justice Puno, that a conservative court system overly solicitous
to the concerns of business may consciously gut away at rights or privileges owing to the labor sector.
This certainly happened before in the United States in the early part of the twentieth century, when the
progressive labor legislation such as that enacted during President Roosevelt's New Deal regime — most
of them addressing problems of labor — were struck down by an arch-conservative Court.43 The
preferred rationale then was to enshrine within the constitutional order business prerogatives, rendering
them superior to the express legislative intent. Curiously, following its judicial philosophy at the time the
U. S. Supreme Court made due process guarantee towards employers prevail over the police power to
defeat the cause of labor.44

Of course, this Court should not be insensate to the means and methods by which the entrenched
powerful class may maneuver the socio-political system to ensure self-preservation. However, the
remedy to rightward judicial bias is not leftward judicial bias. The more proper judicial attitude is to give
due respect to legislative prerogatives, regardless of the ideological sauce they are dipped in.

While the Bill of Rights maintains a position of primacy in the constitutional hierarchy,45 it has scope and
limitations that must be respected and asserted by the Court, even though they may at times serve
somewhat bitter ends. The dissenting opinions are palpably distressed at the effect of the Decision,
which will undoubtedly provoke those reflexively sympathetic to the labor class. But haphazard legal
theory cannot be used to justify the obverse result. The adoption of the dissenting views would give rise
to all sorts of absurd constitutional claims. An excommunicated Catholic might demand his/her
reinstatement into the good graces of the Church and into communion on the ground that
excommunication was violative of the constitutional right to due process. A celebrity contracted to
endorse Pepsi Cola might sue in court to void a stipulation that prevents him/her from singing the
praises of Coca Cola once in a while, on the ground that such stipulation violates the constitutional right
to free speech. An employee might sue to prevent the employer from reading outgoing e-mail sent
through the company server using the company e-mail address, on the ground that the constitutional
right to privacy of communication would be breached.

The above concerns do not in anyway serve to trivialize the interests of labor. But we must avoid
overarching declarations in order to justify an end result beneficial to labor. I dread the doctrinal
acceptance of the notion that the Bill of Rights, on its own, affords protection and sanctuary not just
from the acts of State but also from the conduct of private persons. Natural and juridical persons would
hesitate to interact for fear that a misstep could lead to their being charged in court as a constitutional
violator. Private institutions that thrive on their exclusivity, such as churches or cliquish groups, could be
forced to renege on their traditional tenets, including vows of secrecy and the like, if deemed by the
Court as inconsistent with the Bill of Rights. Indeed, that fundamental right of all private persons to be
let alone would be forever diminished because of a questionable notion that contravenes with centuries
of political thought.

It is not difficult to be enraptured by novel legal ideas. Their characterization is susceptible to the same
marketing traps that hook consumers to new products. With the help of unique wrapping, a catchy label,
and testimonials from professed experts from exotic lands, a malodorous idea may gain wide
acceptance, even among those self-possessed with their own heightened senses of perception. Yet
before we join the mad rush in order to proclaim a theory as "brilliant," a rigorous test must first be
employed to determine whether it complements or contradicts our own system of laws and juristic
thought. Without such analysis, we run the risk of abnegating the doctrines we have fostered for
decades and the protections they may have implanted into our way of life.

Should the Court adopt the view that the Bill of Rights may be invoked to invalidate actions by private
entities against private individuals, the Court would open the floodgates to, and the docket would be
swamped with, litigations of the scurrilous sort. Just as patriotism is the last refuge of scoundrels, the
broad constitutional claim is the final resort of the desperate litigant.

Constitutional Protection of Labor

The provisions of the 1987 Constitution affirm the primacy of labor and advocate a multi-faceted state
policy that affords, among others, full protection to labor. Section 18, Article II thereof provides:

The State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare.

Further, Section 3, Article XIII states:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equal employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security to tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to
its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.

The constitutional enshrinement of the guarantee of full protection of labor is not novel to the 1987
Constitution. Section 6, Article XIV of the 1935 Constitution reads:

The State shall afford protection to labor, especially to working women, and minors, and shall regulate
the relations between the landowner and tenant, and between labor and capital in industry and in
agriculture. The State may provide for compulsory arbitration.

Similarly, among the principles and state policies declared in the 1973 Constitution, is that provided in
Section 9, Article II thereof:

The State shall afford full protection to labor, promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between
workers and employers. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work. The State may provide for
compulsory arbitration.

On the other hand, prior to the 1973 Constitution, the right to security of tenure could only be found in
legislative enactments and their respective implementing rules and regulations. It was only in the 1973
Constitution that security of tenure was elevated as a constitutional right. The development of the
concept of security of tenure as a constitutionally recognized right was discussed by this Court in BPI
Credit Corporation v. NLRC,46 to wit:

The enthronement of the worker's right to security or tenure in our fundamental law was not achieved
overnight. For all its liberality towards labor, our 1935 Constitution did not elevate the right as a
constitutional right. For a long time, the worker's security of tenure had only the protective mantle of
statutes and their interpretative rules and regulations. It was as uncertain protection that sometimes
yielded to the political permutations of the times. It took labor nearly four decades of sweat and tears to
persuade our people thru their leaders, to exalt the worker's right to security of tenure as a sacrosanct
constitutional right. It was Article II, section 2 [9] of our 1973 Constitution that declared as a policy that
the State shall assure the right of worker's to security tenure. The 1987 Constitution is even more
solicitous of the welfare of labor. Section 3 of its Article XIII mandates that the State shall afford full
protection to labor and declares that all workers shall be entitled to security of tenure. Among the
enunciated State policies are the

promotion of social justice and a just and dynamic social order. In contrast, the prerogative of
management to dismiss a worker, as an aspect of property right, has never been endowed with a
constitutional status.

The unequivocal constitutional declaration that all workers shall be entitled to security of tenure spurred
our lawmakers to strengthen the protective walls around this hard earned right. The right was protected
from undue infringement both by our substantive and procedural laws. Thus, the causes for dismissing
employees were more defined and restricted; on the other hand, the procedure of termination was also
more clearly delineated. These substantive and procedural laws must be strictly complied with before a
worker can be dismissed from his employment.47

It is quite apparent that the constitutional protection of labor was entrenched more than eight decades
ago, yet such did not prevent this Court in the past from affirming dismissals for just cause without valid
notice. Nor was there any pretense made that this constitutional maxim afforded a laborer a positive
right against dismissal for just cause on the ground of lack of valid prior notice. As demonstrated earlier,
it was only after the enactment of the Labor Code that the doctrine relied upon by the dissenting
opinions became en vogue. This point highlights my position that the violation of the notice requirement
has statutory moorings, not constitutional.

It should be also noted that the 1987 Constitution also recognizes the principle of shared responsibility
between workers and employers, and the right of enterprise to reasonable returns, expansion, and
growth. Whatever perceived imbalance there might have been under previous incarnations of the
provision have been obviated by Section 3, Article XIII.

In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption that all constitutional
provisions are self-executing. We reasoned that to declare otherwise would result in the pernicious
situation wherein by mere inaction and disregard by the legislature, constitutional mandates would be
rendered ineffectual. Thus, we held:

As against constitutions of the past, modern constitutions have been generally ed upon a different
principle and have often become in effect extensive codes of laws intended to operate directly upon the
people in a manner similar to that of statutory enactments, and the function of constitutional
conventions has evolved into one more like that of a legislative body. Hence, unless it is expressly
provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is
that all provisions of the constitution are self-executing. If the constitutional provisions are treated as
requiring legislation instead of self-executing, the legislature would have the power to ignore and
practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the
prevailing view is, as it has always been, that —
. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing.
. . . Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-
executing, as a contrary rule would give the legislature discretion to determine when, or whether, they
shall be effective. These provisions would be subordinated to the will of the lawmaking body, which
could make them entirely meaningless by simply refusing to pass the needed implementing statute.49

In further discussing self-executing provisions, this Court stated that:

In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of
the rights secured or the determination thereof, or place reasonable safeguards around the exercise of
the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for a remedy for
enforcing a right or liability is not necessarily an indication that it was not intended to be self-executing.
The rule is that a self-executing provision of the constitution does not necessarily exhaust legislative
power on the subject, but any legislation must be in harmony with the constitution, further the exercise
of constitutional right and make it more available. Subsequent legislation however does not necessarily
mean that the subject constitutional provision is not, by itself, fully enforceable.50

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-
executing in the sense that these are automatically acknowledged and observed without need for any
enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the
full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when
examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a
blanket shield in favor of labor against any form of removal regardless of circumstance. This
interpretation implies an unimpeachable right to continued employment-a utopian notion, doubtless-
but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define
the parameters of these guaranteed rights to ensure the protection and promotion, not only the rights
of the labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial
bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the
Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable
right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice
or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice
require legislative enactments for their enforceability. This is reflected in the record of debates on the
social justice provisions of the Constitution:

MS. [FELICITAS S.] AQUINO: We appreciate the concern of the Commissioner. But this Committee [on
Social Justice] has actually become the forum already of a lot of specific grievances and specific
demands, such that understandably, we may have been, at one time or another, dangerously treading
into the functions of legislation. Our only plea to the Commission is to focus our perspective on the
matter of social justice and its rightful place in the Constitution. What we envision here is a mandate
specific enough that would give impetus for statutory implementation. We would caution ourselves in
terms of the judicious exercise of self-censorship against treading into the functions of legislation.
(emphasis supplied)51

xxx

[FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one section on social justice; the
same is true with the 1973 Constitution. But they seem to have stood us in good stead; and I am a little
surprised why, despite that attempt at self-censorship, there are certain provisions here which are
properly for legislation.52

xxx

BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during the presentation of the
provisions on the Bill of Rights by Commissioner Bernas is very apropos here. He spoke of self-executing
rights which belong properly to the Bill of Rights, and then he spoke of a new body of rights which are
more of claims and that these have come about largely through the works of social philosophers and
then the teaching of the Popes. They focus on the common good and hence, it is not as easy to pinpoint
precisely these rights nor the situs of the rights. And yet, they exist in relation to the common good.53

xxx

MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of collaboration will be left to
legislation but the important thing now is the conservation, utilization or maximization of the very
limited resources. xxx

[RICARDO J.] ROMULO: The other problem is that, by and large, government services are inefficient. So,
this is a problem all by itself. On Section 19, where the report says that people's organizations as a
principal means of empowering the people to pursue and protect through peaceful means…, I do not
suppose that the Committee would like to either preempt or exclude the legislature, because the
concept of a representative and democratic system really is that the legislature is normally the principal
means.

[EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream of influencing the
composition or the membership of the legislature, if they do not get organized. It is, in fact, a recognition
of the principle that unless a citizenry is organized and mobilized to pursue its ends peacefully, then it
cannot really participate effectively.54

There is no pretense on the part of the framers that the provisions on Social Justice, particularly Section
3 of Article XIII, are self-executory. Still, considering the rule that provisions should be deemed self-
executing if enforceable without further legislative action, an examination of Section 3 of Article XIII is
warranted to determine whether it is complete in itself as a definitive law, or if it needs future legislation
for completion and enforcement.55 Particularly, we should inquire whether or not the provision voids
the dismissal of a laborer for just cause if no valid notice or hearing is attendant.

Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant comment on Section 3, Article XIII
of the 1987 Constitution:

The [cluster] of rights guaranteed in the second paragraph are the right "to security of tenure, humane
conditions of work, and a living wage." Again, although these have been set apart by a period (.) from
the next sentence and are therefore not modified by the final phrase "as may be provided by law," it is
not the intention to place these beyond the reach of valid laws. xxx (emphasis supplied)56

At present, the Labor Code is the primary mechanism to carry out the Constitution's directives. This is
clear from Article 357 under Chapter 1 thereof which essentially restates the policy on the protection of
labor as worded in the 1973 Constitution, which was in force at the time of enactment of the Labor
Code. It crystallizes the fundamental law's policies on labor, defines the parameters of the rights granted
to labor such as the right to security of tenure, and prescribes the standards for the enforcement of such
rights in concrete terms. While not infallible, the measures provided therein tend to ensure the
achievement of the constitutional aims.

The necessity for laws concretizing the constitutional principles on the protection of labor is evident in
the reliance placed upon such laws by the Court in resolving the issue of the validity of a worker's
dismissal. In cases where that was the issue confronting the Court, it consistently recognized the
constitutional right to security of tenure and employed the standards laid down by prevailing laws in
determining whether such right was violated.58 The Court's reference to laws other than the
Constitution in resolving the issue of dismissal is an implicit acknowledgment that the right to security of
tenure, while recognized in the Constitution, cannot be implemented uniformly absent a law prescribing
concrete standards for its enforcement.

As discussed earlier, the validity of an employee's dismissal in previous cases was examined by the Court
in accordance with the standards laid down by Congress in the Termination Pay Law, and subsequently,
the Labor Code and the amendments thereto. At present, the validity of an employee's dismissal is
weighed against the standards laid down in Article 279, as well as Article 282 in relation to Article 277(b)
of the Labor Code, for a dismissal for just cause, and Article 283 for a dismissal for an authorized cause.

The Effect of Statutory Violation

Of Notice and Hearing

There is no doubt that the dismissal of an employee even for just cause, without prior notice or hearing,
violates the Labor Code. However, does such violation necessarily void the dismissal?

Before I proceed with my discussion on dismissals for just causes, a brief comment regarding dismissals
for authorized cause under Article 283 of the Labor Code. While the justiciable question in Serrano
pertained to a dismissal for unauthorized cause, the ruling therein was crafted as definitive to dismissals
for just cause. Happily, the Decision today does not adopt the same unwise tack. It should be recognized
that dismissals for just cause and dismissals for authorized cause are governed by different provisions,
entail divergent requisites, and animated by distinct rationales. The language of Article 283 expressly
effects the termination for authorized cause to the service of written notice on the workers and the
Ministry of Labor at least one (1) month before the intended date of termination. This constitutes an
eminent difference than dismissals for just cause, wherein the causal relation between the notice and
the dismissal is not expressly stipulated. The circumstances distinguishing just and authorized causes are
too markedly different to be subjected to the same rules and reasoning in interpretation.

Since the present petition is limited to a question arising from a dismissal for just cause, there is no
reason for making any pronouncement regarding authorized causes. Such declaration would be merely
obiter, since they are neither the law of the case nor dispositive of the present petition. When the
question becomes justiciable before this Court, we will be confronted with an appropriate factual milieu
on which we can render a more judicious disposition of this admittedly important question.

B. Dismissal for Just Cause

There is no express provision in the Labor Code that voids a dismissal for just cause on the ground that
there was no notice or hearing. Under Section 279, the employer is precluded from dismissing an
employee except for a just cause as provided in Section 282, or an authorized cause under Sections 283
and 284. Based on reading Section 279 alone, the existence of just cause by itself is sufficient to validate
the termination.

Just cause is defined by Article 282, which unlike Article 283, does not condition the termination on the
service of written notices. Still, the dissenting opinions propound that even if there is just cause, a
termination may be invalidated due to the absence of notice or hearing. This view is anchored mainly on
constitutional moorings, the basis of which I had argued against earlier. For determination now is
whether there is statutory basis under the Labor Code to void a dismissal for just cause due to the
absence of notice or hearing.

As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the Labor Code was amended to
enshrine into statute the twin requirements of notice and hearing.59 Such requirements are found in
Article 277 of the Labor Code, under the heading "Miscellaneous Provisions." Prior to the amendment,
the notice-hearing requirement was found under the implementing rules issued by the then Minister of
Labor in 1981. The present-day implementing rules likewise mandate that the standards of due process,
including the requirement of written notice and hearing, "be substantially observed."60

Indubitably, the failure to substantially comply with the standards of due process, including the notice
and hearing requirement, may give rise to an actionable claim against the employer. Under Article 288,
penalties may arise from violations of any provision of the Labor Code. The Secretary of Labor likewise
enjoys broad powers to inquire into existing relations between employers and employees. Systematic
violations by management of the statutory right to due process would fall under the broad grant of
power to the Secretary of Labor to investigate under Article 273.
However, the remedy of reinstatement despite termination for just cause is simply not authorized by the
Labor Code. Neither the Labor Code nor its implementing rules states that a termination for just cause is
voided because the requirement of notice and hearing was not observed. This is not simply an
inadvertent semantic failure, but a conscious effort to protect the prerogatives of the employer to
dismiss an employee for just cause. Notably, despite the several pronouncements by this Court in the
past equating the notice-hearing requirement in labor cases to a constitutional maxim, neither the
legislature nor the executive has adopted the same tack, even gutting the protection to provide that
substantial compliance with due process suffices.

The Labor Code significantly eroded management prerogatives in the hiring and firing of employees.
Whereas employees could be dismissed even without just cause under the Termination Pay Law61, the
Labor Code affords workers broad security of tenure. Still, the law recognizes the right of the employer
to terminate for just cause. The just causes enumerated under the Labor Code ¾ serious misconduct or
willful disobedience, gross and habitual neglect, fraud or willful breach of trust, commission of a crime
by the employee against the employer, and other analogous causes ¾ are characterized by the harmful
behavior of an employee against the business or the person of the employer.

These just causes for termination are not negated by the absence of notice or hearing. An employee who
tries to kill the employer cannot be magically absolved of trespasses just because the employer forgot to
serve due notice. Or a less extreme example, the gross and habitual neglect of an employee will not be
improved upon just because the employer failed to conduct a hearing prior to termination.

In fact, the practical purpose of requiring notice and hearing is to afford the employee the opportunity to
dispute the contention that there was just cause in the dismissal. Yet it must be understood – if a
dismissed employee is deprived of the right to notice and hearing, and thus denied the opportunity to
present countervailing evidence that disputes the finding of just cause, reinstatement will be valid not
because the notice and hearing requirement was not observed, but because there was no just cause in
the dismissal. The opportunity to dispute the finding of the just cause is readily available before the
Labor Arbiter, and the subsequent levels of appellate review. Again, as held in Serrano:

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to
comply with the Due Process Clause of the Constitution. The time for notice and hearing is at the trial
stage. Then that is the time we speak of notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice requirement before he dismisses an employee does
not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any
decision taken by the employer shall be without prejudice to the right of the worker to contest the
validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission.62

The Labor Code presents no textually demonstrable commitment to invalidate a dismissal for just cause
due to the absence of notice or hearing. This is not surprising, as such remedy will not restore the
employer or employee into equity. Absent a showing of integral causation, the mutual infliction of
wrongs does not negate either injury, but instead enforces two independent rights of relief.
The Damages' Dimensions

Award for Damages Must Have Statutory Basis

The Court has grappled with the problem of what should be the proper remedial relief of an employee
dismissed with just cause, but not afforded either notice or hearing. In a long line of cases, beginning
with Wenphil Corp. v. NLRC63 and up until Serrano in 2000, the Court had deemed an indemnification
award as sufficient to answer for the violation by the employer against the employee. However, the
doctrine was modified in Serrano.

I disagree with Serrano insofar as it held that employees terminated for just cause are to be paid
backwages from the time employment was terminated "until it is determined that the termination is for
just cause because the failure to hear him before he is dismissed renders the termination of his
employment without legal effect."64 Article 279 of the Labor Code clearly authorizes the payment of
backwages only if an employee is unjustly dismissed. A dismissal for just cause is obviously antithetical to
an unjust dismissal. An award for backwages is not clearly warranted by the law.

The Impropriety of Award for Separation Pay

The formula of one month's pay for every year served does have statutory basis. It is found though in the
Labor Code though, not the Civil Code. Even then, such computation is made for separation pay under
the Labor Code. But separation pay is not an appropriate as a remedy in this case, or in any case wherein
an employee is terminated for just cause. As Justice Vitug noted in his separate opinion in Serrano, an
employee whose employment is terminated for a just cause is not entitled to the payment of separation
benefits.65 Separation pay is traditionally a monetary award paid as an alternative to reinstatement
which can no longer be effected in view of the long passage of time or because of the realities of the
situation.66 However, under Section 7, Rule 1, Book VI of the Omnibus Rules Implementing the Labor
Code, "[t]he separation from work of an employee for a just cause does not entitle him to the
termination pay provided in the Code."67 Neither does the Labor Code itself provide instances wherein
separation pay is warranted for dismissals with just cause. Separation pay is warranted only for
dismissals for authorized causes, as enumerated in Article 283 and 284 of the Labor Code.

The Impropriety of Equity Awards

Admittedly, the Court has in the past authorized the award of separation pay for duly terminated
employees as a measure of social justice, provided that the employee is not guilty of serious misconduct
reflecting on moral character.68 This doctrine is inapplicable in this case, as the Agabons are guilty of
abandonment, which is the deliberate and unjustified refusal of an employee to resume his
employment. Abandonment is tantamount to serious misconduct, as it constitutes a willful breach of the
employer-employee relationship without cause.

The award of separation pay as a measure of social justice has no statutory basis, but clearly emanates
from the Court's so-called "equity jurisdiction." The Court's equity jurisdiction as a basis for award, no
matter what form it may take, is likewise unwarranted in this case. Easy resort to equity should be
avoided, as it should yield to positive rules which pre-empt and prevail over such persuasions.69
Abstract as the concept is, it does not admit to definite and objective standards.

I consider the pronouncement regarding the proper monetary awards in such cases as Wenphil Corp. v.
NLRC,70 Reta,71 and to a degree, even Serrano as premised in part on equity. This decision is premised
in part due to the absence of cited statutory basis for these awards. In these cases, the Court deemed an
indemnity award proper without exactly saying where in statute could such award be derived at.
Perhaps, equity or social justice can be invoked as basis for the award. However, this sort of arbitrariness,
indeterminacy and judicial usurpation of legislative prerogatives is precisely the source of my discontent.
Social justice should be the aspiration of all that we do, yet I think it the more mature attitude to
consider that it ebbs and flows within our statutes, rather than view it as an independent source of
funding.

Article 288 of the Labor Code as a Source of Liability

Another putative source of liability for failure to render the notice requirement is Article 288 of the
Labor Code, which states:

Article 288 states:

Penalties. — Except as otherwise provided in this Code, or unless the acts complained of hinges on a
question of interpretation or implementation of ambiguous provisions of an existing collective bargaining
agreement, any violation of the provisions of this Code declared to be unlawful or penal in nature shall
be punished with a fine of not less than One Thousand Pesos (P1,000.00) nor more than Ten Thousand
Pesos (P10,000.00), or imprisonment of not less than three months nor more than three years, or both
such fine and imprisonment at the discretion of the court.

It is apparent from the provision that the penalty arises due to contraventions of the provisions of the
Labor Code. It is also clear that the provision comes into play regardless of who the violator may be.
Either the employer or the employee may be penalized, or perhaps even officials tasked with
implementing the Labor Code.

However, it is apparent that Article 288 is a penal provision; hence, the prescription for penalties such as
fine and imprisonment. The Article is also explicit that the imposition of fine or imprisonment is at the
"discretion of the court." Thus, the proceedings under the provision is penal in character. The criminal
case has to be instituted before the proper courts, and the Labor Code violation subject thereof duly
proven in an adversarial proceeding. Hence, Article 288 cannot apply in this case and serve as basis to
impose a penalty on Riviera Homes.

I also maintain that under Article 288 the penalty should be paid to the State, and not to the person or
persons who may have suffered injury as a result of the violation. A penalty is a sum of money which the
law requires to be paid by way of punishment for doing some act which is prohibited or for not doing
some act which is required to be done.72 A penalty should be distinguished from damages which is the
pecuniary compensation or indemnity to a person who has suffered loss, detriment, or injury, whether
to his person, property, or rights, on account of the unlawful act or omission or negligence of another.
Article 288 clearly serves as a punitive fine, rather than a compensatory measure, since the provision
penalizes an act that violates the Labor Code even if such act does not cause actual injury to any private
person.

Independent of the employee's interests protected by the Labor Code is the interest of the State in
seeing to it that its regulatory laws are complied with. Article 288 is intended to satiate the latter
interest. Nothing in the language of Article 288 indicates an intention to compensate or remunerate a
private person for injury he may have sustained.

It should be noted though that in Serrano, the Court observed that since the promulgation of Wenphil
Corp. v. NLRC73 in 1989, "fines imposed for violations of the notice requirement have varied from
P1,000.00 to P2,000.00 to P5,000.00 to P10,000.00."74 Interestingly, this range is the same range of the
penalties imposed by Article 288. These "fines" adverted to in Serrano were paid to the dismissed
employee. The use of the term "fines," as well as the terminology employed a few other cases,75 may
have left an erroneous impression that the award implemented beginning with Wenphil was based on
Article 288 of the Labor Code. Yet, an examination of Wenphil reveals that what the Court actually
awarded to the employee was an "indemnity", dependent on the facts of each case and the gravity of
the omission committed by the employer. There is no mention in Wenphil of Article 288 of the Labor
Code, or indeed, of any statutory basis for the award.

The Proper Basis: Employer's Liability under the Civil Code

As earlier stated, Wenphil allowed the payment of indemnity to the employee dismissed for just cause is
dependent on the facts of each case and the gravity of the omission committed by the employer.
However, I considered Wenphil flawed insofar as it is silent as to the statutory basis for the indemnity
award. This failure, to my mind, renders it unwise for to reinstate the Wenphil rule, and foster the
impression that it is the judicial business to invent awards for damages without clear statutory basis.

The proper legal basis for holding the employer liable for monetary damages to the employee dismissed
for just cause is the Civil Code. The award of damages should be measured against the loss or injury
suffered by the employee by reason of the employer's violation or, in case of nominal damages, the right
vindicated by the award. This is the proper paradigm authorized by our law, and designed to obtain the
fairest possible relief.

Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction over claims for actual, moral,
exemplary and other forms of damages arising from the employer-employee relations. It is thus the duty
of Labor Arbiters to adjudicate claims for damages, and they should disabuse themselves of any
inhibitions if it does appear that an award for damages is warranted. As triers of facts in a specialized
field, they should attune themselves to the particular conditions or problems attendant to employer-
employee relationships, and thus be in the best possible position as to the nature and amount of
damages that may be warranted in this case.

The damages referred under Section 217(4) of the Labor Code are those available under the Civil Code. It
is but proper that the Civil Code serve as the basis for the indemnity, it being the law that regulates the
private relations of the members of civil society, determining their respective rights and obligations with
reference to persons, things, and civil acts.76 No matter how impressed with the public interest the
relationship between a private employer and employee is, it still is ultimately a relationship between
private individuals. Notably, even though the Labor Code could very well have provided set rules for
damages arising from the employer-employee relationship, referral was instead made to the concept of
damages as enumerated and defined under the Civil Code.

Given the long controversy that has dogged this present issue regarding dismissals for just cause, it is
wise to lay down standards that would guide the proper award of damages under the Civil Code in cases
wherein the employer failed to comply with statutory due process in dismissals for just cause.

First. I believe that it can be maintained as a general rule, that failure to comply with the statutory
requirement of notice automatically gives rise to nominal damages, at the very least, even if the
dismissal was sustained for just cause.

Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or invaded
by another may be vindicated or recognized without having to indemnify the plaintiff for any loss
suffered by him.77 Nominal damages may likewise be awarded in every obligation arising from law,
contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or where any property
right has been invaded.

Clearly, the bare act of failing to observe the notice requirement gives rise to nominal damages
assessable against the employer and due the employee. The Labor Code indubitably entitles the
employee to notice even if dismissal is for just cause, even if there is no apparent intent to void such
dismissals deficiently implemented. It has also been held that one's employment, profession, trade, or
calling is a "property right" and the wrongful interference therewith gives rise to an actionable wrong.78

In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the termination therein was for just
and valid cause, the manner of termination was done in complete disregard of the necessary procedural
safeguards.80 The Court found nominal damages as the proper form of award, as it was purposed to
vindicate the right to procedural due process violated by the employer.81 A similar holding was
maintained in Iran v. NLRC82 and Malaya Shipping v. NLRC.83 The doctrine has express statutory basis,
duly recognizes the existence of the right to notice, and vindicates the violation of such right. It is sound,
logical, and should be adopted as a general rule.

The assessment of nominal damages is left to the discretion of the court,84 or in labor cases, of the
Labor Arbiter and the successive appellate levels. The authority to nominate standards governing the
award of nominal damages has clearly been delegated to the judicial branch, and it will serve good
purpose for this Court to provide such guidelines. Considering that the affected right is a property right,
there is justification in basing the amount of nominal damages on the particular characteristics attaching
to the claimant's employment. Factors such as length of service, positions held, and received salary may
be considered to obtain the proper measure of nominal damages. After all, the degree by which a
property right should be vindicated is affected by the estimable value of such right.
At the same time, it should be recognized that nominal damages are not meant to be compensatory, and
should not be computed through a formula based on actual losses. Consequently, nominal damages
usually limited in pecuniary value.85 This fact should be impressed upon the prospective claimant,
especially one who is contemplating seeking actual/compensatory damages.

Second. Actual or compensatory damages are not available as a matter of right to an employee
dismissed for just cause but denied statutory due process. They must be based on clear factual and legal
bases,86 and correspond to such pecuniary loss suffered by the employee as duly proven.87 Evidently,
there is less degree of discretion to award actual or compensatory damages.

I recognize some inherent difficulties in establishing actual damages in cases for terminations validated
for just cause. The dismissed employee retains no right to continued employment from the moment just
cause for termination exists, and such time most likely would have arrived even before the employer is
liable to send the first notice. As a result, an award of backwages disguised as actual damages would
almost never be justified if the employee was dismissed for just cause. The possible exception would be
if it can be proven the ground for just cause came into being only after the dismissed employee had
stopped receiving wages from the employer.

Yet it is not impossible to establish a case for actual damages if dismissal was for just cause. Particularly
actionable, for example, is if the notices are not served on the employee, thus hampering his/her
opportunities to obtain new employment. For as long as it can be demonstrated that the failure of the
employer to observe procedural due process mandated by the Labor Code is the proximate cause of
pecuniary loss or injury to the dismissed employee, then actual or compensatory damages may be
awarded.

Third. If there is a finding of pecuniary loss arising from the employer violation, but the amount cannot
be proved with certainty, then temperate or moderate damages are available under Article 2224 of the
Civil Code. Again, sufficient discretion is afforded to the adjudicator as regards the proper award, and the
award must be reasonable under the circumstances.88 Temperate or nominal damages may yet prove to
be a plausible remedy, especially when common sense dictates that pecuniary loss was suffered, but
incapable of precise definition.

Fourth. Moral and exemplary damages may also be awarded in the appropriate circumstances. As
pointed out by the Decision, moral damages are recoverable where the dismissal of the employee was
attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or public policy,
or the employer committed an act oppressive to labor.89 Exemplary damages may avail if the dismissal
was effected in a wanton, oppressive or malevolent manner.

Appropriate Award of Damages to the Agabons

The records indicate no proof exists to justify the award of actual or compensatory damages, as it has
not been established that the failure to serve the second notice on the Agabons was the proximate cause
to any loss or injury. In fact, there is not even any showing that such violation caused any sort of injury or
discomfort to the Agabons. Nor do they assert such causal relation. Thus, the only appropriate award of
damages is nominal damages. Considering the circumstances, I agree that an award of Fifteen Thousand
Pesos (P15,000.00) each for the Agabons is sufficient.

• Jaka Food Processing v. Pacot, March 28, 2005

GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a Petition for Review on Certiorari under rule
45 of the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to
wit:

1. Decision dated 16 November 2001,1 reversing and setting aside an earlier decision of the National
Labor Relations Commission (NLRC); and

2. Resolution dated 8 January 2002,2 denying petitioner's motion for reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and
Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for short)
until the latter terminated their employment on August 29, 1997 because the corporation was "in dire
financial straits". It is not disputed, however, that the termination was effected without JAKA complying
with the requirement under Article 283 of the Labor Code regarding the service of a written notice upon
the employees and the Department of Labor and Employment at least one (1) month before the
intended date of termination.

In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations
Commission (NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service
incentive leave and 13th month pay against JAKA and its HRD Manager, Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision3 declaring the termination illegal and
ordering JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay if
reinstatement is not possible. More specifically the decision dispositively reads:

WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and
ordering respondents to reinstate them to their positions with full backwages which as of July 30, 1998
have already amounted to P339,768.00. Respondents are also ordered to pay complainants the amount
of P2,775.00 representing the unpaid service incentive leave pay of Parohinog, Lescano and Cagabcab an
the amount of P19,239.96 as payment for 1997 13th month pay as alluded in the above computation.

If complainants could not be reinstated, respondents are ordered to pay them separation pay equivalent
to one month salary for very (sic) year of service.

SO ORDERED.

Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,4 affirmed in
toto that of the Labor Arbiter.

JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision dated
January 28, 2000,5 this time modifying its earlier decision, thus:

WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and the
challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor Arbiter xxx
are hereby modified by reversing an setting aside the awards of backwages, service incentive leave pay.
Each of the complainants-appellees shall be entitled to a separation pay equivalent to one month. In
addition, respondents-appellants is (sic) ordered to pay each of the complainants-appellees the sum of
P2,000.00 as indemnification for its failure to observe due process in effecting the retrenchment.

SO ORDERED.

Their motion for reconsideration having been denied by the NLRC in its resolution of April 28, 2000,6
respondents went to the Court of Appeals via a petition for certiorari , thereat docketed as CA-G.R. SP
No. 59847.

As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000, applying
the doctrine laid down by this Court in Serrano v. NLRC,7 reversed and set aside the NLRC's decision of
January 28, 2000, thus:

WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission is
REVERSED and SET ASIDE and another one entered ordering respondent JAKA Foods Processing
Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th
month pay and, in addition, full backwages from the time their employment was terminated on August
29, 1997 up to the time the Decision herein becomes final.

SO ORDERED.

This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its
resolution of January 8, 2002.

Hence, JAKA's present recourse, submitting, for our consideration, the following issues:

"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED 'FULL BACKWAGES' TO
RESPONDENTS.

II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO
RESPONDENTS".

As we see it, there is only one question that requires resolution, i.e. what are the legal implications of a
situation where an employee is dismissed for cause but such dismissal was effected without the
employer's compliance with the notice requirement under the Labor Code.

This, certainly, is not a case of first impression. In the very recent case of Agabon v. NLRC,8 we had the
opportunity to resolve a similar question. Therein, we found that the employees committed a grave
offense, i.e., abandonment, which is a form of a neglect of duty which, in turn, is one of the just causes
enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of the dismissal
despite non-compliance with the notice requirement of the Labor Code. However, we required the
employer to pay the dismissed employees the amount of P30,000.00, representing nominal damages for
non-compliance with statutory due process, thus:

"Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should
not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the
employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of
'dismiss now, pay later,' which we sought to deter in the Serrano ruling. The sanction should be in the
nature of indemnification or penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.

xxx

The violation of petitioners' right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the
sound discretion of the court, taking into account the relevant circumstances. Considering the prevailing
circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of
damages would serve to deter employers from future violations of the statutory due process rights of
employees. At the very least, it provides a vindication or recognition of this fundamental right granted to
the latter under the Labor Code and its Implementing Rules," (Emphasis supplied).

The difference between Agabon and the instant case is that in the former, the dismissal was based on a
just cause under Article 282 of the Labor Code while in the present case, respondents were dismissed
due to retrenchment, which is one of the authorized causes under Article 283 of the same Code.

At this point, we note that there are divergent implications of a dismissal for just cause under Article
282, on one hand, and a dismissal for authorized cause under Article 283, on the other.

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.

The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for
authorized cause under Article 283 is further reinforced by the fact that in the first, payment of
separation pay, as a rule, is not required, while in the second, the law requires payment of separation
pay.9

For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of
the just causes under Article 282, and when based on one of the authorized causes under Article 283.

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.

The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it
terminated respondents' employment. As aptly found by the NLRC:

"A careful study of the evidence presented by the respondent-appellant corporation shows that the
audited Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by
the respondent-appellant corporation, The Statement of Income and Deficit found in the Audited
Financial Statement of the respondent-appellant corporation clearly shows the following in 1996, the
deficit of the respondent-appellant corporation was P188,218,419.00 or 94.11% of the stockholder's [sic]
equity which amounts to P200,000,000.00. In 1997 when the retrenchment program of respondent-
appellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or 123.61% of the
stockholders' equity, thus a capital deficiency or impairment of equity ensued. In 1998, the deficit grew
to P355,794,897.00 or 177% of the stockholders' equity. From 1996 to 1997, the deficit grew by more
that (sic) 31% while in 1998 the deficit grew by more than 47%.

The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged losses
was prepared by an independent auditor, SGV & Co. It convincingly showed that the respondent-
appellant corporation was in dire financial straits, which the complainants-appellees failed to dispute.
The losses incurred by the respondent-appellant corporation are clearly substantial and sufficiently
proven with clear and satisfactory evidence. Losses incurred were adequately shown with respondent-
appellant's audited financial statement. Having established the loss incurred by the respondent-
appellant corporation, it necessarily necessarily (sic) follows that the ground in support of retrenchment
existed at the time the complainants-appellees were terminated. We cannot therefore sustain the
findings of the Labor Arbiter that the alleged losses of the respondent-appellant was [sic] not well
substantiated by substantial proofs. It is therefore logical for the corporation to implement a
retrenchment program to prevent further losses."10

Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the
NLRC which, incidentally, was also affirmed by the Court of Appeals.

It is, therefore, established that there was ground for respondents' dismissal, i.e., retrenchment, which is
one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established
that JAKA failed to comply with the notice requirement under the same Article. Considering the factual
circumstances in the instant case and the above ratiocination, we, therefore, deem it proper to fix the
indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents
separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs
Corporation v. NLRC,11 we made the following declaration:

"The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of
the employer, the affected employee is entitled to separation pay. This is consistent with the state policy
of treating labor as a primary social economic force, affording full protection to its rights as well as its
welfare. The exception is when the closure of business or cessation of operations is due to serious
business losses or financial reverses; duly proved, in which case, the right of affected employees to
separation pay is lost for obvious reasons. xxx". (Emphasis supplied)ςrαlαωlιbrαrÿ

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the
Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a
new one entered upholding the legality of the dismissal but ordering petitioner to pay each of the
respondents the amount of P50,000.00, representing nominal damages for non-compliance with
statutory due process.

SO ORDERED.

• Industrial Timber v. Ababon, March 30, 2006

YNARES-SANTIAGO, J.:

On January 25, 2006, the Court rendered judgment disposing of the case as follows:

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-G.R.
SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004
Resolution denying ITC’s motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision
of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITC’s business
valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one
month pay or at least one-half month pay for every year of service, whichever is higher, and P50,000.00
as nominal damages to each employee.

SO ORDERED.1

On March 14, 2006, respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 filed a
Motion for Reconsideration seeking to set aside the above-stated Decision and reinstate the October 21,
2002 Decision of the Court of Appeals, with the modification that they be awarded full backwages, with
the additional award of P50,000.00 as nominal damages for each worker.
They insist that the holding in International Timber Corporation v. National Labor Relations Commission2
that the closure of ITC’s Butuan Plant was valid should not have been applied in the instant cases which
pertain to ITC’s Stanply Plant. They further claim that the findings by the Labor Arbiter that there was a
shortage of raw materials; that the wood processing plaint permit has expired; that the lease contract
with IPGC was terminated; and that ITC and IPGC were not business conduits, were all debunked by the
NLRC.

The arguments raised have been amply discussed; at any rate, they are inconsequential as to affect the
assailed Decision.

On the other hand, petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 also
filed a Motion for Partial Reconsideration seeking to delete or reduce the nominal damages awarded to
each employee, considering that since August 17, 1990 it had ceased operation of its business and that
the award involves a huge amount considering that there are 97 workers.3

While we ruled in this case that the sanction should be stiffer in a dismissal based on authorized cause
where the employer failed to comply with the notice requirement than a dismissal based on just cause
with the same procedural infirmity, however, in instances where the execution of a decision becomes
impossible, unjust, or too burdensome, modification of the decision becomes necessary in order to
harmonize the disposition with the prevailing circumstances.

In the determination of the amount of nominal damages which is addressed to the sound discretion of
the court, several factors are taken into account: (1) the authorized cause invoked, whether it was a
retrenchment or a closure or cessation of operation of the establishment due to serious business losses
or financial reverses or otherwise; (2) the number of employees to be awarded; (3) the capacity of the
employers to satisfy the awards, taken into account their prevailing financial status as borne by the
records; (4) the employer’s grant of other termination benefits in favor of the employees; and (5)
whether there was a bona fide attempt to comply with the notice requirements as opposed to giving no
notice at all.

In the case at bar, there was valid authorized cause considering the closure or cessation of ITC’s business
which was done in good faith and due to circumstances beyond ITC’s control. Moreover, ITC had ceased
to generate any income since its closure on August 17, 1990. Several months prior to the closure, ITC
experienced diminished income due to high production costs, erratic supply of raw materials, depressed
prices, and poor market conditions for its wood products. It appears that ITC had given its employees all
benefits in accord with the CBA upon their termination.

Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the
amount of nominal damages to be awarded for each employee to P10,000.00 each instead of
P50,000.00 each.

WHEREFORE, premises considered, the Motion for Reconsideration of respondents in G.R. No. 164518
who are also petitioners in G.R. No. 164965 is DENIED. The Motion for Partial Reconsideration of
petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 is GRANTED. The amount of
nominal damages awarded to each employee is reduced from P50,000.00 to P10,000.00.

SO ORDERED.

• Sangwoo Phil. v. Sangwoo Phils. Employees Union, December 9,

2013

PERLAS-BERNABE, J.:

Before the Court are consolidated petitions for review on certiorari2 assailing the Decision3 dated
January 12, 2006 and Resolution4 dated June 14, 2006 of the Court of Appeals(CA)in CA-G.R. SP No.
88965 that set aside the Resolutions5 dated January 26, 2005 and March 31, 2005 of the National Labor
Relations Commission(NLRC), deleted the award of separation pay, and ordered the payment of financial
assistance of ₱15,000.00 each to its employees.

The Facts

On July 25, 2003, during the collective bargaining agreement (CBA)negotiations between Sangwoo
Philippines, Inc. Employees Union – Olalia (SPEU) and Sangwoo Philippines, Inc.(SPI), the latter filed with
the Department of Labor and Employment (DOLE) a letter-notice6of temporary suspension of operations
for one (1) month, beginning September 15, 2003, due to lack of orders from its buyers.7 SPEU was
furnished a copy of the said letter. Negotiation son the CBA, however, continued and on September 10,
2003, the parties signed a handwritten Memorandum of Agreement, which, among others, specified the
employees’ wages and benefits for the next two (2) years, and that in the event of a temporary
shutdown, all machineries and raw materials would not be taken out of the SPI premises.8

On September 15, 2003,SPI temporarily ceased operations. Thereafter, it successively filed two (2)
letters9 with the DOLE, copy furnished SPEU, for the extension of the temporary shutdown until March
15, 2004.10 Meanwhile, on October 28, 2003, SPEU filed a complaint for unfair labor practice, illegal
closure, illegal dismissal, damages and attorney’s fees before the Regional Arbitration Branch IV of the
NLRC.11 Subsequently, or on February 12, 2004, SPI posted, in conspicuous places within the company
premises, notices of its permanent closure and cessation of business operations, effective March 16,
2004, due to serious economic losses and financial reverses.12 The DOLE was furnished a copy of said
notice on February 13, 2004, together with a separate letter notifying it of the company’s permanent
closure.13 SPEU was also furnished with a copy of the notice of permanent closure. Forthwith, SPI
offered separation benefits of one-half (½) month pay for every year of service to each of its employees.
234 employees of SPI accepted the offer, received the said sums and executed quitclaims.14 Thosewho
refused the offer, i.e., the minority employees, were nevertheless given until March 25, 2004 to accept
their checks and correspondingly, execute quitclaims. However, the minority employees did not claim
the said checks.

The LA Ruling

In a Decision15 dated June 4, 2004, the Labor Arbiter (LA) ruled in favor of SPI. The LA found that SPI was
indeed suffering from serious business losses–as evidenced by financial statements which were never
contested by SPEU –and, as such, validly discontinued its operations.16 Consequently, the LA held that
SPI was not guilty of unfair labor practice, and similarly observed that it duly complied with the
requirement of furnishing notices of closure to its employees and the DOLE. Lastly, the LA ruled that
since SPI’s closure of business was due to serious business losses, it was not mandated by law to grant
separation benefits to the minority employees.

Aggrieved, SPEU filed an Appeal Memorandum17 before the NLRC.

The NLRC Ruling

In a Resolution18 dated January 26, 2005, the NLRC sustained the ruling of the LA, albeit with
modification. While it upheld SPI’s closure due to serious business losses, it ruled that the members of
SPEU are entitled to payment of separation pay equivalent to one-half (½) month pay for every year of
service. In this relation, the NLRC opined that since SPI already gave separation benefits to 234 of its
employees, the minority employees should not be denied of the same. Dissatisfied, SPI filed a petition
for certiorari19 before the CA, praying for, inter alia, the issuance of a temporary restraining order (TRO)
and/or a writ of preliminary injunction against the execution of the aforesaid NLRC resolution.

The CA Proceedings

In a Resolution20 dated April 12, 2005, the CA issued a TRO, which enjoined the enforcement of the
NLRC resolution. Thereafter, in a Resolution21 dated June 3, 2005, the CA issued a writ of preliminary
injunction against the same.

Meanwhile, pursuant to the CA’s Resolution22 dated May 19, 2005 which suggested that the parties
explore talks of a possible compromise agreement, SPI sent a Formal Offer of Settlement23 dated May
24, 2005 to SPEU, offering the amount of ₱15,000.00 as financial assistance to each of the minority
employees. On May 26, 2005, SPI sent a Reiteration of Formal Offer of Settlement to SPEU, reasserting
its previous offer of financial assistance. However, settlement talks broke down as SPEU did not accept
SPI’s offer.

In a Decision24 dated January 12, 2006, the CA held that the minority employees were not entitled to
separation pay considering that the company’s closure was due to serious business losses. It pronounced
that requiring an employer to be generous when it was no longer in a position to be so would be
oppressive and unjust. Nevertheless, the CA still ordered SPI to pay the minority employees ₱15,000.00
each, representing the amount of financial assistance as contained in the Formal Offer of Settlement.

Both parties filed motions for reconsideration which were, however, denied in a Resolution25 dated June
14, 2006. Hence, these petitions.

The Issues Before the Court

The issues for the Court’s resolution are as follows: (a) whether or not the minority employees are
entitled to separation pay; and (b) whether or not SPI complied with the notice requirement of Article
297 (formerly Article 283)26 of the Labor Code.

The Court’s Ruling

Both petitions are partly meritorious.

A. Non-entitlement to Separation Benefits.

Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of establishment, usually due to financial
losses. Closure of business, as an authorized cause for termination of employment,27 aims to prevent
further financial drain upon an employer who cannot pay anymore his employees since business has
already stopped.28 In such a case, the employer is generally required to give separation benefits to its
employees, unless the closure is due to serious business losses.29 As explained in the case of Galaxie
Steel Workers Union (GSWU-NAFLU-KMU) v. NLRC30(Galaxie):

The Constitution, while affording full protection to labor, nonetheless, recognizes "the right of
enterprises to reasonable returns on investments, and to expansion and growth." In line with this
protection afforded to business by the fundamental law, Article [297] of the Labor Code clearly makes a
policy distinction. It is only in instances of "retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses" that employees whose employment has been terminated as a result are entitled to separation
pay. In other words, Article [297] of the Labor Code does not obligate an employer to pay separation
benefits when the closure is due to serious losses. To require an employer to be generous when it is no
longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to the employer.
Ours is a system of laws, and the law in protecting the rights of the working man, authorizes neither the
oppression nor the self-destruction of the employer. (Emphasis and underscoring supplied)

In this case, the LA, NLRC, and the CA all consistently found that SPI indeed suffered from serious
business losses which resulted in its permanent shutdown and accordingly, held the company’s closure
to be valid. It is a rule that absent any showing that the findings of fact of the labor tribunals and the
appellate court are not supported by evidence on record or the judgment is based on a misapprehension
of facts, the Court shall not examine a new the evidence submitted by the parties.31 Perforce, without
any cogent reason to deviate from the findings on the validity of SPI’s closure, the Court thus holds that
SPI is not obliged to give separation benefits to the minority employees pursuant to Article 297 of the
Labor Code as interpreted in the case of Galaxie. As such, SPI should not be directed to give financial
assistance amounting to ₱15,000.00 to each of the minority employees based on the Formal Offer of
Settlement. If at all, such formal offer should be deemed only as a calculated move on SPI’s part to
further minimize the expenses that it will be bound to incur should litigation drag on, and not as an
indication that it was still financially sustainable. However, since SPEU chose not to accept, said offer did
not ripen into an enforceable obligation on the part of SPI from which financial assistance could have
been realized by the minority employees.

B.Insufficient Notice of Closure.

Article 297 of the Labor Code provides that before any employee is terminated due to closure of
business, it must give a one (1) month prior written notice to the employee and to the DOLE. In this
relation, case law instructs that it is the personal right of the employee to be personally informed of his
proposed dismissal as well as the reasons therefor; and such requirement of notice is not a mere
technicality or formality which the employer may dispense with.32 Since the purpose of previous notice
is to, among others, give the employee some time to prepare for the eventual loss of his job,33 the
employer has the positive duty to inform each and every employee of their impending termination of
employment. To this end, jurisprudence states that an employer’s act of posting notices to this effect in
conspicuous areas in the workplace is not enough.1âwphi1 Verily, for something as significant as the
involuntary loss of one’s employment, nothing less than an individually-addressed notice of dismissal
supplied to each worker is proper. As enunciated in the case of Galaxie:34

Finally, with regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC
and the Court of Appeals, that the written notice of closure or cessation of Galaxie’s business operations
was posted on the company bulletin board one month prior to its effectivity. The mere posting on the
company bulletin board does not, however, meet the requirement under Article [297] of "serving a
written notice on the workers."The purpose of the written notice is to inform the employees of the
specific date of termination or closure of business operations, and must be served upon them at least
one month before the date of effectivity to give them sufficient time to make the necessary
arrangement. In order to meet the foregoing purpose, service of the written notice must be made
individually upon each and every employee of the company.(Emphasis and underscoring supplied;
citations omitted)

Keeping with these principles, the Court finds that the LA, NLRC, and CA erred in ruling that SPI complied
with the notice requirement when it merely posted various copies of its notice of closure in conspicuous
places within the business premises. As earlier explained, SPI was required to serve written notices of
termination to its employees, which it, however, failed to do.It is well to stress that while SPI had a valid
ground to terminate its employees, i.e., closure of business, its failure to comply with the proper
procedure for terminationrenders itliable to pay the employee nominal damages for such omission.
Based on existing jurisprudence, an employer which has a valid cause for dismissing its employee but
conducts the dismissal with procedural infirmity is liable to pay the employee nominal damages in the
amount of ₱30,000.00 if the ground for dismissal is a just cause, or the amount of ₱50,000.00 if the
ground for dismissal is an authorized cause.35 However, case law exhorts that in instances where the
payment of such damages becomes impossible, unjust, or too burdensome, modification becomes
necessary in order to harmonize the disposition with the prevailing circumstances.36 Thus, in the case of
Industrial Timber Corporation v. Ababon37 (Industrial Timber),the Court reduced the amount of nominal
damages awarded to employees from ₱50,000.00 to ₱10,000.00 since the authorized cause of
termination was the employer’s closure or cessation of business which was done in good faith and due
to circumstances beyond the employer’s control,viz.:38

In the determination of the amount of nominal damages which is addressed to the sound discretion of
the court, several factors are taken into account: (1) the authorized cause invoked, whether it was a
retrenchment or a closure or cessation of operation of the establishment due to serious business losses
or financial reverses or otherwise; (2) the number of employees to be awarded; (3) the capacity of the
employers to satisfy the awards, taken into account their prevailing financial status as borneby the
records; (4) the employer’s grant of other termination benefits in favor of the employees; and (5)
whether there was a bona fide attempt to comply with the notice requirements as opposed to giving no
notice at all.

In the case at bar, there was a valid authorized cause considering the closure or cessation of ITC's
business which was done in good faith and due to circumstances beyond ITC's control. Moreover, ITC had
ceased to generate any income since its closure on August 17, 1990. Several months prior to the closure,
ITC experienced diminished income due to high production costs, erratic supply of raw materials,
depressed prices, and poor market conditions for its wood products. It appears that ITC had given its
employees all benefits in accord with the CBA upon their termination.

Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the
amount of nominal damages to be awarded for each employee to Pl0,000.00 each instead of 1!
50,000.00 each. (Emphasis and underscoring supplied)

In this case, considering that SPI closed down its operations due to serious business losses and that said
closure appears to have been done in good faith, the Court -similar to the case of Industrial Timber
-deems it just to reduce the amount of nominal damages to be awarded to each of the minority
employees from ₱50,000.00 to Pl0,000.00. To be clear, the foregoing award should only obtain in favor of
the minority employees and not for those employees who already received sums equivalent to
separation pay and executed quitclaims "releasing [SPI] now and in the future any claims and obligation
which may arise as results of [their] employment with the company."39 For these latter employees who
have already voluntarily accepted their dismissal, their executed quitclaims practically erased the
consequences of infirmities on the notice of dismissal,40 at least as to them.

WHEREFORE, the petitions are PARTLY GRANTED. The Decision dated January 12, 2006 and Resolution
dated June 14, 2006 of the Court of Appeals in CA-G.R. SP No. 88965 are hereby AFFIRMED with
MODIFICATION deleting the award of financial assistance in the amount of ₱15,000.00 to each of the
minority employees. Instead, Sangwoo Philippines, Inc. is ORDERED to pay nominal damages in the
amount of Pl0,000.00 to each of the minority employees.

SO ORDERED.

• Equitable Banking v. Sadac, June 8, 2006

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En Banc
filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to reverse the
Decision1 and Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004, respectively, as
amended by the Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No. 75013, which
reversed and set aside the Resolutions of the National Labor Relations Commission (NLRC), dated 28
March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.

The Antecedents

As culled from the records, respondent Sadac was appointed Vice President of the Legal Department of
petitioner Bank effective 1 August 1981, and subsequently General Counsel thereof on 8 December
1981. On 26 June 1989, nine lawyers of petitioner Bank's Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused respondent Sadac of abusive conduct, inter alia, and
ultimately, petitioned for a change in leadership of the department. On the ground of lack of confidence
in respondent Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed
respondent Sadac to deliver all materials in his custody in all cases in which the latter was appearing as
its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing and formal
investigation but the same remained unheeded. On 9 November 1989, respondent Sadac filed a
complaint for illegal dismissal with damages against petitioner Bank and individual members of the
Board of Directors thereof. After learning of the filing of the complaint, petitioner Bank terminated the
services of respondent Sadac. Finally, on 10 August 1989, respondent Sadac was removed from his office
and ordered disentitled to any compensation and other benefits.4

In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the complaint for
lack of merit. On appeal, the NLRC in its Resolution6 of 24 September 1991 reversed the Labor Arbiter
and declared respondent Sadac's dismissal as illegal. The decretal portion thereof reads, thus:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is
hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him to his former position as
bank Vice-President and General Counsel without loss of seniority rights and other privileges, and to pay
him full backwages and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary damages of P50,000.00, and
attorney's fees equivalent to Ten Percent (10%) of the monetary award. Should reinstatement be no
longer possible due to strained relations, the respondents are ordered likewise jointly and severally to
grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorney's fees equal to Ten Percent (10%) of all the monetary award, or a
grand total of P1,649,329.53.7

Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the NLRC
Resolution of 24 September 1991 in Equitable Banking Corporation v. National Labor Relations
Commission, docketed as G.R. No. 102467.8

In our Decision9 of 13 June 1997, we held respondent Sadac's dismissal illegal. We said that the
existence of the employer-employee relationship between petitioner Bank and respondent Sadac had
been duly established bringing the case within the coverage of the Labor Code, hence, we did not permit
petitioner Bank to rely on Sec. 26, Rule 13810 of the Rules of Court, claiming that the association
between the parties was one of a client-lawyer relationship, and, thus, it could terminate at any time the
services of respondent Sadac. Moreover, we did not find that respondent Sadac's dismissal was
grounded on any of the causes stated in Article 282 of the Labor Code. We similarly found that petitioner
Bank disregarded the procedural requirements in terminating respondent Sadac's employment as so
required by Section 2 and Section 5, Rule XIV, Book V of the Implementing Rules of the Labor Code. We
decreed:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are deleted; and that the liability herein pronounced shall be
due from petitioner bank alone, the other petitioners being absolved from solidary liability. No costs.11

On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and executory.12

Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution13 thereof.
Likewise, petitioner Bank filed a Manifestation and Motion14 praying that the award in favor of
respondent Sadac be computed and that after payment is made, petitioner Bank be ordered forever
released from liability under said judgment.

Per respondent Sadac's computation, the total amount of the monetary award is P6,030,456.59,
representing his backwages and other benefits, including the general increases which he should have
earned during the period of his illegal termination. Respondent Sadac theorized that he started with a
monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice President of
petitioner Bank's Legal Department and later as its General Counsel in December 1981. As of November
1989, when he was dismissed illegally, his monthly compensation amounted to P29,365.00 or more than
twice his original compensation. The difference, he posited, can be attributed to the annual salary
increases which he received equivalent to 15 percent (15%) of his monthly salary.

Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and cited as
authority the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations,15 St. Louis College of
Tuguegarao v. National Labor Relations Commission,16 and Sigma Personnel Services v. National Labor
Relations Commission.17 According to respondent Sadac, the catena of cases uniformly holds that it is
the obligation of the employer to pay an illegally dismissed employee the whole amount of the salaries
or wages, plus all other benefits and bonuses and general increases to which he would have been
normally entitled had he not been dismissed; and therefore, salary increases should be deemed a
component in the computation of backwages. Moreover, respondent Sadac contended that his check-up
benefit, clothing allowance, and cash conversion of vacation leaves must be included in the computation
of his backwages.

Petitioner Bank disputed respondent Sadac's computation. Per its computation, the amount of monetary
award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latter's general salary
increases and other claimed benefits which, it maintained, were unsubstantiated. The jurisprudential
precedent relied upon by petitioner Bank in assailing respondent Sadac's computation is Evangelista v.
National Labor Relations Commission,18 citing Paramount Vinyl Products Corp. v. National Labor
Relations Commission,19 holding that an unqualified award of backwages means that the employee is
paid at the wage rate at the time of his dismissal. Furthermore, petitioner Bank argued before the Labor
Arbiter that the award of salary differentials is not allowed, the established rule being that upon
reinstatement, illegally dismissed employees are to be paid their backwages without deduction and
qualification as to any wage increases or other benefits that may have been received by their co-workers
who were not dismissed or did not go on strike.

On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order20 adopting respondent
Sadac's computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations
Commission21 concluded that respondent Sadac is entitled to the general increases as a component in
the computation of his backwages. Accordingly, he awarded respondent Sadac the amount of
P6,030,456.59 representing his backwages inclusive of allowances and other claimed benefits, namely
check-up benefit, clothing allowance, and cash conversion of vacation leave plus 12 percent (12%)
interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total of P7,398,047.48.
However, considering that respondent Sadac had already received the amount of P1,055,740.48 by
virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor Arbiter directed petitioner
Bank to pay respondent Sadac the amount of P6,342,307.00. The Labor Arbiter also granted an award of
attorney's fees equivalent to ten percent (10%) of all monetary awards, and imposed a 12 percent (12%)
interest per annum reckoned from the finality of the judgment until the satisfaction thereof.

The Labor Arbiter decreed, thus:

WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued commanding the
Sheriff, this Branch, to collect from respondent Bank the amount of Ph6,342,307.00 representing the
backwages with 12% interest per annum due complainant.23

Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a Resolution,24
promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as component in
computing backwages in Sigma Personnel Services and St. Louis was merely obiter dictum. The NLRC
found East Asiatic Co., Ltd. inapplicable on the ground that the original circumstances therein are not
only peculiar to the said case but also completely strange to the case of respondent Sadac. Further, the
NLRC disallowed respondent Sadac's claim to check-up benefit ratiocinating that there was no clear and
substantial proof that the same was being granted and enjoyed by other employees of petitioner Bank.
The award of attorney's fees was similarly deleted.

The dispositive portion of the Resolution states:

WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation prepared by
respondent Equitable Banking Corporation on the award of backwages in favor of complainant Ricardo
Sadac under the decision promulgated by the Supreme Court on June 13, 1997 in G.R. No. 102476 in the
aggregate amount of P2,981,442.98 is hereby ordered.25
Respondent Sadac's Motion for Reconsideration thereon was denied by the NLRC in its Resolution,26
promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking
nullification of the twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as well
as praying for the reinstatement of the 2 August 1999 Order of the Labor Arbiter.

For the resolution of the Court of Appeals were the following issues, viz.:

(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance, and cash
conversion of vacation leave are included in the computation of full backwages for illegally dismissed
employees;

(2) Whether respondent is entitled to attorney's fees; andcralawlibrary

(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all accounts
outstanding until full payment thereof.

Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision on 6 April
2004, the dispositive portion of which is quoted hereunder:

WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions of the
National Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999 Order
of the Labor Arbiter is REVIVED to the effect that private respondent is DIRECTED TO PAY petitioner the
sum of PhP6,342,307.00, representing full back wages (sic) which sum includes annual general increases
in basic salary, check-up benefit, clothing allowance, cash conversion of vacation leave and other sundry
benefits plus 12% per annum interest on outstanding balance from July 28, 1997 until full payment.

Costs against private respondent.27

The Court of Appeals, citing East Asiatic held that respondent Sadac's general increases should be added
as part of his backwages. According to the appellate court, respondent Sadac's entitlement to the annual
general increases has been duly proven by substantial evidence that the latter, in fact, enjoyed an annual
increase of more or less 15 percent (15%). Respondent Sadac's check-up benefit, clothing allowance, and
cash conversion of vacation leave were similarly ordered added in the computation of respondent
Sadac's basic wage.

Anent the matter of attorney's fees, the Court of Appeals sustained the NLRC. It ruled that our
Decision28 of 13 June 1997 did not award attorney's fees in respondent Sadac's favor as there was
nothing in the aforesaid Decision, either in the dispositive portion or the body thereof that supported
the grant of attorney's fees. Resolving the final issue, the Court of Appeals imposed a 12 percent (12%)
interest per annum on the total monetary award to be computed from 28 July 1997 or the date our
judgment in G.R. No. 102467 became final and executory until fully paid at which time the quantification
of the amount may be deemed to have been reasonably ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration29 of the 6 April 2004 Court
of Appeals Decision insofar as the appellate court did not award him attorney's fees. Similarly, petitioner
Bank filed a Motion for Partial Reconsideration thereon. Following an exchange of pleadings between
the parties, the Court of Appeals rendered a Resolution,30 dated 28 July 2004, denying petitioner Bank's
Motion for Partial Reconsideration for lack of merit.

Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to wit:

(a) The Hon. Court of Appeals erred in ruling that general salary increases should be included in the
computation of full backwages.

(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are: (i) East
Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v. NLRC, 177 SCRA 151 (1989);
(iii) Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993); and (iv) Millares v. NLRC, 305 SCRA 500
(1999) and not (i) Art. 279 of the Labor Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990);
(iii) Evangelista v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit, clothing
allowance and cash conversion of vacation leaves notwithstanding that respondent did not present any
evidence to prove entitlement to these claims.

(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal interest even if
the principal amount due him has not yet been correctly and finally determined.31

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision granting
respondent Sadac's Partial Motion for Reconsideration and amending the dispositive portion of the 6
April 2004 Decision in this wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002 Resolutions of
the National Labor Relations Commission are hereby REVERSED and SET ASIDE and the August 2, 1999
Order of the Labor Arbiter is hereby REVIVED to the effect that private respondent is hereby DIRECTED
TO PAY petitioner the sum of P6,342,307.00, representing full backwages which sum includes annual
general increases in basic salary, check-up benefit, clothing allowance, cash conversion of vacation leave
and other sundry benefits "and attorney's fees equal to TEN PERCENT (10%) of all the monetary award"
plus 12% per annum interest on all outstanding balance from July 28, 1997 until full payment.

Costs against private respondent.32

On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review33 contending in the
main that the Court of Appeals erred in issuing the Supplemental Decision by directing petitioner Bank
to pay an additional amount to respondent Sadac representing attorney's fees equal to ten percent
(10%) of all the monetary award.
The Court's Ruling

I.

We are called to write finis to a controversy that comes to us for the second time. At the core of the
instant case are the divergent contentions of the parties on the manner of computation of backwages.

Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not contemplate
the inclusion of salary increases in the definition of "full backwages." It controverts the reliance by the
appellate court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. While
it is in accord with the pronouncement of the Court of Appeals that Republic Act No. 6715, in amending
Article 279, intends to give more benefits to workers, petitioner Bank submits that the Court of Appeals
was in error in relying on East Asiatic to support its finding that salary increases should be included in the
computation of backwages as nowhere in Article 279, as amended, are salary increases spoken of. The
prevailing rule in the milieu of the East Asiatic doctrine was to deduct earnings earned elsewhere from
the amount of backwages payable to an illegally dismissed employee.

Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in the
computation of backwages, it was because the inclusion was purposely to cushion the blow of the
deduction of earnings derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the rationale for including salary
increases in the computation of backwages no longer exists. On the references of salary increases in the
aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank contends
that the same were merely obiter dicta. In fine, petitioner Bank anchors its claim on the cases of (i)
Paramount Vinyl Products Corp. v. National Labor Relations Commission;34 (ii) Evangelista v. National
Labor Relations Commission;35 and (iii) Espejo v. National Labor Relations Commission,36 which ruled
that an unqualified award of backwages is exclusive of general salary increases and the employee is paid
at the wage rate at the time of the dismissal.

For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that his
backwages should include the general increases on the basis of the following cases, to wit: (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares.

Resolving the protracted litigation between the parties necessitates us to revisit our pronouncements on
the interpretation of the term backwages. We said that backwages in general are granted on grounds of
equity for earnings which a worker or employee has lost due to his illegal dismissal.37 It is not private
compensation or damages but is awarded in furtherance and effectuation of the public objective of the
Labor Code. Nor is it a redress of a private right but rather in the nature of a command to the employer
to make public reparation for dismissing an employee either due to the former's unlawful act or bad
faith.38 The Court, in the landmark case of Bustamante v. National Labor Relations Commission,39 had
the occasion to explicate on the meaning of full backwages as contemplated by Article 27940 of the
Labor Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715. The Court in Bustamante
said, thus:
The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educational Center case, by now holding that conformably
with the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be
awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by
the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying reason
for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn a
living to support himself and family, while full backwages have to be paid by the employer as part of the
price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the
amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them
under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to
the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the concerned employee during
the period of his illegal dismissal. In other words, the provision calling for "full backwages" to illegally
dismissed employees is clear, plain and free from ambiguity and, therefore, must be applied without
attempted or strained interpretation. Index animi sermo est.41

Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved. In Mercury
Drug Co., Inc. v. Court of Industrial Relations,42 the rule was that backwages were granted for a period of
three years without qualification and without deduction, meaning, the award of backwages was not
reduced by earnings actually earned by the dismissed employee during the interim period of the
separation. This came to be known as the Mercury Drug rule.43 Prior to the Mercury Drug ruling in 1974,
the total amount of backwages was reduced by earnings obtained by the employee elsewhere from the
time of the dismissal to his reinstatement. The Mercury Drug rule was subsequently modified in Ferrer v.
National Labor Relations Commission44 and Pines City Educational Center v. National Labor Relations
Commission,45 where we allowed the recovery of backwages for the duration of the illegal dismissal
minus the total amount of earnings which the employee derived elsewhere from the date of dismissal up
to the date of reinstatement, if any. In Ferrer and in Pines, the three-year period was deleted, and
instead, the dismissed employee was paid backwages for the entire period that he was without work
subject to the deductions, as mentioned. Finally came our ruling in Bustamante which superseded Pines
City Educational Center and allowed full recovery of backwages without deduction and without
qualification pursuant to the express provisions of Article 279 of the Labor Code, as amended by Rep. Act
No. 6715, i.e., without any deduction of income the employee may have derived from employment
elsewhere from the date of his dismissal up to his reinstatement, that is, covering the entirety of the
period of the dismissal.

The first issue for our resolution involves another aspect in the computation of full backwages, mainly,
the basis of the computation thereof. Otherwise stated, whether general salary increases should be
included in the base figure to be used in the computation of backwages.

In so concluding that general salary increases should be made a component in the computation of
backwages, the Court of Appeals ratiocinated, thus:

The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971) that
"general increases" should be added as a part of full backwages, to wit:

In other words, the just and equitable rule regarding the point under discussion is this: It is the obligation
of the employer to pay an illegally dismissed employee or worker the whole amount of the salaries or
wages, plus all other benefits and bonuses and general increases, to which he would have been normally
entitled had he not been dismissed and had not stopped working, but it is the right, on the other hand of
the employer to deduct from the total of these, the amount equivalent to the salaries or wages the
employee or worker would have earned in his old employment on the corresponding days he was
actually gainfully employed elsewhere with an equal or higher salary or wage, such that if his salary or
wage in his other employment was less, the employer may deduct only what has been actually earned.

The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of Tugueg[a]rao
v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v.
National Labor Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioner's contention, alleged in his Memorandum that only the
wage rate at the time of the employee's illegal dismissal should be considered - private respondent citing
the following decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525 (1990);
Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA 430 (1996) which rendered obsolete
the ruling in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971).

We are not convinced.

The Supreme Court had consistently held that payment of full backwages is the price or penalty that the
employer must pay for having illegally dismissed an employee.

In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and Evergreen Farms,
Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear legislative intent in the amendment in
Republic Act 6715 was to give more benefits to workers than was previously given them under the
Mercury Drug rule or the "deductions of earnings elsewhere" rule.

The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are inapplicable to the
case at bar. The doctrines therein came about as a result of the old Mercury Drug rule, which was
repealed with the passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255 SCRA 430
(1993) when the Supreme Court returned to the doctrine in East Asiatic, which was soon supplanted by
the case of Bustamante v. NLRC and Evergreen Farms, Inc., which held that the backwages to be awarded
to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by the
earnings derived from him during the period of his illegal dismissal. Furthermore, the Mercury Drug rule
was never meant to prejudice the workers, but merely to speed the recovery of their backwages.

Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the Supreme Court
to increase the backwages due an illegally dismissed employee. In the Mercury Drug case, full backwages
was to be recovered even though a three-year limitation on recovery of full backwages was imposed in
the name of equity. Then in Bustamante, full backwages was interpreted to mean absolutely no
deductions regardless of the duration of the illegal dismissal. In Bustamante, the Supreme Court no
longer regarded equity as a basis when dealing with illegal dismissal cases because it is not equity at play
in illegal dismissals but rather, it is employer's obligation to pay full back wages (sic). It is an obligation of
the employer because it is "the price or penalty the employer has to pay for illegally dismissing his
employee."

The applicable modern definition of full backwages is now found in Millares v. National Labor Relations
Commission 305 SCRA 500 (1999), where although the issue in Millares concerned separation pay -
separation pay and backwages both have employee's wage rate at their foundation.

x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally
dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general
increases to which he would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x x

xxxx

x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)

We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section 34 of
Rep. Act No. 6715. The law provides as follows:

ART. 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement. (Emphasis supplied.)

Article 279 mandates that an employee's full backwages shall be inclusive of allowances and other
benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals, we do not see that
a salary increase can be interpreted as either an allowance or a benefit. Salary increases are not akin to
allowances or benefits, and cannot be confused with either. The term "allowances" is sometimes used
synonymously with "emoluments," as indirect or contingent remuneration, which may or may not be
earned, but which is sometimes in the nature of compensation, and sometimes in the nature of
reimbursement.47 Allowances and benefits are granted to the employee apart or separate from, and in
addition to the wage or salary. In contrast, salary increases are amounts which are added to the
employee's salary as an increment thereto for varied reasons deemed appropriate by the employer.
Salary increases are not separate grants by themselves but once granted, they are deemed part of the
employee's salary. To extend the coverage of an allowance or a benefit to include salary increases would
be to strain both the imagination of the Court and the language of law. As aptly observed by the NLRC,
"to otherwise give the meaning other than what the law speaks for by itself, will open the floodgates to
various interpretations."48 Indeed, if the intent were to include salary increases as basis in the
computation of backwages, the same should have been explicitly stated in the same manner that the law
used clear and unambiguous terms in expressly providing for the inclusion of allowances and other
benefits.

Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East
Asiatic Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad A.
Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of the salaries plus all general
increases and bonuses she would have received during the period of her lay-off with the corresponding
right of the employer to deduct from the total amounts, all the earnings earned by the employee during
her lay-off. The emphasis in East Asiatic is the duty of both the employer and the employee to disclose
the material facts and competent evidence within their peculiar knowledge relative to the proper
determination of backwages, especially as the earnings derived by the employee elsewhere are
deductions to which the employer are entitled. However, East Asiatic does not find relevance in the
resolution of the issue before us. First, the material date to consider is 21 March 1989, when the law
amending Article 279 of the Labor Code, Rep. Act No. 6715, otherwise known as the Herrera-Veloso Law,
took effect. It is obvious that the backdrop of East Asiatic, decided by this Court on 31 August 1971 was
prior to the current state of the law on the definition of full backwages. Second, it bears stressing that
East Asiatic was decided at a time when even as an illegally dismissed employee is entitled to the whole
amount of the salaries or wages, it was the recognized right of the employer to deduct from the total of
these, the amount equivalent to the salaries or wages the employee or worker would have earned in his
old employment on the corresponding days that he was actually gainfully employed elsewhere with an
equal or higher salary or wage, such that if his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned.49 It is for this reason the Court centered its
discussion on the duty of both parties to be candid and open about facts within their knowledge to
establish the amount of the deductions, and not leave the burden on the employee alone to establish his
claim, as well as on the duty of the court to compel the parties to cooperate in disclosing such material
facts. The inapplicability of East Asiatic to respondent Sadac was sufficiently elucidated upon by the
NLRC, viz.:

A full discernment of the pertinent portion of the judgment sought to be executed in East Asiatic Co.,
Ltd. would reveal as follows:

"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from September
1, 1958 until actually reinstated with all the rights and privileges acquired and due her, including
seniority and such other terms and conditions of employment AT THE TIME OF HER LAY-OFF"

The basis on which this doctrine was laid out was summed up by the Supreme Court which ratiocinated
in this light. To quote:

"x x x on the other hand, of the employer to deduct from the total of these, the amount equivalent to
these salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the employer may deduct only
what has been actually earned x x x" (Ibid, pp. 547-548).

But the Supreme Court, in the instant case, pronounced a clear but different judgment from that of East
Asiatic Co. decretal portion, in this wise:

"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; xxx"

Undisputably (sic), it was decreed in plain and unambiguous language that complainant Sadac "shall be
entitled to backwages." No more, no less.

Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with the award of
backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd.50

In the same vein, we cannot accept the Court of Appeals' reliance on the doctrine as espoused in
Millares. It is evident that Millares concerns itself with the computation of the salary base used in
computing the separation pay of petitioners therein. The distinction between backwages and separation
pay is elementary. Separation pay is granted where reinstatement is no longer advisable because of
strained relations between the employee and the employer. Backwages represent compensation that
should have been earned but were not collected because of the unjust dismissal. The bases for
computing the two are different, the first being usually the length of the employee's service and the
second the actual period when he was unlawfully prevented from working.51

The issue that confronted the Court in Millares was whether petitioners' housing and transportation
allowances therein which they allegedly received on a monthly basis during their employment should
have been included in the computation of their separation pay. It is plain to see that the reference to
general increases in Millares citing East Asiatic was a mere obiter. The crux in Millares was our
pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize it as
regular and forming part of salary because the nature of the grant is a factor worth considering. Whether
salary increases are deemed part of the salary base in the computation of backwages was not the issue
in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly
contentious therein was the inclusion of fringe benefits in the computation of the award of backwages,
in particular additional vacation and sick leaves granted to therein concerned employees, it evidently
appearing that the reference to East Asiatic in a footnote was a mere obiter dictum. Salary increases are
not akin to fringe benefits52 and neither is it logical to conceive of both as belonging to the same
taxonomy.

We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The basic
issue before the Court therein was whether the employee, Susan Sumatre, a domestic helper in Abu
Dhabi, United Arab Emirates, had been illegally dismissed, in light of the contention of Sigma Personnel
Services, a duly licensed recruitment agency, that the former was a mere probationary employee who
was, on top of this status, mentally unsound.53 Even a cursory reading of Sigma Personnel Services citing
St. Louis College of Tuguegarao would readily show that inclusion of salary increases in the computation
of backwages was not at issue. The same was not on all fours with the instant petition.

What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner
Bank's favor and against respondent Sadac's claim for the inclusion of general increases in the
computation of his backwages.

We stressed in Paramount that an unqualified award of backwages means that the employee is paid at
the wage rate at the time of his dismissal, thus:

The determination of the salary base for the computation of backwages requires simply an application of
judicial precedents defining the term "backwages". Unfortunately, the Labor Arbiter erred in this regard.
An unqualified award of backwages means that the employee is paid at the wage rate at the time of his
dismissal [Davao Free Worker Front v. Court of Industrial Relations, G.R. No. L-29356, October 27, 1975,
67 SCRA 418; Capital Garments Corporation v. Ople, G.R. No. 53627, September 30, 1982, 117 SCRA 473;
Durabilt Recapping Plant & Company v. NLRC, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. And the
Court has declared that the base figure to be used in the computation of backwages due to the
employee should include not just the basic salary, but also the regular allowances that he had been
receiving, such as the emergency living allowances and the 13th month pay mandated under the law
[See Pan-Philippine Life Insurance Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866;
Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510,
October 27, 1987, 155 SCRA 124; Insular Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis supplied.)

There is no ambivalence in Paramount, that the base figure to be used in the computation of backwages
is pegged at the wage rate at the time of the employee's dismissal, inclusive of regular allowances that
the employee had been receiving such as the emergency living allowances and the 13th month pay
mandated under the law.

In Evangelista v. National Labor Relations Commission,55 we addressed the sole issue of whether the
computation of the award of backwages should be based on current wage level or the wage levels at the
time of the dismissal. We resolved that an unqualified award of backwages means that the employee is
paid at the wage rate at the time of his dismissal, thus:

As explicitly declared in Paramount Vinyl Products Corp. v. NLRC, the determination of the salary base for
the computation of backwages requires simply an application of judicial precedents defining the term
"backwages." An unqualified award of backwages means that the employee is paid at the wage rate at
the time of his dismissal. Furthermore, the award of salary differentials is not allowed, the established
rule being that upon reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike.56

The case of Paramount was relied upon by the Court in the latter case of Espejo v. National Labor
Relations Commission,57 where we reiterated that the computation of backwages should be based on
the basic salary at the time of the employee's dismissal plus the regular allowances that he had been
receiving. Further, the clarification made by the Court in General Baptist Bible College v. National Labor
Relations Commission,58 settles the issue, thus:

We also want to clarify that when there is an award of backwages this actually refers to backwages
without qualifications and deductions. Thus, We held that:

"The term 'backwages without qualification and deduction' means that the workers are to be paid their
backwages fixed as of the time of the dismissal or strike without deduction for their earnings elsewhere
during their layoff and without qualification of their wages as thus fixed; i.e., unqualified by any wage
increases or other benefits that may have been received by their co-workers who are not dismissed or
did not go on strike. Awards including salary differentials are not allowed. The salary base properly used
should, however, include not only the basic salary but also the emergency cost of living allowances and
also transportation allowances if the workers are entitled thereto."59 (Italics supplied.)

Indeed, even a cursory reading of the dispositive portion of the Court's Decision of 13 June 1997 in G.R.
No. 102467, awarding backwages to respondent Sadac, readily shows that the award of backwages
therein is unqualified, ergo, without qualification of the wage as thus fixed at the time of the dismissal
and without deduction.

A demarcation line between salary increases and backwages was drawn by the Court in Paguio v.
Philippine Long Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on account of his illegal
transfer sought backwages, including an amount equal to 16 percent (16%) of his monthly salary
representing his salary increases during the period of his demotion, contending that he had been
consistently granted salary increases because of his above average or outstanding performance. We said:

In several cases, the Court had the opportunity to elucidate on the reason for the grant of backwages.
Backwages are granted on grounds of equity to workers for earnings lost due to their illegal dismissal
from work. They are a reparation for the illegal dismissal of an employee based on earnings which the
employee would have obtained, either by virtue of a lawful decree or order, as in the case of a wage
increase under a wage order, or by rightful expectation, as in the case of one's salary or wage. The
outstanding feature of backwages is thus the degree of assuredness to an employee that he would have
had them as earnings had he not been illegally terminated from his employment.

Petitioner's claim, however, is based simply on expectancy or his assumption that, because in the past he
had been consistently rated for his outstanding performance and his salary correspondingly increased, it
is probable that he would similarly have been given high ratings and salary increases but for his transfer
to another position in the company.

In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is
based merely on speculation. Furthermore, it assumes that in the other position to which he had been
transferred petitioner had not been given any performance evaluation. As held by the Court of Appeals,
however, the mere fact that petitioner had been previously granted salary increases by reason of his
excellent performance does not necessarily guarantee that he would have performed in the same
manner and, therefore, qualify for the said increase later. What is more, his claim is tantamount to saying
that he had a vested right to remain as Head of the Garnet Exchange and given salary increases simply
because he had performed well in such position, and thus he should not be moved to any other position
where management would require his services.61

Applying Paguio to the case at bar, we are not prepared to accept that this degree of assuredness applies
to respondent Sadac's salary increases. There was no lawful decree or order supporting his claim, such
that his salary increases can be made a component in the computation of backwages. What is evident is
that salary increases are a mere expectancy. They are, by its nature volatile and are dependent on
numerous variables, including the company's fiscal situation and even the employee's future
performance on the job, or the employee's continued stay in a position subject to management
prerogative to transfer him to another position where his services are needed. In short, there is no
vested right to salary increases. That respondent Sadac may have received salary increases in the past
only proves fact of receipt but does not establish a degree of assuredness that is inherent in backwages.
From the foregoing, the plain conclusion is that respondent Sadac's computation of his full backwages
which includes his prospective salary increases cannot be permitted.

Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage and not
salary, and therefore, the rule is inapplicable to him. It is respondent Sadac's stance that he was not paid
at the wage rate nor was he engaged in some form of manual or physical labor as he was hired as Vice
President of petitioner Bank. He cites Gaa v. Court of Appeals62 where the Court distinguished between
wage and salary.

The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose of Article
1708 of the Civil Code which mandates that, "[t]he laborer's wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical attendance." In labor law,
however, the distinction appears to be merely semantics. Paramount and Evangelista may have involved
wage earners, but the petitioner in Espejo was a General Manager with a monthly salary of P9,000.00
plus privileges. That wage and salary are synonymous has been settled in Songco v. National Labor
Relations Commission.63 We said:

Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal,"
the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in
essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins v. Cromwell,
85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word
"salarium," is often used interchangeably with "wage", the etymology of which is the Middle English
word "wagen". Both words generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed). x x x64 (Italics supplied.)

II.

Petitioner Bank ascribes as its second assignment of error the Court of Appeals' ruling that respondent
Sadac is entitled to check-up benefit, clothing allowance and cash conversion of vacation leaves
notwithstanding that respondent Sadac did not present any evidence to prove entitlement to these
claims.65

The determination of respondent Sadac's entitlement to check-up benefit, clothing allowance, and cash
conversion of vacation leaves involves a question of fact. The well-entrenched rule is that only errors of
law not of facts are reviewable by this Court in a Petition for Review .66 The jurisdiction of this Court in a
Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is
limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not
supported by evidence on record or the impugned judgment is based on a misapprehension of facts.67
This Court is also not precluded from delving into and resolving issues of facts, particularly if the findings
of the Labor Arbiter are inconsistent with those of the NLRC and the Court of Appeals.68 Such is the case
in the instant petition. The Labor Arbiter and the Court of Appeals are in agreement anent the
entitlement of respondent Sadac to check-up benefit, clothing allowance, and cash conversion of
vacation leaves, but the findings of the NLRC were to the contrary. The Labor Arbiter sustained
respondent Sadac's entitlement to check-up benefit, clothing allowance and cash conversion of vacation
leaves. He gave weight to petitioner Bank's acknowledgment in its computation that respondent Sadac is
entitled to certain benefits, namely, rice subsidy, tuition fee allowance, and medicine allowance, thus,
there exists no reason to deprive respondent Sadac of his other benefits. The Labor Arbiter also
reasoned that the petitioner Bank did not adduce evidence to support its claim that the benefits sought
by respondent Sadac are not granted to its employees and officers. Similarly, the Court of Appeals
ratiocinated that if ordinary employees are entitled to receive these benefits, so it is with more reason
for a Vice President, like herein respondent Sadac to receive the same.

We find in the records that, per petitioner Bank's computation, the benefits to be received by
respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance per year.69
Contained nowhere is an acknowledgment of herein claimed benefits, namely, check-up benefit, clothing
allowance, and cash conversion of vacation leaves. We cannot sustain the rationalization that the
acknowledgment by petitioner Bank in its computation of certain benefits granted to respondent Sadac
means that the latter is also entitled to the other benefits as claimed by him but not acknowledged by
petitioner Bank. The rule is, he who alleges, not he who denies, must prove. Mere allegations by
respondent Sadac does not suffice in the absence of proof supporting the same.

III.

We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition for
Review, assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which amended
the fallo of its 6 April 2004 Decision to include "attorney's fees equal to TEN PERCENT (10%) of all the
monetary award" granted to respondent Sadac. Petitioner Bank posits that neither the dispositive
portion of our 13 June 1997 Decision in G.R. No. 102467 nor the body thereof awards attorney's fees to
respondent Sadac. It is postulated that the body of the 13 June 1997 Decision does not contain any
findings of facts or conclusions of law relating to attorney's fees, thus, this Court did not intend to grant
to respondent Sadac the same, especially in the light of its finding that the petitioner Bank was not
motivated by malice or bad faith and that it did not act in a wanton, oppressive, or malevolent manner in
terminating the services of respondent Sadac.70

We do not agree.

At the outset it must be emphasized that when a final judgment becomes executory, it thereby becomes
immutable and unalterable. The judgment may no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the Court rendering it or by the
highest Court of the land. The only recognized exceptions are the correction of clerical errors or the
making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course, where
the judgment is void.71 The Court's 13 June 1997 Decision in G.R. No. 102467 became final and
executory on 28 July 1997. This renders moot whatever argument petitioner Bank raised against the
grant of attorney's fees to respondent Sadac. Of even greater import is the settled rule that it is the
dispositive part of the judgment that actually settles and declares the rights and obligations of the
parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent statements
in the body that may tend to confuse.72

Proceeding therefrom, we make a determination of whether the Court in Equitable Banking Corporation
v. National Labor Relations Commission,73 G.R. No. 102467, dated 13 June 1997, awarded attorney's
fees to respondent Sadac. In recapitulation, the dispositive portion of the aforesaid Decision is
hereunder quoted:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are deleted; and that the liability herein pronounced shall be
due from petitioner bank alone, the other petitioners being absolved from solidary liability. No costs.74

The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent Sadac
attorney's fees equivalent to ten percent (10%) of the monetary award, viz:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is
hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him to his former position as
bank Vice-President and General Counsel without loss of seniority rights and other privileges, and to pay
him full backwages and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary damages of P50,000.00, and
attorney's fees equivalent to Ten Percent (10%) of the monetary award. Should reinstatement be no
longer possible due to strained relations, the respondents are ordered likewise jointly and severally to
grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorney's fees equal to Ten Percent (10%) of all the monetary award, or a
grand total of P1,649,329.53.75 (Italics Ours.)

As can be gleaned from the foregoing, the Court's Decision of 13 June 1997 AFFIRMED with
MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch upon the
award of attorney's fees as granted, hence, the award stands. Juxtaposing the decretal portions of the
NLRC Decision of 24 September 1991 with that of the Court's Decision of 13 June 1997, we find that
what was deleted by the Court was "the award of moral and exemplary damages," but not the award of
"attorney's fees equivalent to Ten Percent (10%) of the monetary award." The issue on the grant of
attorney's fees to respondent Sadac has been adequately and definitively threshed out and settled with
finality when petitioner Bank came to us for the first time on a Petition for Certiorari in Equitable Banking
Corporation v. National Labor Relations Commission, docketed as G.R. No. 102467. The Court had spoken
in its Decision of 13 June 1997 in the said case which attained finality on 28 July 1997. It is now
immutable.

IV.

We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve percent (12%)
interest per annum on the outstanding balance as of 28 July 1997, the date when our Decision in G.R.
No. 102467 became final and executory.

In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking through the Honorable Justice
Jose C. Vitug, laid down the following rules of thumb:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts
is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual or compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Article 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2 above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.77

It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from the time
judgment becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank is liable
to pay interest from 28 July 1997, the finality of our Decision in G.R. No. 102467.78 The Court of Appeals
was not in error in imposing the same notwithstanding that the parties were at variance in the
computation of respondent Sadac's backwages. What is significant is that the Decision of 13 June 1997
which awarded backwages to respondent Sadac became final and executory on 28 July 1997.

V.

Finally, petitioner Bank's Motion to Refer the Petition En Banc must necessarily be denied as established
in our foregoing discussion. We are not herein modifying or reversing a doctrine or principle laid down
by the Court en banc or in a division. The instant case is not one that should be heard by the Court en
banc.79 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the backwages,
respondent Sadac's claimed prospective salary increases, check-up benefit, clothing allowance, and cash
conversion of vacation leaves are excluded. The petition is PARTIALLY DENIED insofar as we AFFIRMED
the grant of attorney's fees equal to ten percent (10%) of all the monetary award and the imposition of
twelve percent (12%) interest per annum on the outstanding balance as of 28 July 1997. Hence, the
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 75013, dated 6 April 2004 and 28 July
2004, respectively, and the Supplemental Decision dated 26 October 2004 are MODIFIED in the following
manner, to wit:

Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:

(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467 with a
clarification that the award of backwages EXCLUDES respondent Sadac's claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of vacation leaves;

(2) ATTORNEY'S FEES equal to TEN PERCENT (10%) of the total sum of all monetary award;
andcralawlibrary

(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum of all monetary
award from 28 July 1997, the date of finality of Our Decision in G.R. No. 102467 until full payment of the
said monetary award.

The Motion to Refer the Petition to the Court En Banc is DENIED.

No costs.

SO ORDERED.

• Carlos v. CA, August 28, 2007

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed
by petitioners Alex B. Carlos (Carlos), ABC Security Services, Inc. (ABC Security), and Honest Care
Janitorial Services, Inc. (Honest Care Janitorial), seeking to reverse and set aside the Decision,1 dated 31
August 2004 and the Resolution,2 dated 9 May 2005 of the Court of Appeals in CA-G.R. SP No. 74458.
The appellate court, in its assailed Decision and Resolution affirmed the Decision dated 19 July 2002 and
Resolution dated 30 August 2002 of the National Labor Relations Commission (NLRC) in NLRC NCR-06-
04079-93 finding the petitioners jointly and severally liable for illegal dismissal, and ordering them to pay
the private respondents backwages, separation pay, overtime pay, 13th month pay, premium pay for rest
days and holidays, and service incentive leave pay. The dispositive portion of the assailed appellate
court's Decision thus reads:

WHEREFORE, for lack of merit, the instant petition is DENIED due course and, accordingly DISMISSED.
Consequently, the decision dated July 19, 2002 of the National Labor Relations Commission is AFFIRMED
in toto.3

The factual and procedural antecedents of the instant petition are as follows:

Petitioner ABC Security is a domestic corporation engaged in the business of job contracting by providing
security services to its clientele. Petitioner Honest Care Janitorial is a domestic corporation likewise
engaged in job contracting janitorial services. It appears that Honest Care Janitorial was consolidated
with ABC Security and the consolidated corporations are represented in this action by its president, Alex
B. Carlos.

Private respondents Perfecto P. Pizzaro (Pizzaro), Joel B. Doce (Doce), Francsico U. Corpus (Corpus) and
Ronillo Gallego (Gallego) were employed by petitioner ABC Security as security guards and were
assigned to Greenvalley Country Club at the time they were allegedly separated from employment.
Private respondent Pizzaro was already with petitioner ABC Security since 1975, while private
respondent Corpus was employed in 1990. Private respondents Doce and Gallego were both hired in
1987.4 Private respondent Solomon was employed by Honest Care Janitorial as janitor supervisor since
1975 and was posted to different offices.5

On 22 July 1993, private respondents filed a Joint/Consolidated Complaint-Affidavit6 against petitioners

praying for the payment of minimum wage, 13th month pay, holiday pay, service incentive leave, cost of
living allowance and clothing allowance.

As shown by the Registry Return Receipt,7 petitioners received a copy of the complaint and the
corresponding summons on 16 July 1993. On the following day, private respondents Pizzaro, Solomon
and Doce were allegedly relieved from their posts and were not given new assignments. Subsequently,
private respondents Gallego and Corpus were also allegedly dismissed from employment.8

Private respondents claimed that every time they received their salaries, they were made to sign two
sets of pay slips, one was written in ink while the other was written in pencil. These two pay slips showed
the amount of salaries they actually received, which was below the minimum; but since the entries
written on one of the pay slips they signed were in pencil, there was a possibility that petitioners could
alter the said entries to make it appear that they were compliant with the labor laws.

For its part, petitioners averred that private respondents were not dismissed but voluntarily resigned
from their respective employments as evidenced by the resignation letters bearing their signatures.
Petitioners claimed that after private respondents' assignment to Greenvalley Country Club ended, they
were reassigned to other posts as an exercise of management prerogative, but they refused to transfer
and opted to resign. In addition, petitioners alleged that private respondents' resignations were
prompted by the loss of bowling equipment in their custody, which they were obliged to pay.

Petitioners further asseverated that the private respondents were paid the minimum wage in
accordance with the standards prescribed by the labor laws and received benefits including the overtime
pay, cost of living allowance, night differential pay, premium pay and 13th month pay as evidenced by
the General Payroll of the company. Private respondents' signatures appeared on the said General
Payroll, signifying that they were able to receive the wages and benefits in accordance with the standard
set by law.

On 31 August 1999, the Labor Arbiter found that petitioners submitted overwhelming documentary
evidence to refute the bare allegations of the private respondents and thereby dismissed the complaint
for lack of merit. The dispositive part of the Labor Arbiter's Decision9 reads:

WHEREFORE, premises all considered, the instant complaint is dismissed for lack of merit.

On appeal, the NLRC reversed the Labor Arbiter's findings by giving more evidentiary weight to private
respondents' testimonies in light of the factual circumstances of the case and thus declared that there
was illegal dismissal. It appears that petitioners received a copy of private respondents' complaint on 16
July 1993, and shortly thereafter, private respondents were dismissed from employment. The decretal
portion of the NLRC Decision10 reads:
WHEREFORE, the decision appealed from is hereby REVERSED.

The [herein petitioners], who are hereby declared to be jointly and severally liable for the monetary
awards, are hereby ordered to pay the [herein private respondents] the following: (1) backwages
(computed on the basis of the applicable minimum wage rate on July 17, 1990) from the said date up to
the date of the promulgation of this decision; (2) separation pay equivalent to one month's salary for
every year of service from the date of hiring to the date of the promulgation of this Decision; and (3) for
the unexpired 3-year period, overtime pay of four (4) hours daily, 13th month pay, premium pay for
restdays and holidays, and service incentive leave pay.

Both petitioners and private respondents moved for the reconsideration of the above-quoted NLRC
Decision. Petitioners prayed for the NLRC to vacate its previous ruling finding them liable for illegal
dismissal and for the monetary claims of the private respondents. On the other hand, private
respondents prayed that, in addition to monetary awards, attorney's fees be also awarded in their favor.

In a Resolution11 dated 30 August 2002, the NLRC denied the Motions for Reconsideration filed by the
parties for lack of cogent reason or palpable error to disturb its earlier findings.

Aggrieved, petitioners elevated the matter to the Court of Appeals by filing a Petition for Certiorari,
alleging that the NLRC abused its discretion in giving more credence to the empty allegations advanced
by private respondents as against the overwhelming documentary evidence on record which was fully
substantiated by the testimonial evidence they submitted during the proceedings before the Labor
Arbiter.

On 31 August 2004, the Court of Appeals rendered a Decision affirming in toto the NLRC Decision. The
appellate court declared that there was no grave abuse of discretion on the part of the NLRC in giving
more evidentiary weight to the evidence submitted by the private respondents.

In addition, the Court of Appeals found that the defense posed by petitioners that private respondents
were not dismissed from employment but voluntarily resigned therefrom, is not plausible in light of the
prompt filing of the complaint for illegal dismissal. Indeed, resignation is inconsistent with the filing of
action for illegal dismissal.

Similarly ill-fated was petitioners' Motion for Reconsideration which was denied by the Court of Appeals
in its Resolution dated 9 May 2005.

Hence, this instant Petition for Review on Certiorari filed by petitioners assailing the foregoing Court of
Appeals Decision and Resolution and raising the following issues:

I.

WHETHER OR NOT THE PRIVATE PETITIONER ALEX B. CARLOS SHOULD BE INCLUDED IN THE JUDGMENT.

II.

WHETHER OR NOT THE [PRIVATE RESPONDENTS] WERE IMPROPERLY PAID OF THEIR SALARIES AND
WAGES AS WELL AS BENEFITS UNDER THE LAW.

III.

WHETHER OR NOT [PRIVATE RESPONDENTS] WERE ILLEGALLY DISMISSED BY [PETITIONERS].

IV.

WHETHER OR NOT THE WRIT OF EXECUTION ISSUED BY THE LABOR ARBITER AND IMPLEMENTED BY THE
NLRC SHERIFF IS IMPROPER.

V.

WHETHER OR NOT THE PETITIONERS [RESPONDENTS] SHOULD BE ADJUDGED OF BACK WAGES DURING
THE PENDENCY OF THE CASE.12

At the outset, we must stress that this Court is not a trier of facts and does not routinely undertake the
re-examination of the evidence presented by the contending parties considering that, as general rule,
the findings of facts of the Court of Appeals are conclusive and binding on the Court.13 We have likewise
held that factual findings of labor officials who are deemed to have acquired expertise in matters within
their respective jurisdiction are generally accorded not only respect, but even finality, as long as they are
supported by substantial evidence.14

Notably, the question of whether or not the private respondents were illegally dismissed from
employment or voluntarily resigned therefrom, as well as the issue of whether or not they are entitled to
the monetary awards they are claiming, are factual matters that should not be delved into by this Court.

As borne by the records, it appears that there is a divergence in the findings of facts of the Labor Arbiter
on one hand, from those of the NLRC, as affirmed by the Court of Appeals, on the other. For the purpose
of clarity and intelligibility therefore, this Court will make a scrunity of the decisions of the labor officials
and appellate court and ascertain whose findings are supported by evidence on record.

The Labor Arbiter found that the private respondents voluntarily resigned from employment, since they
refused to be assigned to another work station. The new assignment effected by petitioners was in valid
exercise of their management prerogative which should not take precedence over private respondents'
personal interests. The NLRC and the Court of Appeals found otherwise.

In finding that private respondents were illegally dismissed, the Court of Appeals declared that the
alleged resignations of the private respondents were inconsistent with their filing of the complaint for
illegal dismissal. It decreed that it is illogical for private respondents to resign and then file a complaint
for illegal dismissal thereafter.

For its part, the NLRC found that the confluence of the factual circumstances as to the date of the receipt
by the petitioners of the copy of the complaint filed by private respondents, which was in close
succession to the time when private respondents were relieved from their posts, leads to the reasonable
conclusion that petitioners were indeed illegally dismissed in retaliation for their filing of a complaint for
money claims.

We see merit in the findings and conclusions drawn by the NLRC and the Court of Appeals. They are
more in accord with prudence, logic, common sense and sound judgment.

Time and again we have ruled that in illegal dismissal cases like the present one, the onus of proving that
the employee was not dismissed or if dismissed, that the dismissal was not illegal, rests on the employer
and failure to discharge the same would mean that the dismissal is not justified and therefore illegal.15

Thus, petitioners must not only rely on the weakness of private respondents' evidence, but must stand
on the merits of their own defense. A party alleging a critical fact must support his allegation with
substantial evidence, for any decision based on unsubstantiated allegation and unreliable documentary
evidence cannot stand, as it will offend due process.

Petitioners failed to discharge this burden.

Petitioners' complete reliance on the alleged resignation letters to support their claim that private
respondents voluntarily resigned is unavailing, as the filing of the complaint for illegal dismissal is
inconsistent with resignation.16 Resignation is the voluntary act of employees who are compelled by
personal reasons to dissociate themselves from their employment. It must be done with the intention of
relinquishing an office, accompanied by the act of abandonment.17

It is illogical for private respondents to resign and then file a complaint for illegal dismissal. We find it
highly unlikely that private respondents would just quit their jobs because they refused to take new
assignments or attempted to avoid any monetary liability for the purported loss of bowling equipment,
after enduring long years of working for the petitioners, notwithstanding the meager salary they were
receiving and the lack of the appropriate labor and social benefits. It would have been equally senseless
for private respondents to file a complaint seeking payment of their salaries and benefits, as mandated
by law, then abandon subsequently and immediately their work by resigning.

In the same breath, we agree with the NLRC that the General Payrolls submitted by petitioners cannot be
given the stature of substantial evidence, not only because of evident inconsistencies of the entries
therein with the factual circumstances surrounding their preparation, but also because there is a high
possibility that they could have been manipulated, given that the General Payrolls are within the
complete control and custody of the petitioners. We thus quote with approval the findings of the NLRC:

Not only were the [herein private respondents] one in testifying that they did not receive the salaries
stated in the payrolls submitted by the [herein petitioners] - they were able to show that the payrolls in
question were a sham because [private respondent] Doce, whose signature appears on the payroll for
January 1-15, 1990, could not have signed the same, since at that time he was assigned, not in
Greenvalley Country Club, but in Ajinomoto. Falsus in unius, falsus in omnibus. The payrolls may not be
given any weight. As a result, full weight must be accorded to [private respondents'] testimonies to the
effect that they worked twelve hours daily, and were not paid overtime pay, 13th month pay and
premium pay for Sundays and holidays.18
The above-quoted NLRC Decision is anchored on the substantial evidence culled from the records that
swayed the reasonable mind of this Court to adopt its conclusion. Surely, petitioners cannot expect this
Court to sustain its stance and accord full evidentiary weight to the documentary and testimonial
evidence they adduced in the absence of clear, convincing and untarnished proof to discharge the
allegations of the private respondents. Having failed in this regard, we are constrained to sustain the
findings of the NLRC as affirmed by the Court of Appeals in light of the time-honored dictum that should
doubt exist between the evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the latter.19

Accordingly, this Court finds no reason to disturb the monetary awards for backwages, separation pay,
overtime pay, 13th month pay, premium pay, holiday and service incentive leave pays ordered by the
NLRC and the Court of Appeals. In addition to the monetary awards, we find that the grant of backwages
was likewise proper, with some modification as to the computation of separation pay.

An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to full back wages, inclusive of allowances, and to other benefits
or their monetary equivalents computed from the time compensation was withheld up to the time of
actual reinstatement.20

In explaining the rationale of this rule, we thus held in De la Cruz v. National Labor Relations Commission
that21 :

The provision gives meaning to the laborer's constitutional guaranty of security of tenure and finds solid
basis on the universal principles of justice and equity. The grant of back wages allows the unjustly and
illegally dismissed employee to recover from the employer that which the former lost by way of wages as
a result of his dismissal from employment.

Undoubtedly, private respondents are entitled to the payment of full backwages, that is, without
deducting their earnings elsewhere during the periods of their illegal dismissal. However, where, as in
this case, reinstatement is no longer feasible due to strained relations between the parties, separation
pay equivalent to one month's salary for every year of service shall be granted.22

The question now arises: when is the period for computation of backwages and separation pay supposed
to end? This question was squarely addressed in Gaco v. National Labor Relations Commission23 where
it was held that in such circumstance, the computation shall be up to the time of finality of this Court's
decision. Apparently, the justification is that along with the finality of this Court's decision, the issue of
illegal dismissal is finally laid to rest.24

The petitioners' insistence that they cannot be held liable for backwages during the period of the
pendency of this action for they cannot be faulted for the delay of the disposition of this case cannot
take precedence over the long-standing and well-entrenched jurisprudential rule.

Parenthetically, the award for separation pay equivalent to one-month pay for every year of service shall
be computed from the time the private respondents were illegally separated from their employment up
to the finality of this Court's Decision in the instant petition.

Furthermore, petitioners argue that the veil of corporate fiction of petitioners ABC Security and Honest
Care Janitorial should not be pierced, because said corporations have personalities separate and distinct
from their stockholders and from each other.

The petitioners must concede that they raised this issue belatedly, not having done so before the labor
tribunals, but only before the appellate court. Fundamental is the rule that theories and arguments not
brought to the attention of the trial court need not be, and ordinarily will not be, considered by a
reviewing court, as they cannot be raised for the first time on appeal. However, even if this argument
were to be addressed at this time, the Court still finds no reason to uphold it.25 chanrobles virtual law
library

Basic in corporation law is the principle that a corporation has a separate personality distinct from its
stockholders and from other corporations to which it may be connected. This feature flows from the
legal theory that a corporate entity is separate and distinct from its stockholders.26

However, the statutorily granted privilege of a corporate veil may be used only for legitimate purposes.
On equitable considerations, the veil can be disregarded when it is utilized as a shield to commit fraud,
illegality or inequity; defeat public convenience; confuse legitimate issues; or serve as a mere alter ego
or business conduit of a person or an instrumentality, agency or adjunct of another corporation. The
legal fiction of a separate corporate personality in those cited instances, for reasons of public policy and
in the interest of justice, will be justifiably set aside.27

Petitioner Carlos admitted that he is not only the stockholder of petitioners ABC Security and Honest
Care Janitorial, but the General Manager of said corporations as well. Being the General Manager of
these corporations, it is assumed that petitioner Carlos possessed complete control of their affairs
including matters pertaining to personnel management, which includes the rates of pay, hours of work,
selection or engagement of the employees, manner of accomplishing their work, and their hiring and
dismissal. It is highly plausible then that petitioner Carlos had a hand not only in unilaterally terminating
the private respondents' employment, but also in paying private respondents' wages below minimum
and denying them the benefits accorded by the Labor Standard Law which includes, but is not limited to,
the payment of night-shift differential, overtime pay, premium pay and 13th month pay.

We cannot allow petitioner Carlos to hide behind the cloak of corporate fiction in order to evade liability.
It bears repeating that the corporate veil must be pierced and disregarded when it is utilized to commit
fraud, illegality or inequity.

Lastly, petitioners' contention that the execution of the NLRC Decision pending review of this case is
detrimental to their interest is equally unavailing.

The pertinent provisions of the 2005 Revised Rules of Procedure of the National Labor Relations
Commission provides:

Rule VII
Proceeding Before the Commission

x x x

Section 14. Finality of Decision of the Commission and Entry of Judgment. '

a) Finality of the Decisions, Resolutions or Orders of the Commission. - Except as provided in Section 9 of
Rule X, the decisions, resolutions or orders of the Commission shall become final and executory after ten
(10) calendar days from receipt thereof by the parties.

b) Entry of Judgment. - Upon the expiration of the ten (10) calendar day period provided in paragraph (a)
of this Section, the decision, resolution, or order shall be entered in a book of entries of judgment.

The Executive Clerk or Deputy Executive Clerk shall consider the decision, resolution or order as final and
executory after sixty (60) calendar days from the date of mailing in the absence of return cards,
certifications from the post office, or other proof of service to parties.

SECTION 15. MOTIONS FOR RECONSIDERATION. - Motion for reconsideration of any decision, resolution
or order of the Commission shall not be entertained except when based on palpable or patent errors;
provided that the motion is under oath and filed within ten (10) calendar days from receipt of decision,
resolution or order, with proof of service that a copy of the same has been furnished, within the
reglementary period, the adverse party; and provided further, that only such motion from the same
party shall be entertained.

Should a motion for reconsideration be entertained pursuant to this section, the resolution shall be
executory after ten (10) calendar days from receipt thereof.

RULE XI

Execution Proceedings

x x x

SECTION 10. Effect of Petition for Certiorari on Execution. - A petition for certiorari with the Court of
Appeals or the Supreme Court shall not stay the execution of the assailed decision unless a restraining
order is issued by said courts. (Emphasis supplied.)

Prescinding from the above, the private respondents had a clear right to move for the execution of the
monetary award of the NLRC pending appeal. The rule is in harmony with the social justice principle that
poor employees who have been deprived of their only source of livelihood should be provided the
means to support their families.

Having said that, we need not further press that the proposition of the petitioners assailing the order
granting execution pending appeal of the NLRC Decision should fail.

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated
31 August 2004 and its Resolution dated 9 May 2005 in CA-G.R. SP No. 74458 are hereby AFFIRMED with
MODIFICATION as to the amount of backwages which shall be computed from the date of the private
respondents' dismissal up to the finality of this judgment. Costs against the petitioners.

SO ORDERED.

• Tomas Claudio Memorial College v. CA, February 16, 2004

CALLEJO, SR., J.:

This 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 of the Court of Appeals in CA-G.R. SP No. 62651, which affirmed with
modification the decision of the National Labor Relations Commission (NLRC) affirming the decision of
the Labor Arbiter in NLRC Case No. RAB IV-6-9082-97. The antecedent facts are as follows:

Sometime in 1983, private respondent Pedro Natividad started working with petitioner Tomas Claudio
Memorial College (TCMC) in Morong, Rizal. In time, he was promoted as "Liason Officer" of the school
with the Department of Education, Culture and Sports (DECS) and with the Commission on Higher
Education (CHED) with the rank of Assistant Registrar.

On June 10, 1996, the private respondent was arrested by the Morong police authorities, without any
warrant therefore, for violation of the Dangerous Drugs Act (Republic Act NO. 6425). A criminal
complaint was later filed against him, docketed as Criminal Case No. 5137. A preliminary investigation
was conducted by the Municipal Court of Morong, Rizal which found probable cause to hold him for trial.
The court, on the said date, issued a warrant for the private respondent’s arrest. The records were
elevated to the Office of the Provincial Prosecutor of Rizal, and was docketed as I.S. No. 96-4385.

In the interim, the petitioner, through its president, Aladdin F. Trinidad, sent a Memorandum2 dated
June 13, 1996 to the private respondent informing him that his employment was already terminated,
thus:

...

The undersigned issued a Memorandum in cooperation with the program of the DECS denominated as
"Drugless," "Smokeless" and "Violentless" School Campus intended to combat drug addiction in public
and private schools.

Also, the undersigned has directed your immediate superior, Ms. Minda de la Vega to make a summary
of your absences for the School Year 1995-1996 and the Summer Term of 1996 as it has been observed
that you have been absenting yourself frequently and if you were asked to go to the DECS and to the
CHED you do not return to TCMC anymore.

Further, discreet inquiry is ongoing because of your secretive activities which has been rumored already
among those who were following your dealings with our students, we barely started our initial inquiry
when the authorities arrested you as a drug "pusher" and drug "user", a just cause to terminate
employment. You are now in jail as you were apprehended for possession of "shabu."
You are a dangerous employee in TCMC campus considering that we are in education.

For the above, please be informed that your services with TCMC is (sic) terminated effective upon receipt
of this memorandum.

You are barred also in (sic) entering [the] TCMC campus without Administration’s approval.

(SGD.) ALADDIN F. TRINIDAD

President3

The private respondent was thenceforth barred from entering the school without the petitioner’s
approval. On July 5, 1996, the private respondent posted a bail bond in Criminal Case No. 5137 and was
released from his detention cell.4 He did not, however, file any complaint against the petitioner with the
NLRC on account of his dismissal.

On October 2, 1996, the State Prosecutor issued a Resolution dismissing the criminal complaint in I.S.
No. 96-4385 filed against the private respondent for lack of merit.5 The State Prosecutor reasoned out
that:

On the date of the preliminary investigation, respondents submitted their separate counter-affidavits,
supported by the affidavits of their respective witnesses, and in it, both refuted the claim of the arresting
officers that regulated drugs were recovered from them.

There is obviously no basis to sustain the complaints. In the first place, the basis for the invitation
extended to the respondents, which is the alleged quarrel over drugs, is hearsay, as it was merely relayed
to them, and they had no personal knowledge of said incident.

In the second place, [the] respondents had not committed, are actually committing or are about to
commit an offense when they were invited, to the police station, so the police officers had no right to
invite them for questioning. Hence, the subsequent search made on the respondents had no legal basis.
It follows that anything recovered from them after their unlawful arrest are unadmissible (sic) as
evidence against them, the same being the fruit of the poisonous tree.6

On November 21, 1996, the private respondent was arrested anew by police authorities. The Morong
Chief of Police filed a criminal complaint docketed as Criminal Case No. 5251 against the private
respondent for violation of Section 27, Article III of Rep. Act No. 6425, as amended.7 On February 17,
1997, an Information therefore was filed with the Regional Trial Court of Morong docketed as Criminal
Case No. 2661-M.8 On said date, the private respondent posted a bail bond and was released from
detention.

On June 11, 1997, the private respondent filed a complaint with the NLRC against the petitioner for
illegal dismissal.9 The case was docketed as NLRC Case No. RAB-IV-6-9082-97. The private respondent
executed a sworn statement claiming that (a) there was no factual basis for his dismissal; and (b) he was
deprived of his rights to due process.10 He also submitted the Joint Affidavit of Rose Baruel, Ellen
Alcarde, Rosario Alvarez, Rosauro Resurreccion and Aida S.D. Geronimo.11

Answering the complaint, the petitioner asserted that on or about March 1996, it had received an
anonymous telephone call branding the private respondent as not only a "drug user" but also a "pusher."
After a discreet investigation, the information was confirmed by unnamed tricycle drivers, students and
school personnel. According to the petitioner, the private respondent was connected to a syndicate
supplying prohibited drugs and was selling the same in a nearby billiard hall, in restaurants, and in other
places immediately outside the perimeter of the school gate.12 The petitioner further alleged that
before the private respondent’s activities were reported to the police authorities, he was arrested in
October 1996 while at work and was jailed for violation of the Dangerous Drug Act.

On November 10, 1998, Acting Executive Labor Arbiter Pedro C. Ramos, rendered a decision dismissing
the complaint for lack of legal basis, thus:

WHERREFORE, premises considered, the complaint in this case for "illegal dismissal" is hereby ordered
dismissed for lack of legal basis.

SO ORDERED.13

The private respondent appealed the decision to the NLRC which affirmed the same. The NLRC also
denied the private respondent’s motion for the reconsideration of the said decision.

However, on certiorari with the Court of Appeals, the appellate court affirmed, with modification, the
decision of the NLRC, holding that although there was a valid cause for the private respondent’s
dismissal, the petitioner did not follow the procedure for the termination of his employment. The CA
ordered the petitioner to pay backwages to the private respondent from June 13, 1996 up to the finality
of the said decision. The decretal portion of the CA decision reads as follows:

WHEREFORE, the decision of the public respondent NLRC is MODIFIED such that the private respondent
is hereby directed to pay the petitioner backwages from June 13, 1996 up to the finality of this
judgment.14

The petitioner’s motion for reconsideration was denied by the Court of Appeals in its Resolution dated
February 14, 2002.

The petitioner assails the decision of the CA in this Court, contending that:

...

[The] Hon. Court of Appeals (Special Eight Division) Gravely Abused Its Discretion And Authority
Amounting To Without Or In Excess Of Jurisdiction When It Reviewed The Final Decision Of The Hon.
NLRC And Refused To Hear The Side Of TCMC That The Appeal In This Case Was Filed out of Time As The
decision Of The Hon. NLRC Is Final Already.

...
[The]Hon. Court of Appeals (Special Eight Division) gravely Abused Its Discretion And Authority
Amounting To Without Or In Excess Of Jurisdiction When It entertained The Petition For Certiorari Which
Was Filed Beyond The Sixty (60) Day Period From Receipt Of The Order-Denying the Motion For
Reconsideration And Refused To Hear The Point Raised By TCMC That [The] Subject Petition Was Filed
Beyond The Sixty (60) Day Period For The Filing Of The Petition For Certiorari.

...

[The] Hon. Court of Appeals (Special Eight Division) Gravely Abused Its Discretion And Authority When It
Disregarded The Evidence In The Record When It Modified, Altered And Changed The Final Decision Of
The Hon. National Labor Relations Commission To Justify The Award Of Backwages. Which Included Even
The Period When Respondent Natividad Were In Jail For Three Times.

...

[The] Hon. Court of Appeals (Special Eight Division) Gravely Abused Its Discretion And Authority When It
Knowingly Rendered A Decision Which Is Bias. Unfair & Unjust, A Violation Of Art. 205 Of The Revised
Penal Code In Relation To Sec (2) (E) Of RA 3019 (Anti-Graft Law) Hence The Decision Is Void.15

The petitioner avers that the Court of Appeals committed a grave abuse of its discretion amounting to
excess or lack of jurisdiction when it gave due course to the private respondent’s petition for certiorari
and modified the decision of the NLRC. According to the petitioner, when the private respondent filed
his petition with the CA, the decision of the NLRC had already become final and executory; thus, the said
petition was filed out of time. Furthermore, the petitioner cannot be lawfully compelled to pay
backwages for the period of time that the private respondent was in jail on account of his violation of
the Dangerous Drugs Act, from June 10, 1996 up to July 5, 1996, and from November 21, 1996 up to
February 17, 1997. It contends that the decision of the CA is void for being biased, unjust and that the
issuance of the same is a felony under Article 205 of the Revised Penal Code, as well a crime under
Section 2(e) of Rep. Act No. 3019, also known as the Anti-Graft and Corrupt Practices Act.

In his Comment on the petition, the private respondent avers that the petitioner failed to comply with
Section 4, Rule 45 in relation to Section 2, Rule 42 of the Rules of Court, and that the petition was filed
out of time. He maintains that his petition for certiorari with the CA was timely filed and that the
decision of the CA is in accord with law.

The issues for resolution may be synthesized, thus: (a) whether the private respondent is proscribed
from filing a petition for certiorari for the nullification of the decision of the NLRC, and its resolution
denying his motion for reconsideration; (b) whether the said petition in the CA was filed on time; (c)
whether the petition at bar was filed beyond the fifteen-day period in Section 2, Rule 45 of the Rules of
Court, as amended; and (d) whether the CA committed a grave abuse of discretion amounting to excess
or lack of jurisdiction when it modified the decision of the NLRC and ordered the petitioner to pay
backwages to the private respondent.

Anent the first ground, the petitioner asserts that under Article 223 of the Labor Code, as amended, the
decision of the Labor Arbiter/NLRC shall become final after ten (10) days from receipt of the decision.
The decision of the NLRC had become final and executory on November 30, 2000, but the private
respondent filed his petition for certiorari with the CA only on January 16, 2001, long after the NLRC
decision had become final and executory. The petitioner contends that the private respondent was thus
proscribed from filing his petition with the CA. Even if the private respondent was not so barred from
filing his petition, still the same was filed beyond the sixty-day period under Rule 65, Section 4 of the
Rules of Court, as amended.

The petitioner’s contentions have no merit.

Article 223 of the Labor Code, as amended, states inter alia:

ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders.16

Clearly, Article 223 of the Labor Code applies only to appeals, from awards or final orders of the Labor
Arbiter to the NLRC and not to appeals from the decisions, awards or orders of the NLRC to the Court of
Appeals. Under Article 222 of the Labor Code, a decision of the NLRC shall be final after ten (10) calendar
days from receipt thereof by the petitioner. The private respondent received the decision on January 13,
1999 and had until January 23, 1999 to perfect his appeal with the NLRC. Thus, the private respondent
seasonably appealed to the NLRC. The petitioner failed to prove its claim that its copy of the appeal of
the private respondent was mailed to it on a later date.

Irrefragably, the decision of the NLRC became final and executory on November 17, 2000 when the
private respondent filed his petition with the CA on January 16, 2001. However, the private respondent
was not proscribed from filing a petition for certiorari within a period of sixty days from the notice of the
NLRC’s denial of his motion for the reconsideration of the decision of the NLRC under Section 1, rule 65
of the Rules of Court. If the CA grants the petition and nullifies the decision of the NLRC on the ground of
grave abuse of discretion amounting to excess or lack of jurisdiction, the decision of the NLRC is, in
contemplation of law, null and void ab initio; hence, the decision never became final and executory.

Anent the second ground, the petitioner insists that the private respondent’s petition with the Court of
Appeals was filed out of time because its copy of the petition was not verified and the assailed decisions
and resolutions were not attached thereto. The petitioner asserts that since the petition was defective in
form, the filing thereof in the CA did not suspend the 60-day period under Section 1, Rule 65 of the Rules
of Court.

This contention is, likewise, erroneous.

In its Resolution17 dated February 14, 2002, the Court of Appeals resolved the following issues:

This petition was filed at 3:04 p.m. on January 16, 2001, as shown by the stamp of receipt on the upper
right corner of its first page. The docketing and other legal fees were likewise paid at the same time.
Hence, there is no question that the petition was timely filed.

Had the respondent-movant’s counsel examined the record, he would have found out that the petition is
properly verified, with the Certification/Verification duly notarized on January 16, 2001. The original of
the registry receipts are attached to page 13 of the petition. All the other necessary annexes are likewise
attached to the petition. In view thereof, there is absolutely no reason for us not to receive and act
thereon. The malicious insinuation of the counsel that we have have (sic) another rule for this case is
therefore uncalled for.18

We agree with the Court of Appeals. We have reviewed the petition with the Court of Appeals and the
annexes thereof. We confirm the verisimilitude of the resolution of the CA that the petition of the
private respondent was sufficient in form and substance.

On the next issue, the petitioner contends that the CA committed a grave abuse of its discretion
amounting to excess or lack of jurisdiction in modifying the decision of the NLRC. It asserts that the
decision of the CA modifying the decision of the NLRC and ordering it to pay backwages to the private
respondent is a nullity.

The private respondent, for his part, avers that the proper remedy to assail the decision of the CA was to
file a petition for review on certiorari in this Court under Rule 45 of the Rules of Court within fifteen (15)
days from receipt of notice of the CA resolution denying the petitioner’s motion for reconsideration.
However, the petitioner filed a petition with this Court under Rule 65, dated April 2, 2002, well beyond
the fifteen-day period counted from February 21, 2002 when the petitioner received the copy of the
assailed Resolution of the CA.

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a
petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts
or issues of law within fifteen days from notice of the said resolution. Otherwise, the decision of the CA
shall become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to
this Court from the decision of the CA. It is a continuation of the appellate process over the original case.
A review is not a matter of right but is a matter of judicial discretion. The aggrieved party, may however,
assail the decision of the CA via a petition for certiorari under rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying the motion for reconsideration of the
same. This is based on the premise that in issuing the assailed decision and resolution, the CA acted with
grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and
adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if it
will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower
court.19

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the
remedies of appeal and certiorari are mutually exclusive and not alternative or successive.20 The
aggrieved party is, likewise barred from filing a petition for certiorari if the remedy of appeal is lost
through his negligence. A petition for certiorari is an original action and does not interrupt the course of
the principal case unless a temporary restraining order or a writ of preliminary injunction has been
issued against the public respondent from further proceeding.21 A petition for certiorari must be based
on jurisdictional grounds because, as long as the respondent court acted within its jurisdiction, any error
committed by it will amount to nothing more than an error of judgment which may be corrected or
reviewed only by appeal.22

In this case, he petitioner must establish that the Court of Appeals acted with grave abuse of discretion
amounting to excess or lack of jurisdiction in ordering it to pay backwages to the private respondent.

The public respondent acts without jurisdiction if he does not have the legal power to determine the
case. There is excess of jurisdiction when the public respondent, being clothed with the power to
determine the case, oversteps his authority as determined by law. There is a grave abuse of discretion
where the public respondent acts in a capricious, whimsical, arbitrary or despotic manner in the exercise
of its judgment as to be equivalent to lack of jurisdiction.23

The petitioner avers that the CA acted with grave abuse of discretion amounting to excess or lack of
jurisdiction when the CA ordered the petitioner to pay backwages to the private respondent from June
13, 1996 until the judgment of the CA shall have become final and executory. This is because the private
respondent was detained from June 10, 1996 up to July 5, 1996, and from November 21, 1996 to
February 17, 1997 for violations of the Dangerous Drugs Act. The petitioner asserts that it is absurd for
the petitioner to pay backwages to the private respondent while the latter was in jail. The private
respondent would thereby be enriching himself at the expense of the petitioner. The petitioner insists
that backwages should not and cannot be awarded to the private respondent, since it would include that
period of time when the latter was in jail. The petitioner relied on the declaration of this Court in the
case of Cathedral School of Technology v. NLRC,24 where it held that when the employee’s dismissal is
for a just cause, there can be no backwages even if she was denied due process, otherwise she would be
unjustly enriching herself at the expense of the employer.25

We do not agree.

In Santos v. NLRC,26 we explained the normal consequences of a finding that an employee has been
illegally dismissed, the statutory intent on the matter and nature of the true remedies of reinstatement
and payment of backwages, thus:

The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights and
secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual
reinstatement. The statutory intent on this matter is clearly discernible. Reinstatement restores the
employee who was unjustly dismissed to the position from which he was removed, that is, to his status
quo ante dismissal, while the grant of backwages allows the same employee to recover from the
employer that which he had lost by way of wages as a result of his dismissal. These twin remedies-
reinstatement and payment of backwages – make the dismissed employee whole who can then look
forward to continued employment. Thus do these two remedies give meaning and substance to the
constitutional right of labor to security of tenure. The two forms of relief are distinct and separate, one
from the other. Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-
availability of the other. . . .27

The payment of backwages is generally granted on the ground of equity. It is a form of relief that restores
the income that was lost by reason of the unlawful dismissal; the grant thereof is intended to restore the
earnings that would have accrued to the dismissed employee during the period of dismissal until it is
determined that the termination of employment is for a just cause.28 It is not private compensation or
damages but is awarded in furtherance and effectuation of the public objective of the Labor Code. Nor is
it a redress of a private right but rather in the nature of a command to the employer to make public
reparation for dismissing an employee either due to the former’s unlawful act or bad faith.29

The award of backwages is not conditioned on the employee’s ability or inability to, in the interim, earn
any income. While it may be true that on June 11, 1996, the private respondent was detained in Criminal
Case No. 5137, the State Prosecutor found no probable cause for the detention of the private
respondent and resolved to dismiss the case. The private respondent has not yet been convicted by final
judgment in Criminal Case No. 5251. Indeed, he is presumed innocent until his guilt is proved beyond
reasonable doubt.

In fine, we find and so hold that the Decision of the CA is in accord with law.

IN THE LIGHT OF THE FOREGOING, the petition is DISMISSED.

SO ORDERED.

• Chronicle Securities v. NLRC, November 25, 2004

YNARES-SANTIAGO, J.:

This is a Petition for Review under Rule 45 of the Rules of Court seeking to set aside the Decision1 of the
Court of Appeals dated November 13, 2002 in CA-G.R. SP No. 67933, entitled, "Chronicle Securities
Corporation, et al. v. National Labor Relations Commission, et al.," which denied the Petition for
Certiorari2 and affirmed the February 28, 2001 Order3 of the National Labor Relations Commission.

The factual antecedents of the present petition are as follows:

Sometime in September 1993, petitioners hired private respondent Neal H. Cruz, who was then the
executive editor of the Today newpaper, as the publicist and the editor in chief of its national daily
broadsheet, the Manila Chronicle. As compensation for his services, private respondent received a
monthly compensation of P60,000.00 plus a brand new car.4

Thereafter, private respondent quit his job with Today to assume the duties and responsibilities as the
editor in chief of the Manila Chronicle. Private respondent went about the task of improving the over-all
image of the Manila Chronicle. He made full use of its color capabilities and introduced new columns and
sections. In time, these initiatives helped improve the financial condition of the Manila Chronicle,
boosting circulation and increasing advertising revenue.5

However, due to private respondent's role in the publication of a controversial article that was carried by
the newspaper sometime in July 1994, petitioners terminated his services. Consequently, private
respondent filed a complaint for illegal dismissal against herein petitioners.6

On January 2, 1997, Labor Arbiter Ariel C. Santos rendered a decision7 holding that private respondent
Neal Cruz was illegally dismissed. The dispositive portion of the Labor Arbiter's decision stated:

WHEREFORE, premises considered, respondent CHRONICLE SECURITIES CORPORATION, ROBERTO

COJIUTO (sic) JR., AND ONOFRE CORPUZ are hereby held guilty of ILLEGAL DISMISSAL and directed to
reinstate complainant to his former position as Editor-in-Chief of Manila Chronicle immediately even
pending appeal without loss of seniority rights and other benefits accruing during the pendency of this
case. If reinstatement is no longer feasible, then, separation pay of one month for every year of service
in addition to full backwages is hereby decreed.

In addition to the above, respondents must comply with the following:

1. Considering that respondents did not interpose any objection to the pleading of complainant that
ownership of the vehicle assigned to him as part of the compensation package when he was lured by
respondents to join the Manila Chronicle, the same is hereby awarded to him.

2. To pay complainant moral damages in the sum of TEN MILLION (P10,000,000.00) PESOS considering
the mental anguish, social shock and besmirched reputation not to mention his near brush with death
due to shame and humiliation.

3. As a correction and example for the public good in order to prevent the repetition of the same to
employees equally situated like complainant, FIVE MILLION (P5,000,000.00) PESOS is hereby awarded as
exemplary damages.

4. Ten percent of all sums owing to complainant is awarded as attorney's fees.

SO ORDERED.

Petitioners appealed the decision with the National Labor Relations Commission (NLRC), which affirmed
the labor arbiter's decision with modification by reducing the moral damages to P500,000.00 and
exemplary damages to P200,000.00.

Petitioners moved for reconsideration, which was denied on September 15, 1998.8 Petitioners then filed
a petition for certiorari and prohibition with the Court of Appeals. However, the petition was
subsequently dismissed on May 4, 1999.9

Upon the finality of the Court of Appeals' decision, private respondent Neal Cruz filed a Motion for
Immediate Execution10 of the NLRC's Decision. On October 16, 1999, Labor Arbiter Ariel Santos issued
the Writ of Execution.11 Petitioners filed a Motion to Quash12 the writ of execution, which was denied
on August 29, 2000.13
Petitioners received copy of the Order denying their motion to quash on October 10, 2000. Hence, they
had until October 20, 2000 to file their appeal. However, on October 20, 2000, Friday, at 3:30 p.m., the
NLRC suspended work due to a Luzon wide power blackout.

The following Monday, October 23, 2000, petitioners filed a Manifestation with Urgent Motion to
Admit14 with the NLRC. Attached to this motion are the petitioners' Notice of Appeal and Memorandum
of Appeal. On February 28, 2001, the NLRC denied petitioners' appeal for being filed out of time.15
Petitioners' Motion for Reconsideration was likewise denied on August 20, 2001.16

A petition for certiorari was filed by petitioners with the Court of Appeals.17 Finding no grave abuse of
discretion on the part of the NLRC, the petition was dismissed on November 13, 2002.18 Petitioners'
Motion for Reconsideration19 was likewise denied.20

Hence, this Petition for Review , assailing the November 13, 2002 Decision and the March 17, 2003
Resolution of the Court of Appeals on the following alleged errors:

1. That the delay in the filing of petitioners' Appeal with the NLRC was justifiable and purely due to
extraordinary circumstances, without fault on the part of petitioners and;

2. That the enforcement of the assailed resolutions of the Court of Appeals, the NLRC and the Labor
Arbiter would result in the award of a grossly excessive and unconscionable amount to the respondent
since the backwages due him were erroneously computed.

Petitioners claim that they were prepared to file their appeal within the prescribed period, were it not
for circumstances beyond their control. On October 20, 2000, Friday, Romeo A. Blanca, messenger of
petitioners' counsel, left the office at 2:00 p.m. to file the appeal with the NLRC. His itinerary for that
afternoon included a trip to the post office to mail a copy of the appeal to the private respondent, then
to the NLRC's office in Bookman Building in Quezon Avenue, Quezon City for the filing of the appeal.
Purportedly, at around 2:30 p.m. of that day, Mr. Blanca arrived at the Makati City Post Office and was
able to send a copy of the Notice of Appeal with Memorandum of Appeal to adverse counsel by
registered mail under Registry Receipt No. 16488.21 However, when he arrived at the NLRC at around
3:30 p.m., he was informed by the security guard that, owing to a Luzon-wide power failure, the NLRC
has suspended its operations as early as 12:00 p.m. of that day. Thus, there was no one at the Docket
Section to receive the Notice of Appeal and Memorandum. Mr. Blanca then attempted to file the appeal
by registered mail, but post offices were ordered by the Postmaster General to cease operations at 3:30
p.m. that day.22 Thus, petitioners were able to file their appeal only the following Monday, October 23,
2000, which resulted in the dismissal thereof.

Petitioners argue that the peculiar facts surrounding their failure to file their appeal on time warrant a
review of the dismissal of their appeal by the NLRC.

We agree.

The right to appeal is a purely statutory right. Not being a natural right or a part of due process, the right
to appeal may be exercised only in the manner and in accordance with the rules provided therefor.
Failure to bring an appeal within the period prescribed by the rules renders the judgment appealed from
final and executory.23 However, it is always within the power of this Court to suspend its own rules, or to
except a particular case from its operations, whenever the purposes of justice require it.24

In not a few instances, we relaxed the rigid application of the rules of procedure to afford the parties the
opportunity to fully ventilate their cases on the merits. This is in line with the time honored principle
that cases should be decided only after giving all parties the chance to argue their causes and defenses.
Technicality and procedural imperfections should thus not serve as bases of decisions. In that way, the
ends of justice would be better served. For indeed, the general objective of procedure is to facilitate the
application of justice to the rival claims of contending parties, bearing always in mind that procedure is
not to hinder but to promote the administration of justice.25

In Philippine National Bank, et al. v. Court of Appeals,26 we allowed, in the higher interest of justice, an
appeal filed three days late.

In Republic v. Court of Appeals,27 we ordered the Court of Appeals to entertain an appeal filed six days
after the expiration of the reglamentary period; while in Siguenza v. Court of Appeals,28 we accepted an
appeal filed thirteen days late. Likewise, in Olacao v. NLRC,29 we affirmed the respondent Commission's
order giving due course to a tardy appeal "to forestall the grant of separation pay twice" since the issue
of separation pay had been judicially settled with finality in another case. All of the aforequoted rulings
were reiterated in our 2001 decision in the case of Equitable PCI Bank v. Ku.30

Moreover, the facts herein are akin to the case of Surigao del Norte Electric Cooperative v. NLRC,31
where we upheld the NLRC's order taking cognizance of an appeal filed one day late since the delay in
filing was caused by the onslaught of typhoon Besing, resulting in the closure of the Surigao Post Office
on the last day for the appellant to file her appeal.

Verily, the respondent NLRC's dismissal of the petitioners' appeal in this case failed to consider the valid
reasons for not being able to timely file the same.

Anent the second issue raised by the petitioners, i.e., the matter of the proper computation of the
backwages due the private respondent, we resolve the same in favor of the petitioners. We have gone
through the portions of the records pertinent to the resolution of this issue and we find that the Court of
Appeals and the NLRC committed reversible error in laying down the basis for the computation of private
respondent's backwages.

There is no question that petitioners illegally dismissed private respondent Neal Cruz. Even petitioners
themselves are no longer questioning the findings of the Labor Arbiter and the NLRC on this aspect.
Petitioners main concern in this petition is the proper computation of backwages to be awarded to the
private respondent who is rightfully entitled to the payment of backwages, the only question that
remains is how much?chanroblesvirtualawlibrary

Backwages, in general, are granted on grounds of equity for earnings which a worker or employee has
lost due to his illegal dismissal.32 It represents compensation that should be earned but was not
collected because an employer has unjustly dismissed an employee.33 Thus, the payment of backwages
is a form of relief that restores the income that was lost by reason of unlawful dismissal.34

Article 279 of the Labor Code of the Philippines, as amended, provides that:

An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement. (Underscoring supplied)ςrαlαωlιbrαrÿ

Under Republic Act No. 6715, employees who are illegally dismissed are entitled to full backwages,
among others, computed from the time their actual compensation was withheld from them up to the
time of their actual reinstatement. If reinstatement is no longer possible, the backwages shall be
computed from the time of their illegal termination up to the finality of the decision.35

In the instant case, petitioners are questioning the basis of the Labor Arbiter's computation of private
respondent's backwages as reflected in the August 29, 2000 Order.36 In the said order, the Labor Arbiter
computed the total award to the respondent as follows:

1.

BACKWAGES:

Basic Wage:

9/15/94 - 9/15/2000

P60,000.00 x 72 mos.

P 4,320,000.00

13th Month Pay

1/12 of 4,320,000.00

360,000.00

2.

SEPARATION PAY:

(Reinstatement no longer feasible)

10/1/93 - 9/15/2000 = 6 yrs. & 11 mos.

P60,000.00 x 7 yrs.
=

P 420,000.00

: TOTAL

P 5,100,000.00

3.

ATTORNEY'S FEES

10% of P 5,100,000.00

P 510,000.00

4.

MORAL DAMAGES

500,000.00

5.

EXEMPLARY DAMAGES

200,000.00

: TOTAL AWARD

P 6,310,000.00

Petitioners contend that contrary to established jurisprudence, the Labor Arbiter's computation of the
amount due to the private respondent was principally based on the mistaken premise that complainant
was entitled to backwages even beyond the closure and cessation of petitioners' newspaper business on
January 19, 1998.37 Petitioners argue that this should not be the case because the amount of backwages
should only be computed from the date of illegal dismissal up to the time when reinstatement was still
possible. Reinstatement could not have been possible beyond the date of the closure of the Manila
Chronicle on January 19, 1998. Therefore, backwages should only be computed from September 15,
1994, the effectivity of private respondents termination by the petitioners until the date when the
Manila Chronicle ceased publication.

Petitioners further contend that they only had one newspaper business and, with the closure of the
same, the reinstatement of private respondent Neal Cruz to his former position as Editor-In-Chief
became a physical and legal impossibility. Private respondent could not claim that he should have been
appointed to another position with the petitioners because he was hired solely for his editorial skills.
There is simply no equivalent or substantially equivalent position to which private respondent could be
assigned in petitioners' organization.38

This is not the first time that we resolved an issue of this nature. In the case of Pizza Inn/Consolidated
Foods Corporation v. NLRC,39 we ruled that:

An employer found guilty of unfair labor practice in dismissing his employee may not be ordered so to
pay backwages beyond the date of closure of business where such closure was due to legitimate
business reasons and not merely an attempt to defeat the order of reinstatement.40

In the case at bar, the Manila Chronicle ceased publication on January 19, 1998. The cessation of
publication was a permanent one and it was precipitated by the paper's dire financial condition which
was aggravated by a crippling strike causing it to finally shut down. Petitioners' closure of their
newspaper business was made on legal and valid grounds. It was never resorted to as a means to
deprive the private respondent of the opportunity to be reinstated to his former position. To allow the
computation of the backwages due the private respondent to be based on a period beyond January 19,
1998 would be an injustice to the petitioners.

Our power to exact retribution from erring employers for cases of illegal dismissal should not go beyond
what is recognized as just and fair under the circumstances. While we are inclined more often than not
toward the worker and uphold his cause in his conflicts with his employer, such favoritism has not
blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine.41

WHEREFORE, the petition is GRANTED. The November 13, 2002 Decision of the Court of Appeals as well
as its March 17, 2003 Resolution in CA-G.R. SP No. 67933 are SET ASIDE. Respondent National Labor
Relations Commission is DIRECTED to reinstate and give due course to petitioners' appeal for a
determination of the amount of backwages to be paid to private respondent with further instructions to
receive or require such further evidence as may be necessary. Pending the final determination of the
correct amount of backwages due the private respondent, the NLRC is ENJOINED from conducting any
enforcement or execution proceedings with respect to NLRC NCR Case No. 10-07187-94.

No pronouncement as to costs.

SO ORDERED.

• Intercontinental Broadcasting v. Benedicto, July 20, 2006

CORONA, J.:

This is a Petition for Review on Certiorari 1 of the October 18, 2001 decision2 and March 18, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 53413 which in turn affirmed the March 5,
1999 decision4 and June 10, 1999 resolution5 of the National Labor Relations Commission (NLRC) in
NLRC NCR CA Case No. 017886-99.

Petitioner alleged that Intercontinental Broadcasting Corporation is a government-owned and controlled

corporation.6 It is engaged in the business of mass media communications including, among others, the
operation of television Channel 13 (IBC 13).7

In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the general manager8 then of petitioner,
as marketing manager with a monthly compensation of P20,000 plus 1% commission from collections of
all advertising contracts consummated.9

In a letter dated October 11, 1994 signed by Tomas Gomez III, at that time the president of petitioner,
Benedicto was terminated from his position.10

On December 3, 1996, Benedicto filed a complaint with the NLRC for illegal dismissal and damages. He
alleged that after his appointment, he was able to increase the televiewing, listening and audience
ratings of petitioner which resulted in its improved competitive financial strength.11 Specifically, in 1994,
he claimed that he successfully initiated, pursued and consummated an advertising contract with VTV
Corporation for a period of five years involving the amount of P600 million.12 However, on October 11,
1994, he was terminated from his position without just or authorized cause.

Labor arbiter Jovencio LL. Mayor, Jr.,13 in a decision dated August 17, 1998, ruled in favor of Benedicto
finding that he was indeed illegally dismissed. Consequently, Mayor: (1) ordered his reinstatement with
full backwages from the time of his dismissal up to his actual reinstatement (amounting to P920,000 at
the time of the promulgation of the decision); (2) directed petitioner to pay his 1% commission on the
contract with VTV Corporation (P645,000), attorney's fees in the amount of 10% of the total award
(P156,500) and (3) dismissed the claim for moral and exemplary damages.14

Finding the award excessive, petitioner, on October 15, 1998, filed with the NLRC its memorandum on
appeal with motion to re-compute the award on which the appeal bond was to be based.15 This motion
was not acted upon,16 hence, on December 10, 1998, petitioner proceeded to file the appeal bond
based on the amounts17 awarded in the judgment appealed from.18

In a decision promulgated on March 5, 1999, the NLRC dismissed the appeal and ruled that petitioner
failed to perfect its appeal since it did not file the appeal bond within the reglementary period. The CA
affirmed the NLRC's decision.

Thus this petition with application for preliminary injunction and/or temporary restraining order alleging
the following assignment of errors:

I. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING THE ASSAILED DECISION/RESOLUTION OF THE
[NLRC] ON MERE TECHNICALITY, FAILING TO RECOGNIZE THAT PETITIONER HAS IN FACT PERFECTED ITS
APPEAL UNDER EXISTING LAW AND JURISPRUDENCE[;]

II. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED RESOLUTION/DECISION
DEPRIVING PETITIONER OF ITS RIGHT TO APPEAL, BY IGNORING THE MERITS OF THE MOTION TO
RECOMPUTE AWARD TO REDUCE BOND AND ITS SIGNIFICANCE IN RELATION TO THE PERFECTION OF
THE APPEAL[;]

III. WITH DUE RESPECT, THE [CA] ERRED IN NOT PASSING UPON THE SUBSTANTIVE MERITS OF THE CASE,
SPECIALLY ON THE VALIDITY OF THE REINSTATEMENT OF [BENEDICTO] AT AGE SEVENTY TWO (72),
CONTRARY TO LAW AND JURISPRUDENCE, AND THE GRANT OF BACKWAGES BEYOND [THE] AGE FOR
COMPULSORY RETIREMENT AT 65[;]

IV. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED RESOLUTION/DECISION
THAT GRANTS 5-YEAR AUTOMATIC INCREASE OF AWARD [SUCH] AS FROM P1.565M TO 2.711M
WITHOUT SETTING [BENEDICTO]'S MOTION TO RECOMPUTE AWARD FOR HEARING AND WITHOUT DUE
NOTICE THEREOF DEPRIVING THE PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS[;]

V. THE [CA] ERRED IN IGNORING THE ISSUE OF JURISDICTION RAISED BY PETITIONER.19

On June 26, 2002, this Court issued a temporary restraining order enjoining Benedicto and the NLRC
from implementing the decision of labor arbiter Mayor.20

During the pendency of the case, on November 6, 2002, Benedicto passed away.21 He was substituted
by his surviving spouse Lourdes V. Benedicto and their four children.22

After this petition was given due course, Atty. Rodolfo B. Barriga, who claimed to have been hired by
Benedicto as collaborating counsel, filed a motion dated December 17, 2002 praying to be reinstated as
counsel of record of respondents.23 The Court, in a resolution dated March 26, 2003, denied the motion
since any attorney-client relationship between him and Benedicto, if it indeed existed, was terminated by
the latter's death. Thereafter, Atty. Barriga filed a motion to determine attorney's fees and notice and
statement of charging lien for attorney's fees dated May 5, 2003 praying, among others, that we
determine and approve his attorney's fees and approve the notice of his charging lien.24

Now the resolution of the issues.

Petitioner raises the issue of jurisdiction without, however, explaining properly the basis of its
objections.25 Such half-hearted and belated attempt to argue the NLRC's alleged lack of jurisdiction
cannot possibly be taken seriously at this late stage of the proceedings.

The NLRC and the CA dismissed petitioner's appeal. Both held that petitioner failed to perfect its appeal.
Petitioner had ten calendar days from its receipt of the labor arbiter's decision on October 5, 1998 to
appeal. While it filed its memorandum on appeal with motion to re-compute award on October 15,
1998, the appeal bond was posted after the appeal period.
Under the second paragraph of Article 223 of the Labor Code, when a judgment involving monetary
award is appealed by the employer, the appeal is perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the NLRC in an amount equivalent to
the monetary award in the judgment. This assures the workers that if they finally prevail in the case, the
monetary award will be given to them on dismissal of the employer's appeal.26 It is also meant to
discourage employers from using the appeal to delay or evade payment of their obligations to the
employees.27

Nevertheless, such amount of the bond may be reduced by the NLRC in meritorious cases, on motion of
the appellant.28 Indeed, an unreasonable and excessive amount of bond is oppressive and unjust, and
has the effect of depriving a party of his right to appeal.29

The provision of Article 223 of the Labor Code requiring the posting of a bond for the perfection of an
appeal of a monetary award must be given liberal interpretation in line with the desired objective of
resolving controversies on the merits.30 If only to achieve substantial justice, strict observance of the
reglementary periods may be relaxed if warranted.31 However, this liberal interpretation must be
justified by substantial compliance with the rule. As we declared in Buenaobra v. Lim King Guan:32

It is true that the perfection of an appeal in the manner and within the period prescribed by law is not
only mandatory but jurisdictional, and failure to perfect an appeal has the effect of making the judgment
final and executory. However, technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. We have allowed appeals from the
decisions of the labor arbiter to the NLRC, even if filed beyond the reglementary period, in the interest of
justice.33

In this case, petitioner posted the bond when the NLRC did not act on its motion for re-computation of
the award. There was thus substantial compliance that justified a liberal application of the requirement
on the timely filing of the appeal bond. Moreover, petitioner presented a meritorious ground in
questioning the computation of the backwages, as we shall discuss below.

We now proceed to the merits of the case.

The labor arbiter found that Benedicto was an employee (the marketing manager) of petitioner.34 He
also determined that there was no just or authorized cause for Benedicto's termination. Neither did
petitioner comply with the two-notice requirement for valid termination under the law. He therefore
concluded that Benedicto was illegally dismissed.35

These factual findings of the NLRC, confirmed by the CA, are binding on us since they are supported by
substantial evidence. Petitioner, aside from merely stating that Benedicto's appointment was
unauthorized,36 did not extensively deal with the issue of whether Benedicto was in fact its employee.
Besides, it is estopped from denying such fact considering its admission that its former President, Tomas
Gomez III, wrote him a letter of termination on October 11, 1994.37 Petitioner, furthermore, never
contested the finding of illegal dismissal. Accordingly, there are no strong reasons for us to again delve
into the facts.
Instead, the bulk of petitioner's arguments focused on the labor arbiter's order of reinstatement and
award of backwages. The issue of reinstatement was mooted by Benedicto's death in 2002.

As for the award of backwages, petitioner insists that the award should be limited to what Benedicto was
entitled to as of the compulsory retirement age of 65 years. When the labor arbiter promulgated his
decision (wherein he awarded the amount of P920,000 as backwages), Benedicto was already 68 years
old. In an order dated August 10, 1999, he further increased the backwages by P180,000.38

We agree with petitioner that Benedicto was entitled to backwages only up to the time he reached 65
years old, the compulsory retirement age under the law.39 When Benedicto was illegally dismissed on
October 11, 1994, he was already 64 years old. He turned 65 years old on December 1, 199440 at which
age he was deemed to have retired. Since backwages are granted on grounds of equity for earnings lost
by an employee due to his illegal dismissal,41 Benedicto was entitled to backwages only for the period
he could have worked had he not been illegally dismissed, i.e. from October 11, 1994 to December 1,
1994.42

Petitioner also questions the award by the labor arbiter of Benedicto's 1% commission on the blocktime
sale agreement with VTV Corporation in the amount of P645,000.43 The arbiter found that the
agreement was initiated by and consummated through Benedicto's efforts and that he was entitled to
the commission.44 This is another factual matter that is binding on us. However, it is unclear how the
labor arbiter arrived at the amount adjudged. We therefore rule that in computing the amount of the
commission Benedicto was entitled to, the following should be considered:

First, because Benedicto was entitled to backwages only from October 11 to December 1, 1994 when he
turned 65 years old, petitioner should pay his commission only for this period.

Second, by nature, commissions are given to employees only if the employer receives income.45
Employees, as a reward, receive a percentage of the earnings of the employer, which they, through their
efforts, helped produce.46 Commissions are also given in the form of incentives or encouragement so
that employees will be inspired to put a little more industry into their tasks. Commissions can also be
considered as direct remunerations for services rendered.47 All these different concepts of commissions
are incongruent with the claim that an employee can continue to receive them indefinitely after reaching
his mandatory retirement age.

Benedicto's right to the commissions was coterminous with his employment with petitioner48 and this
ended when he reached the compulsory retirement age.

Lastly, the stipulation49 providing for commissions (which did not specify the period of entitlement)
would be too burdensome if interpreted to mean that Benedicto had a right to it even after his
employment with petitioner. Doubts in contracts should be settled in favor of the greatest reciprocity of
interests.50 A lopsided and open-minded construction could not have been the parties' contemplation.
Had that been their intent, then they should have spelled it out in no uncertain terms.

The labor arbiter should therefore re-compute the commission Benedicto was entitled to in accordance
with these guidelines.

Petitioner is also liable for 10% of the total amount for attorney's fees since Benedicto and the present
respondents were compelled to litigate and incur expenses to enforce and protect his rights.51

With respect to Atty. Barriga's motion, we note that this entails a factual determination and examination
of the evidence. Since Atty. Barriga still has to prove his entitlement to the attorney's fees he is claiming
and the amount thereof (if he is so entitled), this may be taken up in the NLRC which will execute the
judgment.52

In summary, this case shall be remanded to the labor arbiter for re-computation of backwages and
commissions to be paid by petitioner to respondent(s) for the period October 11, 1994 to December 1,
1994 and 10% of the total amount as attorney's fees. The labor arbiter shall also set for further hearing
Atty. Barriga's motion to determine his attorney's fees and thereafter to fix the amount thereof if he is so
entitled.

WHEREFORE, the assailed decision dated October 18, 2001 and resolution dated March 18, 2002 of the
Court of Appeals in CA-G.R. SP No. 53413 are hereby REVERSED and SET ASIDE.

Petitioner is ORDERED to pay the deceased respondent's backwages and commissions to his heirs from
the time he was illegally dismissed on October 11, 1994 up to the time he reached compulsory
retirement age on December 1, 1994. Likewise, petitioner is ORDERED to pay attorney's fees equivalent
to 10% of the total monetary award (backwages plus commissions). For this purpose, the case is hereby
ordered REMANDED to the labor arbiter for the re-computation of the amounts due.

The labor arbiter is also DIRECTED to set for further hearing Atty. Rodolfo B. Barriga's motion to
determine his attorney's fees and thereafter to fix the amount thereof if due to him.

Our temporary restraining order issued on June 26, 2002 is hereby LIFTED.

Costs against petitioner.

SO ORDERED.

• Velasco v. NLRC, June 26, 2006

TINGA, J.:

There is little difficulty on the part of the Court in upholding the rulings challenged in this Petition for
Review and confirming the finding that private respondents in this case were illegally dismissed. Further,
it is clear that private respondents should be awarded full backwages, an entitlement denied them even
as they were granted separation pay in lieu of reinstatement. We affirm, subject to modification on the
matter of backwages.
Petitioner Pepito Velasco (Velasco) is the owner-manager of Modern Furniture Manufacturing (Modern
Furniture).1 Private respondent Ernesto Tayag was hired as a carpenter by Velasco and Modern Furniture
in 1968, while his relatives, co-private respondents Antonio Tayag and Rodolfo Tayag, were hired in the
same capacity in 1970. All three were paid on a piece-rate basis.2

According to the Tayags, in 1998, Velasco and Modern Furniture started laying off workers due to
business losses, albeit with the promise to the dismissed workers that they would be rehired should the
business again prosper. Purportedly, Antonio and Ernesto Tayag were laid off in December of 1999, while
Rodolfo Tayag was dismissed in May of 2000.3 All three filed complaints for illegal dismissal against
Modern Furniture and Velasco with the National Labor Relations Commission, Regional Arbitration
Branch No. III, based in San Fernando, Pampanga.4 The Tayags sought separation pay in lieu of
reinstatement, as well as 13th month pay, holiday pay, overtime pay, and exemplary damages.5

Velasco and Modern Furniture have a different version. They claimed that while they had indeed
suffered business losses in 1998, causing them to lay off some workers, they subsequently agreed with
their employees, including the Tayags, to pay wages on a piece-rate basis. In the first part of the year
2000, Ernesto Tayag inexplicably stopped reporting to work. In June of that year, Antonio and Rodolfo
Tayag also stopped reporting for work.6 Velasco claimed that he next heard from the three when he was
served summons in the instant case.7 It was thus argued that the Tayags were not actually terminated,
but instead had abandoned their work.

After the complaints of the Tayags were consolidated, Labor Arbiter Eduardo J. Carpio rendered a
Decision dated 15 September 2000 dismissing the complaints for illegal dismissal. The Labor Arbiter
reasoned that since Velasco and Modern Furniture had denied terminating the employees in the first
place, the burden fell upon the Tayags to prove by substantial evidence that they were actually
terminated.8 The Labor Arbiter concluded that the contentions of the Tayags of dismissal were
unsubstantiated, and thus he dismissed the complaints.

On appeal, the NLRC set aside the Decision of the Labor Arbiter in its Resolution dated 26 March 2002.9
The NLRC held that the Labor Arbiter had misappreciated the facts of the case. It was noted that Velasco
and Modern Furniture had admitted that since the Tayags were paid on a per piece basis, they were not
required to go to the work place. In fact, the Tayags were only required to report for work when new job
orders came in and they were called upon by Velasco and Modern Furniture. The NLRC found that there
was no instance from the evidence adduced wherein Velasco or Modern Furniture called upon the
Tayags to report for work.10 From these facts, the NLRC concluded that the Tayags had not reported to
the premises of Modern Furniture simply because they were not given any work, as in fact they had
actually been dismissed. Thus, the NLRC did not agree with the contention that the Tayags had
abandoned work, and concluded instead that they were entitled to separation pay in lieu of
reinstatement. Nonetheless, the other monetary claims of the Tayags were dismissed for lack of merit.11

Velasco filed a Petition for Certiorari and Prohibition with the Court of Appeals, assailing the Resolution
of the NLRC. In a Decision12 dated 30 September 2003, the Court of Appeals sustained the NLRC and
dismissed the petition. The appellate court agreed that it was Velasco, as employer, who had the burden
to prove that the termination was for just or authorized causes, and that Velasco had failed to overcome
such burden.13 The Court of Appeals also deemed the award of separation pay as proper, with the
finding of illegal dismissal and separation pay being a proper alternative remedy should reinstatement be
no longer possible.14

Hence this petition, brought forth after the Court of Appeals had denied Velasco’s Motion for
Reconsideration.15 The crux of Velasco’s arguments before this Court rests on one sentence in the
Resolution of the NLRC, which states:

Viewed in this light, the relief available to complainants-appellants is reinstatement without backwages
there being no showing also that there was illegal dismissal.16

Velasco argues that since the NLRC had concluded that there was no illegal dismissal, the Court of
Appeals erred in concluding instead that the Tayags were illegally dismissed.17 From the same premise,
Velasco also claims that the Court of Appeals also erred in granting separation pay, considering the
alleged finding of the NLRC that there was no illegal dismissal.18

The proper perspective should be asserted. This being an appeal by certiorari under Rule 45 from a
decision of the Court of Appeals, the petitioner must be able to establish an error of law imputable to
the Court of Appeals, since it is the decision of that court that is primarily reviewed by this Court. In
short, the petitioner must stake the petition on the position that in error was the Court of Appeals itself,
rather than the agencies below.

In the case at bar, Velasco claims that the Court of Appeals erred in ruling that the Tayags were illegally
dismissed because the NLRC had purportedly concluded otherwise. We are not persuaded.

We have examined the entirety of the Resolution of the NLRC, as well as the controversial sentence. The
phrase "there being no showing also that there was illegal dismissal" is clearly off-tangent with the rest
of the Resolution, as well as the dispositive portion thereof.

The Resolution of the NLRC is eight (8) pages long. It devoted the first four (4) pages to the factual
narrative and a summary of the ruling of the Labor Arbiter. The Resolution then proceeded to discuss the
position of the Labor Arbiter that with Velasco’s counter-allegation of abandonment the burden of proof
shifted to the Tayags to establish by substantial evidence that they were terminated by Velasco. On this
point, the NLRC concluded that "[the Tayags’ opposing] contention has merit."19 The NLRC then
proceeded to cite the legal doctrines on abandonment, including a statement that the burden of proof
was on the employer to show an unequivocal intent on the part of the employee to discontinue
employment.20

We now quote the next three pages of the Resolution, culminating in the paragraph containing the
controverted passage:

In this case, complainants-appellants Antonio and Ernesto Tayag contend that they were laid off in
December 1999, while complainant-appellant Rodolfo Tayag was laid-off in May, 2000 and that
respondents-appellees promised to recall them as soon as business gets better. On the other hand,
respondents-appellants contend that complainant-appellant Ernesto Tayag voluntarily did not come to
the work premises for about six (6) months or since February, 2000; that in June, 2000, complainants-
appellants Antonio and Rodolfo Tayag likewise for no apparent reason failed to report at respondents-
appellees’ premises. Moreover, respondents-appellees repeatedly assert that:

"Apparently, complainants-appellants are being paid on a per piece basis and not required to go to the
work place, they have the liberty to go or not to go to the work place and therefore, they cannot claim to
have been illegally dismissed if respondent-appellee does not notify or call them for work. It should also
be noted that the complainants-appellants work is based on orders received by the respondent-
appellee, thus, if there are no work orders, they have no work. Furthermore, herein complainants-
appellants are not the only workers engaged by herein respondent-appellee, thus work orders are
usually divided among them and if there are only few orders, other workers would have no work." (p. 55,
Records)

From the foregoing, it is clear that complainants-appellants only go to work when there are orders that
need to be done and when they are called upon by respondents-appellees. The choice to call
complainants-appellants rests on respondents-appellees, so the latter has no basis to complain that
complainants-appellants failed to appear at the work premises. From the evidence adduced, there was
no instance where respondents-appellees called upon complainants-appellants to report for work
because there are orders to be done and the latter refused. What respondents-appellees are merely
saying is that complainants-appellants had voluntarily failed to go to the premises. Clearly, the reason
why complainants-appellants do not appear at the work premises is the fact that they are not called
upon to do work pursuant to their alleged agreement of paying by payment rate basis. It is undisputed
that since early 2000, complainant-appellant Ernesto Tayag was not given work while complainants-
appellants Antonio and Rodolfo

Tayag were not also given work since May, 2000. Hence, complainants-appellants believed and
concluded that they were laid off. Having worked for more than thirty (30) years with respondents-
appellees, Antonio Tayag and Ernesto Tayag are both fifty-five (55) years of age while Rodolfo Tayag is
forty-six (46) years old. We can thus safely conclude that another reason why respondents-appellants do
not call upon them to work is because of their having become old. Verily, respondents-appellees’
assertion that complainants-appellants abandoned their work have no factual basis. We note that even
during the hearing of this case until the Decision was issued, there has been no offer of work made by
respondents-appellees to complainants-appellants.

Viewed in this light, the relief available to complainants-appellants is reinstatement without backwages
there being no showing also that there was illegal dismissal. However, it is clear that respondents-
appellees are no longer interested in calling complainants-appellants back to work because of the
financial difficulty of the business and that complainants-appellants on the other hand, are asking for
separation pay. Such being the case, separation pay in lieu of reinstatement without backwages is the
proper relief in the instant case.21

Reading the entire Resolution, it is beyond doubt that the NLRC concluded that Velasco had failed to
establish that the Tayags had abandoned their employment. Such conclusion is crucial, Velasco’s defense
against the charge of illegal dismissal being that the Tayags had actually abandoned their employment,
which is recognized in jurisprudence as a form of neglect of duty one of the just causes for dismissal
under Article 282 of the Labor Code.22 The disquisition is also relevant, as it debunks the Labor Arbiter’s
contention that it fell upon the Tayags to establish that they had been illegally dismissed. Instead, the
NLRC correctly held that the burden was upon Velasco to substantiate his claim that the Tayags had
abandoned their employment.

Further, the NLRC concluded that the Tayags had stopped reporting to the premises of Modern Furniture
because Velasco and Modern Furniture had stopped assigning them work. Considering that the Tayags
were paid on a per-piece basis, it necessarily followed that they stopped receiving income as well. The
NLRC even hazarded a theory that Velasco had stopped giving the Tayags work because of their age.
Thus, the NLRC stated: "Verily, respondents-appellees’ assertion that complainants-appellants
abandoned their work have no factual basis."23

Given the context of the preceding discussion, which illustrated that the Tayags were not guilty of
abandonment, there is no legal basis whatsoever for the conclusion that "there was no showing x x x
that there was illegal dismissal." It is not clear why the NLRC stated that there was "no showing also that
there was illegal dismissal" when its preceding discussion so obviously pointed to the contrary. Yet when
it is clear that the cited passage cannot stand with the rest of the decision, including the dispositive
portion, the Court cannot obviously confer binding effect on the conclusion that there was no illegal
dismissal, as it runs contrary against the grain of the rest of the Resolution.

Indeed, the dispositive portion of the Resolution clearly supports the premise that the Tayags were
illegally dismissed, there being an award of separation pay in lieu of reinstatement.

WHEREFORE, premises considered, the appeal is partly GRANTED and the Decision dated 15 September
2000 finding that complainants-appellants simply did not report for work or were the ones who
abandoned their work is hereby ordered SET ASIDE. A new Decision is hereby issued ordering
respondents-appellees to award complainants-appellants separation pay in lieu of reinstatement
computed at one-half (1/2) month pay for every year of service computed as follows:

1) Antonio Tayag

Separation Pay:

From 1970 to May 2000 = 30 yrs.

P1,200.00 x 4 wks x 30 yrs. x ½ mo. P72,000.00

2) Ernesto Tayag

Separation Pay:

From 1968 to Dec. 1999 – 31 yrs.

P1,500.00 x 4 wks. X 31 yrs. x ½ mo. P93,000.00

3) Rodolfo Tayag

Separation Pay:

From 1970 to May 2000 = 30 yrs.

P1,500.00 x 4 wks. x 30 yrs. x ½ mo. P90,000.00

GRAND TOTAL P255,000.00

SO ORDERED.24

Under Article 279 of the Labor Code, an employee unjustly dismissed from work is entitled to
reinstatement and backwages, among others. However, it has long been recognized that if reinstatement
is no longer possible or practicable, the employer may be made instead to pay separation pay to the
employee in lieu of reinstatement.25 The dispositive portion of the Resolution is consistent with the
premise that the Tayags were entitled to reinstatement by reason of their illegal dismissal, but they could
receive instead separation pay in lieu of reinstatement if reinstatement is no longer practicable. The
dispositive portion does not hew to a mindset that the Tayags were not illegally dismissed, the thinking
which Velasco wishes to ascribe on the NLRC. It is derived instead from the conclusion that the Tayags
were illegally dismissed, a conclusion that may contradict the cited passage of the NLRC Resolution, but
not the tenor and findings of the Resolution in its entirety.

Other than the erroneous contention that the NLRC had concluded that there was no illegal dismissal,
Velasco’s only remaining argument is that the payment of separation pay was "misplaced, since no
evidence as to the necessity thereof was presented." Velasco cites the Court’s comment in Quijano v.
Mercury Drug Corp.26 that "the doctrine of strained relations should be strictly construed x x x Every
labor dispute almost always results in ‘strained relations’, and the phrase cannot be given an over-
arching interpretation x x x x27

In Quijano, it was the employer who was seeking that the employee be granted separation pay instead of
reinstatement, while in this case Velasco consistently argued against the award of separation pay. Of
course, following Velasco’s logic, the Tayags should instead be reinstated. Nonetheless, the Court finds
no reason to disturb the ruling that the Tayags should be awarded separation pay in lieu of
reinstatement. The cited remarks of the Court in Quijano were made in the context of pointing out that
"[s]ome unscrupulous employers x x x have taken advantage of the overgrowth of this doctrine of
‘strained relations’ by using it as a cover to get rid of its employees and thus defeat their right to job
security."28

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no
longer practical or in the best interest of the parties.29 Separation pay in lieu of reinstatement may
likewise be awarded if the employee decides not to be reinstated.30 It is not controverted that Modern
Furniture has undergone financial hardship, and that the Tayags had opted to seek separation pay in lieu
of reinstatement. We defer to the findings of the NLRC, as affirmed by the Court of Appeals and
authorized under jurisprudence, that separation pay in lieu of reinstatement is warranted in this case.

Finally, the Tayags argue in their Memorandum before this Court that the NLRC and Court of Appeals had
erred in not awarding them full backwages.31 The NLRC, while awarding separation pay to the Tayags,
held that they had failed to establish sufficient factual basis for their other monetary claims.32 The Court
of Appeals remained silent on that aspect.

The Tayags are correct in pointing out that they are entitled to full backwages by reason of their illegal
dismissal, notwithstanding the award of separation pay. The Court made this point clear in Santos v.
NLRC.33

The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights and,
secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual
reinstatement. The statutory intent on this matter is clearly discernible. Reinstatement restores the
employee who was unjustly dismissed to the position from which he was removed, that is, to his status
quo ante dismissal, while the grant of backwages allows the same employee to recover from the
employer that which he had lost by way of wages as a result of his dismissal. These twin remedies—
reinstatement and payment of backwages—make the dismissed employee whole who can then look
forward to continued employment. Thus do these two remedies give meaning and substance to the
constitutional right of labor to security of tenure. The two forms of relief are distinct and separate, one
from the other. Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-
availability of the other. Separation pay was awarded in favor of petitioner Lydia Santos because the
NLRC found that her reinstatement was no longer feasible or appropriate. As the term suggests,
separation pay is the amount that an employee receives at the time of his severance from the service
and, as correctly noted by the Solicitor General in his Comment, is designed to provide the employee
with "the wherewithal during the period that he is looking for another employment." In the instant case,
the grant of separation pay was a substitute for immediate and continued re-employment with the
private

respondent Bank. The grant of separation pay did not redress the injury that is intended to be relieved
by the second remedy of backwages, that is, the loss of earnings that would have accrued to the
dismissed employee during the period between dismissal and reinstatement. Put a little differently,
payment of backwages is a form of relief that restores the income that was lost by reason of unlawful
dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period
the dismissed employee must undergo before locating a replacement job. It was grievous error
amounting to grave abuse of discretion on the part of the NLRC to have considered an award of
separation pay as equivalent to the aggregate relief constituted by reinstatement plus payment of
backwages under Article 280 of the Labor Code. The grant of separation pay was a proper substitute only
for reinstatement; it could not be an adequate substitute both for reinstatement and for backwages. In
effect, the NLRC in its assailed decision failed to give to petitioner the full relief to which she was entitled
under the statute.34 (Emphasis supplied)

The Santos rule has been repeatedly affirmed by this Court, and must be applied to this case.35 Even
assuming that the Tayags had not adduced any evidence to establish the amount of backwages to be
paid, it cannot be denied that under the law, particularly Article 279 of the Labor Code, they are entitled
to backwages as a matter of right, owing to their illegal dismissal. Hence, the NLRC and the Court of
Appeals erred in not awarding backwages as well.

However, the Court recognizes that there may be some difficulty in ascertaining the proper amount of
backwages, considering that the Tayags were apparently paid on a piece-rate basis. In Labor Congress of
the Philippines v. NLRC,36 the Court was confronted with a situation

wherein several workers paid on a piece-rate basis were entitled to back wages by reason of illegal
dismissal. However, the Court noted that as the piece-rate workers had been paid by the piece, "there
[was] a need to determine the varying degrees of production and days worked by each worker," and that
"this issue is best left to the [NLRC]."37 We believe the same result should obtain in this case, and the
NLRC be tasked to conduct the proper determination of the appropriate amount of backwages due to
each of the Tayags.38

Nonetheless, even as the case should be remanded to the NLRC for the proper determination of
backwages, nothing in this decision should be construed in a manner that would impede the award of
separation pay to the Tayags as previously rendered by the NLRC, and affirmed by the Court of Appeals.

WHEREFORE, the Petition is DENIED. The Resolution of the National Labor Relations Commission dated
26 March 2002 and the Decision of the Court of Appeals dated 30 September 2003 are AFFIRMED, with
the MODIFICATION that backwages shall be awarded to respondents in such amounts as shall be
determined by the National Labor Relations Commission. In this regard, the case is hereby REMANDED
to the National Labor Relations Commission for the determination of the back wages due respondents,
conformably with this Decision. Said Commission is further DIRECTED TO RESOLVE the issue of
backwages within sixty (60) days from its receipt of a copy of this Decision and of the records of the case
and to submit to this Court a report of its compliance herewith within ten (10) days from the rendition of
its resolution. Costs against petitioner.

SO ORDERED.

• PCIB v. Abad, February 28, 2005

PANGANIBAN, J.:

An employee dismissed for a just cause under Article 282 of the Labor Code may still be awarded
separation pay as a measure of social justice. Such financial assistance, however, is not given when the
employee has been validly dismissed for serious misconduct, or for causes that reflect on moral
character or personal integrity.

The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the October 14, 2002
Decision2 and the April 11, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 66368. The
assailed Decision disposed as follows:

"WHEREFORE, premises considered, the assailed Decision of respondent Commission in NLRC Case No.
V-000848-99 is hereby AFFIRMED with modification, that is, in addition to the financial award granted by
the NLRC, [petitioner] Bank is further ordered to give [respondent] a separation pay equivalent to one
half (1/2) month's pay for every year of service. x x x."4

The assailed Resolution denied petitioner's Motion for Reconsideration.

The Facts

The facts are narrated by the CA as follows:

"x x x Anastacio D. Abad was the senior Assistant Manager (Sales Head) of [petitioner Philippine
Commercial International Bank (PCI Bank now Equitable PCI Bank)], Tacloban City Branch when he was
dismissed from his work on 03 August 1998.

"He started working with said [petitioner] Bank since 03 December 1973, rose from the ranks and was
receiving a monthly salary of P36,358.52 at the time of his termination.

"On 13 March 1998, [Abad] received a Memorandum from [petitioner] Bank concerning the irregular
clearing of PNB-Naval Check of Sixtu Chu, the Bank's valued client.ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ

"On 18 March 1998, [Abad] submitted his Answer, categorically denying that he instructed his
subordinates to validate the out-of-town checks of Sixtu Chu presented for [deposit or encashment] as
local clearing checks.

"During the actual investigation conducted by [petitioner] Bank, several transactions violative of the
Bank's Policies and Rules and Regulations were [uncovered] by the Fact-Finding Committee. Said
transactions placed the Bank at risk in the amount of P23,044,527.88 and were consummated in the
span of only one (1) month - from 02 February 1998 to 02 March 1998.

"Consequently, Mr. Lorenzo A. Cervantes, the Fact-Finding Officer of [petitioner] Bank, issued, on 01 April
1998, another Memorandum to [Abad] asking the latter to explain the newly discovered irregularities.

"Not satisfied with the explanations of [Abad] in his 11 April 1998 Reply, [petitioner] Bank served
another Memorandum, attaching thereto the 01 July 1998 Decision of the Fact-Finding Committee,
terminating his employment effective immediately upon receipt of the same.

"On 07 September 1998, x x x Abad instituted a Complaint for Illegal Dismissal With Non-Payment of
Overtime Pay, Premium Pay for Holiday and Rest Day, Separation Pay, Retirement Benefits, Damages and
Attorney's Fees.
"On 30 August 1999, after the contending parties['] submission of their respective Position Papers, Labor
Arbiter Guimoc promulgated his Decision in favor of [petitioner] and against [Abad], to wit:

'WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of complainant
[Abad] to be legal.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

[Petitioner Bank] is, however, directed to indemnify [Abad] in the amount of P10,000.00 for its failure to
fully comply with the requirements of due process.

'x x x x x x x x x

'SO ORDERED. '5

"Aggrieved by the ruling of the Labor Arbiter, [Abad] appealed the same before the [National Labor
Relations Commission (NLRC)] which, on 29 November 2000, issued [a] Decision, affirming with
modification the judgment of the Labor Arbiter, thus:

'WHEREFORE, premises considered, the decision of the Labor [A]rbiter Benjamin S. Guimoc dated 30
August 1999 is MODIFIED, to wit:

'Ordering the [petitioner Bank] to pay the complainant [Abad] in the amount of Twenty One Thousand
Two Hundred Nine & 31/100 (P21,209.31) representing his proportionate 13th month pay for the year
1998.

'SO ORDERED. '6

"After the denial of his Motion for Reconsideration by [the NLRC] in its Resolution dated 01 June 2001,
[Abad] elevated the case before [the CA in a Petition for Certiorari under Rule 65 of the Rules of
Court]."7

Ruling of the Court of Appeals

The CA sustained the factual findings of the NLRC and the labor arbiter that the dismissal of Abad was
valid. The appellate court ruled that the bank was able to establish that the latter had lost its trust and
confidence in him.8

However, the CA awarded separation pay equivalent to one half (1/2) month pay for every year of
service, in accordance with the social justice policy in favor of the working class.9 It noted that Abad had
acted in the belief that Sixtu Chu was a valued client of the bank, and that there was an existing bills
purchase line agreement in client's favor.10

Hence, this Petition.11

The Issue

Petitioner states the issue in this wise:

"The Court of Appeals grossly erred in awarding separation pay equivalent to one-half (1/2) month's pay
for every year of service to respondent, the same being contrary to law and jurisprudence."12

The Court's Ruling

The Petition is unmeritorious.

Main Issue:

Separation Pay Despite Lawful Dismissal

The Court is tasked to determine the propriety of awarding separation pay to an employee despite the
finding of lawful dismissal. Pertinent here are the rules on dismissals of employees.

Applicable Law

The award of separation pay is required for dismissals due to causes specified under Articles 28313 and
28414 of the Labor Code, as well as for illegal dismissals in which reinstatement is no longer feasible.15
On the other hand, an employee dismissed for any of the just causes enumerated under Article 28216 of
the Labor Code is not, as a rule, entitled to separation pay.17

As an exception, allowing the grant of separation pay or some other financial assistance to an employee
dismissed for just causes is based on equity.18 The Court has granted separation pay as a measure of
social justice even when an employee has been validly dismissed, as long as the dismissal was not due to
serious misconduct or reflective of personal integrity or morality.

This equitable principle was explained in San Miguel Corporation v. Lao19 as follows:

"In Soco v. Mercantile Corporation of Davao [148 SCRA 526, March 16, 1987], separation pay was
granted to an employee who had been dismissed for using the company vehicle for a private purpose. In
Tanala v. National Labor Relations Commission [322 Phil. 342, January 24, 1996] the payment of
separation pay to an employee who had been dismissed for quarreling with a fellow worker outside the
company premises was sustained. Likewise, in Filipro, Inc. v. NLRC [229 Phil. 150, October 16, 1999], an
award of separation pay was decreed in favor of an employee who had been validly dismissed for
preferring certain dealers in violation of company policy. The Court, however, disallowed the grant of
separation pay to employees dismissed for serious misconduct or for some other causes reflecting on his
moral character. In the case of Philippine Long Distance Telephone Co. (PLDT) v. NLRC and Abucay [164
SCRA 671, 682, August 23, 1988], the Court clarified a perceived incongruence in its several
pronouncements by stating thusly:

'We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.

'x x x x x x x x x

'The policy of social justice is not intended to countenance wrongdoing simply because it is committed
by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.'

The dictum was followed in Philippine National Construction Corporation v. NLRC [170 SCRA 207,
February 9, 1989], where the Court deleted an award of separation pay to an employee who had been
found guilty of dishonesty for having stolen company property. Cosmopolitan Funeral Homes, Inc. v.
Maalat [187 SCRA 108, July 2, 1990] disallowed the grant of separation pay to an employee who was
dismissed for dishonesty for an understatement of reported contract price against the actual contract
price charged to and paid by the customers and for misappropriation of funds or collections. A similar
holding was reached in Zenco Sales, Inc. v. NLRC [234 SCRA 689, August 3, 1994], where the dismissed
employee was found guilty of gross misconduct for having used his employer's property, equipment and
personnel in his personal business. The Court reversed the decision of the NLRC in San Miguel
Corporation v. NLRC [325 Phil. 940, March 29, 1996], granting an employee, dismissed for dishonesty, the
privilege to retire from the company with a right to avail himself of 100% of the benefits the company
had offered to retiring employees. Quite recently, in Edge Apparel, Inc. v. NLRC [349 Phil. 972, February
12, 1998], the Court, categorizing the two causes for the dismissal of an employee - 'just causes' under
Article 282 of the Labor Code and 'authorized causes' under Article 283 and 284 of the same code -
reiterated that an employee whose employment was terminated for a just cause would not be so
entitled as a matter of right to the payment of separation benefits."20

In line with San Miguel, separation pay depends on the cause of the dismissal and the circumstances of
each case. The dismissal should not be due to serious misconduct or to causes reflective of moral
character. Notwithstanding a valid dismissal, an employee's lack of moral depravity could evoke
compassion and thereby compel an award of separation pay.

Dismissal in the Present Case

The CA affirmed the factual findings of the labor arbiter and the NLRC that Abad had violated the bank's
policies, rules and regulations, and code of discipline.21 On this basis, the appellate court ruled that the
dismissal was valid on the ground that the bank had lost its trust and confidence in Abad, who was a
managerial employee.22

This Court observes that petitioner is not challenging the ground relied upon by the CA in affirming the
dismissal. Instead, petitioner merely disputes the award of separation pay, arguing that respondent
deliberately violated the bank's policies and was therefore not entitled to the grant.23 Such argument,
though relevant to a justification of the dismissal, does not directly relate to the propriety of awarding
separation pay.

Under the San Miguel test, separation pay may be awarded, provided that the dismissal does not fall
under either of two circumstances: (1) there was serious misconduct, or (2) the dismissal reflected on
the employee's moral character. The dismissal in the present case was due to loss of trust and
confidence, not serious misconduct. There had been jurisprudence granting separation pay for dismissals
based on this ground.24 Not falling under the first qualification, the query now shifts to whether it was
reflective of the moral character of respondent.

While he violated the bank's policy, rules and regulations, there was no indication that his actions were
perpetrated for his self-interest or for an unlawful purpose. On the contrary, and as the facts indicate,25
his actions were motivated by a desire to accommodate a valued client of the bank.

The Court is also mindful of previous rulings that have granted separation pay26 after giving considerable
weight to long years of employment. Accordingly, respondent's employment of 25 years, with only one
other infraction that petitioner has failed to elaborate on, supports the award of separation pay.

Alleged Change of Theory

Petitioner also contests the arguments of respondent that (1) Sixtu Chu was a valued a client and (2) had
a bills purchase line agreement with the bank. Allegedly, these were raised for the first time on
appeal.27 Accordingly, petitioner contends that respondent was allowed to change his theory when he
appealed the case to the CA.28

These contentions could have been proper subjects for our consideration, had petitioner itself not been
guilty of the same fault of changing theory on appeal. A perusal of its Motion for Partial
Reconsideration29 of the assailed Decision shows that this issue was not raised therein. Petitioner did
not question the CA's consideration of these alleged new defenses. Prior to raising the argument before
this Court, it should have raised the matter in its Motion for Partial Reconsideration, in order to give the
appellate court an opportunity to correct its ruling.30 For it to raise this very issue before us now would
be improper, since it failed to do so before the CA.

At any rate, the alleged change of theory on appeal has not been sufficiently shown by petitioner. It has
merely raised bare allegations and referred to the defenses in the Supplemental Position Paper filed by
respondent with the labor arbiter.31 From those bare statements, no firm conclusion can be inferred
that respondent limited his allegations only to those stated therein.

All in all, petitioner has not successfully demonstrated any reversible error in the assailed Decision and
Resolution of the appellate court.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED.

Costs against petitioner.

SO ORDERED.

• Bago v. NLRC, April 4, 2007

CARPIO MORALES, J.:

In a complaint filed on November 20, 20021 with the Human Resource Development Department
(HRDD) of respondent Standard Insurance Company Incorporated (SICI), Celia P. Abordo (Celia), the Head
of the Tuguegarao Branch of SICI, charged five employees including herein petitioner Arlyn Bago (Arlyn),
an encoder, and Elsie Pagarigan (Elsie), an assistant underwriter, with "manipulating money out of the
agents/zone managers and [Celia’s] commissions."2 She further charged Arlyn and two other employees
with "spreading rumors to clients/agents/zone managers that [Celia] is having an ‘affair’ with the claims
assistant."3

On Celia’s recommendation, the Internal Audit Department conducted a special audit from November
25-29, 2002 which disclosed as follows, quoted verbatim:

1. Agents whose business coded under the Branch Head were not given commissions due to them.
Likewise, commissions due to the Branch Head were not also given . . . to her. Commission slips were not
signed by the corresponding recipient. This is done in the following ways, to wit;

A. through Branch Head’s commission drawn in the G&A Fund (Cashier encash the check and the
Accountant computes commissions of sub-agent and other expenses to be deducted from the cash. Sub-
agents will be given a commission lower than the amount that was reported to the Branch Head.
Commissions due to sub-agents that was being reported to the Branch Head is written in a scratch paper
by the Branch Accountant, thus commission will be given to sub-agent is concealed to their Branch Head
as well as the agent. Cash due will then be given to the Branch Head by the Branch Cashier x x x

xxxx

B. through cash collection. Branch Head did not receive the amount what is due to her, likewise discount
given to client is also concealed (lower than what was computed in the commission slip.) They
commonly used the word "discount" in the commission slip to mislead the Branch Head in approving it; x
xx

xxxx

2. The above dishonesty was admitted by the Branch Cashier and Branch Accountant as per statement
submitted to the auditors x x x and discussions with them on November 27, 2002. However, their letters
differ as to the details of the act. x x x

The above act of dishonesty was discussed with the Branch. It was admitted that there was a connivance
between Branch Cashier, Accountant, Underwriter, and the Encoder during the meeting as evidenced by
their signing on the auditors’ report on November 27, 2002. They admitted that the amount they get
from the act is divided equally among them. x x x

3. During the verification of the auditors regarding the common fund record, the Branch Cashier
provided xxx a photocopy of a portion of the common fund record. x x x As per record, the act started
last quarter of 2001. The staff obtained loans from the fund except the Claims Assistant. x x x The
running balance of the fund as of November 5, 2002 is ₱5, 039.09.
4. A written statement from the Underwriter and the Encoder was also obtained. x x x They are blaming
the Branch Accountant and the Branch Cashier for such an act of dishonesty. They are also denying that
they are part of connivance and that they do not know that the money they received comes from such
act of dishonesty. However, on the last part of their letter they are asking for an apology for being a part
of the act they have committed.

x x x x4 (Underscoring and emphasis partly in the original, partly supplied; italics supplied)

The audit also disclosed that the alleged rumor about Celia started when she requested the Claims
Evaluator to drive for her and allowed him to bring home her car.5

On the request of the HRDD,6 Celia submitted statements of three witnesses7 to substantiate the charge
of rumor-mongering.

The HRDD thus directed Arlyn and the two other concerned employees to explain within five days why
appropriate sanction under SICI’s Code of Conduct should not be imposed on them relative to the charge
of spreading malicious rumors about Celia.8 Complying, Arlyn and her two co-employees explained, by
letter of December 3, 2002 addressed to the Assistant Vice President of SICI’s legal department, as
follows:

We, the concerned staff of Standard Insurance Co., Inc. Tuguegarao Branch, would like to appeal to your
good end as we are asking apologies for all offenses and distractions committed by us against our Branch
Head. We humbly acknowledge our faults. "Hindi nga po naming maubos maisip kung bakit at paano
naming nagawa yun sa kabila ng lahat ng kabutihang nagawa sa amin ng aming boss." Ayon nga sa
kasabihan, "Ang pagsisisi ay laging nasa huli". Lubos po kaming nagsisisi ngayon pero sana hindi pa huli
ang lahat.

On some occasions, jealousy and anger have driven us towards our boss. Tao lang po kami na mahina at
nagkakasala. Kungsabagay, sa pangyayaring ito marami kaming natutunan. Ngayon alam na namin na
dapat naming protektahan at suportahan ang aming Branch Head. We have already personally asked
forgiveness from Ma’am Cecil [sic], she readily forgave us naman. But then, we still seek for your further
consideration and advice. PLEASE GIVE US ANOTHER CHANCE, SIR, to prove that we are sincere and to
show how deeply sorry we are for all inconveniences we have done. Sana man lang, kahit ito na ang
pamasko niyo sa amin.9 (Emphasis and italics in the original; underscoring supplied)

Noting that Arlyn et al. had not responded to the charge of rumor-mongering, the HRDD gave them an
extension of time to comply. They accordingly replied:

While it is true that we did not answer the first memo sent to us, we likewise deny that such act was an
admission of the offense charged to us. Please be known that during the period of five (5) days given to
us to explain our side, we approached Ma’am Cecil [sic] and earnestly talked to her begging forgiveness
for all offenses we’ve done. The conversation we’ve had was very emotional and touchy. We cried deeply
as we asked for another chance to show how sorry we were with deepest desires to work with her once
again.
To this, Ma’am Cecil [sic] recognized our sincerity and she readily forgave us. It shocked us that she was
able to get through with our faults despite our shortcomings. We really appreciate our boss who has a
big soft heart. We then planned to start anew. Days passed and we noticed she forgot all about the issue.
There’s no sign of remorse in her anymore. She really has forgiven us we know. That’s why, we decided
not to answer the memo any longer since we have thought the problem is already over. Whether we
failed to comply in your first memo, our apologies. x x x10 (Underscoring supplied)

The HRDD likewise required Arlyn, along with her similarly charged co- employees, to explain within five
days why appropriate sanction should not be imposed upon them for dishonesty, given their admission
thereof during the conduct of the internal audit.11 Arlyn’s explanation reads:

My admission to my participation to the misdeed was deliberately made during the Auditors’ visit to Tug.
branch simply because I would like to put an end to that form of Dishonesty which we have gradually
committed, for one would not put a blame on the person who initiated the proposal but I would
consider the wrong doing a collective responsibility of the group. It is with much regret, however,
because I have succumb [sic]/or gave in to such fraudulent move.

I love my work and the company I work with. I’m already on my 8 years working with the co. but I have
not been involved on any act of dishonesty nor have been complained of administratively or otherwise.
Moreover, the money pooled by us turned out to be a petty cash fund were [sic] we could borrow for
emergency purposes. I’m willing to return whatever amount I have benefited. I acknowledge and deeply
apologized for that said shortcomings. I know that with that misdeed, it has affected my integrity, which I
have taken cared [sic] of a number of years. The complaint of the Branch Head was already discussed
with the staff and the said problem has already been given a solution and the staff swore that they
would never commit the same mistakes again. I’m also grateful to our Branch Head for having a big heart
that despite the act we’ve done to her she still forgave us.

All I request for the company is to give me one more chance to make up for the things I have done and to
proved [sic] that I’m still worthy to work in this company. Once again, I beg for the company’s
understanding and compassion.12 (Underscoring supplied)

Arlyn et al. were soon informed about the conduct of a formal hearing of the charges on February 7,
2003 during which they could be assisted by counsel and present additional evidence.13 The records
show that on the scheduled hearing on February 7, 2003, SICI employees were interviewed. There is no
showing, however, if Arlyn et al. attended the hearing.14

Arlyn et al. were later terminated effective March 31, 2003.15

Arlyn and Elsie subsequently filed separate complaints for illegal dismissal against respondent SICI and its
President-co-respondent Ernesto T. Echaus. The complaints were consolidated. 16

By Decision of October 27, 2003, Executive Labor Arbiter Salvador V. Reyes found that Arlyn and Elsie
were illegally dismissed and accordingly ordered their reinstatement to their former positions, without
loss of seniority rights,17 and the award to them of full backwages and other benefits they normally
enjoyed under existing company policy, moral damages, exemplary damages, and attorney’s fees.18

SICI later manifested that it opted to adopt payroll reinstatement for Arlyn and Elsie pending appeal
which the Labor Arbiter approved on December 10, 2003.19

On appeal20 by respondents, the National Labor Relations Commission (NLRC), by Decision21 dated
September 27, 2004, reversed the Labor Arbiter’s decision and declared valid the termination of Arlyn
and Elsie’s services on the grounds of loss of trust and confidence and dishonesty.22 Arlyn and Elsie’s
Joint Motion for Reconsideration23 having been denied24 by the NLRC, Arlyn filed a Petition for
Certiorari and Prohibition with the Court of Appeals which, by Decision25 dated August 25, 2005, it
denied.

Hence, Arlyn’s present Petition for Review on Certiorari,26 positing that the appellate court gravely erred

A. . . . [IN] RUL[ING] THAT PETITIONER IS NOT AN ORDINARY RANK-AND-FILE EMPLOYEE [SO] THAT SHE
COULD BE DISMISSED FOR LOSS OF TRUST AND CONFIDENCE.

B. . . . IN METING THE PENALTY OF DISMISSAL TO HEREIN PETITIONER GIVEN THE FACT THAT THE
ACTUAL AMOUNT OF MONEY ALLEGEDLY MISAPPROPRIATED WAS NEVER ESTABLISHED.27 (Underscoring
supplied)

Arlyn also raises in her present petition the lack of "further" investigation "despite [her] insistent denial
of the charge,"28 and the lack of opportunity to cross-examine the witnesses whose statements were
submitted by Celia to prove her charge of rumor-mongering.29

Furthermore, Arlyn complains that after the NLRC reversed the Labor Arbiter’s decision, respondents
"unilaterally discontinued [her] reinstatement pending appeal contrary to prevailing laws and
jurisprudence."30 She thus prays that this Court "order respondent to pay the benefits due [her] from
September 2004 [when after the NLRC declared her dismissal valid, respondents discontinued her
reinstatement] up to [the] present pursuant to Art. 223 of the Labor Code and existing jurisprudence,
pending resolution" of the present petition."31

The petition is bereft of merit.

Arlyn’s claim that she is an ordinary rank-and-file employee, hence, she cannot be dismissed for loss of
trust and confidence does not lie. The observation of the Court of Appeals that "[h]er work is of such
nature as to require a substantial amount of trust and confidence on the part of x x x her employer"32 is
well-taken in light of her following functions, as enumerated by the NLRC:

1. Batches, collates and encode[s] policies, endorsements and official receipts;

2. Generates printed production, collection, statistical and receivable reports for submission to the Head
Office;

3. Reconciles and finalizes production and collection reports;

4. Maintains the computer hardware and software; and

5. Performs other related functions as may be assigned to her by her superior from time to time, 33

which functions "required the use of judgment and discretion."34

Arlyn of course incorrectly assumes that mere rank-and-file employees cannot be dismissed on the
ground of loss of confidence. Jurisprudence holds otherwise albeit it requires "a higher proof of
involvement" in the questioned acts.

As a general rule, employers are allowed a wide latitude of discretion in terminating the employment of
managerial personnel or those who, while not of similar rank, perform functions which by their nature
require the employer’s full trust and confidence. Proof beyond reasonable doubt is not required. It is
sufficient that there is some basis for 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. This must be distinguished from the case of ordinary rank-and-file employees, whose
termination on the basis of these same grounds requires a higher proof of involvement in the events in
question; mere uncorroborated assertions and accusations by the employer will not suffice.35 (Emphasis
and underscoring supplied)

Even assuming that Arlyn may be considered a rank and file employee, sufficient evidence of her
involvement in the dishonest scheme of SICI’s accountant and cashier who were also charged and found
guilty exists. Not only was her participation established by the internal audit conducted; the cashier
identified her as part of the scheme,36 and she herself admitted her involvement. Her claim that she
merely received money from the cashier and the accountant without knowledge of its illegal source37 is
contradicted by her subsequent statement of January 7, 2003 submitted to the HRDD owning up to
having participated in the scheme.38

But even assuming further that Arlyn may not be dismissed for loss of confidence, she can, on the
ground of fraud or betrayal of trust, following Article 282 of the Labor Code which provides that:

An employer may terminate an employee for any of the following causes:

xxxx

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

xxxx

(e) Other causes analogous to the foregoing.39 (Emphasis supplied)

Arlyn’s argument that "Even granting that there was withdrawal from the [Branch Head’s] commissions,
[SICI] was not even prejudiced financially [and] its income was not diminished [as the withdrawn
amounts were not] diverted from its coffers"40 fails. Etcuban, Jr. v. Sulpicio Lines, Inc.41 instructs that:
"x x x Whether or not the respondent was financially prejudiced is immaterial. Also, what matters is not
the amount involved, be it paltry or gargantuan; rather the fraudulent scheme in which the petitioner
was involved, which constitutes a clear betrayal of trust and confidence." x x x42 (Underscoring supplied)

As for Arlyn’s claim that she was denied due process and her admission was improvidently obtained,43
the records of the case show otherwise. In addition to the conduct of an internal audit during which she
was heard, the requirements of twin-notice and hearing were complied with.

Respecting Arlyn’s claim that she was denied a chance to cross-examine Celia’s witnesses who executed
statements substantiating the charge of rumor-mongering, Arlyn’s joint statements which she and her
co-employees executed admitting the truth of the said charge44 rendered it unnecessary to cross-
examine the witnesses.

As for the propriety of dismissal as a penalty in light of Arlyn’s eight years of service during which, so she
claims, she committed no infraction, the doctrines established in Salvador v. Philippine Mining Service
Corp.,45 to wit:

To be sure, length of service is taken into consideration in imposing the penalty to be meted an erring
employee. However, the case at bar involves dishonesty and pilferage by petitioner which resulted in
respondent’s loss of confidence in him. Unlike other just causes for dismissal, trust in an employee, once
lost is difficult, if not impossible, to regain.46 (Underscoring supplied)

and in Flores v. NLRC,47 to wit:

The fact that petitioner worked for private respondent for twenty-one (21) years, if it is to be considered
at all, should be taken against him. The infraction that he committed, vis-à-vis his long years of service
with the company, reflects a regrettable lack of loyalty. Loyalty that he should have strengthened instead
of betrayed. If an employee’s length of service is to be regarded as a justifying circumstance in
moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning
of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables.48 (Emphasis
and underscoring supplied) apply.

Finally, on Arlyn’s claim that respondents "unilaterally withheld [her] payroll reinstatement" after the
NLRC reversed on September 27, 2004 the Labor Arbiter’s decision, Article 223, paragraph 6 of the Labor
Code provides that the decision of the NLRC on appeals from decisions of the Labor Arbiter "shall
become final and executory after ten (10) calendar days from receipt thereof by the parties." The 2002
New Rules of Procedure of the NLRC provided:

RULE VII

xxxx

SECTION 14. FINALITY OF DECISION OF THE COMMISSION AND ENTRY OF JUDGMENT. - (a) Finality of the
Decisions, Resolutions or Orders of the Commission. Except as provided in Rule XI, Section 9, the
decisions, resolutions or orders of the Commission/Division shall become executory after ten (10)
calendar days from receipt of the same.

(b) Entry of Judgment. - Upon the expiration of the ten (10) calendar day period provided in paragraph
(a) of this section, the decision/resolution/order shall, as far as practicable, be entered in a book of
entries of judgment.

(c) Allowance for Delay of Mail in the Issuance of Entries of Judgment. - In issuing entries of judgment,
the Executive Clerk of Court or the Deputy Executive Clerk, in the absence of a return card or
certification from the post office concerned, shall determine the finality of the decision by making
allowance for delay of mail, computed sixty (60) calendar days from the date of mailing of the decision,
resolution or order.49

That the Court of Appeals may take cognizance of and resolve a petition for certiorari for the nullification
of the decisions of the NLRC on jurisdictional and due process considerations does not affect the
statutory finality of the NLRC Decision.50 The 2002 New Rules of Procedure of the NLRC so provided:

RULE VIII

xxxx

SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON EXECUTION. - A petition for certiorari
with the Court of Appeals or the Supreme Court shall not stay the execution of the assailed decision
unless a temporary restraining order is issued by the Court of Appeals or the Supreme Court.51

In the case at bar, Arlyn received the September 27, 2004 NLRC decision on October 25, 2004,52 and the
January 31, 2005 NLRC Resolution denying her Motion for Reconsideration on February 23, 2005.53
There is no showing that the Court of Appeals issued a temporary restraining order to enjoin the
execution of the NLRC decision, as affirmed by its Resolution of January 31, 2005.

If above-quoted paragraph (a) of Section 14 of Rule VII of the 2002 NLRC New Rules of Procedure were
followed, the decision of the NLRC would have become final and executory on March 7, 2005, ten (10)
calendar days from February 25, 2005. The NLRC, however, issued on June 16, 2005 a Notice of Entry of
Judgment54 stating that the NLRC Resolution of January 31, 2005 became final and executory on April
16, 2005, apparently following the above-quoted last paragraph of Section 14 of Rule VII. No objection
having been raised by any of the parties to the declaration in the Notice of Entry of Judgment of the date
of finality of the NLRC January 31, 2005 Resolution, Arlyn’s payroll reinstatement ended on April 16,
2005. It goes without saying that since this Court is sustaining the NLRC decision, no issue of payroll
reinstatement may be considered at all after April 16, 2005.

WHEREFORE, the petition is, in light of the foregoing discussions, DENIED and the questioned decision of
the court a quo is AFFIRMED with MODIFICATION in that respondent Standard Insurance Co., Inc. is
ordered to pay the salaries due petitioner, Arlyn Bago, from the time her payroll reinstatement was
withheld after the promulgation on September 27, 2004 of the decision of the National Labor Relations
Commission until April 16, 2005 when it became final and executory.
Costs against petitioner.

SO ORDERED.

• Panuncillo v. CAP Phils., February 9, 2007

CARPIO MORALES, J.:

Assailed via Petition for Review1 are the Decision dated May 16, 20032 and Resolution dated November
17, 20033 of the Court of Appeals in CA-G.R. SP No. 74665 which declared valid the dismissal of Milagros
Panuncillo (petitioner) by CAP Philippines, Inc. (respondent).

Petitioner was hired on August 28, 1980 as Office Senior Clerk by respondent. At the time of her
questioned separation from respondent on April 23, 1999, she was receiving a monthly salary of
₱16,180.60.

In order to secure the education of her son, petitioner procured an educational plan (the plan) from
respondent which she had fully paid but which she later sold to Josefina Pernes (Josefina) for ₱37,000.
Before the actual transfer of the plan could be effected, however, petitioner pledged it for ₱50,000 to
John Chua who, however, sold it to Benito Bonghanoy. Bonghanoy in turn sold the plan to Gaudioso R.
Uy for ₱60,000.

Having gotten wind of the transactions subsequent to her purchase of the plan, Josefina, by letter of
February 10, 1999,4 informed respondent that petitioner had "swindled" her but that she was willing to
settle the case amicably as long as petitioner pay the amount involved and the interest. She expressed
her appreciation "if [respondent] could help her in anyway."

Acting on Josefina’s letter, the Integrated Internal Audit Operations (IIAO) of respondent required
petitioner to explain in writing why the plan had not been transferred to Josefina and was instead sold to
another. Complying, petitioner proffered the following explanation:

Because of extreme need of money, I was constrained to sell my CAP plan of my son to J. Pernes last July,
1996, in the amount of Thirty Seven Thousand Pesos (P37,000.) The plan was not transferred right away
because of lacking requirement on the part of the buyer (birth certificate). The birth certificate came a
month later. While waiting for the birth certificate, again because of extreme need of money, I was
tempted to pawned [sic] the plan, believing I can redeemed [sic] it later when the birth certificate will
come.

Last year, I was already pressured by J. Pernes for the transfer of the plan. But before hand, she already
knew the present situation. I was trying to find means to redeemed [sic] the plan but to no avail. I cannot
borrow anymore from my creditors because of outstanding loans which remains unpaid. As of the
present, I am heavily debtladen and I don’t know where to run.

I can’t blame the person whom I pawned the plan if he had sold it. I can’t redeemed [sic] it anymore.
Everybody needs money and besides, I have given them my papers.
I admit, I had defrauded Ms. J. Pernes, but I didn’t do it intentionally. At first, I believe I can redeem the
plan hoping I can still borrow from somebody.

With my more than 18 years stay with the company, I don’t have the intention of ruining my image as
well as the company’s. I think I am just a victim of circumstances.5 (Emphasis and underscoring supplied)

A show-cause memorandum6 dated February 23, 1999 was thereupon sent to petitioner, giving her 48
hours from receipt thereof to explain why she should not be disciplinarily dealt with. Petitioner did not
comply, however.

The IIAO of respondent thus conducted an investigation on the matter. By Memorandum of April 5,
1999,7 the IIAO recommended that, among other things, administrative action should be taken against
petitioner for violating Section 8.4 of respondent’s Code of Discipline reading:

Committing or dealing any act or conniving with co-employees or anybody to defraud the company or
customer/sales associates.

In the same memorandum, the IIAO reported other matters bearing on petitioner’s duties as an
employee, to wit:

OTHERS:

We also received a copy of demand letter of a certain Evelia Casquejo addressed to Ms. Panuncillo
requiring the latter to pay the amount of P54,870.00 for the supposed transfer of the lapsed plan of
Subscriber Corazon Lintag with SFA # 25-67-40-01-00392. Ms. Panuncillo received the payment of
P25,000.00 and P29,870.00 on July 17, 1997 and July 18, 1997 respectively (Exhibits L&M).

Ms. Panuncillo verbally admitted that she was the one who sold the plan to Ms. Casquejo but with the
authorization from Ms. Lintag. However, the transfer was not effected because she had misappropriated
a portion of the money until the plan was terminated. Ms. Casquejo, however, did not file a complaint
because Ms. Panuncillo executed a Special Power of Attorney authorizing the former to receive P68,000
of Ms. Panuncillo’s retirement pay (Exhibit N).8 (Emphasis in the original; underscoring supplied))

On April 7, 1999, another show-cause memorandum was sent to petitioner by Renato M. Daquiz
(Daquiz), First Vice President of respondent, giving her another 48 hours to explain why she should not
be disciplinarily dealt with in connection with the complaints of Josefina and Evelia Casquejo (Evelia).
Complying with the directive, petitioner, by letter of April 10, 1999, on top of reiterating her admission of
having "defrauded" Josefina, admitted having received from Evelia the payment for a lapsed plan, thus:

With regards to [Evelia’s] case, yes its [sic] true I had received the payment but it was accordingly given
to the owner or Subscriber Ms. C. Lintag. The plan was not transferred because it was already forfeited
and we, Ms. Lintag, [Evelia] and I already made settlement of the case.

I think I have violated Sec. 8.4 of the company’s Code of Discipline. I admit it is my wrongdoing. I was
only forced to do this because of extreme needs to pay for my debts. I am open for whatever disciplinary
action that will be sanctioned againts [sic] me. I hope it is not termination from my job. How can I pay for
obligations if that will happen to me.

As for [Josefina], I have the greatest desire to pay for my indebtedness but my capability at the moment
is nil. (space) I have been planning to retire early just to pay my obligations. That is why I had written to
you last year inquiring tax exemption when retiring. I have been with the company for almost 19 years
already and I never intend [sic] to smear its name as well as mine. I was only forced by circumstances.
Although it hurts to leave CAP, I will be retiring on April 30, 1999.

x x x x9 (Emphasis and underscoring supplied)

Respondent thereupon terminated the services of petitioner by Memorandum dated April 20, 1999.10

Petitioner sought reconsideration of her dismissal, by letter of April 23, 1999 addressed to Daquiz,
imploring as follows:

. . . Please consider my retirement letter I sent to you. I would like to avail [of] the retirement benefit of
the company. The proceeds of my retirement could help me pay some of my obligations as well as the
needs of my family. My husband is jobless and I am the breadwinner of the family. If I will be terminated,
I don’t know what will happen to us.

Sir, I am enclosing the affidavit of Ms. Evelia Casquejo proving that we have already settled the case.

x x x x11 (Underscoring supplied)1awphi1.net

Pending resolution of petitioner’s motion for reconsideration, respondent received a letter dated April
28, 199912 from one Gwendolyn N. Dinoro (Gwendolyn) who informed that she had been paying her
"quarterly dues" through petitioner but found out that none had been remitted to respondent, on
account of which she (Gwendolyn) was being penalized with interest charges.

Acting on petitioner’s motion for reconsideration, Daquiz, by letter-memorandum of May 5, 1999,

denied the same in this wise:

A review of your case was made per your request, and we note that it was not just a single case but
multiple cases, that of Ms. Casquejo, Ms. Pernes, and newly reported Ms. Dinoro. Furthermore, the
cases happened way back in July 1996 and 1997, and were just discovered recently. In addition, the
misappropriation of money/or act to defraud the company or customer was deliberate and intentional.
There were several payments received – over a period of time. While you plead for your retirement
benefit to help you pay some of your obligations, as well as the need of your family (your husband being
jobless and being the breadwinner), these thoughts should have crossed your mind before you
committed the violations rather than now. To allow you to retire with benefits, is to tolerate and
encourage others to do the same in the future, as it will be a precedent that will surely be invoked in
similar situations in the future, as it will be a precedent that will surely be invoked in similar situations in
the future. It is also unfair to others who do their jobs faithfully and honestly. If we let you have your
way, it will appear that we let you scot-free and even reward you with retirement – someone who
deliberately violated trust and confidence of the company and customers.

Premises considered, the decision to terminate your services for cause stays and the request for
reconsideration is denied.

x x x x13 (Emphasis and underscoring supplied)

Petitioner thus filed a complaint14 for illegal dismissal, 13th month pay, service incentive leave pay,
damages and attorney’s fees against respondent.

The Labor Arbiter, while finding that the dismissal was for a valid cause, found the same too harsh. He
thus ordered the reinstatement of petitioner to a position one rank lower than her previous position,
and disposed as follows:

WHEREFORE, the foregoing considered, judgement [sic] is hereby rendered directing the respondent to
pay complainant’s 13th Month pay and Service Incentive Leave Pay for 1999 in proportionate amount
computed as follows:

13th Month Pay

January 1, 1999 to April 1, 1999

= 3 months

= P16,180.60/12 mos. x 3 mos. P4,045.14

Service Incentive Leave

= P16,180.60/26 days

=P622.30 per day x 5 days/12 months. 777.87

TOTAL --------------------------------P4,823.01

Plus P482.30 ten (10%) Attorney’s Fees or a total aggregate amount of PESOS: FIVE THOUSAND THREE
HUNDRED FIVE & 31/100 (P5,305.31).

Respondent is likewise, directed to reinstate the complainant to a position one rank lower without
backwages.15 (Underscoring supplied)

On appeal, the National Labor Relations Commission (NLRC), by Decision of October 29, 2001, reversed
that of the Labor Arbiter, it finding that petitioner’s dismissal was illegal and accordingly ordering her
reinstatement to her former position. Thus it disposed:

WHEREFORE, the Decision in the main case dated February 18, 2000 of the Labor Arbiter declaring the
dismissal of the complainant valid, and his Order dated June 26, 2000 declaring the Motion to Declare
Respondent-appellant in Contempt as prematurely filed and ordering the issuance of an alias writ of
execution are hereby SET ASIDE, and a new one is rendered DECLARING the dismissal of the complainant
illegal, and ORDERING the respondent, CAP PHILIPPINES, INCORPORATED, the following:

1. to reinstate the complainant MILAGROS B. PANUNCILLO to her former position without loss of
seniority rights and with full backwages from the date her compensation was withheld from her on April
20, 1999 until her actual reinstatement;

2. to pay to the same complainant P4,045.14 as 13th month pay, and P777.89 as service incentive leave
pay;

3. to pay to the same complainant moral damages of FIFTY THOUSAND PESOS (P50,000.00), and
exemplary damages of another FIFTY THOUSAND PESOS (P50,000.00);

4. to pay attorney’s fees equivalent to ten percent (10%) of the total award exclusive of moral and
exemplary damages.

Further, the complainant’s Motion to Declare Respondent in Contempt dated May 3, 2000 is denied and
rendered moot by virtue of this Decision.

All other claims are dismissed for lack of merit.16 (Underscoring supplied)

In so deciding, the NLRC held that the transaction between petitioner and Josefina was private in
character and, therefore, respondent did not suffer any damage, hence, it was error to apply Section 8.4
of respondent’s Code of Discipline.

Respondent challenged the NLRC Decision before the appellate court via Petition for Certiorari.17 By
Decision of May 16, 2003,18 the appellate court reversed the NLRC Decision and held that the dismissal
was valid and that respondent complied with the procedural requirements of due process before
petitioner’s services were terminated.

Hence, the present petition, petitioner faulting the appellate court

x x x IN REVIEWING THE FINDINGS OF FACT OF THE LABOR ARBITER AND THE NATIONAL LABOR
RELATIONS COMMISSION THAT RESPONDENT CAP PHILIPPINES, INC., HAS NOT BEEN DEFRAUDED NOR
DAMAGED IN THE TRANSACTION/S ENTERED INTO BY PETITIONER RELATING TO HER FULLY PAID
EDUCATIONAL PLAN.

II

x x x IN HOLDING THAT RESPONDENT CAP PHILIPPINES, INC. IS THE INSURER OF PETITIONER’S FULLY
PAID EDUCATIONAL PLAN UNDER THE INSURANCE CODE.

III

x x x IN HOLDING THAT PETITIONER WAS DULY AFFORDED DUE PROCESS BEFORE DISMISSAL[,]
and maintaining that she

IV

x x x IS ENTITLED TO HER FULL BACKWAGES FROM THE DATE HER COMPENSATION WAS WITHHELD
FROM HER ON APRIL 20, 1999 PURSUANT TO THE DECISION OF THE NLRC REINSTATING HER TO HER
PREVIOUS POSITION WITH FULL BACKWAGES AND SETTING ASIDE THE DECISION OF THE LABOR ARBITER
REINSTATING HER TO A POSITION NEXT LOWER IN RANK, UNTIL THE REVERSAL OF THE NLRC DECISION
BY THE HONORABLE COURT OF APPEALS.19 (Emphasis and underscoring supplied)

The petition is not meritorious.

Whether respondent did not suffer any damage resulting from the transactions entered into by
petitioner, particularly that with Josefina, is immaterial. As Lopez v. National Labor Relations Commission
instructs:

That the [employer] suffered no damage resulting from the acts of [the employee] is inconsequential. In
Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA), we held that
deliberate disregard or disobedience of company rules could not be countenanced, and any justification
that the disobedient employee might put forth would be deemed inconsequential. The lack of resulting
damage was unimportant, because "the heart of the charge is the crooked and anarchic attitude of the
employee towards his employer. Damage aggravates the charge but its absence does not mitigate nor
negate the employee’s liability." x x x20 (Italics in the original; underscoring supplied)

The transaction with Josefina aside, there was this case of misappropriation by petitioner of the amounts
given to her by Evelia representing payment for the lapsed plan of Corazon Lintag. While a settlement of
the case between the two may have eventually been forged, that did not obliterate the misappropriation
committed by petitioner against a client of respondent.

Additionally, there was still another complaint lodged before respondent by Gwendolyn against
petitioner for failure to remit the cash payments she had made to her, a complaint she was apprised of
but on which she was silent.

In fine, by petitioner’s repeated violation of Section 8.4 of respondent’s Code of Discipline, she violated
the trust and confidence of respondent and its customers. To allow her to continue with her
employment puts respondent under the risk of being embroiled in unnecessary lawsuits from customers
similarly situated as Josefina, et al. Clearly, respondent exercised its management prerogative when it
dismissed petitioner.

. . . [T]ime and again, this Court has upheld a company’s management prerogatives so long as they 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.

Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever

maybe the justification behind the violations is immaterial at this point, because the fact still remains
that an infraction of the company rules has been committed.

Under the Labor Code, the employer may terminate an employment on the ground of serious
misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. Infractions of company rules and regulations have been
declared to belong to this category and thus are valid causes for termination of employment by the
employer.

xxxx

The employer cannot be compelled to continue the employment of a person who was found guilty of
maliciously committing acts which are detrimental to his interests. It will be highly prejudicial to the
interests of the employer to impose on him the charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remain in the service. It
may encourage him to do even worse and will render a mockery of the rules of discipline that employees
are required to observe. This Court was more emphatic in holding that in protecting the rights of the
laborer, it cannot authorize the oppression or self-destruction of the employer.21 x x x (Underscoring
supplied)

Petitioner nevertheless argues that she was not afforded due process before her dismissal as she was
merely required to answer a show-cause memorandum dated April 7, 1999 and there was no actual
investigation conducted in which she could have been heard.

Before terminating the services of an employee, the law requires two written notices: (1) one to apprise
him of the particular acts or omissions for which his dismissal is sought; and (2) the other to inform him
of his employer’s decision to dismiss him. As to the requirement of a hearing, the essence of due process
lies in an opportunity to be heard, and not always and indispensably in an actual hearing.22

When respondent received the letter-complaint of Josefina, petitioner was directed to comment and
explain her side thereon. She did comply, by letter of February 22, 1999 wherein she admitted that she
"had defrauded Ms. J. Pernes, but [that she] didn’t do it intentionally."

Respondent subsequently sent petitioner a show-cause memorandum giving her 48 hours from receipt
why she should not be disciplinarily sanctioned. Despite the 48-hour deadline, nothing was heard from
her until April 10, 1999 when she complied with the second show-cause memorandum dated April 7,
1999.

On April 20, 1999, petitioner was informed of the termination of her services to which she filed a motion
for reconsideration.

There can thus be no doubt that petitioner was given ample opportunity to explain her side.
Parenthetically, when an employee admits the acts complained of, as in petitioner’s case, no formal
hearing is even necessary.23

Finally, petitioner argues that even if the order of reinstatement of the NLRC was reversed on appeal, it is
still obligatory on the part of an employer to reinstate and pay the wages of a dismissed employee
during the period of appeal, citing Roquero v. Philippine Airlines,24 the third paragraph of Article 22325
of the Labor Code, and the last paragraph of Section 16,26 Rule V of the then 1990 New Rules of
Procedure of the NLRC.

Petitioner adds that respondent made "clever moves to frustrate [her] from enjoying the reinstatement
aspect of the decision starting from that of the Labor Arbiter (although to a next lower rank), [to that] of
the NLRC to her previous position without loss of seniority rights until it was caught up by the decision of
the Honorable Court of Appeals reversing the decision of the NLRC and declaring the dismissal of
petitioner as based on valid grounds."

Respondent, on the other hand, maintains that Roquero and the legal provisions cited by petitioner are
not applicable as they speak of reinstatement on order of the Labor Arbiter and not of the NLRC.

The Labor Arbiter ordered the reinstatement of petitioner to a lower position. The third paragraph of
Article 223 of the Labor Code is clear, however – the employee, who is ordered reinstated, must be
accepted back to work under the same terms and conditions prevailing prior to his dismissal or
separation.

Petitioner’s being demoted to a position one rank lower than her original position is certainly not in
accordance with the said third paragraph provision of Article 223. Besides, the provision contemplates a
finding that the employee was illegally dismissed or there was no just cause for her dismissal. As priorly
stated, in petitioner’s case, the Labor Arbiter found that there was just cause for her dismissal, but that
dismissal was too harsh, hence, his order for her reinstatement to a lower position.

The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. Thus this
Court declared in Colgate Palmolive Philippines, Inc. v. Ople:

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their
part is not in conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where
the totality of the evidence was sufficient to warrant the dismissal of the employees the law warrants
their dismissal without making any distinction between a first offender and a habitual delinquent. Under
the law, respondent Minister is duly mandated to equally protect and respect not only the labor or
workers’ side but also the management and/or employers’ side. The law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer. x x x As stated by Us in the
case of San Miguel Brewery vs. National Labor Union, "an employer cannot legally be compelled to
continue with the employment of a person who admittedly was guilty of misfeasance or malfeasance
towards his employer, and whose continuance in the service of the latter is patently inimical to his
interest."27 (Emphasis and underscoring supplied)

The NLRC was thus correct when it ruled that it was erroneous for the Labor Arbiter to order the
reinstatement of petitioner, even to a position one rank lower than that which she formerly held.28

Now, on petitioner’s argument that, following the third paragraph of Article 223 of the Labor Code, the
order of the NLRC to reinstate her and to pay her wages was immediately executory even while the case
was on appeal before the higher courts: The third paragraph of Article 223 of the Labor Code directs that
– "the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal."

In Roquero, the Labor Arbiter upheld the dismissal of Roquero, along with another employee, albeit he
found both the two and employer Philippine Airlines (PAL) at fault. The Labor Arbiter thus ordered the
payment of separation pay and attorney’s fees to the complainant. No order for reinstatement was
issued by the Labor Arbiter, precisely because the dismissal was upheld.

On appeal, the NLRC ruled in favor of Roquero and his co-complainant as it also found PAL guilty of
instigation. The NLRC thus ordered the reinstatement of Roquero and his co-complainant to their former
positions, but without backwages.

PAL appealed the NLRC decision via Petition for Review before this Court. Roquero and his co-
complainant did not. They instead filed before the Labor Arbiter a Motion for Execution of the NLRC
order for their reinstatement which the Labor Arbiter granted.

Acting on PAL’s Petition for Review, this Court referred it to the Court of Appeals pursuant to St. Martin
Funeral Home v. NLRC.29

The appellate court reversed the NLRC decision and ordered the reinstatement of the decision of the
Labor Arbiter but only insofar as it upheld the dismissal of Roquero.

Back to this Court on Roquero’s Petition for Review, the following material issues were raised:

xxxx

2. Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunal’s order
be halted by a petition having been filed in higher courts without any restraining order or preliminary
injunction having been ordered in the meantime?

3. Would the employer who refused to reinstate an employee despite a writ duly issued be held liable to
pay the salary of the subject employee from the time that he was ordered reinstated up to the time that
the reversed decision was handed down?30

Resolving these issues, this Court held in Roquero:

Article 223 (3rd paragraph) of the Labor Code as amended by Section 12 of Republic Act No. 6715, and
Section 2 of the NLRC Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, provide
that an order of reinstatement by the Labor Arbiter is immediately executory even pending appeal. The
rationale of the law has been explained in Aris (Phil.) Inc. vs. NLRC:

"In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy
which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the
working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force,
which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for
the nation’s progress and stability.

xxxx

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate
a dismissed employee entitles him to payment of his salaries effective from the time the employer failed
to reinstate him despite the issuance of a writ of execution. Unless there is a restraining order issued, it
is ministerial upon the Labor Arbiter to implement the order of reinstatement. In the case at bar, no
restraining order was granted. Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate
him in the payroll. Having failed to do so, PAL must pay Roquero the salary he is entitled to, as if he was
reinstated, from the time of the decision of the NLRC until the finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are
applied only in a suppletory manner and only to effectuate the objectives of the Labor Code and not to
defeat them. Hence, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during
the period of appeal until reversal by the higher court. On the other hand, if the employee has been
reinstated during the appeal period and such reinstatement order is reversed with finality, the employee
is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually
rendered services during the period.31 (Italics in the original, emphasis and underscoring supplied)

In the present case, since the NLRC found petitioner’s dismissal illegal and ordered her reinstatement,
following the provision of the sixth paragraph of Article 223, viz:

The [National Labor Relations] Commission shall decide all cases within twenty (20) calendar days from
receipt of the answer of the appellee. The decision of the Commission shall be final and executory after
ten (10) calendar days from receipt thereof by the parties. (Emphasis and underscoring supplied),

the NLRC decision became "final and executory after ten calendar days from receipt of the decision by
the parties" for reinstatement.

In view, however, of Article 224 of the Labor Code which provides:

ART. 224. Execution of decisions, orders or awards. – (a) The Secretary of Labor and Employment or any
Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu
proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years
from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or
enforce final decisions, orders or awards of the Secretary of Labor and Employment or regional director,
the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the
duty of the responsible officer to separately furnish immediately the counsels of record and the parties
with copies of said decisions, orders or awards. Failure to comply with the duty prescribed herein shall
subject such responsible officer to appropriate administrative sanctions.

x x x x (Emphasis and underscoring supplied),

there was still a need for the issuance of a writ of execution of the NLRC decision.

Unlike then the order for reinstatement of a Labor Arbiter which is self-executory, that of the NLRC is
not. There is still a need for the issuance of a writ of execution. Thus this Court held in Pioneer
Texturizing Corp. v. NLRC:32

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not stay
the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and its
issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by
Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement
order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In
enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which
operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be
construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In
introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715,
Congress should not be considered to be indulging in mere semantic exercise. On appeal, however, the
appellate tribunal concerned may enjoin or suspend the reinstatement order in the exercise of its sound
discretion.33 (Italics in the original, emphasis and underscoring supplied)

If a Labor Arbiter does not issue a writ of execution of the NLRC order for the reinstatement of an
employee even if there is no restraining order, he could probably be merely observing judicial courtesy,
which is advisable "if there is a strong probability that the issues before the higher court would be
rendered moot and moribund as a result of the continuation of the proceedings in the lower court."34 In
such a case, it is as if a temporary restraining order was issued, the effect of which Zamboanga City
Water District v. Buhat explains:

The issuance of the temporary restraining order … did not nullify the rights of private respondents to
their reinstatement and to collect their wages during the period of the effectivity of the order but merely
suspended the implementation thereof pending the determination of the validity of the NLRC
resolutions subject of the petition. Naturally, a finding of this Court that private respondents were not
entitled to reinstatement would mean that they had no right to collect any back wages. On the other
hand, where the Court affirmed the decision of the NLRC and recognized the right of private respondents
to reinstatement,… private respondents are entitled to the wages accruing during the effectivity of the
temporary restraining order.35 (Emphasis and underscoring supplied)

While Zamboanga was decided prior to St. Martin Funeral and, therefore, the NLRC decisions were at the
time passed upon by this Court to the exclusion of the appellate court, it is still applicable.

Since this Court is now affirming the challenged decision of the Court of Appeals finding that petitioner
was validly dismissed and accordingly reversing the NLRC Decision that petitioner was illegally dismissed
and should be reinstated, petitioner is not entitled to collect any backwages from the time the NLRC
decision became final and executory up to the time the Court of Appeals reversed said decision.

It does not appear that a writ of execution was issued for the implementation of the NLRC order for
reinstatement. Had one been issued, respondent would have been obliged to reinstate petitioner and
pay her salary until the said order of the NLRC for her reinstatement was reversed by the Court of
Appeals, and following Roquero, petitioner would not have been obliged to reimburse respondent for
whatever salary she received in the interim.

In sum, while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC
becomes final and executory after the lapse of ten calendar days from receipt thereof by the parties, the
adverse party is not precluded from assailing it via Petition for Certiorari under Rule 65 before the Court
of Appeals and then to this Court via a Petition for Review under Rule 45. If during the pendency of the
review no order is issued by the courts enjoining the execution of a decision of the Labor Arbiter or NLRC
which is favorable to an employee, the Labor Arbiter or the NLRC must exercise extreme prudence and
observe judicial courtesy when the circumstances so warrant if we are to heed the injunction of the
Court in Philippine Geothermal, Inc v. NLRC:

While it is true that compassion and human consideration should guide the disposition of cases involving
termination of employment since it affects one’s source or means of livelihood, it should not be
overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. The law in
protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a
recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be
denied to none).36 (Italics in the original; emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. The assailed Court of Appeals Decision dated May 16, 2003 and
Resolution dated November 17, 2003 are AFFIRMED.
SO ORDERED.

• Garcia v. Philippine Airlines, January 20, 2009

CARPIO MORALES, J.:

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16,
2004 Resolution of the Court of Appeals1 in CA-G.R. SP No. 69540 which granted the petition for
certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners’ Motion for
Reconsideration, respectively. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN
DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of
public respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for
having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction.
Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are
hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.2

The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners3
after they were allegedly caught in the act of sniffing shabu when a team of company security personnel
and law enforcers raided the PAL Technical Center’s Toolroom Section on July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of
Discipline,4 prompting them to file a complaint for illegal dismissal and damages which was, by Decision
of January 11, 1999,5 resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia,
immediately comply with the reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange Commission (SEC)
placed PAL (hereafter referred to as respondent), which was suffering from severe financial losses, under
an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation
Receiver on June 7, 1999.

From the Labor Arbiter’s decision, respondent appealed to the NLRC which, by Resolution of January 31,
2000, reversed said decision and dismissed petitioners’ complaint for lack of merit.6

Petitioners’ Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of
Judgment was issued on July 13, 2000.7

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting the
reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of
Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while
petitioners moved to release the garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by
Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice
issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation Receiver for
appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged Decision and
Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent
finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor
arbiter’s decision (the first ground), and (2) the impossibility to comply with the reinstatement order due
to corporate rehabilitation provides a reasonable justification for the failure to exercise the options
under Article 223 of the Labor Code (the second ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively
reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz:

Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal
to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor
Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners’ case
for illegal dismissal and should instead have directed them to lodge their claim before PAL’s receiver.

However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar
circumstances of the case– that their dismissal was eventually held valid with only the matter of
reinstatement pending appeal being the issue– this Court deems it legally expedient to suspend the
proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are
SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is
hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.

SO ORDERED.8 (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by
Order of September 28, 2007, granted its request to exit from rehabilitation proceedings.9

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the
remaining issue for consideration, which is whether petitioners may collect their wages during the
period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC decision
overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal
removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision.

On this score, the Court’s attention is drawn to seemingly divergent decisions concerning reinstatement
pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the
jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora,10 while
on the other is the recent case of Genuino v. National Labor Relations Commission.11 At the core of the
seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which reads:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as
the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee
shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis and
underscoring supplied)

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during
the appeal period and such reinstatement order is reversed with finality, the employee is not required to
reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services
during the period.12 (Emphasis in the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled
to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a
restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it
is mandatory on the employer to comply therewith.13

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll
reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her
employer under existing laws, collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the pendency of the appeal, then the employee
is entitled to the compensation received for actual services rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of
the fallo of the September 3, 1994 NLRC Decision.14 (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the
employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of
cases,15 the Court did not order the refund of salaries garnished or received by payroll-reinstated
employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render
inutile the rationale of reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the
provisions of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force,
which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for
the nation's progress and stability.

xxxx

x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that
saving act is designed to stop, although temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated
employee and his family.16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust
enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and
statutory precepts portray the otherwise "unjust" situation as a condition affording full protection to
labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of human
experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter
could harm, more than help, a dismissed employee. The employee, to make both ends meet, would
necessarily have to use up the salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the
employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to
refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably,
the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to
return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of
the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon.
Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also
institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed
pendente lite merely serve as a bond posted in installment by the employer. For in the event of a
reversal of the Labor Arbiter’s decision ordering reinstatement, the employer gets back the same
amount without having to spend ordinarily for bond premiums. This circumvents, if not directly
contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not
stay the execution for reinstatement."17

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement
to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the
proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a
reversal on appeal.

Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more basis to
enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero
Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and allied cases
inapplicable because, unlike the present case, the writ of execution therein was secured prior to the
reversal of the Labor Arbiter’s decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion
stopped there without considering the cause of the delay. Second, it requires the issuance of a writ of
execution despite the immediately executory nature of the reinstatement aspect of the decision. In
Pioneer Texturing Corp. v. NLRC,18 which was cited in Panuncillo v. CAP Philippines, Inc.,19 the Court
observed:

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not stay
the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and its
issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by
Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement
order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In
enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which
operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be
construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In
introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715,
Congress should not be considered to be indulging in mere semantic exercise. x x x20 (Italics in the
original; emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court.21 It settles the view
that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either
re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to
reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must
pay the employee’s salaries.22

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied
upon by the appellate court in the assailed issuances. The Court sustains the appellate court’s finding
that the peculiar predicament of a corporate rehabilitation rendered it impossible for respondent to
exercise its option under the circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter
issues the decision containing an order of reinstatement. The immediacy of its execution needs no
further elaboration. Reinstatement pending appeal necessitates its immediate execution during the
pendency of the appeal, if the law is to serve its noble purpose. At the same time, any attempt on the
part of the employer to evade or delay its execution, as observed in Panuncillo and as what actually
transpired in Kimberly,23 Composite,24 Air Philippines,25 and Roquero,26 should not be countenanced.

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal
was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending
appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s
unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the employer may
still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s decision.

In Genuino, there was no showing that the employer refused to reinstate the employee, who was the
Treasury Sales Division Head, during the short span of four months or from the promulgation on May 2,
1994 of the Labor Arbiter’s Decision up to the promulgation on September 3, 1994 of the NLRC Decision.
Notably, the former NLRC Rules of Procedure did not lay down a mechanism to promptly effectuate the
self-executory order of reinstatement, making it difficult to establish that the employer actually refused
to comply.

In a situation like that in International Container Terminal Services, Inc. v. NLRC27 where it was alleged
that the employer was willing to comply with the order and that the employee opted not to pursue the
execution of the order, the Court upheld the self-executory nature of the reinstatement order and ruled
that the salary automatically accrued from notice of the Labor Arbiter's order of reinstatement until its
ultimate reversal by the NLRC. It was later discovered that the employee indeed moved for the issuance
of a writ but was not acted upon by the Labor Arbiter. In that scenario where the delay was caused by
the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed to act upon the
employee’s motion for the issuance of a writ of execution may no longer adversely affect the cause of
the dismissed employee in view of the self-executory nature of the order of reinstatement.28

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to
submit a report of compliance within 10 calendar days from receipt of the Labor Arbiter’s decision,29
disobedience to which clearly denotes a refusal to reinstate. The employee need not file a motion for the
issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue the writ.
With the new rules in place, there is hardly any difficulty in determining the employer’s intransigence in
immediately complying with the order.

In the case at bar, petitioners exerted efforts30 to execute the Labor Arbiter’s order of reinstatement
until they were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by
the NLRC of the Labor Arbiter’s decision. Technically, there was still actual delay which brings to the
question of whether the delay was due to respondent’s unjustified act or omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but whether such
omission was justified depends on the onset of the exigency of corporate rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before
any court, tribunal or board against the corporation shall ipso jure be suspended.31 As stated early on,
during the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed respondent
under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced
the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of
reinstatement is ministerial and mandatory.32 This injunction or suspension of claims by legislative
fiat33 partakes of the nature of a restraining order that constitutes a legal justification for respondent’s
non-compliance with the reinstatement order. Respondent’s failure to exercise the alternative options of
actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondent’s
obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did
not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or
even the life of the dismissed employee and his family, it does not contemplate the period when the
employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to
survive.

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.

In sum, the obligation to pay the employee’s salaries upon the employer’s failure to exercise the
alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the
inherent constraints of corporate rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5,
2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of
Execution and the Notice of Garnishment are concerned, the Court finds no reversible error.

SO ORDERED.

• PAL v. Paz, November 26, 2014

REYES, J.:

Before this Court is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court by
Philippine Airlines, Inc. (PAL), seeking to annul and set aside the Amended Decision2 dated June 29, 2010
of the Court of Appeals (CA) in CA-G.R. SP No. 75618. Reynaldo V. Paz (respondent) was a former
commercial pilot of PAL and a member of the Airlines Pilots Association of the Philippines (ALPAP), the
sole and exclusive bargaining representative of all the pilots in PAL.

On December 9, 1997, ALPAP filed a notice of strike with the National Conciliation and Mediation Board
of the Department of Labor and Employment (DOLE). Pursuant to Article 263(g) of the Labor Code, the
DOLE Secretary assumed jurisdiction over the labor dispute and enjoined the parties from committing
acts which will further exacerbate the situation.3

On June 5, 1998, notwithstanding the directive of the DOLE Secretary, the ALPAP officers and members
staged a strike and picketed at the PAL’s premises. To control the situation, the DOLE Secretary issued a
return-to-work order on June 7, 1998, directing all the striking officers and members of ALPAP to return
to work within 24 hours from notice of the order. The said order was served upon the officers of ALPAP
on June 8, 1998 by the DOLE Secretary himself. Even then, the striking members of ALPAP did not report
for work.4
On June 25, 1998, Atty. Joji Antonio, the counsel for ALPAP, informed the members of the union that she
has just received a copy of the return-to-work order and that they have until the following day within
which to comply. When the striking members of the ALPAP reported for work on the following day, the
security guards of PAL denied them entry.5

On June 13, 1998, the DOLE Secretary issued a resolution on the case from which both parties filed a
motion for reconsideration. Pending the resolution of the motions, PAL filed a petition for approval of
rehabilitation plan and for appointment of a rehabilitation receiver with the Securities and Exchange
Commission (SEC), claiming serious financial distress brought about by the strike. Subsequently, on June
23, 1998, the SEC appointed a rehabilitation receiver for PAL and declared the suspension of all claims
against it.6

On June 1, 1999, the DOLE Secretary resolved the motions for reconsideration filed by both parties and
declared the strike staged by ALPAP illegal and that the participants thereof are deemed to have lost
their employment.7

On June 25, 1999, the respondentfiled a complaint for illegal dismissal against PAL for not accepting him
back towork, claiming non-participation in the illegal strike. In his position paper, he alleged that on the
day the ALPAP staged a strike onJune 5, 1998, he was off-duty from work and was in Iligan City. However,
when he reported back to work on June 12, 1998, after a week-long break, he was no longer allowed to
enter PAL’s premises in Nichols, Pasay City.8

The respondent further alleged that on June 25, 1998, he learned that the DOLE Secretary issued a
return-to-work order, requiring all the striking pilots to return to work within 24 hours from notice.
Notwithstanding his non-participation in the strike, he signed the logbook at the entrance of PAL’s office
on the following day. When he tried to report for work, however, he was denied entry by the PAL’s
security guards.9

For its part, PAL claimed that the respondent was among the participants of the strike staged by ALPAP
on June 5, 1998 who did not heed to the return-to-work order issued on June 7, 1998 by the DOLE
Secretary. The said order directed all the participants of the strike to return to work within 24 hours from
notice thereof. However, ALPAP and its counsel unjustifiably refused to receive the copy of the order and
was therefore deemed served. The 24-hour deadline for the pilots to return to work expired on June 9,
1998, without the respondent reporting back to work. Subsequently, the DOLE Secretary issued the
Resolution dated June 1, 1999, declaring that the striking pilots have lost their employment for defying
the return-to-work order. Thus, PAL argued that the respondent’s charge of illegal dismissal is utterly
without merit.10

On March 5, 2001, the Labor Arbiter (LA) rendered a Decision, 11 holding that the respondentwas
illegally dismissed and ordered that he be reinstated to his former position without loss of seniority
rights and other privileges and paid his full backwages inclusive of allowances and other benefits
computed from June 12, 1998 up to his actual reinstatement. The dispositive portion of the decision
reads, as follows:
WHEREFORE, judgment is hereby rendered:

1. Declaring that this Arbitration Branch has jurisdiction over the causes of action raised by the
[respondent] in this case;

2. Declaring that the causes of action raised in the complaint in this case have not been barred by prior
judgment of the Secretary of Labor and Employment in his Resolution of June 1, 1999; 3. Declaring that
the termination of the services of the [respondent] was not for any just or authorized cause and also
without due process and therefore illegal;

4. Ordering Philippine Airlines, Inc. to reinstate immediately upon receipt of this decision [respondent]
Reynaldo V. Paz to his former position as commercial pilot without loss of seniority rights and other
privileges and to pay him his full backwages inclusive of allowances and other benefits or their monetary
equivalent computed from June 12, 1998 up to his actual reinstatement even pending appeal but the
respondent has the option to actually reinstate [the respondent] to his former position or to reinstate
him merely in payroll. As of September 5, 2000, the full backwages due to the [respondent] total
₱2,629,420.00;

5. Ordering Philippine Airlines, Inc. to pay the [respondent] the following:

Productivity Pay (₱22,383.62 x 27 months…… ₱604,357.74

Retirement Fund Contribution

(₱9,800.00 x 27 months)……. ………….. ₱264,600.00

PODF (₱4,663.25 x 27 months)………………..... 125,907.75

Sick Leave (₱3,000.62 x 42 days)……………….. 126,026.04

Vacation Leave (₱3,000.62 x 42 days)………….. 125,026.04

Rice Subsidy (₱600.00 x 27 months)……………. 16,200.00

13th Month Pay (₱93,265.00 x 2 years)………….. 188,030.00

Longevity Pay (₱500.00 x 2 years) ……………… 1,000.00

6. Ordering Philippine Airlines, Inc. to pay [the respondent] attorney’s fees equivalent to 10% of the
whole monetary award (Art. III, Labor Code);

7. Ordering Philippine Airlines, Inc. to pay [the respondent] moral damages equivalent to Five Hundred
Thousand Pesos (₱500,00[0].00) and exemplary damages of Five Hundred Thousand

Pesos (₱500,000.00)

SO ORDERED.12
Unyielding, PAL appealed the foregoing decision to the National Labor Relations Commission (NLRC).
Pending appeal, the respondent filed a motion for partial execution of the reinstatement aspect of the
decision. The LA granted the said motion and issued a partial writ of execution on May 25, 2001.

Subsequently, on June 27, 2001, the NLRC rendered a Resolution,13 reversing the LA decision. The NLRC
ruled that the pieces of evidence presented by PAL proved that the respondent participated in the strike
and defied the return-to-work order of the DOLE Secretary; hence, he is deemed to have lost his
employment. The pertinent portions of the decision read:

Indeed, other than [the respondent’s] self-serving assertions, he has failed to substantiate his claim that
he was in Iligan City and that he reported for work a week after June5, 1998. [PAL], on the other hand,
has presented photographs of the complainant picketing [at the PAL’s] premises on June 15 & 26, 1998. x
xx

x x x x In sum, [PAL’s] concrete evidence submitted in the proceedings below should prevail over the self-
serving assertions of [the respondent]. Consequently, we are of the view that [PAL] acted within its rights
when it refused to accept [the respondent] when he reported for work on June 26, 1998. This is
consistent with the finding[s] of the DOLE Secretary when he declared the strikers to have lost their
employment status. x x x.

xxxx

WHEREFORE, premises considered, the appeal is hereby GRANTED, and the decision dated March 5,
2001, is REVERSED and SET ASIDE for utter lack of merit.

SO ORDERED.14

Notwithstanding the reversal of the LA decision, the respondent pursued his move for the issuance of a
writ of execution, claiming that he was entitled to reinstatement salaries which he supposedly earned
during the pendency of the appeal to the NLRC. On August 28, 2001, the LA granted the motion and
issued the corresponding writ of execution.15

On September 17, 2001, the LA issued an Order,16 clarifying the respondent’s entitlement to
reinstatement salaries. He ratiocinated that the order of reinstatement is immediately executory even
pending appeal and that under Article 223 of the Labor Code, the employer has the option to admit the
employee back towork or merely reinstate him in the payroll. Considering, however, that there was no
physical reinstatement, the respondent, as a matter of right, must be reinstated in the payroll. The
accrued salaries may now be the subject of execution despite the NLRC’s reversal of the decision.

PAL appealed the LA Order dated September 17, 2001 to the NLRC, arguing that the writ of execution
lackedfactual and legal basis considering that the NLRC reversed and set aside the LA decision and
categorically declared the order of reinstatement as totally devoid of merit. It contended that
entitlement to salaries pending appeal presupposes a finding that the employee is entitled to
reinstatement. Absent such finding, the employee is not entitled to reinstatement salaries and the writ
of execution issued pursuant thereto is a complete nullity.17
On June 28, 2002, the NLRC rendered a Resolution,18 sustaining the award of reinstatement salaries to
the respondent albeit suspending its execution in view of the fact that PAL was under rehabilitation
receivership. PAL filed a motion for reconsideration but the NLRC denied the same in its Resolution19
dated November 22, 2002.

Unperturbed, PAL filed a petition for certiorari with the CA, questioning the NLRC Resolution dated June
28, 2002. Subsequently, in a Decision20 dated January 31, 2005, the CA affirmed with modification the
NLRC Resolution dated June 28, 2002, the dispositive portion of which reads, as follows:

WHEREFORE, the NLRC Resolution dated June 28, 2002 is AFFIRMED with the MODIFICATION that, in lieu
of reinstatement salaries, petitioner Philippine Airlines, Inc. is ordered to pay respondent Paz separation
pay equivalent to one month salary for every year of service, to be computed from the time respondent
commenced employment with petitioner PAL until the time the Labor Arbiter issued the writ ordering
respondent’s reinstatement, i.e., on May 25, 2001.

SO ORDERED.21

The CA ruled that while the respondent is entitled to reinstatement, the prevailing circumstances
rendered the same difficult if not impossible to execute. It noted that at the time the reinstatement was
ordered, there was no vacant B747-400 pilot position available for the respondent. Further complicating
the situation is the fact that PAL has been under receivership since July 1998. Thus, in lieu of
reinstatement salaries, the CA ordered PAL to pay the respondent separation pay equivalent to one (1)
month salary for every year of service.22

PAL filed a motion for reconsideration of the CA decision. Subsequently, the CA rendered the assailed
Amended Decision23 dated June 29, 2010, holding thus:

Accordingly, compliance with the reinstatement order is not affected by the fact that private
respondent’s previous position had been filled-up. In reinstatement pending appeal, payroll
reinstatement is an alternative to actual reinstatement. Hence, public respondent did not err when it
upheld the Labor Arbiter that private respondent is entitled to reinstatement salaries during the period
of appeal.

WHEREFORE, premises considered, the modification contained in Our January 31, 2005 Decision is
DELETED and SET ASIDE. The June 28, 2002 Resolution of the National Labor Relations Commission is
hereby REINSTATED in toto.

SO ORDERED.24

On August 3, 2010, PAL filed the instant petition with the Court, contending that the CA acted in a
manner contrary to law and jurisprudence when it upheld the award of reinstatement salaries to the
respondent.25

The petition is meritorious.

The same issue had been raised and addressed by the Court in the case of Garcia v. Philippine Airlines,
Inc.26 In the said case, the Court deliberated on the application of Paragraph 3, Article 223 of the Labor
Code in light of the apparent divergence in its interpretation, specifically on the contemplation of the
reinstatement aspectof the LA decision. The pertinent portion of the provision reads, thus:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as
the reinstatement aspectis concerned, shall immediately be executory, pending appeal. The employee
shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated inthe payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement provided herein.27 (Emphasis and
underscoring in the original)

Briefly, in Garcia, the petitioners were dismissed by their employer, respondent PAL, after they were
allegedly caught in the act of sniffing shabu when a team of company security personnel and law
enforcers raided the PAL Technical Center’s Toolroom Section. After they filed a complaint for illegal
dismissal, respondent PAL was placed under rehabilitation receivership due to serious financial losses.
Eventually, the LA resolved the case in favor of the petitioners and ordered their immediate
reinstatement. Upon appeal, however, the NLRC reversed the LA decision and dismissed the complaint.
Even then, the LA issued a writ of execution, with respect to the reinstatement aspect of the decision,
and issued a notice of garnishment. Respondent PAL filed an urgent petition for injunction with the NLRC
but the latter, by way of Resolutions dated November 26, 2001 and January 28, 2002, affirmed the
validity of the writ and the notice issued by the LA but suspended and referred the action to the
rehabilitation receiver. On appeal, the CA ruled in favor of respondent PAL and nullified the NLRC
resolutions, holding that (1) a subsequent finding of a valid dismissal removes the basis for the
reinstatement aspect of a LA decision, and (2) the impossibility to comply with the reinstatement order
due to corporate rehabilitation justifies respondent PAL’s failure to exercise the options under Article 223
of the Labor Code. When the case was further elevated to this Court, the petition was partially granted
and reinstated the NLRC resolutions insofar as it suspended the proceedings. Subsequently, respondent
PAL notified the Court that it has exited from the rehabilitation proceedings. The Court then proceeded
to determine the main issue of whether the petitioners therein are entitled to collect salaries pertaining
to the period when the LA’s order of reinstatement is pending appeal to the NLRC until it was reversed.

The factual milieu of the instant case resembles that of Garcia. The respondent herein obtained a
favorable ruling from the LA in the complaint for illegal dismissal case he filed against PAL but the same
was reversed on appeal by the NLRC. Also, PAL was under rehabilitation receivership during the entire
period that the illegal dismissal case was being heard. A similar question is now being raised, i.e.,
whether the respondent may collect reinstatement salaries which he is supposed to have received from
the time PAL received the LA decision, orderinghis reinstatement, until the same was overturned by the
NLRC.

The rule is that the employee is entitled to reinstatement salaries notwithstanding the reversal of the LA
decision granting him said relief. In Roquero v. Philippine Airlines,28 the Court underscored that it is
obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during
the period of appeal untilreversal by the higher court. This is so because the order of reinstatement is
immediately executory. Unless there is a restraining order issued, it is ministerial upon the LA to
implement the order of reinstatement. The unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate
him.29

In Garcia, however, the Court somehow relaxed the rule by taking into consideration the cause of delay
in executing the order of reinstatement of the LA. It was declared, thus:

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal
was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending
appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s
unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the employer may
still be required to pay the salaries notwithstanding the reversal of the LaborArbiter’s decision.30 (Italics
ours and emphasis and underscoring deleted)

It is clear from the records that PAL failed to reinstate the respondent pending appeal of the LA decision
to the NLRC.1âwphi1 It can be recalled that the LA rendered the decision ordering the reinstatement of
the respondent on March 5, 2001. And, despite the self-executory nature of the order of reinstatement,
the respondent nonetheless secured a partial writ of execution on May 25, 2001. Even then, the
respondent was not reinstated to his former position or even through payroll.

A scrutiny of the circumstances, however, will show that the delay in reinstating the respondent was not
due to the unjustified refusal of PAL to abide by the order but because of the constraints of corporate
rehabilitation. It bears noting that a year before the respondent filed his complaint for illegal dismissal
on June 25, 1999, PAL filed a petition for approval of rehabilitation plan and for appointment of a
rehabilitation receiver with the SEC. On June 23, 1998, the SEC appointed an Interim Rehabilitation
Receiver. Thereafter, the SEC issued an Order31 dated July 1, 1998, suspending all claims for payment
against PAL.

The inopportune event of PAL’s entering rehabilitation receivership justifies the delay or failure to
complywith the reinstatement order of the LA. Thus, in Garcia, the Court held:

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims beforeany
court, tribunal or board against the corporation shall ipso jurebe suspended. As stated early on, during
the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed respondent under an
Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the
Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of
reinstatement is ministerial and mandatory. This injunction or suspension of claimsby legislative fiat
partakes of the nature of a restraining order that constitutes a legal justification for respondent's non-
compliance with the reinstatement order. Respondent's failure to exercise the alternative options of
actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondent's
obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did
not attach.32 (Citations omitted)

In light of the fact that PAL's failure to comply with the reinstatement order was justified by the
exigencies of corporation rehabilitation, the respondent may no longer claim salaries which he should
have received during the period that the LA decision ordering his reinstatement is still pending appeal
until it was overturned by the NLRC. Thus, the CA committed a reversible error in recognizing the
respondent's right to collect reinstatement salaries albeit suspending its execution while PAL is still under
corporate rehabilitation.

WHEREFORE, the petition is GRANTED. The Amended Decision dated June 29, 2010 of the Court of
Appeals in CA-G.R. SP No. 75618 is hereby REVERSED and SET ASIDE. Respondent Reynaldo V. Paz is not
entitled to the payment of reinstatement salaries.

SO ORDERED.

• Islriz v.Capada, January 31, 2011

DEL CASTILLO, J.:

We reiterate in this petition the settled view that employees are entitled to their accrued salaries during
the period between the Labor Arbiter's order of reinstatement pending appeal and the resolution of the
National Labor Relations Commission (NLRC) overturning that of the Labor Arbiter. Otherwise stated,
even if the order of reinstatement of the Labor Arbiter is reversed on appeal, the employer is still obliged
to reinstate and pay the wages of the employee during the period of appeal until reversal by a higher
court or tribunal. In this case, respondents are entitled to their accrued salaries from the time petitioner
received a copy of the Decision of the Labor Arbiter declaring respondents' termination illegal and
ordering their reinstatement up to the date of the NLRC resolution overturning that of the Labor
Arbiter.cralaw

This Petition for Review on Certiorari assails the Decision[1] dated March 18, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 84744 which dismissed the petition for certiorari before it, as well as the
Resolution[2] dated June 16, 2005 which denied the motion for reconsideration thereto.cralaw

Factual Antecedents

Respondents Efren Capada, Lauro Licup, Norberto Nigos and Godofredo Magnaye were drivers while
respondents Ronnie Abel, Arnel Siberre, Edmundo Capada, Nomerlito Magnaye and Alberto Dela Vega
were helpers of Islriz Trading, a gravel and sand business owned and operated by petitioner Victor Hugo
Lu. Claiming that they were illegally dismissed, respondents filed a Complaint[3] for illegal dismissal and
non-payment of overtime pay, holiday pay, rest day pay, allowances and separation pay against
petitioner on August 9, 2000 before the Labor Arbiter. On his part, petitioner imputed abandonment of
work against respondents.cralaw

Proceedings before the Labor Arbiter and the NLRC

On December 21, 2001, Labor Arbiter Waldo Emerson R. Gan (Gan) rendered a Decision[4] in this wise:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondent ISLRIZ TRADING guilty of illegal dismissal.

2. Ordering respondent to reinstate complainants to their former positions without loss of seniority
rights and the payment of full backwages from date of dismissal to actual reinstatement which are
computed as follows: (As of date of decision);

1. EFREN CAPADA

P 102,400.00 (6,400.00X16)

2. LAURO LICUP

87,040.00 (5,440.00X16)

3. NORBERTO NIGOS

87,040.00 (5,440.00X16)

4. RONNIE ABEL

76,800.00 (4,800.00X16)

5. GODOFREDO MAGNAYE

102,400.00 (6,400.00X16)

6. ARNEL SIBERRE

51,200.00 (3,200.00X16)

7. EDMUNDO CAPADA

76,800.00 (4,800.00X16)

8. NOMERLITO MAGNAYE

76,800.00 (4,800.00X16)

9. ALBERTO DELA VEGA

51,200.00 (3,200.00X16)
3. Ordering respondent to pay complainants 10% of the total monetary award as attorney's fees.

All other claims are dismissed for lack of merit.cralaw

SO ORDERED.[5]

Aggrieved, petitioner appealed[6] to the NLRC which granted the appeal. The NLRC set aside the
Decision of Labor Arbiter Gan in a Resolution[7] dated September 5, 2002. Finding that respondents'
failure to continue working for petitioner was neither caused by termination nor abandonment of work,
the NLRC ordered respondents' reinstatement but without backwages. The dispositive portion of said
Resolution reads as follows:

WHEREFORE, premises considered, the appeal is GRANTED and the Decision dated 21 December 2001 is
hereby ordered SET ASIDE.

A New Decision is hereby rendered finding that the failure to work of complainants-appellees is neither
occasioned by termination (n)or abandonment of work, hence, respondents-appellants shall reinstate
complainants-appellees to their former positions without backwages within ten (10) days from receipt of
this Resolution.cralaw

SO ORDERED.[8]

Respondents filed a Motion for Reconsideration[9] thereto but same was likewise denied in a
Resolution[10] dated November 18, 2002. This became final and executory on December 7, 2002.[11]

On December 9, 2003, however, respondents filed with the Labor Arbiter an Ex-Parte Motion to Set Case
for Conference with Motion.[12] They averred therein that since the Decision of Labor Arbiter Gan
ordered their reinstatement, a Writ of Execution[13] dated April 22, 2002 was already issued for the
enforcement of its reinstatement aspect as same is immediately executory even pending appeal. But
this notwithstanding and despite the issuance and subsequent finality of the NLRC Resolution which
likewise ordered respondents' reinstatement, petitioner still refused to reinstate them. Thus,
respondents prayed that in view of the orders of reinstatement, a computation of the award of
backwages be made and that an Alias Writ of Execution for its enforcement be issued.

The case was then set for pre-execution conference on January 29, February 24 and March 5, 2004. Both
parties appeared thereat but failed to come to terms on the issue of the monetary award. Hence, the
office of the Labor Arbiter through Fiscal Examiner II Ma. Irene T. Trinchera (Fiscal Examiner Trinchera)
issued an undated Computation[14] of respondents' accrued salaries from January 1, 2002 to January
30, 2004 or for a total of 24.97 months in the amount of P1,110,665.60 computed as follows:cralaw

Accrued Salary from January 1, 2002 to January 30, 2004 = 24.97 months

Efren Capada

P 6,400.00 x 24.97 months

P 159,808.00

Lauro Licup

P 5,440.00 x 24.97 months

P 135,836.80

Norberto Nigos

P 5,440.00 x 24.97 months

P 135,836.80

Ronnie Abel

P 4,800.00 x 24.97 months

P 119,856.00

Godofredo Magnaye

P 6,400.00 x 24.97 months

P 159,808.00

Arnel Siberre

P 3,200.00 x 24.97 months

P 79, 904.00

Edmundo Capada

P 4,800.00 x 24.97 months

P 119, 856.00

Nomerlito Magnaye

P 4,800.00 x 24.97 months

P 119, 856.00

Alberto de la Vega

P 3,200.00 x 24.97 months

P 79, 904.00
Total

P 1,110,665.60

Petitioner questioned this computation in his Motion/Manifestation[15] claiming that said computation
was without any factual or legal basis considering that Labor Arbiter Gan's Decision had already been
reversed and set aside by the NLRC and that therefore there should be no monetary award.cralaw

Nevertheless, Labor Arbiter Danna M. Castillon (Castillon) still issued a Writ of Execution[16] dated
March 9, 2004 to enforce the monetary award in accordance with the abovementioned computation.
Accordingly, the Sheriff issued a Notice of Sale/Levy on Execution of Personal Property[17] by virtue of
which petitioner's properties were levied and set for auction sale on March 29, 2004. In an effort to
forestall this impending execution, petitioner then filed a Motion to Quash Writ of Execution with Prayer
to Hold in Abeyance of Auction Sale[18] and a Supplemental Motion to Quash/Stop Auction Sale.[19] He
also served upon the Sheriff a letter of protest.[20] All of these protest actions proved futile as the
Sheriff later submitted his Report dated March 30, 2004 informing the Labor Arbiter that he had levied
some of petitioner's personal properties and sold them in an auction sale where respondents were the
only bidders. After each of the respondents entered a bid equal to their individual shares in the
judgment award, the levied properties were awarded to them.

Later, respondents claimed that although petitioner's levied properties were already awarded to them,
they could not take full control, ownership and possession of said properties because petitioner had
allegedly padlocked the premises where the properties were situated. Hence, they asked Labor Arbiter
Castillon to issue a break-open order.[21] For his part and in a last ditch effort to nullify the writ of
execution, petitioner filed a Motion to Quash Writ of Execution, Notice of Sale/Levy on Execution of
Personal Property and Auction Sale on Additional Grounds.[22] He reiterated that since the NLRC
Resolution which reversed the Decision of the Labor Arbiter ordered respondents' reinstatement
without payment of backwages or other monetary award, only the execution of reinstatement sans any
backwages or monetary award should be enforced. It is his position that the Writ of Execution dated
March 9, 2004 ordering the Sheriff to collect respondents' accrued salaries of P1,110,665.60 plus
P1,096.00 execution fees or the total amount of P1,111,761.60, in effect illegally amended the said NLRC
Resolution; hence, said writ of execution is null and void. And, as the writ is null and void, it follows that
the Labor Arbiter cannot issue a break-open order. In sum, petitioner prayed that the Writ of Execution
be quashed and all proceedings subsequent to it be declared null and void and that respondents' Urgent
Motion for Issuance of Break Open Order be denied for lack of merit.cralaw

Both motions were resolved in an Order[23] dated June 3, 2004. Labor Arbiter Castillon explained
therein that the monetary award subject of the questioned Writ of Execution refers to respondents'
accrued salaries by reason of the reinstatement order of Labor Arbiter Gan which is self-executory
pursuant to Article 223[24] of the Labor Code. The Order cited Roquero v. Philippine Airlines Inc.[25]
where this Court ruled that employees are still entitled to their accrued salaries even if the order of
reinstatement has been reversed on appeal. As to the application for break open order, Labor Arbiter
Castillon relied on the Sheriff's report that there is imminent danger that petitioner's properties sold at
the public auction might be transferred or removed, as in fact four of said properties were already
transferred. Thus, she deemed it necessary to grant respondents' request for a break open order to gain
access to petitioner's premises. The dispositive portion of said Order reads:cralaw

WHEREFORE, premises considered, the Motion to Quash Writ of Execution [and] Notice of Sale/Levy on
Execution Sale filed by the respondent(s) [are] hereby DENIED. In view of the refusal of the respondents'
entry to its premises, Deputy Sheriff S. Diega of this Office is hereby ordered to break-open the entrance
of the premises of respondent wherein the properties are located.

For this purpose, he may secure the assistance of the local police officer having jurisdiction over the
locality where the said properties are located.cralaw

SO ORDERED.[26]

Undeterred, petitioner brought the matter to the CA through a Petition for Certiorari.

Proceedings before the Court of Appeals

Before the CA, petitioner imputed grave abuse of discretion amounting to lack or excess of jurisdiction
upon Labor Arbiter Castillon for issuing the questioned Writ of Execution and the Order dated June 3,
2004. He maintained that since the December 21, 2001 Decision of Labor Arbiter Gan has already been
reversed and set aside by the September 5, 2002 Resolution of the NLRC, the Writ of Execution issued by
Labor Arbiter Castillon should have confined itself to the said NLRC Resolution which ordered
respondents' reinstatement without backwages. Hence, when Labor Arbiter Castillon issued the writ
commanding the Sheriff to satisfy the monetary award in the amount of P1,111,761.60, she acted with
grave abuse of discretion amounting to lack or excess of jurisdiction. For the same reason, her issuance
of the Order dated June 3, 2004 denying petitioner's Motion to Quash Writ of Execution with Prayer to
Hold in Abeyance Auction Sale and granting respondents' Urgent Motion for Issuance of Break Open
Order is likewise tainted with grave abuse of discretion. Aside from these, petitioner also questioned the
conduct of the auction sale. He likewise claimed that he was denied due process because he was not
given the opportunity to file a motion for reconsideration of the Order denying his Motion to Quash Writ
of Execution considering that a break-open order was also made in the same Order. For their part,
respondents posited that since they have already disposed of petitioner's levied properties, the petition
has already become moot.cralaw

In a Decision[27] dated March 18, 2005, the CA quoted the June 3, 2004 Order of Labor Arbiter Castillon
and agreed with her ratiocination that pursuant to Article 223 of the Labor Code, what is sought to be
enforced by the subject Writ of Execution is the accrued salaries owing to respondents by reason of the
reinstatement order of Labor Arbiter Gan. The CA also found as unmeritorious the issues raised by
petitioner with regard to the conduct of the auction sale. Moreover, it did not give weight to petitioner's
claim of lack of due process considering that a motion for reconsideration of a Writ of Execution is not an
available remedy. Thus, the CA dismissed the petition. Petitioner's Motion for Reconsideration[28]
suffered the same fate as it was also denied in a Resolution[29] dated June 16, 2005.cralaw
Hence, petitioner is now before this Court through this Petition for Review on Certiorari where he
presents the following issues:

Whether the provision of Article 223 of the Labor Code is applicable to this case x x x.

Whether x x x the Decision dated March 18, 2005 and the Resolution dated June 16, 2005 of the Court of
Appeals are contrary to law and jurisprudence[.]

Whether x x x the award of accrued salaries has legal and factual bases[.][30]cralaw

The Parties' Arguments

Petitioner contends that the assailed Decision and Resolution of the CA are contrary to law and
jurisprudence. This is because in upholding the issuance of the questioned Writ of Execution for the
enforcement of respondents' accrued salaries, said Decision and Resolution, in effect, altered the NLRC
Resolution which only decreed respondents' reinstatement without backwages. Moreover, he

posits that Article 223 of the Labor Code only applies when an employee has been illegally dismissed
from work. And since in this case the NLRC ruled that respondents' failure to continue working for
petitioner was not occasioned by termination, there is no illegal dismissal to speak of, hence, said
provision of the Labor Code does not apply. Lastly, petitioner claims that the computation of
respondents' accrued salaries in the total amount of P1,110,665.60 has no legal and factual bases since
as repeatedly pointed out by him, the NLRC Resolution reversing the Labor Arbiter's Decision has already
ordered respondents' reinstatement without backwages after it found that there was no illegal
termination.

Respondents, on the other hand, maintain that the CA did not err in applying Article 223 of the Labor
Code to the instant case. They thus contend that the computation of their accrued salaries covering the
period during which they were supposed to have been reinstated or from January 1, 2002 to January 30,
2004, should be upheld since same merely applied Article 223. In sum, respondents believe that the
assailed Decision and Resolution of the CA are in accord with law and jurisprudence.cralaw

Our Ruling

The petition is not meritorious.

The core issue to be resolved in this case is similar to the one determined in Garcia v. Philippine Airlines
Inc.,[31] that is, whether respondents may collect their wages during the period between the Labor
Arbiter's order of reinstatement pending appeal and the NLRC Resolution overturning that of the Labor
Arbiter.

In order to provide a thorough discussion of the present case, an overview of Garcia is proper.

In Garcia, petitioners therein were dismissed by Philippine Airlines Inc. (PAL) after they were allegedly
caught in the act of sniffing shabu during a raid at the PAL Technical Center's Toolroom Section. They
thus filed a complaint for illegal dismissal. In the meantime, PAL was placed under an interim
rehabilitation receivership because it was then suffering from severe financial losses. Thereafter, the
Labor Arbiter ruled in petitioners' favor and ordered PAL to immediately comply with the reinstatement
aspect of the decision. PAL appealed to the NLRC. The NLRC reversed the Labor Arbiter's Decision and
dismissed petitioners' complaint for lack of merit. As petitioners' Motion for Reconsideration thereto was
likewise denied, the NLRC issued an Entry of Judgment. Notably, PAL's Interim Rehabilitation Receiver
was replaced by a Permanent Rehabilitation Receiver during the pendency of its appeal with the NLRC.
A writ of execution with respect to the reinstatement aspect of the Labor Arbiter's Decision was then
issued and pursuant thereto, a Notice of Garnishment was likewise issued. To stop this, PAL filed an
Urgent Petition for Injunction with the NLRC. While the NLRC suspended and referred the action to the
rehabilitation receiver, it however, likewise affirmed the validity of the writ so that PAL appealed to the
CA. Fortunately for PAL, the CA nullified the assailed NLRC Resolutions on the grounds that (1) a
subsequent finding of a valid dismissal removes the basis for the reinstatement aspect of a labor
arbiter's decision and, (2) the impossibility to comply with the reinstatement order due to corporate
rehabilitation justifies PAL's failure to exercise the options under Article 223 of the Labor Code. When
the case reached this Court, we partially granted the petition in a Decision dated August 29, 2007 and
effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings. But as PAL later
manifested that the rehabilitation proceedings have already been terminated, the court proceeded to
determine the remaining issue, which is, as earlier stated, whether petitioners therein may collect their
wages during the period between the Labor Arbiter's order of reinstatement pending appeal and the
NLRC Resolution overturning that of the Labor Arbiter.cralaw

In resolving the case, the Court examined its conflicting rulings with respect to the application of
paragraph 3 of Article 223 of the Labor Code, viz:

At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code
which reads:

`In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as
the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee
shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement provided herein.'cralaw

The view as maintained in a number of cases is that:

`x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on
the part of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during
the appeal period and such reinstatement order is reversed with finality, the employee is not required to
reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services
during the period.cralaw

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled
to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a
restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it
is mandatory on the employer to comply therewith.

The opposite view is articulated in Genuino which states:

`If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll
reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her
employer under existing laws, collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the pendency of the appeal, then the employee
is entitled to the compensation received for actual services rendered without need of refund.cralaw

x x x x'

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment." (Emphasis, italics and
underscoring in the original; citations omitted.)[32]

The Court then stressed that as opposed to the abovementioned Genuino v. National Labor Relations
Commission,[33] the social justice principles of labor law outweigh or render inapplicable the civil law
doctrine of unjust enrichment. It then went on to examine the precarious implication of the "refund
doctrine" as enunciated in Genuino, thus:

[T]he "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm,
more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have
to use up the salaries received during the pendency of the appeal, only to end up having to refund the
sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff
of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to
refuse payroll reinstament and simply find work elsewhere in the interim, if any is available. Notably, the
option of payroll reinstatement belongs to the employer, even if the employee is able and raring to
return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of
the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also
institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed
pendente lite merely serve as a bond posted in installment by the employer. For in the event of a
reversal of the Labor Arbiter's decision ordering reinstatement, the employer gets back the same
amount without having to spend ordinarily for bond premiums. This circumvents, if not directly
contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not
stay the execution for reinstatement. [Underscoring in the original][34]cralaw

In view of this, the Court held this stance in Genuino as a stray posture and realigned the proper course
of the prevailing doctrine on reinstatement pending appeal vis-Ã -vis the effect of a reversal on appeal,
that is, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on
the part of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court or tribunal. It likewise settled the view that the Labor Arbiter's
order of reinstatement is immediately executory and the employer has to either re-admit them to work
under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the
payroll, and that failing to exercise the options in the alternative, employer must pay the employee's
salaries.

The discussion, however, did not stop there. The court went on to declare that after the Labor Arbiter's
decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued
wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on
the part of the employer. It then provided for the two-fold test in determining whether an employee is
barred from recovering his accrued wages, to wit: (1) there must be actual delay or that the order of
reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due
to the employer's unjustified act or omission. If the delay is due to the employer's unjustified refusal,
the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter's
Decision. In Garcia, after it had been established that there was clearly a delay in the execution of the
reinstatement order, the court proceeded to ascertain whether same was due to PAL's unjustified act or
omission. In so doing, it upheld the CA's finding that the peculiar predicament of a corporate
rehabilitation rendered it impossible for PAL, under the circumstances, to exercise its option under
Article 223 of the Labor Code. The suspension of claims dictated by rehabilitation procedure therefore
constitutes a justification for PAL's failure to exercise the alternative options of actual reinstatement or
payroll reinstatement. Because of this, the Court held that PAL's obligation to pay the salaries pending
appeal, as the normal effect of the non-exercise of the options, did not attach. Simply put, petitioners
cannot anymore collect their accrued salaries during the period between the Labor Arbiter's order of
reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter because
PAL's failure to actually reinstate them or effect payroll reinstatement was justified by the latter's
situation of being under corporate rehabilitation.cralaw

Application of the Two-Fold Test to the present case

As previously mentioned, the vital question that needs to be answered in the case at bar is: Can
respondents collect their accrued salaries for the period between the Labor Arbiter's order of
reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter? If in the
affirmative, the assailed CA Decision and Resolution which affirmed the June 3, 2004 Order of Labor
Arbiter Castillon denying the Motion to Quash Writ of Execution and ordering the break-open of
petitioner's premises as well as the issuance of the subject Writ of Execution itself, have to be upheld.
Otherwise, they need to be set aside as what petitioner would want us to do.

To come up with the answer to said question, we shall apply the two-fold test used in Garcia.

Was there an actual delay or was the order of reinstatement pending appeal executed prior to its
reversal? As can be recalled, Labor Arbiter Gan issued his Decision ordering respondents' reinstatement
on December 21, 2001, copy of which was allegedly received by petitioner on February 21, 2002.[35] On
March 4, 2002, petitioner appealed said decision to the NLRC. A few days later or on March 11, 2002,
respondents filed an Ex-Parte Motion for Issuance of Writ of Execution relative to the implementation of
the reinstatement aspect of the decision.[36] On April 22, 2002, a Writ of Execution was issued by Labor
Arbiter Gan. However, until the issuance of the September 5, 2002 NLRC Resolution overturning Labor
Arbiter Gan's Decision, petitioner still failed to reinstate respondents or effect payroll reinstatement in
accordance with Article 223 of the Labor Code. This was what actually prompted respondents to file an
Ex-Parte Motion to Set Case for Conference with Motion wherein they also prayed for the issuance of a
computation of the award of backwages and Alias Writ of Execution for its enforcement. It cannot
therefore be denied that there was an actual delay in the execution of the reinstatement aspect of the
Decision of Labor Arbiter Gan prior to the issuance of the NLRC Resolution overturning the same.

Now, the next question is: Was the delay not due to the employer's unjustified act or omission? Unlike
in Garcia where PAL, as the employer, was then under corporate rehabilitation, Islriz Trading here did not
undergo rehabilitation or was under any analogous situation which would justify petitioner's non-
exercise of the options provided under Article 223 of the Labor Code. Notably, what petitioner gave as
reason in not immediately effecting reinstatement after he was served with the Writ of Execution dated
April 22, 2002 was that he would first refer the matter to his counsel as he could not effectively act on
the order of execution without the latter's advice.[37] He gave his word that upon conferment with his
lawyer, he will inform the Office of the Labor Arbiter of his action on the writ. Petitioner, however,
without any satisfactory reason, failed to fulfill this promise and respondents remained to be not
reinstated until the NLRC resolved petitioner's appeal. Evidently, the delay in the execution of
respondents' reinstatement was due to petitioner's unjustified refusal to effect the same.

Hence, the conclusion is that respondents have the right to collect their accrued salaries during the
period between the Labor Arbiter's Decision ordering their reinstatement pending appeal and the NLRC
Resolution overturning the same because petitioner's failure to reinstate them either actually or through
payroll was due to petitioner's unjustified refusal to effect reinstatement. In order to enforce this, Labor
Arbiter Castillon thus correctly issued the Writ of Execution dated March 9, 2004 as well as the Order
dated June 3, 2004 denying petitioner's Motion to Quash Writ of Execution and granting respondents'
Urgent Motion for Issuance of Break-Open Order. Consequently, we find no error on the part of the CA in
upholding these issuances and in dismissing the petition for certiorari before it.

Having settled this, we find it unnecessary to discuss further the issues raised by petitioner except the
one with respect to the computation of respondents' accrued salaries.

Correctness of the Computation of

Respondents' Accrued Salaries

Petitioner contends that respondents' accrued salaries in the total amount of P1,110,665.60 have no
factual and legal bases. This is because of his obstinate belief that the NLRC's reversal of Labor Arbiter
Gan's Decision has effectively removed the basis for such award.
Although we do not agree with petitioner's line of reasoning, we, however, find incorrect the
computation made by Fiscal Examiner Trinchera.

In Kimberly Clark (Phils.), Inc., v. Facundo,[38] we held that:

[T]he Labor Arbiter's order of reinstatement was immediately executory. After receipt of the Labor
Arbiter's decision ordering private respondents' reinstatement, petitioner has to either re-admit them to
work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the
payroll. Failing to exercise the options in the alternative, petitioner must pay private respondents'
salaries which automatically accrued from notice of the Labor Arbiter's order of reinstatement until its
ultimate reversal of the NLRC.

xxxx

x x x [S]ince private respondent's reinstatement pending appeal was effective only until its reversal by
the NLRC on April 28, 1999, they are no longer entitled to salaries from May 1, 1999 to March 15, 2001,
as ordered by the Labor Arbiter. (Emphasis supplied)

To clarify, respondents are entitled to their accrued salaries only from the time petitioner received a
copy of Labor Arbiter Gan's Decision declaring respondents' termination illegal and ordering their
reinstatement up to the date of the NLRC Resolution overturning that of the Labor Arbiter. This is
because it is only during said period that respondents are deemed to have been illegally dismissed and
are entitled to reinstatement pursuant to Labor Arbiter Gan's Decision which was the one in effect at
that time. Beyond that period, the NLRC Resolution declaring that there was no illegal dismissal is
already the one prevailing. From such point, respondents' salaries did not accrue not only because there
is no more illegal dismissal to speak of but also because respondents have not yet been actually
reinstated and have not rendered services to petitioner.

Fiscal Examiner Trinchera's computation of respondents' accrued salaries covered the period January 1,
2002 to January 30, 2004. As there was no showing when petitioner actually received a copy of Labor
Arbiter Gan's decision except for petitioner's self-serving claim that he received the same on February
21, 2002,[39] we are at a loss as to how Fiscal Examiner Trinchera came up with January 1, 2002 as the
reckoning point for computing respondents' accrued wages. We likewise wonder why it covered the
period up to January 30, 2004 when on September 5, 2002, the NLRC already promulgated its Resolution
reversing that of the Labor Arbiter. Hence, we deem it proper to remand the records of this case to the
Labor Arbiter for the correct computation of respondents' accrued wages which shall commence from
petitioner's date of receipt of the Labor Arbiter's Decision ordering reinstatement up to the date of the
NLRC Resolution reversing the same. Considering, however, that petitioner's levied properties have
already been awarded to respondents and as alleged by the latter, have also already been sold to third
persons, respondents are ordered to make the proper restitution to petitioner for whatever excess
amount received by them based on the correct computation.

As a final note, since it appears that petitioner still failed to reinstate respondents pursuant to the final
and executory Resolution of the NLRC, respondents' proper recourse now is to move for the execution of
the same. It is worthy to note that Labor Arbiter Castillon stated in her questioned Order of June 3, 2004
that the Writ of Execution she issued is for the sole purpose of enforcing the wages accruing to
respondents by reason of Labor Arbiter Gan's order of reinstatement. Indeed, the last paragraph of said
writ provides only for the enforcement of said monetary award and nothing on reinstatement, viz:

NOW THEREFORE, you are commanded to proceed to the premises of respondents Islriz Trading/Victor
Hugo C. Lu located at Brgy. Luciano Trece Martires[,] Cavite City or wherever it may be found to collect
the amount of One Million One Hundred Eleven Thousand Seven Hundred Sixty One pesos & 60/100
(P1,111,761.60) inclusive [of] P1,096.00 as execution fees and turn over the said amount to the NLRC
Cashier for further disposition. In case you fail to collect the said amount in cash, you are directed to
cause the satisfaction of the same out of respondents' chattels, movable/immovable properties not
exempt from execution. You are directed to return these Writ One Hundred Eighty (180) days from
receipt hereof, together with the report of compliance.cralaw

SO ORDERED.[40]

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed March 18, 2005 Decision and
June 16, 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 84744 are AFFIRMED. The records of
this case are ordered REMANDED to the Office of the Labor Arbiter for the correct computation of
respondents' accrued salaries covering the date of petitioner's receipt of the December 21, 2001
Decision of the Labor Arbiter up to the issuance of the NLRC Resolution on September 5, 2002.
Respondents are ordered to make the proper restitution to petitioner for whatever excess amount
which may be

determined to have been received by them based on the correct computation.cralaw

SO ORDERED.

• Lansangan v. Amkor Technology Philippines, January 30, 2009

CARPIO MORALES, J.:

An anonymous e-mail was sent to the General Manager of Amkor Technology Philippines (respondent)
detailing allegations of malfeasance on the part of its supervisory employees Lunesa Lansangan and
Rosita Cendaña (petitioners) for "stealing company time."1 Respondent thus investigated the matter,
requiring petitioners to submit their written explanation. In handwritten letters, petitioners admitted
their wrongdoing.2 Respondent thereupon terminated petitioners for "extremely serious offenses" as
defined in its Code of Discipline,3 prompting petitioners to file a complaint for illegal dismissal against
it.4

Labor Arbiter Arthur L. Amansec, by Decision of October 20, 2004,5 dismissed petitioners' complaint, he
having found them guilty of

"[s]wiping another employees' [sic] I.D. card or requesting another employee to swipe one's I.D. card to
gain personal advantage and/or in the interest of cheating", an offense of dishonesty punishable as a
serious form of misconduct and fraud or breach of trust under Article 282 of the Labor Code:

xxx

which allows the dismissal of an employee for a valid cause. (Emphasis and underscoring
supplied)cralawlibrary

The Arbiter, however, ordered the reinstatement of petitioners to their former positions without
backwages "as a measure of equitable and compassionate relief" owing mainly to petitioners' prior
unblemished employment records, show of remorse, harshness of the penalty and defective attendance
monitoring system of respondent.6

Respondent assailed the reinstatement aspect of the Arbiter's order before the National Labor Relations
Commission (NLRC).

In the meantime, petitioners, without appealing the Arbiter's finding them guilty of "dishonesty as a
form of serious misconduct and fraud or breach of trust,"moved for the issuance of a "writ of
reinstatement."7

After a series of oppositions, motions and orders,8 the Arbiter issued an alias writ of execution following
which respondent's bank account at Equitable-PCI Bank was garnished. Respondent thereupon moved
for the quashal of the alias writ of execution and lifting of the notice of garnishment, which the Arbiter
denied by Order of January 26, 2005, drawing respondent to appeal to the NLRC.

After consolidating respondent's appeal from the Labor Arbiter's order of reinstatement and subsequent
appeal/order denying the quashal of the alias writ of execution and lifting of the notice of garnishment,
the NLRC, by Resolution of June 30, 2005,9 granted respondent's appeals by deleting the reinstatement
aspect of the Arbiter's decision and setting aside the Arbiter's Alias Writ of Execution and Notice of
Garnishment. Thus the NLRC disposed as follows:

ACCORDINGLY, the appeal is hereby GRANTED. The Labor Arbiter's Decision dated October 20, 2004 is
hereby MODIFIED by DELETING the portion that ruled for appelle[e]s' reinstatement. Consequently, the
Writ of Execution dated November 19, 2004, the subsequent Alias Writ of Execution dated January 26,
2005, and the Notice of Garnishment dated January 14, 2005 served upon Equitable PCI Bank by Sheriff
Agripina Sangel are hereby ordered to be SET ASIDE.

SO ORDERED. (Underscoring supplied)cralawlibrary

Petitioners' motion for reconsideration of the NLRC Resolution having been denied, they filed a petition
for certiorari before the Court of Appeals which, by Decision10 of September 19, 2006, while affirming
the finding that petitioners were guilty of misconduct and the like, ordered respondent to "pay
petitioners their corresponding backwages without qualification and deduction for the period covering
October 20, 2004 (date of the Arbiter's decision) up to June 30, 2005 (date of the NLRC Decision)," citing
Article 223 of the Labor Code and Roquero v. Philippine Airlines.11
Both parties' filed their respective motions for partial reconsideration which were denied.12 Only
petitioners have come to this Court via the present Petition for Review, 13 contending that:

WITH ALL DUE RESPECT, THE ORDER OF THE HONORABLE COURT OF APPEALS LIMITING THE PAYMENT
OF BACKWAGES [TO] THE PETITIONERS FROM OCTOBER 20, 2004 (ARBITER DECISION) UP TO JUNE 30,
2005 (NLRC DECISION) ONLY IS CONTRARY TO THE CASE OF ALEJANDRO ROQUERO v. PHILIPPINE
AIRLINES, INC.[,] G.R. NO. 152329, APRIL [22,] 2003 [AND]

II

. . . THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN CONCLUDING

THAT THE PETITIONERS COMMITTED SERIOUS MISCONDUCT, FRAUD, DISHONESTY AND BREACH OF
TRUST. BUT EVEN ASSUMING THAT THE PETITIONERS COMMITTED THE SWIPING IN OF IDENTIFICATION
CARD, THE PENALTY OF DISMISSAL IS TOO SEVERE, HARSH AND CONTRARY TO ARTICLE 282 OF THE
LABOR CODE OF THE PHILIPPINES AND EXISTING JURISPRUDENCE.14

Since respondent did not appeal from the appellate court's decision, the said court's order for it to pay
backwages to petitioners for the therein specified period has become final.

Petitioners highlight the Court's ruling in Roquero v. Philippine Airlines15 where the therein employer
was ordered to pay the wages to which the therein employee was entitled from the time the
reinstatement order was issued until the finality of this Court's decision16 in favor of the therein
employee. Thus, petitioners contend that the payment of backwages should not be computed only up to
the promulgation by the NLRC of its decision.

In its Comment,17 respondent asserts that, inter alia, petitioners' reliance on Roquero is misplaced in
view of the glaring factual differences between said case and the present case.

The petition fails.

The decision of the Arbiter finding that petitioners committed "dishonesty as a form of serious
misconduct and fraud, or breach of trust" had become final, petitioners not having appealed the same
before the NLRC as in fact they even moved for the execution of the reinstatement aspect of the
decision. It bears recalling that it was only respondent which assailed the Arbiter's decision to the NLRC -
to solely question the propriety of the order for reinstatement, and it succeeded.ςηαñrοblεš νιrâ€
υαl lαω lιbrαrÿ

Roquero, as well as Article 22318 of the Labor Code on which the appellate court also relied, finds no
application in the present case. Article 223 concerns itself with an interim relief, granted to a dismissed
or separated employee while the case for illegal dismissal is pending appeal, as what happened in
Roquero. It does not apply where there is no finding of illegal dismissal, as in the present case.

The Arbiter found petitioners' dismissal to be valid. Such finding had, as stated earlier, become final,
petitioners not having appealed it. Following Article 279 which provides:

xxx

In cases of regular employment, the employer shall not terminate the services of an employee except for
a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement (Emphasis,
underscoring and italics supplied),

petitioners are not entitled to full backwages as their dismissal was not found to be illegal. Agabon v.
NLRC19 so states '' payment of backwages and other benefits is justified only if the employee was
unjustly dismissed.

WHEREFORE, the petition is DENIED.

No costs.

SO ORDERED.

• Palteng v. UCPB, February 27, 2009

QUISUMBING, J.:

Assailed in this Petition for Review on Certiorari are the Decision1 dated December 23, 2005 and
Resolution2 dated April 4, 2006 of the Court of Appeals in CA-G.R. SP No. 72660 denying
reconsideration. The appellate court had modified the Decision3 dated March 6, 2002 of the National
Labor Relations Commission (NLRC) and limited the award of backwages in favor of petitioner Elizabeth
D. Palteng from the time she was illegally dismissed on October 25, 1996, until the promulgation of the
Labor Arbiter's Decision4 on December 6, 1999.

The antecedent facts are as follows:

Petitioner Elizabeth D. Palteng was the Senior Assistant Manager/Branch Operations Officer of
respondent United Coconut Planters Bank in its Banaue Branch in Quezon City.

On April 15, 1996, Area Head and Vice-President Eulallo S. Rodriguez reported to the bank's Internal
Audit and Credit Review Division that bank client Clariza L. Mercado-The Red Shop has incurred Past Due
Domestic Bills Purchased (BP) of P34,260,000. After conducting a diligence audit, the division reported to
the Audit and Examination Committee that Palteng committed several offenses under the Employee
Discipline Code in connection with Mercado's Past Due Domestic BP. It also recommended that the
matter be referred to the Committee on Employee Discipline for proper disposition

On August 14, 1996, Palteng was required to explain why no disciplinary action should be taken against
her in connection with the following alleged offenses:
"1. Gross negligence and dereliction of duties in the implementation of company policies or valid orders
from Management authorities, when:

A. You granted BP against personal checks. Per bank policy, checks eligible for BP accommodation are
trade checks and granting of BP against personal checks is strictly prohibited.

b. You granted accommodations based on client's statement that a loan will be released. You failed to
confirm this with AO Pearl Urbano before effecting the accommodations. You likewise failed to report to
AO Urbano the excess availments on the OL of the client. Per bank policy on CSBD/CCD clients with
established lines, the servicing unit/branches shall coordinate all BP/DAUD availments with the account
officer for proper monitoring and control.

2. Abuse of discretion when:

A. You granted BP accommodations to the client in excess of the P5 million sublimit under her Omnibus
Line. In spite of the fact that you did not have the approving authority, you did not elevate the client's
availment to the proper authority for approval.

b. You approved the MCs issued to the client beyond your approving limit of P5 million being a Class C
signatory. Issuance[s] were not confirmed by proper approving body."5

In response, Palteng explained that at the time the BP accommodation was extended, Mercado has, as
far as she knew, an Omnibus Line of P100 Million secured by a pledge on jewelries. She was not aware
that the Omnibus Line has been reduced to P50 Million and that it contained a P5 Million sublimit on BP.
Nevertheless, she accepted full responsibility for granting the BP accommodation against Mercado's
personal checks beyond and outside her authority. While she admitted committing a major offense that
may cause her dismissal, she claimed that it was an honest mistake.6

After hearing and investigation, the committee recommended Palteng's dismissal. On October 25, 1996,
Palteng was dismissed with forfeiture of all benefits.7

Palteng filed a complaint8 for illegal dismissal seeking reinstatement to her former position without loss
of seniority rights with full backwages, or in the alternative, payment of separation pay with full
backwages, and recovery of her monetary claims with damages.

On December 6, 1999, the Labor Arbiter rendered a decision disposing, thus:

WHEREFORE, premises considered, judgment is hereby rendered declaring as illegal the termination of
herein complainant and ordering respondent to pay complainant the following:

1.) Separation pay in lieu of reinstatement computed at the rate of one (1) month pay for every year of
service from the time of her employment up to the time of termination.

2.) Full backwages plus increments or adjustment if any from the time of her dismissal until finality of
judgment.
3.) P500,000.00 as moral damages.

4.) [P300,000.00] as exemplary damages.

5.) 10% of the total monetary award as attorney's fees.

SO ORDERED.9

The bank appealed to the NLRC which rendered a decision on March 6, 2002, to wit:

WHEREFORE, premises considered[,] the assailed decision is hereby affirmed except that the awards of
moral and exemplary damages are ordered deleted therefrom.

SO ORDERED.10

Dissatisfied, the bank elevated the matter to the Court of Appeals. On December 23, 2005, the appellate
court modified the decision of the NLRC, in this wise:

WHEREFORE, premises considered, the petition is partially GRANTED. The decision of the labor arbiter
dated December 6, 1999, as affirmed with modification by the National Labor Relations Commission, is
further MODIFIED in that the award of backwages in favor of respondent Elizabeth D. Palteng shall
correspond to the period from the date of her dismissal (on October 25, 1996) up to the promulgation of
the labor arbiter's decision (on December 6, 1999).

SO ORDERED.11

The appellate court noted Palteng's admission that she granted BP accommodation to Mercado against
her personal checks beyond and outside her authority and that said infraction is a major offense that
may cause her dismissal. Hence, it limited the award of backwages from the time Palteng was illegally
dismissed on October 25, 1996, until the promulgation of the Labor Arbiter's Decision on December 6,
1999, as penalty for her offense.

Petitioner now submits the following issue for our consideration:

THE COURT OF APPEALS ERRED IN LIMITING THE AWARD OF BACKWAGES IN FAVOR OF PETITIONER,
WHOSE DISMISSAL FROM EMPLOYMENT WAS DECLARED ILLEGAL BY THE COURT AND THE LABOR
TRIBUNALS, TO ONLY UP TO THE DATE OF THE PROMULGATION OF THE LABOR ARBITER'S DECISION[.]12

The crux of the present controversy is whether the award of backwages, if any, should be counted from
the time petitioner was illegally dismissed until the promulgation of the Labor Arbiter's Decision on
December 6, 1999, or until the finality of the decision.

Petitioner contends that the Labor Arbiter, the NLRC and the Court of Appeals unanimously found her
dismissal illegal. Thus, she is entitled to the twin reliefs of reinstatement (or payment of separation pay if
reinstatement is no longer possible) and payment of backwages. She adds that the backwages should be
computed from the time she was illegally dismissed on October 25, 1996, until the finality of the
decision.
Respondent counters that petitioner is not entitled to the payment of backwages since she is not entirely
faultless or fully innocent of the offenses imputed against her.

Settled is the rule that an employee who is illegally dismissed from work is entitled to reinstatement
without loss of seniority rights, and other privileges as well as to full backwages, inclusive of allowances,
and to other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.13 However, in the event that
reinstatement is no longer possible, the employee may be given separation pay instead.14
ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

Notably, reinstatement and payment of backwages are distinct and separate reliefs given to alleviate the
economic setback brought about by the employee's dismissal. The award of one does not bar the other.
Backwages may be awarded without reinstatement, and reinstatement may be ordered without
awarding backwages.15

In a number of cases,16 the Court, despite ordering reinstatement or payment of separation pay in lieu
of reinstatement, has not awarded backwages as penalty for the misconduct or infraction committed by
the employee.

In the case at bar, petitioner admitted that she granted the BP accommodation against Mercado's
personal checks beyond and outside her authority. The Labor Arbiter, the NLRC and the Court of Appeals
all found her to have committed an "error of judgment,"17 "honest mistake,"18 "honest mistake" vis - Ã
-vis a "major offense."19

Since petitioner was not faultless in regard to the offenses imputed against her, we hold that the award
of separation pay only, without backwages, is proper.

WHEREFORE, the Decision dated December 23, 2005 of the Court of Appeals in CA-G.R. SP No. 72660 is
AFFIRMED with the MODIFICATION that the award of backwages is DELETED. Petitioner Elizabeth D.
Palteng is hereby DECLARED entitled to be paid by respondent Bank only separation pay in lieu of
reinstatement computed at the rate of one (1) month pay for every year of service from the time of her
employment up to the time of her dismissal. No pronouncement as to costs.

SO ORDERED.

• Alcantara & Sons v. CA, September 29, 2010

ABAD, J.:

This case is about a) the consequences of an illegally staged strike upon the employment status of the
union officers and its ordinary members and b) the right of reinstated union members to go back to work
pending the company's appeal from the order reinstating them.

The Facts and the Case

C. Alcantara & Sons, Inc., (the Company) is a domestic corporation engaged in the manufacture and
processing of plywood. Nagkahiusang Mamumuo sa Alsons-SPFL (the Union) is the exclusive bargaining
agent of the Company's rank and file employees. The other parties to these cases are the Union
officers[1] and their striking members.[2]

The Company and the Union entered into a Collective Bargaining Agreement (CBA) that bound them to
hold no strike and no lockout in the course of its life. At some point the parties began negotiating the
economic provisions of their CBA but this ended in a deadlock, prompting the Union to file a notice of
strike. After efforts at conciliation by the Department of Labor and Employment (DOLE) failed, the Union
conducted a strike vote that resulted in an overwhelming majority of its members favoring it. The Union
reported the strike vote to the DOLE and, after the observance of the mandatory cooling-off period,
went on strike.

During the strike, the Company filed a petition for the issuance of a writ of preliminary injunction with
prayer for the issuance of a temporary restraining order (TRO) Ex Parte[3] with the National Labor
Relations Commission (NLRC) to enjoin the strikers from intimidating, threatening, molesting, and
impeding by barricade the entry of non-striking employees at the Company's premises. The NLRC first
issued a 20-day TRO and, after hearing, a writ of preliminary injunction, enjoining the Union and its
officers and members from performing the acts complained of. But several attempts to implement the
writ failed. Only the intervention of law enforcement units made such implementation possible.
Meantime, the Union filed a petition[4] with the Court of Appeals (CA), questioning the preliminary
injunction order. On February 8, 1999 the latter court dismissed the petition. The Union did not appeal
from such dismissal.

The Company, on the other hand, filed a petition with the Regional Arbitration Board to declare the
Union's strike illegal,[5] citing its violation of the no strike, no lockout, provision of their CBA.
Subsequently, the Company amended its petition to implead the named Union members who allegedly
committed prohibited acts during the strike. For their part, the Union, its officers, and its affected
members filed against the Company a counterclaim for unfair labor practices, illegal dismissal, and
damages. The Union also assailed as invalid the service of summons on the individual Union members
included in the amended petition.

On June 29, 1999 the Labor Arbiter rendered a decision,[6] declaring the Union's strike illegal for
violating the CBA's no strike, no lockout, provision. As a consequence, the Labor Arbiter held that the
Union officers should be deemed to have forfeited their employment with the Company and that they
should pay actual damages of P3,825,000.00 plus 10% interest and attorney's fees. With respect to the
striking Union members, finding no proof that they actually committed illegal acts during the strike, the
Labor Arbiter ordered their reinstatement without backwages. The Labor Arbiter denied the Union's
counterclaim for lack of merit.

On June 29, 1999 the terminated Union members promptly filed a motion for their immediate
reinstatement but the Labor Arbiter did not act on the same. At any rate, the Company did not reinstate
them. Both parties appealed[7] the Labor Arbiter's decision to the NLRC. The Company impugned the
Labor Arbiter's decision insofar as it ordered the reinstatement of the terminated Union members. The
Union, on the other hand, questioned the declaration of illegality of the strike as well as the dismissal of
its officers and the order for them to pay damages.

On November 8, 1999 the NLRC rendered a decision,[8] affirming that of the Labor Arbiter insofar as the
latter declared the strike illegal, ordered the Union officers terminated, and directed them to pay
damages to the Company. The NLRC ruled, however, that the Union members involved, who were
identified in the proceedings held in the case, should also be terminated for having committed
prohibited and illegal acts.

The Union filed a petition for certiorari[9] with the CA, questioning the NLRC decision. Finding merit in
the petition, the CA rendered a decision on March 20, 2002,[10] annulling the NLRC decision and
reinstating that of the Labor Arbiter. The Company and the Union with its officers and members filed
separate petitions for review of the CA decision in G.R. 155109 and 155135, respectively.

During the pendency of these cases, the affected Union members filed with the Labor Arbiter a motion
for reinstatement pending appeal by the parties and the computation of their backwages based on the
CA decision. After hearing, the Labor Arbiter issued a resolution dated November 21, 2002,[11] holding
that due to the delay in the resolution of the dispute and the impracticability of reinstatement owing to
the fact that the relations between the terminated Union members and the Company had been severely
strained by the prolonged litigation, payment of separation pay to such Union members was in order.
The Labor Arbiter thus approved the computation and payment of their separation pay and denied all
their other claims.

Both parties appealed the Labor Arbiter's resolution[12] to the NLRC. Initially, in its resolution dated
April 30, 2003,[13] the NLRC declared the Labor Arbiter's resolution of November 21, 2002 void for lack
of factual and legal basis but ordered the Company to pay the affected employees' accrued wages and
13th month pay considering the Company's refusal to reinstate them pending appeal. On motion for
reconsideration by both parties, however, the NLRC issued a resolution on August 29, 2003,[14]
modifying its earlier resolution by deleting the grant of accrued wages and 13th month pay to the
subject employees, thus denying their motion for computation.

Upon the Union's petition for certiorari[15] with the CA, questioning the NLRC's denial of the terminated
Union members' claim for separation pay, accrued wages, and other benefits, the CA rendered a decision
on February 24, 2005,[16] dismissing the petition. The CA ruled that the reinstatement pending appeal
provided under Article 223 of the Labor Code contemplated illegal dismissal or termination cases and
not cases under Article 263. Thus, the CA ruled that the resolution ordering the reinstatement of the
terminated Union members and the payment of their wages and other benefits had no basis. Aggrieved,
the Union sought intervention by this Court.

The Issues Presented

The issues presented in these cases are:

1. Whether or not the NLRC properly acquired jurisdiction over the persons of the individual Union
members impleaded in the case;

2. Whether or not the Union staged an illegal strike;

3. Assuming the strike to be illegal, whether or not the impleaded Union members committed illegal acts
during the strike, justifying their termination from employment;

4. Whether or not the terminated Union members are entitled to the payment of backwages on account
of the Company's refusal to reinstate them, pending appeal by the parties, from the Labor Arbiter's
decision of June 29, 1999; and

5. Whether or not the terminated Union members are entitled to accrued backwages and separation
pay.

The Rulings of the Court

One. The NLRC acquires jurisdiction over parties in cases before it either by summons served on them or
by their voluntary appearance before its Labor Arbiter. Here, while the Union insists that summons were
not properly served on the impleaded Union members with respect to the Company's amended petition
that sought to declare the strike illegal, the records show that they were so served. The Return of
Service of Summons[17] indicated that 74 out of the 81[18] impleaded Union members were served
with summons. But they refused either to accept the summons or to acknowledge receipt of the same.
Such refusal cannot of course frustrate the NLRC's acquisition of jurisdiction over them. Besides, the
affected Union members voluntarily entered their appearance in the case when they sought affirmative
relief in the course of the proceedings like an award of damages in their favor.

Two. A strike may be regarded as invalid although the labor union has complied with the strict
requirements for staging one as provided in Article 263 of the Labor Code when the same is held
contrary to an existing agreement, such as a no strike clause or conclusive arbitration clause.[19] Here,
the CBA between the parties contained a "no strike, no lockout" provision that enjoined both the Union
and the Company from resorting to the use of economic weapons available to them under the law and
to instead take recourse to voluntary arbitration in settling their disputes.

No law or public policy prohibits the Union and the Company from mutually waiving the strike and
lockout maces available to them to give way to voluntary arbitration. Indeed, no less than the 1987
Constitution recognizes in Section 3, Article XIII, preferential use of voluntary means to settle disputes.
Thus -

The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.

The Court finds no compelling reason to depart from the findings of the Labor Arbiter, the NLRC, and the
CA regarding the illegality of the strike. Social justice is not one-sided. It cannot be used as a badge for
not complying with a lawful agreement.
Three. Since the Union's strike has been declared illegal, the Union officers can, in accordance with law
be terminated from employment for their actions. This includes the shop stewards. They cannot be
shielded from the coverage of Article 264 of the Labor Code since the Union appointed them as such and
placed them in positions of leadership and power over the men in their respective work units.

As regards the rank and file Union members, Article 264 of the Labor Code provides that termination
from employment is not warranted by the mere fact that a union member has taken part in an illegal
strike. It must be shown that such a union member, clearly identified, performed an illegal act or acts
during the strike.[20]

Here, although the Labor Arbiter found no proof that the dismissed rank and file Union members
committed illegal acts, the NLRC found following the injunction hearing in NLRC IC M-000126-98 that the
Union members concerned committed such acts, for which they had in fact been criminally charged
before various courts and the prosecutors' office in Davao City. Since the CA held that the existence of
criminal complaints against the Union members did not warrant their dismissal, it becomes necessary for
the Court to go into the records to settle the issue.

The striking Union members allegedly committed the following prohibited acts:

They threatened, coerced, and intimidated non-striking employees, officers, suppliers and customers;

They obstructed the free ingress to and egress from the company premises; and

They resisted and defied the implementation of the writ of preliminary injunction issued against the
strikers.

Cornelio Caguiat, Ruben Tungapalan, and Eufracio Rabusa depicted the above prohibited acts in their
affidavits and testimonies. The Sheriff of the NLRC said in his Report[21] that, in the course of his
implementation of the writ of injunction, he observed that the striking employees blocked the exit lane
of the Alson drive with their tent. Tungapalan, a non-striking employee, identified the Union members
who threatened and coerced him. Indeed, he filed criminal actions against them. Lastly, the photos
taken of the strike show the strikers, properly identified, committing the acts complained of. These
constitute substantial evidence in support of the termination of the subject Union members.

The mere fact that the criminal complaints against the terminated Union members were subsequently
dismissed for one reason or another does not extinguish their liability under the Labor Code. Nor does
such dismissal bar the admission of the affidavits, documents, and photos presented to establish their
identity and guilt during the hearing of the petition to declare the strike illegal. The technical grounds
that the Union interposed for denying admission of the photos are also not binding on the NLRC.[22]

Four. The terminated Union members contend that, since the Company refused to reinstate them after
the Labor Arbiter rendered a decision in their favor, the Company should be ordered to pay them their
wages during the pendency of the appeals from the Labor Arbiter's decision.

It will be recalled that after the Labor Arbiter rendered his decision on June 29, 1999, which decision
ordered the reinstatement of the terminated Union members, the latter promptly filed a motion for their
reinstatement pending appeal. But the Labor Arbiter did not for some reason act on the motion. As it
happened, after about four months or on November 8, 1999, the NLRC reversed the Labor Arbiter's
reinstatement order. It cannot be said, therefore, that the Company had resisted a standing order of
reinstatement directed at it at this point.

Of course, on March 20, 2002 the CA restored the Labor Arbiter's reinstatement order. And this
prompted the affected Union members to again file with the Labor Arbiter a motion for their
reinstatement pending appeal. But, acting on the motion, the Labor Arbiter resolved at this point that
reinstatement was no longer practicable because of the severely strained relation between the company
and the terminated Union members. In place of reinstatement, the Labor Arbiter ordered the Company
to pay them their separation pays.

Both parties appealed the Labor Arbiter's above ruling[23] to the NLRC. But, as it turned out the NLRC
did not also favor reinstatement. It instead ordered the Company to pay the terminated Union members
their accrued wages and 13th month pay considering its refusal to reinstate them pending appeal. On
motion for reconsideration, however, the NLRC reconsidered and deleted altogether the grant of accrued
wages and 13th month pay. The Union appealed the NLRC ruling to the CA on behalf of its terminated
members but the CA denied their appeal.

The CA denied reinstatement for the reason that the reinstatement pending appeal provided under
Article 223 of the Labor Code contemplated illegal dismissal or termination cases and not cases under
Article 264. But this perceived distinction does not find support in the provisions of the Labor Code.

The grounds for termination under Article 264 are based on prohibited acts that employees could
commit during a strike. On the other hand, the grounds for termination under Articles 282 to 284 are
based on the employee's conduct in connection with his assigned work. Still, Article 217, which defines
the powers of Labor Arbiters, vests in the latter jurisdiction over all termination cases, whatever be the
grounds given for the termination of employment. Consequently, Article 223, which provides that the
decision of the Labor Arbiter reinstating a dismissed employee shall immediately be executory pending
appeal, cannot but apply to all terminations irrespective of the grounds on which they are based.

Here, although the Labor Arbiter failed to act on the terminated Union members' motion for
reinstatement pending appeal, the Company had the duty under Article 223 to immediately reinstate the
affected employees even if it intended to appeal from the decision ordaining such reinstatement. The
Company's failure to do so makes it liable for accrued backwages until the eventual reversal of the order
of reinstatement by the NLRC on November 8, 1999,[24] a period of four months and nine days.

Five. While it is true that generally the grant of separation pay is not available to employees who are
validly dismissed, there are, in furtherance of the law's policy of compassionate justice, certain
circumstances that warrant the grant of some relief in favor of the terminated Union members based on
equity.

Bitter labor disputes, especially strikes, always generate a throng of odium and abhorrence that
sometimes result in unpleasant, although unwanted, consequences.[25] Considering this, the striking
employees' breach of certain restrictions imposed on their concerted actions at their employer's
doorsteps cannot be regarded as so inherently wicked that the employer can totally disregard their long
years of service prior to such breach.[26] The records also fail to disclose any past infractions committed
by the dismissed Union members. Taking these circumstances in consideration, the Court regards the
award of financial assistance to these Union members in the form of one-half month salary for every
year of service to the company up to the date of their termination as equitable and reasonable.

WHEREFORE, the Court DENIES the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and its
officers and members in G.R. 155135 for lack of merit, and REVERSES and SETS ASIDE the decision of the
Court of Appeals in CA-G.R. SP 59604 dated March 20, 2002. The Court, on the other hand, GRANTS the
petition of C. Alcantara & Sons, Inc. in G.R. 155109 and REINSTATES the decision of the National Labor
Relations Commission in NLRC CA M-004996-99 dated November 8, 1999.

Further, the Court PARTIALLY GRANTS the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and
their dismissed members in G.R. 179220 and ORDERS C. Alcantara & Sons, Inc. to pay the terminated
Union members backwages for four (4) months and nine (9) days and separation pays equivalent to one-
half month salary for every year of service to the company up to the date of their termination, with
interest of 12% per annum from the time this decision becomes final and executory until such
backwages and separation pays are paid. The Court DENIES all other claims.

SO ORDERED.

• Aboc v. Metrobank, December 13, 2010

MENDOZA, J.:

Assailed in these consolidated petitions for review is the October 28, 2005 Decision[1] of the Court of
Appeals-Cebu City (CA) disposing two consolidated cases, CA-G.R. SP. No. 80747 and CA-G.R. SP. No.
81363. The CA Decision affirmed the Decision[2] of the National Labor Relations Commission (NLRC)
which reversed the Decision[3] of the Labor Arbiter (LA) finding Antonio A. Aboc (Aboc) to have been
illegally dismissed by the Metropolitan Bank and Trust Company (Metrobank).

These two cases stemmed from a complaint for illegal dismissal and damages filed by Aboc against
Metrobank on October 1, 1998.

In his position paper,[4] Aboc, the Regional Operations Coordinator of Metrobank in Cebu City with a
monthly salary of P11,980.00, alleged that on August 29, 1988, he started working as a loans clerk. He
was given merit increases and awarded promotions during his employment because of his highly
satisfactory performance. For nine years, he maintained an unblemished employment record until he
received an inter-office letter[5] on January 29, 1998, requiring him to explain in writing the charges that
he had actively participated in the lending activities of his immediate supervisor, Wynster Y. Chua (Chua),
the Branch Manager of Metrobank where he was assigned.

Aboc wrote a letter[6] to Metrobank explaining that he had no interest whatsoever in the lending
business of Chua because it was solely owned by the latter. He admitted, however, that he did some acts
for Chua in connection with his lending activity. He did so because he could not say "no" to Chua
because of the latter's influence and ascendancy over him and because of his "utang na loob" (debt of
gratitude).[7]

His participation in the lending activity was limited to ministerial acts such as the preparation of deposit
and withdrawal slips and the typing of statement of accounts for some clients of Chua. In fact, Chua
wrote a letter to Metrobank absolving him of any responsibility and participation in his lending activities.
Despite the same, Metrobank still dismissed him on February 12, 1998.

Metrobank, on the other hand, replied that sometime in November 1995, Chua, Judith Eva Cabrido
(assistant manager), Arthur Arcepi (accountant), and Aboc organized a credit union known as Cebu North
Road Investment (CNRI). Said officers and employees used Metrobank's premises, equipment and
facilities in their lending business. Apparently, its head office was not informed of the organization of
CNRI. Had it been informed of the organization of said credit union, it would not have tolerated or
approved of it because the nature of its business would be in conflict, inimical, and in competition with
its banking business. Moreover, they did not register CNRI with the Securities and Exchange Commission
(SEC) and with the Department of Trade and Industry (DTI). The lending and investment business of CNRI
was confined not only to the employees of Metrobank but also to outsiders, including clients of the
bank.[8]

Metrobank also disclosed that on August 13, 1996, Aboc and his companions created another credit
union, the First Fund Access (FFA), which opened accounts with Metrobank under fictitious names.
Again, it was not informed of the existence of this credit union.

In September 1997, Chua and Aboc were observed to have openly convinced outsiders and clients of
Metrobank to patronize their lending and investment business. During the investigation conducted by
Metrobank on January 15, 1998, it was discovered that Aboc solicited investors including its clients for
said credit union. He also induced bank clients to withdraw their accounts and invest them in CNRI. He
even signed as one of the signatories in the trust receipts of some bank clients.

During the administrative investigation, Metrobank likewise discovered that Aboc committed the
following acts:

Preparation of all necessary documents on deposits/placements and loans of said lending activities.

Preparation of checks and acting as co-signatory of Chua in payment for matured deposits/placements
or proceeds of loans to the damage and prejudice of Metrobank.

Metrobank required Aboc to submit a written explanation why he should not be dismissed for cause and
attend a conference in the morning of February 10, 1998 at the Visayas Regional Office, Fuente Osmeña
Center, Cebu City, in which he was allowed to bring a counsel of his own choice. On February 6, 1998, he
submitted his written explanation. On February 10, 1998, he attended the conference.

Thereafter, Metrobank found that Aboc's actions constituted serious misconduct and a breach of trust
and confidence. On February 12, 1998, Metrobank terminated his services.

Ruling of the Labor Arbiter

After the parties had submitted their respective position papers, the LA rendered her decision on July 12,
1999, finding that Aboc was illegally dismissed from the service by Metrobank. The dispositive portion of
her decision reads:

WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby rendered declaring complainant
Antonio Aboc to have been illegally dismissed from the service by respondent Metropolitan Bank and
Trust Company (Metrobank). Consequently, same respondent Metrobank is hereby ordered to reinstate
complainant Aboc to his former position or to a substantially equivalent position without loss of seniority
rights and other privileges, and to pay said complainant the following, to wit:

1. Backwages

February 12, 1998 to July 12, 1999

P11, 980.00 x 18 months ..............................P215, 640.00

13th month = 1 yr ..................P11, 980.00

5 mons ........................P 4, 991.66

P 16, 971.66

Service Incentive Leave (P11, 980.00 divided

by 26 = P460.76 x 5 ..................2,303.80 P19,275.46 P234, 915.46

2. 10% Attorney's Fees............................................P 23, 491.54

GRAND TOTAL AWARD---------------------------------P258, 407.00[9]

The LA reasoned out that Metrobank failed to prove by clear and convincing evidence the charges of
serious misconduct, breach of trust and loss of confidence against Aboc. His lending activities were not
foreign to Metrobank in the sense that credit unions commonly existed in its other branches and that
said credit unions were handled by its high ranking employees.

The LA added that Aboc's participation in the lending activities was due to "force of circumstance." He
was an "unwilling participant" in the business of his superior because he could not just say "no" to Chua
in view of the latter's moral ascendancy over him. In fact, Chua vouched for his non-participation in the
lending business. According to the LA, to sanction the penalty of dismissal against Aboc would be unfair.
[10]

Moreover, the LA ruled that Metrobank did not comply with the due process requirement in dismissing
Aboc because no hearing was conducted after he was required to explain. He was never informed that
he was going to be investigated in connection with the charges being leveled against him. The
conference set up by Metrobank could not be considered a substitute to the actual holding of a hearing.

Ruling of the National

Labor Relations Commission

On December 11, 2002, the NLRC set aside the decision of the LA but ordered Metrobank to pay Aboc
reinstatement wages from July 12, 1999 to September 16, 1999; salary increase from January 2000 to
June 2001; Christmas bonus for the year 2000; 13th month pay differential for the year 2000; and salary
differential for July and August 2001. The dispositive portion of the NLRC Decision reads:

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby set aside and vacated and
a new one entered dismissing the complaint. However, respondent Metropolitan Bank and Trust
Company is hereby ordered to pay the following amounts with respect to complainant's reinstatement
pending appeal:

1.

Reinstatement Wages (July 12, 1999 to

September 16, 1999 at P11, 980.00)

P23, 960.00

2.

Salary Increase from January 2000 to

June 2001 at P1, 500.00/month

27, 000.00

3.

Christmas Bonus CY 2000

18, 030.00

4.

13th Month Pay Differential for CY 2000

1, 500.00

5.

Salary Diff'l for July & Aug. 2001

7, 200.00

Total

P77, 690.00

SO ORDERED.[11]

The NLRC ruled that Aboc was guilty of serious misconduct and breach of trust and loss of confidence
based on the following overt acts:

Complainant (Aboc) was an organizer of both CNRI and FFA, business entities which directly competed
with the line of business of respondent (Metrobank);

Complainant was a responsible officer of both credit unions and actively participated in their
transactions, using the respondent bank's office, facilities, and equipments.

Complainant, as bank officer, had the serious responsibility of reporting to respondent the establishment
of CNRI and FFA but he deliberately failed to do so.

Petitioner admits having opened new accounts bearing fictitious names knowing fully well that it was
against bank policy.

The NLRC wrote that Aboc's loyalty should be first and foremost to Metrobank. This consideration should
be over and above whatever personal debts of gratitude he owed Chua.

On due process, the NLRC ruled that Metrobank fully complied with the two-notice rule under the Labor
Code. It sent an inter-office letter dated July 16, 1998 to Aboc asking him to explain why his services
should not be terminated for cause. Subsequently, Aboc submitted a written explanation dated February
6, 1998. He was likewise invited to a conference, which he attended on February 10, 1998, purposely to
give him the chance to explain his side and to adduce evidence in his behalf.

On the monetary awards, the NLRC explained that Aboc was entitled to receive them because he was
included in the payroll by Metrobank as he was ordered reinstated by the LA.

Both Aboc and Metrobank were not satisfied with the NLRC Decision. The former filed a motion for
reconsideration[12] while the latter filed a motion for partial reconsideration[13] on the monetary
award.

On September 17, 2003, the NLRC issued a resolution[14] affirming its finding of valid dismissal but
modifying the monetary award by directing Metrobank to pay Aboc his CBA benefits during his
reinstatement pending appeal and his salary during the period stated therein, thereby partially granting
Aboc's motion for reconsideration and denying Metrobank's motion for partial consideration.

Aggrieved, Metrobank challenged the grant of monetary award in a petition[15] before the CA, docketed
as CA-G.R. SP. No. 80747, while Aboc questioned the validity of his dismissal in a petition,[16] docketed
as CA-G.R.SP. No. 81363. The two petitions were consolidated by the CA because they involved the same
parties and intertwined issues.

Ruling of the Court of Appeals

On October 28, 2005, the CA rendered its decision affirming the decision of the NLRC, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. In CA-G.R. No. 807407, the petition is partially granted insofar as the finding of public respondent on
the validity and legality of the dismissal of private respondent Antonio A. Aboc.

2. In CA-G.R. No. 81363, the petition is partially granted insofar as the grant of the monetary award in
favor of petitioner Antonio A. Aboc.

No pronouncement as to costs.

SO ORDERED.[17]

The CA wrote that Aboc's participation in the organization of two (2) credit unions operating inside
Metrobank without its knowledge and consent was inimical to the welfare of the bank. The lending and
investment transactions of the credit unions directly competed with the business of Metrobank. Aboc
held a position that required loyalty and exercise of sound judgment.

The CA also agreed with the NLRC that Aboc was duly afforded ample opportunity to defend himself
during the conference conducted on February 10, 1998 reasoning that a formal trial-type hearing was
not, at all times, essential to due process. Aboc was able to explain his side and submit evidence during
the conference.

On the monetary award, as Aboc was ordered reinstated as an employee of Metrobank pending appeal,
the CA held that he was entitled to receive his monetary claims.

Dissatisfied with the assailed CA Decision, both parties filed their respective petitions before this Court.
Aboc's petition was docketed as G.R. No. 170542-43 and Metrobank's petition as G.R. No. 176460. On
June 4, 2007, this Court issued a resolution[18] consolidating the two petitions because they have the
same set of facts and involve the same parties and issues.

ISSUES

Whether or not the Court of Appeals erred in ruling that Antonio A. Aboc was validly dismissed by the
Metropolitan Bank and Trust Company.

Whether or not the Court of Appeals erred in ruling that the Metropolitan Bank and Trust Company was
liable to pay the monetary award claimed by Antonio A. Aboc.

Position of Aboc
Aboc basically contends that:

1. Metrobank's CA petition should have been dismissed for being filed out of time and for failing to
comply with the procedural requirements. Metrobank's counsel of record, E.F. Rosello and Associates
Law Office, received a copy of the September 17, 2003 CA Resolution on September 26, 2003.
Therefore, it had until November 25, 2003 within which to file its petition. The petition, however, was
filed after November 25, 2003 only because the Verification and Certification of Non-Forum Shopping
therein was notarized only on November 27, 2003. Moreover, the petition did not contain a Statement
of Material Dates and Proof of Service thereof on the opposing party.

2. He was illegally dismissed as he was not guilty of serious misconduct and breach of trust. Being "an
organizer" of credit unions like CNRI and FFA did not necessarily make him guilty of serious misconduct
or breach of trust and confidence because the operation of credit unions and cooperatives were not
prohibited or, at the very least, tolerated by Metrobank. In fact, all Metrobank branches practically
maintained credit unions of their own. Metrobank even "failed to present a single written rule or
regulation that suggested even remotely that credit unions were prohibited."[19]

3. He was effectively deprived of his rights to due process because the interrogation conducted by
Metrobank's representatives at its head office in Manila clearly smacked of oppression, intimidation and
coercion. Metrobank exerted moral coercion, undue ascendancy and undue influence over him, a
hapless and helpless employee.

Position of Metrobank

Metrobank argues that:

1. The date of the filing of its petition should be reckoned from September 29, 2003, the date the law
firm of Rayala Alonso and Partners received the September 17, 2003 CA Resolution because said law firm
took active participation in the proceedings while the law office of E.F. Rosello and Associates had
already ceased taking active part.

2. Bank employees, as per Bank Policy, were prohibited from engaging in informal credit union activities.
Aboc engaged in an irregular activity for profit, which directly competed with Metrobank's business. The
acts committed by Aboc - organizing and acting as auditor of the CNRI and FFA credit unions; opening
the accounts of CNRI and FFA with Metrobank under his name and his companions; soliciting investors
including the clients of Metrobank; opening accounts for the credit unions under fictitious names to hide
the lending and investment activities of said credit unions; and inducing a respondent bank's client to
withdraw her account with Metrobank and to invest it instead with CNRI- constituted wrong and
improper conduct warranting dismissal for serious misconduct and loss of trust and confidence.

3. The dispositive portion of the reversed decision of the LA merely made mention of reinstatement,
payment of backwages, 13th month pay, service incentive leave pay, and attorney's fees. It was silent on
the salary increase from January 2000 to June 2001, salary increase differentials, 13th month pay, and
award of bonuses. Therefore, these should have been deleted and no other monetary awards should
have been given to Aboc.

4. The computation of Aboc's backwages should be limited to the rate of wage at the time of his
separation from the service, excluding the salary increases and those under the collective bargaining
agreement. Since the salary increase from January 2000 to June 2001 would have the effect of
increasing Aboc's base salary, it should not have been awarded. If he was not entitled to salary
increases, he should not be awarded salary increase differentials or wage differentials as well as 13th
month pay differentials.

5. The granting of a bonus is a management prerogative. Aboc is not entitled to receive bonuses
because he participated in activities competing with Metrobank's main business instead of remaining
loyal to it.

The Court's Ruling

After an assiduous assessment of the records, the Count finds no cogent reason to disturb the subject
decision of the CA.

On the procedural issue raised by Aboc regarding Metrobank's alleged belated filing of its petition before
the CA, the records show that all pleadings filed by Metrobank, since the filing of its Motion For Partial
Reconsideration dated January 15, 2003, was prepared and filed by Rayala Alonso and Partners. Aboc
knew all along that Metrobank was being represented by said firm since his counsel furnished the latter
a copy of his motion for reconsideration.

It appears that Rayala Alonso and Partners received a copy of the September 17, 2003 NLRC decision on
September 29, 2003. For said reason, Metrobank is correct in asserting that it timely filed its petition on
November 7, 2004.

Nonetheless, granting that Metrobank belatedly filed its petition, a delay of just two (2) days should not
be fatal. Litigations should be decided on the merits of the case, not on mere technicalities.

The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a power conferred on
the court, not a duty. The discretion must be a sound one, to be exercised in accordance with the tenets
of justice and fair play, having in mind the circumstances obtaining in each case. Technicalities, however,
must be avoided. The law abhors technicalities that impede the cause of justice. The court's primary
duty is to render or dispense justice.

Litigations must be decided on their merits and not on technicality. Every party litigant must be afforded
the amplest opportunity for the proper and just determination of his cause, free from the unacceptable
plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought
not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not
override substantial justice. It is a far better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather
than dispose of the case on technicality and cause a grave injustice to the parties, giving a false
impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.[20]

On Aboc's termination, Article 282 of the Labor Code states:

ART. 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;

(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.

In termination cases, the burden of proof rests on the employer to show that the dismissal was for a just
cause or authorized cause. An employee's dismissal due to serious misconduct and loss of trust and
confidence must be supported by substantial evidence. Substantial evidence is that amount of relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds,
equally reasonable, might conceivably opine otherwise.[21]

In the case at bench, Metrobank's evidence clearly shows that the acts of Aboc in helping Chua organize
the CNRI and FFA credit unions and in the operations thereof constituted serious misconduct or breach
of trust and confidence. In response to the inter-office letter[22] sent by Metrobank on January 29, 1998,
Aboc submitted his Explanation[23] dated February 6, 1998, admitting having committed said acts but
claiming that he was only an "unwilling participant" doing a ministerial job.

During the investigation conducted on January 15, 1998 at Metrobank's head office in Makati City,
however, the following facts were established:

1. He was one of the organizers of the CNRI and FFA credit unions and acted as auditor of said credit
unions.

2. He and his co-organizers did not inform Metrobank about the existence of said credit unions.

3. CNRI and FFA opened an account with Metrobank under the names Wynster Chua, Judith Eva Cabrido
and Antonio Aboc.

4. He solicited investors including Metrobank clients for said credit unions, and signed as one of the
signatories in the Trust Certificate of Marlyn Belleza and Grace Lim.
5. He and Chua opened accounts for the said credit unions under the fictitious names of Vicente
Belocura and Romeo Gonzales, respectively.

6. He induced a certain Nerinilda Arcipe (Nerinilda), a non-employee of Metrobank, to withdraw her

UNISA account with Metrobank and invest it with CNRI.

7. The regional and local checks in the names of Belocura, John BK Chua, John AJ. Jazal, and Wynster
Chua, issued in connection with the business activities of CNRI and FFA were treated as bills purchases
and the proceeds thereof were immediately withdrawn without waiting for three (3) to five (5) days
clearing in violation of Metrobank's control system.

Indeed, Aboc's participation in the lending and investment activities of CNRI and FFA was highly irregular
and clearly in conflict with Metrobank's business. The irregularity of his act was evident from the fact
that he deliberately failed to inform Metrobank about the existence of CNRI and FFA. Though he
expressed apprehension and was not pleased with the way Chua was running the lending business, he
never informed or, at least, sought advice from his employer. Instead of doing so, he actively participated
in the business of Chua which competed against that of Metrobank.

Moreover, Aboc knew about the subject credit union's non-registration with the Central Bank or any
proper government institution. Being an experienced banker, he should have known that the lending
activities of the subject credit unions were questionable, if not, illegal, due to its non-registration. Again,
Aboc chose not to inform his employer about this and, instead, participated in the operations of the
subject credit unions.

The fact that Aboc opened accounts for the subject credit unions under fictitious names can only mean
that the group had something to hide.

Under the above circumstances, the Court cannot subscribe to the assertion that he was just an
"unwilling participant" doing a "ministerial" job for the subject credit unions. Certainly, the acts of 1)
opening an account under fictitious names; 2) solicitation of Metrobank clients to invest in their credit
union; 3) co-signing of trust receipts; and 4) inducement of an investor to withdraw her account and
transfer it to the subject credit unions, were certainly not "ministerial" tasks of an "unwilling
participant." He was just not a runner doing errands for Chua; he was the auditor for CNRI and FFA and
actively participated in their lending activities.

Aboc cannot be saved by Chua's letter[24] dated February 17, 1998 explaining that Aboc had no
participation whatsoever in said lending activities. Metrobank was his employer, not Chua. Most
important, Metrobank was paying his salary and other benefits in exchange for his services. Therefore,
Aboc's loyalty should first and foremost be to Metrobank. Ironically, Aboc did not return the favor. He
chose his personal interest over that of Metrobank.

The Court cannot give weight to the argument that Metrobank was aware of the proliferation of credit
unions in practically all of its branches and did not prohibit the operation thereof. Contrary to Aboc's
position, Metrobank issued notices to all its employees regarding the prohibition on the practice of
borrowing and lending money among its officers, employees, and bank clients. Metrobank's notices
were dated June 15, 1988[25] and August 30, 1995.[26]

Aboc's highly irregular participation in the lending business of CNRI and FFA jeopardized the business of
Metrobank. CNRI and FFA were practically competing with the business of Metrobank by soliciting
investors including clients of the bank for their credit unions. Aboc admitted that he was able to induce
Nerinilda, the widow of a former branch accountant of Metrobank, to withdraw her UNISA account with
Metrobank and invest it with their credit union. This was confirmed by Nerinilda herself in her
affidavit[27] dated December 11, 1997.

To extricate himself, Aboc also argues that Metrobank failed to comply with the requirements of due
process in dismissing him because he was not properly investigated. According to him, the interrogation
conducted by Metrobank was done in an atmosphere of fear, oppression, intimidation, and coercion.

The Court is not persuaded.

The evidence shows that he was afforded due process. The essence of due process is an opportunity to
be heard or, as applied to administrative proceedings, an opportunity to explain one's side. A formal or
trial-type hearing is not essential.[28] In this regard, the Court agrees with the CA when it wrote:

Regarding the procedural requirements of notice and hearing, records show Aboc was duly notified
through the letter dated 29 January 1998 asking him to explain why his services should not be
terminated. In fact, Aboc replied to the same by submitting a written explanation on 6 February 1998.
We likewise find that he was duly afforded ample opportunity to defend himself during the conference
conducted on 10 February. Aboc's contention that the conference he attended cannot substitute the
"hearing mandated by the Labor Code is bereft of merit. A formal trial-type hearing is not at all times
and in all instances essential to due process. It is enough that the parties are given a fair and reasonable
opportunity to explain their respective sides of the controversy and to present supporting evidence on
which a fair decision can be based.[29]

The Court, however, cannot also accommodate Metrobank.

The monetary award granted to Aboc was warranted under the law and jurisprudence. Article 223 of the
Labor Code reads, in part:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as
the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee
shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement provided herein.

In the case at bench, it cannot be denied that Metrobank opted to reinstate Aboc in its payroll. Since
Metrobank chose payroll reinstatement for Aboc, the Court agrees with the CA that he then became a
reinstated regular employee. This means that he was restored to his previous position as a regular
employee without loss of seniority rights and other privileges appurtenant thereto. His payroll
reinstatement put him on equal footing with the other regular Metrobank employees insofar as
entitlement to the benefits given under the Collective Bargaining Agreement is concerned.

The fact that the decision of the LA was reversed on appeal has no controlling significance. The rule is
that even if the order of reinstatement of the LA is reversed on appeal, it is obligatory on the part of the
employer to reinstate and pay the wages of the dismissed employee during the period of appeal until
final reversal by the higher court.[30]

WHEREFORE, the October 28, 2005 Decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

• Prince Transport v. Garcia, January 12, 2011

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court praying for the
annulment of the Decision1cralaw and Resolution2cralaw of the Court of Appeals (CA) dated December
20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953. The assailed Decision reversed
and set aside the Resolutions dated May 30, 20033cralaw and September 26, 20034cralaw of the
National Labor Relations Commission (NLRC) in CA No. 029059-01,while the disputed Resolution denied
petitioners' Motion for Reconsideration.

The present petition arose from various complaints filed by herein respondents charging petitioners with
illegal dismissal, unfair labor practice and illegal deductions and praying for the award of premium pay
for holiday and rest day, holiday pay, service leave pay, 13th month pay, moral and exemplary damages
and attorney's fees.

Respondents alleged in their respective position papers and other related pleadings that they were
employees of Prince Transport, Inc. (PTI), a company engaged in the business of transporting passengers
by land; respondents were hired either as drivers, conductors, mechanics or inspectors, except for
respondent Diosdado Garcia (Garcia), who was assigned as Operations Manager; in addition to their
regular monthly income, respondents also received commissions equivalent to 8 to 10% of their wages;
sometime in October 1997, the said commissions were reduced to 7 to 9%; this led respondents and
other employees of PTI to hold a series of meetings to discuss the protection of their interests as
employees; these meetings led petitioner Renato Claros, who is the president of PTI, to suspect that
respondents are about to form a union; he made known to Garcia his objection to the formation of a
union; in December 1997, PTI employees requested for a cash advance, but the same was denied by
management which resulted in demoralization on the employees' ranks; later, PTI acceded to the
request of some, but not all, of the employees; the foregoing circumstances led respondents to form a
union for their mutual aid and protection; in order to block the continued formation of the union, PTI
caused the transfer of all union members and sympathizers to one of its sub-companies, Lubas Transport
(Lubas); despite such transfer, the schedule of drivers and conductors, as well as their company
identification cards, were issued by PTI; the daily time records, tickets and reports of the respondents
were also filed at the PTI office; and, all claims for salaries were transacted at the same office; later, the
business of Lubas deteriorated because of the refusal of PTI to maintain and repair the units being used
therein, which resulted in the virtual stoppage of its operations and respondents' loss of employment.

Petitioners, on the other hand, denied the material allegations of the complaints contending that herein
respondents were no longer their employees, since they all transferred to Lubas at their own request;
petitioners have nothing to do with the management and operations of Lubas as well as the control and
supervision of the latter's employees; petitioners were not aware of the existence of any union in their
company and came to know of the same only in June 1998 when they were served a copy of the
summons in the petition for certification election filed by the union; that before the union was registered
on April 15, 1998, the complaint subject of the present petition was already filed; that the real motive in
the filing of the complaints was because PTI asked respondents to vacate the bunkhouse where they
(respondents) and their respective families were staying because PTI wanted to renovate the same.

Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision,5cralaw the dispositive portion of which
reads as follows: chanrob1esvirtwallawlibrary

WHEREFORE, judgment is hereby rendered: chanrob1esvirtwallawlibrary

1. Dismissing the complaints for Unfair Labor Practice, non-payment of holiday pay and holiday
premium, service incentive leave pay and 13 th month pay; chanroblesvirtualawlibrary

Dismissing the complaint of Edgardo Belda for refund of boundary-hulog; chanroblesvirtualawlibrary

2. Dismissing the complaint for illegal dismissal against the respondents Prince Transport, Inc. and/or
Prince Transport Phils. Corporation, Roberto Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy,
Mario Feranil and Peter Buentiempo; chanroblesvirtualawlibrary

3. Declaring that the complainants named below are illegally dismissed by Lubas Transport; ordering said
Lubas Transport to pay backwages and separation pay in lieu of reinstatement in the following amount:
chanrob1esvirtwallawlibrary

Complainants Backwages Separation Pay

Complainants

Backwages

Separation Pay

(1) Diosdado Garcia P222,348.70 P79,456.00

(2) Feliciano Gasco, Jr. 203,350.00 54,600.00

(3) Pablito Macasaet 145,250.00 13,000.00

 (4) Esmael Ramboyong 221,500.00 30,000.00

(5) Joel Gramatica 221,500.00 60,000.00

(6) Amado Galanto 130,725.00 29,250.00

(7) Miel Cervantes 265,800.00 60,000.00

(8) Roberto Mano 221,500.00 50,000.00

(9) Roe dela Cruz 265,800.00 60,000.00

(10) Richelo Balidoy 130,725.00 29,250.00

(11) Vilma Porras 221,500.00 70,000.00

(12) Miguelito Salcedo 265,800.00 60,000.00

(13) Cristina Garcia 130,725.00 35,100.0

(14) Luisito Garcia 145,250.00 19,500.00

(15) Rogelio Bagawisan 265,800.00 60,000.00

(16) Rodante H. Romero 221,500.00 60,000.00

(17) Dindo Torres 265,800.00 50,000.00

(18) Edgar Sanfuego 221,500.00 40,000.00

(19) Ronald Gacita 221,500.00 40,000.00

(20) Harry Toca 174,300.00 23,400.00

(21) Amado Galanto 130,725.00 17,550.00

(22) Teresita Cabañes 130,725.00 17,550.00

(23) Rex Bartolome 301,500.00 30,000.00

(24) Mario Nazareno 221,500.00 30,000.00

(25) Eustaquio Villareal 145,250.00 19,500.00

(26) Ariel Sanchez 265,800.00 60,000.00

(27) Gloria Orante 263,100.00 60,000.00

(28) Nelson Montero 264,600.00 60,000.00

 (29) Rizal Beato 295,000.00 40,000.00

(30) Eutiquio Lugtu 354,000.00 48,000.00

(31) Warlito Dickensomn 295,000.00 40,000.00

(32) Edgardo Belda 354,000.00 84,000.00

(33) Tita Go 295,000.00 70,000.00

(34) Alex Lodor 295,000.00 50,000.00

(35) Glenda Arguilles 295,000.00 40,000.00

(36) Erwin Luces 354,000.00 48,000.00

(37) Jesse Celle 354,000.00 48,000.00

(38) Roy Adorable 295,000.00 40,000.00

(39) Marlon Bangcoro 295,000.00 40,000.00

(40)Edgardo Bangcoro 354,000.00 36,000.00

chanroblesvirtualawlibrary

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of the total monetary award;
and

6. Ordering the dismissal of the claim for moral and exemplary damages for lack merit.

SO ORDERED.6cralawredlaw

The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of evidence
to show that they violated respondents' right to self-organization. The Labor Arbiter also held that Lubas
is the respondents' employer and that it (Lubas) is an entity which is separate, distinct and independent
from PTI. Nonetheless, the Labor Arbiter found that Lubas is guilty of illegally dismissing respondents
from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be held
equally liable as Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and disposed
as follows: chanrob1esvirtwallawlibrary

WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED. Accordingly, the Decision
appealed from is SUSTAINED subject to the modification that Complainant-Appellant Edgardo Belda
deserves refund of his boundary-hulog in the amount of P 446,862.00; and that Complainants-Appellants
Danilo Rojo and Danilo Laurel should be included in the computation of Complainants-Appellants claim
as follows: chanrob1esvirtwallawlibrary

Complainants

Backwages

Separation Pay

41. Danilo Rojo P355,560.00 P48,000.00

42. Danilo Laurel P357,960.00 P72,000.00

As regards all other aspects, the Decision appealed from is SUSTAINED.

SO ORDERED.7cralawredlaw

Respondents filed a Motion for Reconsideration, but the NLRC denied it in its Resolution8cralaw dated
September 26, 2003.

Respondents then filed a special civil action for certiorari with the CA assailing the Decision and
Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents'
petition. The CA ruled that petitioners are guilty of unfair labor practice; that Lubas is a mere
instrumentality, agent conduit or adjunct of PTI; and that petitioners' act of transferring respondents'
employment to Lubas is indicative of their intent to frustrate the efforts of respondents to organize
themselves into a union. Accordingly, the CA disposed of the case as follows:
chanrob1esvirtwallawlibrary

WHEREFORE , the Petition for Certiorari is hereby GRANTED. Accordingly, the subject decision is hereby
REVERSED and SET ASIDE and another one ENTERED finding the respondents guilty of unfair labor
practice and ordering them to reinstate the petitioners to their former positions without loss of seniority
rights and with full backwages.

With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in the computation of
petitioner's claim for backwages and with respect to the portion ordering the refund of Edgardo Belda's
boundary-hulog in the amount of P 446,862.00, the NLRC decision is affirmed and maintained.

SO ORDERED.9cralawredlaw

Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution10cralaw dated
February 24, 2005.

Hence, the instant petition for review on certiorari based on the following grounds:
chanrob1esvirtwallawlibrary
A

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE COURSE TO THE
RESPONDENTS' PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS OF THE LABOR ARBITER AND
AFFIRMED BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION

3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION WITH RESPECT TO
RESPONDENTS REX BARTOLOME, FELICIANO GASCO, DANILO ROJO, EUTIQUIO LUGTU, AND NELSON
MONTERO AS THEY FAILED TO FILE AN APPEAL TO THE NLRC

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE TRANSPORT, INC.
AND MR. RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION AND THUS,
LIABLE IN SOLIDUM TO RESPONDENTS.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE REINSTATEMENT
OF RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS NOT ONE OF THE ISSUES RAISED IN
RESPONDENTS' PETITION FOR CERTIORARI.11cralawredlaw

Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC are
accorded not only respect but even finality; that the CA should have outrightly dismissed the petition
filed before it because in certiorari proceedings under Rule 65 of the Rules of Court it is not within the
province of the CA to evaluate the sufficiency of evidence upon which the NLRC based its determination,
the inquiry being limited essentially to whether or not said tribunal has acted without or in excess of its
jurisdiction or with grave abuse of discretion. Petitioners assert that the CA can only pass upon the
factual findings of the NLRC if they are not supported by evidence on record, or if the impugned
judgment is based on misapprehension of facts - which circumstances are not present in this case.
Petitioners also emphasize that the NLRC and the Labor Arbiter concurred in their factual findings which
were based on substantial evidence and, therefore, should have been accorded great weight and respect
by the CA.

Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed error
in re-evaluating the NLRC's factual findings since such findings are not in accord with the evidence on
record and the applicable law or jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules of
Court has been settled as early as this Court's decision in St. Martin Funeral Homes v. NLRC.12cralaw In
said case, the Court held that the proper vehicle for such review is a special civil action for certiorari
under Rule 65 of the said Rules, and that the case should be filed with the CA in strict observance of the
doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas Pambansa
Blg. 129, as amended by Republic Act No. 7902, the CA - pursuant to the exercise of its original
jurisdiction over petitions forcertiorari - is specifically given the power to pass upon the evidence, if and
when necessary, to resolve factual issues.13cralaw Section 9 clearly states: chanrob1esvirtwallawlibrary

xxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and
perform any and all acts necessary to resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new trials or further proceedings. x x x

However, equally 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 by the courts when supported by substantial evidence, i.e., the amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion.14cralaw But 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.15cralaw The CA can grant the petition for
certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual finding not
supported by substantial evidence.16cralaw It is within the jurisdiction of the CA, whose jurisdiction over
labor cases has been expanded to review the findings of the NLRC.17cralawredlaw

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are
generally binding on the appellate court, unless there was a showing that they were arrived at arbitrarily
or in disregard of the evidence on record. In respondents' petition for certiorari with the CA, these
factual findings were reexamined and reversed by the appellate court on the ground that they were not
in accord with credible evidence presented in this case. To determine if the CA's reexamination of factual
findings and reversal of the NLRC decision are proper and with sufficient basis, it is incumbent upon this
Court to make its own evaluation of the evidence on record.18cralawredlaw

After a thorough review of the records at hand, the Court finds that the CA did not commit error in
arriving at its own findings and conclusions for reasons to be discussed hereunder.

Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached
verification and certificate against forum shopping was signed only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs in
a case and the signature of only one of them is insufficient, the Court has stressed that the rules on
forum shopping, which were designed to promote and facilitate the orderly administration of justice,
should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objective.19cralaw Strict compliance with the provision regarding the certificate of non-forum shopping
underscores its mandatory nature in that the certification cannot be altogether dispensed with or its
requirements completely disregarded.20cralaw It does not, however, prohibit substantial compliance
therewith under justifiable circumstances, considering especially that although it is obligatory, it is not
jurisdictional.21cralawredlaw

In a number of cases, the Court has consistently held that when all the 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 rules.22cralaw In the present case,
there is no question that respondents share a common interest and invoke a common cause of action.
Hence, the signature of respondent Garcia is a sufficient compliance with the rule governing certificates
of non-forum shopping. In the first place, some of the respondents actually executed a Special Power of
Attorney authorizing Garcia as their attorney-in-fact in filing a petition for certiorari with the
CA.23cralawredlaw

The Court, likewise, does not agree with petitioners' argument that the CA should not have given due
course to the petition filed before it with respect to some of the respondents, considering that these
respondents did not sign the verification attached to the Memorandum of Partial Appeal earlier filed
with the NLRC. Petitioners assert that the decision of the Labor Arbiter has become final and executory
with respect to these respondents and, as a consequence, they are barred from filing a petition for
certiorari with the CA.

With respect to the absence of some of the workers' signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the
same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have
been made in good faith or are true and correct, and not merely speculative. Moreover, respondents'
Partial Appeal shows that the appeal stipulated as complainants-appellants "Rizal Beato, et al.", meaning
that there were more than one appellant who were all workers of petitioners.

In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified, may
be given due course even without a verification if the circumstances warrant the suspension of the rules
in the interest of justice.24cralaw Indeed, the absence of a verification is not jurisdictional, but only a
formal defect, which does not of itself justify a court in refusing to allow and act on a case.25cralaw
Hence, the failure of some of the respondents to sign the verification attached to their Memorandum of
Appeal filed with the NLRC is not fatal to their cause of action.

Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil with
respect to Lubas, because the said doctrine is applicable only to corporations and Lubas is not a
corporation but a single proprietorship; that Lubas had been found by the Labor Arbiter and the NLRC to
have a personality which is separate and distinct from that of PTI; that PTI had no hand in the
management and operation as well as control and supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A
settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises
are owned, conducted and controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that these two entities are distinct and treat
them as identical or as one and the same.26cralaw In the present case, it may be true that Lubas is a
single proprietorship and not a corporation. However, petitioners' attempt to isolate themselves from
and hide behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is
precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit: chanrob1esvirtwallawlibrary

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was Prince
Transport who made the decision to transfer its employees to the former? Besides, Prince Transport
never regarded Lubas Transport as a separate entity. In the aforesaid letter, it referred to said entity as
"Lubas operations." Moreover, in said letter, it did not transfer the employees; it "assigned" them. Lastly,
the existing funds and 201 file of the employees were turned over not to a new company but a "new
management."27cralawredlaw

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent from
PTI why is it that the latter decides which employees shall work in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner
company admitted that Lubas is one of its sub-companies.28cralaw In addition, PTI, in its letters to its
employees who were transferred to Lubas, referred to the latter as its "New City Operations
Bus."29cralawredlaw

Moreover, petitioners failed to refute the contention of respondents that despite the latter's transfer to
Lubas of their daily time records, reports, daily income remittances of conductors, schedule of drivers
and conductors were all made, performed, filed and kept at the office of PTI. In fact, respondents'
identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving
different groups of employees transferred by PTI to other companies, the Labor Arbiter handling the
cases found that these companies and PTI are one and the same entity; thus, making them solidarily
liable for the payment of backwages and other money claims awarded to the complainants
therein.30cralawredlaw

Petitioners likewise aver that the CA erred and committed grave abuse of discretion when it ordered
petitioners to reinstate respondents to their former positions, considering that the issue of
reinstatement was never brought up before it and respondents never questioned the award of
separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are seeking reinstatement.31cralawredlaw
In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief
sought, but may add a general prayer for such further or other reliefs as may be deemed just and
equitable. Under this rule, a court can grant the relief warranted by the allegation and the proof even if it
is not specifically sought by the injured party; the inclusion of a general prayer may justify the grant of a
remedy different from or together with the specific remedy sought, if the facts alleged in the complaint
and the evidence introduced so warrant.32cralawredlaw

Moreover, in BPI Family Bank v. Buenaventura,33cralaw this Court ruled that the general prayer is broad
enough "to justify extension of a remedy different from or together with the specific remedy sought."
Even without the prayer for a specific remedy, proper relief may be granted by the court if the facts
alleged in the complaint and the evidence introduced so warrant. The court shall grant relief warranted
by the allegations and the proof even if no such relief is prayed for. The prayer in the complaint for other
reliefs equitable and just in the premises justifies the grant of a relief not otherwise specifically prayed
for.34cralaw In the instant case, aside from their specific prayer for reinstatement, respondents, in their
separate complaints, prayed for such reliefs which are deemed just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent reason to depart
from the findings of the CA that respondents' transfer of work assignments to Lubas was designed by
petitioners as a subterfuge to foil the former's right to organize themselves into a union. Under Article
248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor practice if it interferes with,
restrains or coerces its employees in the exercise of their right to self-organization or if it discriminates in
regard to wages, hours of work and other terms and conditions of employment in order to encourage or
discourage membership in any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after
respondents' transfer to Lubas, petitioners left them high and dry insofar as the operations of Lubas was
concerned. The Court finds no error in the findings and conclusion of the CA that petitioners "withheld
the necessary financial and logistic support such as spare parts, and repair and maintenance of the
transferred buses until only two units remained in running condition." This left respondents virtually
jobless.

WHEREFORE , the instant petition is denied. The assailed Decision and Resolution of the Court of
Appeals, dated December 20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953, are
AFFIRMED.

SO ORDERED .

• Robinsons Galleria/Robinsons Supermarket Corp. v. Ranchez,

January 19, 2011

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the
Decision1cralaw dated August 29, 2006 and the Resolution2cralaw dated May 16, 2007 of the Court of
Appeals (CA) in CA-G.R. SP No. 91631.

The Facts

The facts of the case are as follows.

Respondent was a probationary employee of petitioner Robinsons Galleria/Robinsons Supermarket

Corporation (petitioner Supermarket) for a period of five (5) months, or from October 15, 1997 until
March 14, 1998.3cralaw She underwent six (6) weeks of training as a cashier before she was hired as
such on October 15, 1997.4cralawredlaw

Two weeks after she was hired, or on October 30, 1997, respondent reported to her supervisor the loss
of cash amounting to Twenty Thousand Two Hundred Ninety-Nine Pesos ( P 20,299.00) which she had
placed inside the company locker. Petitioner Jess Manuel (petitioner Manuel), the Operations Manager
of petitioner Supermarket, ordered that respondent be strip-searched by the company guards. However,
the search on her and her personal belongings yielded nothing.5cralawredlaw

Respondent acknowledged her responsibility and requested that she be allowed to settle and pay the
lost amount. However, petitioner Manuel did not heed her request and instead reported the matter to
the police. Petitioner Manuel likewise requested the Quezon City Prosecutor's Office for an
inquest.6cralawredlaw

On November 5, 1997, an information for Qualified Theft was filed with the Quezon City Regional Trial
Court. Respondent was constrained to spend two weeks in jail for failure to immediately post bail in the
amount of Forty Thousand Pesos ( P 40,000.00).7cralawredlaw

On November 25, 1997, respondent filed a complaint for illegal dismissal and damages.8cralawredlaw

On March 12, 1998, petitioners sent to respondent by mail a notice of termination and/or notice of
expiration of probationary employment dated March 9, 1998.9cralawredlaw

On August 10, 1998, the Labor Arbiter rendered a decision,10cralaw the fallo of which reads:
chanrob1esvirtwallawlibrary

CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered dismissing the claim of illegal
dismissal for lack of merit.

Respondents are ordered to accept complainant to her former or equivalent work without prejudice to
any action they may take in the premises in connection with the missing money of P 20,299.00.

SO ORDERED.11cralawredlaw

In dismissing the complaint for illegal dismissal, the Labor Arbiter ratiocinated that at the time
respondent filed the complaint for illegal dismissal, she was not yet dismissed by petitioners. When she
was strip- searched by the security personnel of petitioner Supermarket, the guards were merely
conducting an investigation. The subsequent referral of the loss to the police authorities might be
considered routine. Respondent's non-reporting for work after her release from detention could be
taken against her in the investigation that petitioner supermarket would conduct.12cralawredlaw

On appeal, the National Labor Relations Commission (NLRC) reversed the decision of the Labor Arbiter in
a decision13cralaw dated October 20, 2003. The dispositive portion of the decision reads:
chanrob1esvirtwallawlibrary

WHEREFORE, the appealed decision is SET ASIDE. The respondents are hereby ordered to immediately
reinstate complainant to her former or equivalent position without loss of seniority rights and privileges
and to pay her full backwages computed from the time she was constructively dismissed on October 30,
1997 up to the time she is actually reinstated.

SO ORDERED.14cralawredlaw

In reversing the decision of the Labor Arbiter, the NLRC ruled that respondent was denied due process by
petitioners. Strip-searching respondent and sending her to jail for two weeks certainly amounted to
constructive dismissal because continued employment had been rendered impossible, unreasonable,
and unlikely. The wedge that had been driven between the parties was impossible to ignore.15cralaw
Although respondent was only a probationary employee, the subsequent lapse of her probationary
contract of employment did not have the effect of validly terminating her employment because
constructive dismissal had already been effected earlier by petitioners.16cralawredlaw

Petitioners filed a motion for reconsideration, which was denied by the NLRC in a resolution17cralaw
dated July 21, 2005.

Petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. On August 29,
2006, the CA rendered a Decision, the dispositive portion of which reads: chanrob1esvirtwallawlibrary

WHEREFORE, premises considered, the challenged Decision of the National Labor Relations Commission
is AFFIRMED with MODIFICATION in that should reinstatement be no longer possible in view of the
strained relation between the parties, Petitioners are ordered to pay Respondent separation pay
equivalent to one (1) month pay in addition to backwages from the date of dismissal until the finality of
the assailed decision.

SO ORDERED.18cralawredlaw

Petitioners filed a motion for reconsideration. However, the CA denied the same in a Resolution dated
May 16, 2007.

Hence, this petition.

Petitioners assail the reinstatement of respondent, highlighting the fact that she was a probationary
employee and that her probationary contract of employment lapsed on March 14, 1998. Thus, her
reinstatement was rendered moot and academic. Furthermore, even if her probationary contract had
not yet expired, the offense that she committed would nonetheless militate against her
regularization.19cralawredlaw

On the other hand, respondent insists that she was constructively dismissed by petitioner Supermarket
when she was strip-searched, divested of her dignity, and summarily thrown in jail. She could not have
been expected to go back to work after being allowed to post bail because her continued employment
had been rendered impossible, unreasonable, and unlikely. She stresses that, at the time the money was
discovered missing, it was not with her but locked in the company locker. The company failed to provide
its cashiers with strong locks and proper security in the work place. Respondent argues that she was not
caught in the act and even reported that the money was missing. She claims that she was denied due
process.20cralawredlaw

The Issue

The sole issue for resolution is whether respondent was illegally terminated from employment by
petitioners.

The Ruling of the Court

We rule in the affirmative.

There is probationary employment when the employee upon his engagement is made to undergo a trial
period during which the employer determines his fitness to qualify for regular employment based on
reasonable standards made known to him at the time of engagement.21cralawredlaw

A probationary employee, like a regular employee, enjoys security of tenure.22cralaw However, in cases
of probationary employment, aside from just or authorized causes of termination, an additional ground
is provided under Article 281 of the Labor Code, i. e., the probationary employee may also be terminated
for failure to qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of the engagement. Thus, the services of an employee who has
been engaged on probationary basis may be terminated for any of the following: (1) a just or (2) an
authorized cause; and (3) when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.23cralawredlaw

Article 277(b) of the Labor Code mandates that subject to the constitutional right of workers to security
of tenure and their right to be protected against dismissal, except for just and authorized cause and
without prejudice to the requirement of notice under Article 283 of the same Code, the employer shall
furnish the worker, whose employment is sought to be terminated, a written notice containing a
statement of the causes of termination, and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of a representative if he so desires, in accordance with company rules
and regulations pursuant to the guidelines set by the Department of Labor and Employment.

In the instant case, based on the facts on record, petitioners failed to accord respondent substantive and
procedural due process. The haphazard manner in the investigation of the missing cash, which was left
to the determination of the police authorities and the Prosecutor's Office, left respondent with no choice
but to cry foul. Administrative investigation was not conducted by petitioner Supermarket. On the same
day that the missing money was reported by respondent to her immediate superior, the company
already pre-judged her guilt without proper investigation, and instantly reported her to the police as the
suspected thief, which resulted in her languishing in jail for two weeks.

As correctly pointed out by the NLRC, the due process requirements under the Labor Code are
mandatory and may not be supplanted by police investigation or court proceedings. The criminal aspect
of the case is considered independent of the administrative aspect. Thus, employers should not rely
solely on the findings of the Prosecutor's Office. They are mandated to conduct their own separate
investigation, and to accord the employee every opportunity to defend himself. Furthermore,
respondent was not represented by counsel when she was strip-searched inside the company premises
or during the police investigation, and in the preliminary investigation before the Prosecutor's Office.

Respondent was constructively dismissed by petitioner Supermarket effective October 30, 1997. It was
unreasonable for petitioners to charge her with abandonment for not reporting for work upon her
release in jail. It would be the height of callousness to expect her to return to work after suffering in jail
for two weeks. Work had been rendered unreasonable, unlikely, and definitely impossible, considering
the treatment that was accorded respondent by petitioners.

As to respondent's monetary claims, Article 279 of the Labor Code provides that an employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges, to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. However, due to the strained relations of the parties, the payment of separation pay has
been considered an acceptable alternative to reinstatement, when the latter option is no longer
desirable or viable. On the one hand, such payment liberates the employee from what could be a highly
oppressive work environment. On the other, the payment releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer trust.24cralawredlaw

Thus, as an illegally or constructively dismissed employee, respondent is entitled to: (1) either
reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2) backwages. These
two reliefs are separate and distinct from each other and are awarded conjunctively.25cralawredlaw

In this case, since respondent was a probationary employee at the time she was constructively dismissed
by petitioners, she is entitled to separation pay and backwages. Reinstatement of respondent is no
longer viable considering the circumstances.

However, the backwages that should be awarded to respondent shall be reckoned from the time of her
constructive dismissal until the date of the termination of her employment, i.e., from October 30, 1997
to March 14, 1998. The computation should not cover the entire period from the time her compensation
was withheld up to the time of her actual reinstatement. This is because respondent was a probationary
employee, and the lapse of her probationary employment without her appointment as a regular
employee of petitioner Supermarket effectively severed the employer-employee relationship between
the parties.
In all cases involving employees engaged on probationary basis, the employer shall make known to its
employees the standards under which they will qualify as regular employees at the time of their
engagement. Where no standards are made known to an employee at the time, he shall be deemed a
regular employee,26cralaw unless the job is self-descriptive, like maid, cook, driver, or messenger.
However, the constitutional policy of providing full protection to labor is not intended to oppress or
destroy management.27cralaw Naturally, petitioner Supermarket cannot be expected to retain
respondent as a regular employee considering that she lost P 20,299.00 while acting as a cashier during
the probationary period. The rules on probationary employment should not be used to exculpate a
probationary employee who acts in a manner contrary to basic knowledge and common sense, in regard
to which, there is no need to spell out a policy or standard to be met.28cralawredlaw

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 91631 is hereby AFFIRMED with the MODIFICATION that petitioners are hereby ordered
to pay respondent Irene R. Ranchez separation pay equivalent to one (1) month pay and backwages from
October 30, 1997 to March 14, 1998.

Costs against petitioners.

SO ORDERED.

• Pfizer v. Velasco, March 9, 2011

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure to annul and set
aside the Resolution1 dated October 23, 2006 as well as the Resolution2 dated April 10, 2007 both
issued by the Court of Appeals in CA-G.R. SP No. 88987 entitled, "Pfizer, Inc. and/or Rey Gerardo Bacarro,
and/or Ferdinand Cortes, and/or Alfred Magallon, and/or Aristotle Arce v. National Labor Relations
Commission Second Division and Geraldine Velasco." The October 23, 2006 Resolution modified upon
respondent’s motion for reconsideration the Decision3 dated November 23, 2005 of the Court of
Appeals by requiring PFIZER, Inc. (PFIZER) to pay respondent’s wages from the date of the Labor Arbiter’s
Decision4 dated December 5, 2003 until it was eventually reversed and set aside by the Court of
Appeals. The April 10, 2007 Resolution, on the other hand, denied PFIZER’s motion for partial
reconsideration.

The facts of this case, as stated in the Court of Appeals Decision dated November 23, 2005, are as
follows:

Private respondent Geraldine L. Velasco was employed with petitioner PFIZER, INC. as Professional
Health Care Representative since 1 August 1992. Sometime in April 2003, Velasco had a medical work up
for her high-risk pregnancy and was subsequently advised bed rest which resulted in her extending her
leave of absence. Velasco filed her sick leave for the period from 26 March to 18 June 2003, her vacation
leave from 19 June to 20 June 2003, and leave without pay from 23 June to 14 July 2003.

On 26 June 2003, while Velasco was still on leave, PFIZER through its Area Sales Manager, herein
petitioner Ferdinand Cortez, personally served Velasco a "Show-cause Notice" dated 25 June 2003. Aside
from mentioning about an investigation on her possible violations of company work rules regarding
"unauthorized deals and/or discounts in money or samples and unauthorized withdrawal and/or pull-out
of stocks" and instructing her to submit her explanation on the matter within 48 hours from receipt of
the same, the notice also advised her that she was being placed under "preventive suspension" for 30
days or from that day to 6 August 2003 and consequently ordered to surrender the following
"accountabilities;" 1) Company Car, 2) Samples and Promats, 3) CRF/ER/VEHICLE/SOA/POSAP/MPOA and
other related Company Forms, 4) Cash Card, 5) Caltex Card, and 6) MPOA/TPOA Revolving Travel Fund.
The following day, petitioner Cortez together with one Efren Dariano retrieved the above-mentioned
"accountabilities" from Velasco’s residence.

In response, Velasco sent a letter addressed to Cortez dated 28 June 2003 denying the charges. In her
letter, Velasco claimed that the transaction with Mercury Drug, Magsaysay Branch covered by her check
(no. 1072) in the amount of ₱23,980.00 was merely to accommodate two undisclosed patients of a
certain Dr. Renato Manalo. In support thereto, Velasco attached the Doctor’s letter and the affidavit of
the latter’s secretary.

On 12 July 2003, Velasco received a "Second Show-cause Notice" informing her of additional
developments in their investigation. According to the notice, a certain Carlito Jomen executed an
affidavit pointing to Velasco as the one who transacted with a printing shop to print PFIZER discount
coupons. Jomen also presented text messages originating from Velasco’s company issued cellphone
referring to the printing of the said coupons. Again, Velasco was given 48 hours to submit her written
explanation on the matter. On 16 July 2003, Velasco sent a letter to PFIZER via Aboitiz courier service
asking for additional time to answer the second Show-cause Notice.

That same day, Velasco filed a complaint for illegal suspension with money claims before the Regional
Arbitration Branch. The following day, 17 July 2003, PFIZER sent her a letter inviting her to a disciplinary
hearing to be held on 22 July 2003. Velasco received it under protest and informed PFIZER via the
receiving copy of the said letter that she had lodged a complaint against the latter and that the issues
that may be raised in the July 22 hearing "can be tackled during the hearing of her case" or at the
preliminary conference set for 5 and 8 of August 2003. She likewise opted to withhold answering the
Second Show-cause Notice. On 25 July 2003, Velasco received a "Third Show-cause Notice," together
with copies of the affidavits of two Branch Managers of Mercury Drug, asking her for her comment
within 48 hours. Finally, on 29 July 2003, PFIZER informed Velasco of its "Management Decision"
terminating her employment.

On 5 December 2003, the Labor Arbiter rendered its decision declaring the dismissal of Velasco illegal,
ordering her reinstatement with backwages and further awarding moral and exemplary damages with
attorney’s fees. On appeal, the NLRC affirmed the same but deleted the award of moral and exemplary
damages.5

The dispositive portion of the Labor Arbiter’s Decision dated December 5, 2003 is as follows:
WHEREFORE, judgment is hereby rendered declaring that complainant was illegally dismissed.
Respondents are ordered to reinstate the complainant to her former position without loss of seniority
rights and with full backwages and to pay the complainant the following:

1. Full backwages (basic salary, company benefits, all allowances

as of December 5, 2003 in the amount of ₱572,780.00);

2. 13th Month Pay, Midyear, Christmas and performance bonuses

in the amount of ₱105,300.00;

3. Moral damages of ₱50,000.00;

4. Exemplary damages in the amount of ₱30,000.00;

5. Attorney’s Fees of 10% of the award excluding damages in the

amount of ₱67,808.00.

The total award is in the amount of ₱758,080.00.6

PFIZER appealed to the National Labor Relations Commission (NLRC) but its appeal was denied via the
NLRC Decision7 dated October 20, 2004, which affirmed the Labor Arbiter’s ruling but deleted the award
for damages, the dispositive portion of which is as follows:

WHEREFORE, premises considered, the instant appeal and the motion praying for the deposit in escrow
of complainant’s payroll reinstatement are hereby denied and the Decision of the Labor Arbiter is
affirmed with the modification that the award of moral and exemplary damages is deleted and attorney’s
fees shall be based on the award of 13th month pay pursuant to Article III of the Labor Code.8

PFIZER moved for reconsideration but its motion was denied for lack of merit in a NLRC Resolution9
dated December 14, 2004.

Undaunted, PFIZER filed with the Court of Appeals a special civil action for the issuance of a writ of
certiorari under Rule 65 of the Rules of Court to annul and set aside the aforementioned NLRC issuances.
In a Decision dated November 23, 2005, the Court of Appeals upheld the validity of respondent’s
dismissal from employment, the dispositive portion of which reads as follows:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the NLRC dated 20 October 2004
as well as its Resolution of 14 December 2004 is hereby ANNULED and SET ASIDE. Having found the
termination of Geraldine L. Velasco’s employment in accordance with the two notice rule pursuant to the
due process requirement and with just cause, her complaint for illegal dismissal is hereby DISMISSED.10

Respondent filed a Motion for Reconsideration which the Court of Appeals resolved in the assailed
Resolution dated October 23, 2006 wherein it affirmed the validity of respondent’s dismissal from
employment but modified its earlier ruling by directing PFIZER to pay respondent her wages from the
date of the Labor Arbiter’s Decision dated December 5, 2003 up to the Court of Appeals Decision dated
November 23, 2005, to wit:

IN VIEW WHEREOF, the dismissal of private respondent Geraldine Velasco is AFFIRMED, but petitioner
PFIZER, INC. is hereby ordered to pay her the wages to which she is entitled to from the time the
reinstatement order was issued until November 23, 2005, the date of promulgation of Our Decision.11

Respondent filed with the Court a petition for review under Rule 45 of the Rules of Civil Procedure,
which assailed the Court of Appeals Decision dated November 23, 2005 and was docketed as G.R. No.
175122. Respondent’s petition, questioning the Court of Appeals’ dismissal of her complaint, was denied
by this Court’s Second Division in a minute Resolution12 dated December 5, 2007, the pertinent portion
of which states:

Considering the allegations, issues and arguments adduced in the petition for review on certiorari, the
Court resolves to DENY the petition for failure to sufficiently show any reversible error in the assailed
judgment to warrant the exercise of this Court’s discretionary appellate jurisdiction, and for raising
substantially factual issues.

On the other hand, PFIZER filed the instant petition assailing the aforementioned Court of Appeals
Resolutions and offering for our resolution a single legal issue, to wit:

Whether or not the Court of Appeals committed a serious but reversible error when it ordered Pfizer to
pay Velasco wages from the date of the Labor Arbiter’s decision ordering her reinstatement until
November 23, 2005, when the Court of Appeals rendered its decision declaring Velasco’s dismissal
valid.13

The petition is without merit.

PFIZER argues that, contrary to the Court of Appeals’ pronouncement in its assailed Decision dated
November 23, 2005, the ruling in Roquero v. Philippine Airlines, Inc.14 is not applicable in the case at
bar, particularly with regard to the nature and consequences of an order of reinstatement, to wit:

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate
a dismissed employee entitles him to payment of his salaries effective from the time the employer failed
to reinstate him despite the issuance of a writ of execution. Unless there is a restraining order issued, it
is ministerial upon the Labor Arbiter to implement the order of reinstatement. In the case at bar, no
restraining order was granted. Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate
him in the payroll. Having failed to do so, PAL must pay Roquero the salary he is entitled to, as if he was
reinstated, from the time of the decision of the NLRC until the finality of the decision of the Court.15
(Emphases supplied.)

It is PFIZER’s contention in its Memorandum16 that "there was no unjustified refusal on [its part] to
reinstate [respondent] Velasco during the pendency of the appeal,"17 thus, the pronouncement in
Roquero cannot be made to govern this case. During the pendency of the case with the Court of Appeals
and prior to its November 23, 2005 Decision, PFIZER claimed that it had already required respondent to
report for work on July 1, 2005. However, according to PFIZER, it was respondent who refused to return
to work when she wrote PFIZER, through counsel, that she was opting to receive her separation pay and
to avail of PFIZER’s early retirement program.

In PFIZER’s view, it should no longer be required to pay wages considering that (1) it had already
previously paid an enormous sum to respondent under the writ of execution issued by the Labor Arbiter;
(2) it was allegedly ready to reinstate respondent as of July 1, 2005 but it was respondent who
unjustifiably refused to report for work; (3) it would purportedly be tantamount to allowing respondent
to choose "payroll reinstatement" when by law it was the employer which had the right to choose
between actual and payroll reinstatement; (4) respondent should be deemed to have "resigned" and
therefore not entitled to additional backwages or separation pay; and (5) this Court should not
mechanically apply Roquero but rather should follow the doctrine in Genuino v. National Labor Relations
Commission18 which was supposedly "more in accord with the dictates of fairness and justice."19

We do not agree.

At the outset, we note that PFIZER’s previous payment to respondent of the amount of ₱1,963,855.00
(representing her wages from December 5, 2003, or the date of the Labor Arbiter decision, until May 5,
2005) that was successfully garnished under the Labor Arbiter’s Writ of Execution dated May 26, 2005
cannot be considered in its favor. Not only was this sum legally due to respondent under prevailing
jurisprudence but also this circumstance highlighted PFIZER’s unreasonable delay in complying with the
reinstatement order of the Labor Arbiter. A perusal of the records, including PFIZER’s own submissions,
confirmed that it only required respondent to report for work on July 1, 2005, as shown by its Letter20
dated June 27, 2005, which is almost two years from the time the order of reinstatement was handed
down in the Labor Arbiter’s Decision dated December 5, 2003.

As far back as 1997 in the seminal case of Pioneer Texturizing Corporation v. National Labor Relations
Commission,21 the Court held that an award or order of reinstatement is immediately self-executory
without the need for the issuance of a writ of execution in accordance with the third paragraph of Article
22322 of the Labor Code. In that case, we discussed in length the rationale for that doctrine, to wit:

The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not stay
the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and its
issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by
Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement
order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In
enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which
operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be
construed in the light of the purpose to be achieved and the evil sought to be prevented. x x x In
introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715,
Congress should not be considered to be indulging in mere semantic exercise. x x x23 (Italics in the
original; emphasis and underscoring supplied.)

In the case at bar, PFIZER did not immediately admit respondent back to work which, according to the
law, should have been done as soon as an order or award of reinstatement is handed down by the Labor
Arbiter without need for the issuance of a writ of execution. Thus, respondent was entitled to the wages
paid to her under the aforementioned writ of execution. At most, PFIZER’s payment of the same can only
be deemed partial compliance/execution of the Court of Appeals Resolution dated October 23, 2006 and
would not bar respondent from being paid her wages from May 6, 2005 to November 23, 2005.

It would also seem that PFIZER waited for the resolution of its appeal to the NLRC and, only after it was
ordered by the Labor Arbiter to pay the amount of ₱1,963,855.00 representing respondent’s full
backwages from December 5, 2003 up to May 5, 2005, did PFIZER decide to require respondent to report
back to work via the Letter dated June 27, 2005.

PFIZER makes much of respondent’s non-compliance with its return- to-work directive by downplaying
the reasons forwarded by respondent as less than sufficient to justify her purported refusal to be
reinstated. In PFIZER’s view, the return-to-work order it sent to respondent was adequate to satisfy the
jurisprudential requisites concerning the reinstatement of an illegally dismissed employee.

It would be useful to reproduce here the text of PFIZER’s Letter dated June 27, 2005:

Dear Ms. Velasco:

Please be informed that, pursuant to the resolutions dated 20 October 2004 and 14 December 2004
rendered by the National Labor Relations Commission and the order dated 24 May 2005 issued by
Executive Labor Arbiter Vito C. Bose, you are required to report for work on 1 July 2005, at 9:00 a.m., at
Pfizer’s main office at the 23rd Floor, Ayala Life–FGU Center, 6811 Ayala Avenue, Makati City, Metro
Manila.

Please report to the undersigned for a briefing on your work assignments and other responsibilities,
including the appropriate relocation benefits.

For your information and compliance.

Very truly yours,

(Sgd.)

Ma. Eden Grace Sagisi

Labor and Employee Relations Manager24

To reiterate, under Article 223 of the Labor Code, an employee entitled to reinstatement "shall either be
admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll."

It is established in jurisprudence that reinstatement means restoration to a state or condition from which
one had been removed or separated. The person reinstated assumes the position he had occupied prior
to his dismissal. Reinstatement presupposes that the previous position from which one had been
removed still exists, or that there is an unfilled position which is substantially equivalent or of similar
nature as the one previously occupied by the employee.25

Applying the foregoing principle to the case before us, it cannot be said that with PFIZER’s June 27, 2005
Letter, in belated fulfillment of the Labor Arbiter’s reinstatement order, it had shown a clear intent to
reinstate respondent to her former position under the same terms and conditions nor to a substantially
equivalent position. To begin with, the return-to-work order PFIZER sent respondent is silent with regard
to the position or the exact nature of employment that it wanted respondent to take up as of July 1,
2005. Even if we assume that the job awaiting respondent in the new location is of the same designation
and pay category as what she had before, it is plain from the text of PFIZER’s June 27, 2005 letter that
such reinstatement was not "under the same terms and conditions" as her previous employment,
considering that PFIZER ordered respondent to report to its main office in Makati City while knowing
fully well that respondent’s previous job had her stationed in Baguio City (respondent’s place of
residence) and it was still necessary for respondent to be briefed regarding her work assignments and
responsibilities, including her relocation benefits.

The Court is cognizant of the prerogative of management to transfer an employee from one office to
another within the business establishment, provided that there is no demotion in rank or diminution of
his salary, benefits and other privileges and the action is not motivated by discrimination, made in bad
faith, or effected as a form of punishment or demotion without sufficient cause.26 Likewise, the
management prerogative to transfer personnel must be exercised without grave abuse of discretion and
putting to mind the basic elements of justice and fair play. There must be no showing that it is
unnecessary, inconvenient and prejudicial to the displaced employee.27

The June 27, 2005 return-to-work directive implying that respondent was being relocated to PFIZER’s
Makati main office would necessarily cause hardship to respondent, a married woman with a family to
support residing in Baguio City. However, PFIZER, as the employer, offered no reason or justification for
the relocation such as the filling up of respondent’s former position and the unavailability of
substantially equivalent position in Baguio City. A transfer of work assignment without any justification
therefor, even if respondent would be presumably doing the same job with the same pay, cannot be
deemed faithful compliance with the reinstatement order. In other words, in this instance, there was no
real, bona fide reinstatement to speak of prior to the reversal by the Court of Appeals of the finding of
illegal dismissal.

In view of PFIZER’s failure to effect respondent's actual or payroll reinstatement, it is indubitable that the
Roquero ruling is applicable to the case at bar. The circumstance that respondent opted for separation
pay in lieu of reinstatement as manifested in her counsel’s Letter28 dated July 18, 2005 is of no moment.
We do not see respondent’s letter as taking away the option from management to effect actual or
payroll reinstatement but, rather under the factual milieu of this case, where the employer failed to
categorically reinstate the employee to her former or equivalent position under the same terms,
respondent was not obliged to comply with PFIZER’s ambivalent return-to-work order. To uphold
PFIZER’s view that it was respondent who unjustifiably refused to work when PFIZER did not reinstate
her to her former position, and worse, required her to report for work under conditions prejudicial to
her, is to open the doors to potential employer abuse. Foreseeably, an employer may circumvent the
immediately enforceable reinstatement order of the Labor Arbiter by crafting return-to-work directives
that are ambiguous or meant to be rejected by the employee and then disclaim liability for backwages
due to non-reinstatement by capitalizing on the employee’s purported refusal to work. In sum, the
option of the employer to effect actual or payroll reinstatement must be exercised in good faith.

Moreover, while the Court has upheld the employer’s right to choose between actually reinstating an
employee or merely reinstating him in the payroll, we have also in the past recognized that
reinstatement might no longer be possible under certain circumstances. In F.F. Marine Corporation v.
National Labor Relations Commission,29 we had the occasion to state:

It is well-settled that when a person is illegally dismissed, he is entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages. In the event, however, that reinstatement
is no longer feasible, or if the employee decides not be reinstated, the employer shall pay him separation
pay in lieu of reinstatement. Such a rule is likewise observed in the case of a strained employer-
employee relationship or when the work or position formerly held by the dismissed employee no longer
exists. In sum, an illegally dismissed employee is entitled to: (1) either reinstatement if viable or
separation pay if reinstatement is no longer viable, and (2) backwages.30 (Emphasis supplied.)

Similarly, we have previously held that an employee’s demand for separation pay may be indicative of
strained relations that may justify payment of separation pay in lieu of reinstatement.31 This is not to
say, however, that respondent is entitled to separation pay in addition to backwages. We stress here that
a finding of strained relations must nonetheless still be supported by substantial evidence.32

In the case at bar, respondent’s decision to claim separation pay over reinstatement had no legal effect,
not only because there was no genuine compliance by the employer to the reinstatement order but also
because the employer chose not to act on said claim. If it was PFIZER’s position that respondent’s act
amounted to a "resignation" it should have informed respondent that it was accepting her resignation
and that in view thereof she was not entitled to separation pay. PFIZER did not respond to respondent’s
demand at all. As it was, PFIZER’s failure to effect reinstatement and accept respondent’s offer to
terminate her employment relationship with the company meant that, prior to the Court of Appeals’
reversal in the November 23, 2005 Decision, PFIZER’s liability for backwages continued to accrue for the
period not covered by the writ of execution dated May 24, 2005 until November 23, 2005.

Lastly, PFIZER exhorts the Court to re-examine the application of Roquero with a view that a mechanical
application of the same would cause injustice since, in the present case, respondent was able to gain
pecuniary benefit notwithstanding the circumstance of reversal by the Court of Appeals of the rulings of
the Labor Arbiter and the NLRC thereby allowing respondent to profit from the dishonesty she
committed against PFIZER which was the basis for her termination. In its stead, PFIZER proposes that the
Court apply the ruling in Genuino v. National Labor Relations Commission33 which it believes to be more
in accord with the dictates of fairness and justice. In that case, we canceled the award of salaries from
the date of the decision of the Labor Arbiter awarding reinstatement in light of our subsequent ruling
finding that the dismissal is for a legal and valid ground, to wit:

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the salaries
due to the complainant from the date it reinstated complainant in the payroll (computed at ₱60,000.00 a
month, as found by the Labor Arbiter) up to and until the date of this decision," the Court hereby cancels
said award in view of its finding that the dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal
pursuant to Art. 223, paragraph 3 of the Labor Code, which states:

xxxx

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll
reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her
employer under existing laws, collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the pendency of the appeal, then the employee
is entitled to the compensation received for actual services rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of
the fallo of the September 3, 1994 NLRC Decision.34 (Emphases supplied.)

Thus, PFIZER implores the Court to annul the award of backwages and separation pay as well as to
require respondent to refund the amount that she was able to collect by way of garnishment from
PFIZER as her accrued salaries.

The contention cannot be given merit since this question has been settled by the Court en banc.

In the recent milestone case of Garcia v. Philippine Airlines, Inc.,35 the Court wrote finis to the stray
posture in Genuino requiring the dismissed employee placed on payroll reinstatement to refund the
salaries in case a final decision upholds the validity of the dismissal. In Garcia, we clarified the principle
of reinstatement pending appeal due to the emergence of differing rulings on the issue, to wit:

On this score, the Court's attention is drawn to seemingly divergent decisions concerning reinstatement
pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the
jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora, while on
the other is the recent case of Genuino v. National Labor Relations Commission. At the core of the
seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code x x x.

xxxx

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during
the appeal period and such reinstatement order is reversed with finality, the employee is not required to
reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services
during the period. (Emphasis in the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled
to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a
restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it
is mandatory on the employer to comply therewith.

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll
reinstatement to refund the salaries [he] received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from [his]
employer under existing laws, collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the pendency of the appeal, then the employee
is entitled to the compensation received for actual services rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of
the fallo of the September 3, 1994 NLRC Decision. (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the
employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of
cases, the Court did not order the refund of salaries garnished or received by payroll-reinstated
employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render
inutile the rationale of reinstatement pending appeal.

xxxx
x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that
saving act is designed to stop, although temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated
employee and his family.36

Furthermore, in Garcia, the Court went on to discuss the illogical and unjust effects of the "refund
doctrine" erroneously espoused in Genuino:

Even outside the theoretical trappings of the discussion and into the mundane realities of human
experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter
could harm, more than help, a dismissed employee. The employee, to make both ends meet, would
necessarily have to use up the salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the
employee to a risky cliff of insolvency.1avvphi1

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to
refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably,
the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to
return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of
the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also
institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed
pendente lite merely serve as a bond posted in installment by the employer. For in the event of a
reversal of the Labor Arbiter's decision ordering reinstatement, the employer gets back the same
amount without having to spend ordinarily for bond premiums. This circumvents, if not directly
contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not
stay the execution for reinstatement."

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement
to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the
proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a
reversal on appeal.

xxxx

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court. x x x.37 (Emphasis
supplied.)

In sum, the Court reiterates the principle that reinstatement pending appeal necessitates that it must be
immediately self-executory without need for a writ of execution during the pendency of the appeal, if
the law is to serve its noble purpose, and any attempt on the part of the employer to evade or delay its
execution should not be allowed. Furthermore, we likewise restate our ruling that an order for
reinstatement entitles an employee to receive his accrued backwages from the moment the
reinstatement order was issued up to the date when the same was reversed by a higher court without
fear of refunding what he had received. It cannot be denied that, under our statutory and jurisprudential
framework, respondent is entitled to payment of her wages for the period after December 5, 2003 until
the Court of Appeals Decision dated November 23, 2005, notwithstanding the finding therein that her
dismissal was legal and for just cause. Thus, the payment of such wages cannot be deemed as unjust
enrichment on respondent’s part.

WHEREFORE, the petition is DENIED and the assailed Resolution dated October 23, 2006 as well as the
Resolution dated April 10, 2007 both issued by the Court of Appeals in CA-G.R. SP No. 88987 are hereby
AFFIRMED.

SO ORDERED.

• Luna v. Allado Construction, May 30, 2011

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking to
reverse and set aside the Decision[1] dated July 28, 2006 of the Court of Appeals as well as its
Resolution[2] dated September 28, 2006 denying the motion for reconsideration filed by petitioner.

As narrated in the Court of Appeals' July 28, 2006 Decision, the facts of this case are as follows:

[Respondent] Allado Construction Co., Inc. is a juridical entity engaged in the construction business;
[respondent] Ramon Allado is the President of the said corporation.

[Petitioner] filed a complaint before the Executive Labor Arbiter Arturo Gamolo, RAB Branch XI, Davao
City, alleging that he was an employee of herein [respondents], having been a part of [respondents']
construction pool of personnel. He had continuously rendered services as a warehouseman and a
timekeeper in every construction project undertaken by [respondents]. Sometime in the afternoon of
November 24, 2001, while at [respondents'] construction site in Maasim, Sarangani Province, he was
given a travel order dated November 24, 2001 to proceed to [respondents'] main office in Davao City for
reassignment. Upon arrival at the office of [respondents] on November 26, 2001, he was told by one
Marilou Matilano, personnel manager of [respondents], to sign several sets of "Contract of Project
Employment". He refused to sign the said contracts. Because of his refusal, he was not given a
reassignment or any other work. These incidents prompted him to file the complaint.

[Respondents], on the other hand, alleged that on November 29, 2001, [petitioner] applied for a leave of
absence until December 6, 2001, which was granted. Upon expiration of his leave, [petitioner] was
advised to report to the company's project in Kablacan, Sarangani Province. However, he refused to
report to his new assignment and claimed instead that he had been dismissed illegally.[3]
Finding that petitioner should be deemed to have resigned,[4] the Labor Arbiter dismissed petitioner's
complaint for illegal dismissal against respondents, but ordered the latter to pay the former the amount
of P18,000.00 by way of financial assistance. The dispositive portion of the Decision[5] dated June 26,
2002 of the Labor Arbiter is as follows:

WHEREFORE, foregoing considered, judgment is hereby rendered dismissing the action for illegal
dismissal but ordering respondent ALLADO CONSTRUCTION CO., INC. to extend complainant RODOLFO
LUNA the amount of PESOS: EIGHTEEN THOUSAND PESOS (P18,000.00) by way of financial assistance to
tide him over during his post-employment with the former.[6]

Only respondents interposed an appeal with the National Labor Relations Commission (NLRC), purely for
the purpose of questioning the validity of the grant of financial assistance made by the Labor Arbiter.

In its Resolution[7] dated May 9, 2003, the NLRC reversed the June 26, 2002 Decision of the Labor
Arbiter and declared respondents guilty of illegal dismissal and ordered them to pay petitioner one-
month salary for every year of service as separation pay, computed at P170.00 per day and full
backwages from November 21, 2001 up to the finality of the decision. The dispositive portion of the
May 9, 2003 NLRC Resolution reads:

WHEREFORE, the appeal is Granted and the assailed Decision is reversed and vacated; A new judgment is
rendered declaring respondents-appellant guilty of illegal dismissal and to pay complainant-appellant
one (1) month salary for every year of service as separation pay, computed at P170.00 per day and full
backwages from November 21, 2001 up to the finality of the decision.[8]

Respondents moved for reconsideration but their motion was denied in the NLRC Resolution[9] dated
September 30, 2003 due to lack of merit.

Unperturbed, respondents elevated their cause to the Court of Appeals via a petition for certiorari under
Rule 65 of the Rules of Court to set aside the aforementioned NLRC issuances and to reinstate the Labor
Arbiter's decision with the modification that the award of financial assistance be deleted. In its Decision
dated July 28, 2006, the Court of Appeals granted respondents' petition for certiorari and disposed of
the case in this wise:

ACCORDINGLY, the assailed Orders of respondent Commission are hereby SET ASIDE. The Decision of the
Labor Arbiter in NLRC Case No. RAB XI-12-01312-01 is hereby REINSTATED with the MODIFICATION that
the award of financial assistance is deleted.[10]

Relying on jurisprudence, the Court of Appeals held that it was grave abuse of discretion for the NLRC to
rule on the issue of illegal dismissal when the only issue raised to it on appeal was the propriety of the
award of financial assistance. The Court of Appeals further ruled that financial assistance may not be
awarded in cases of voluntary resignation.

Expectedly, petitioner filed a motion for reconsideration but this was denied by the Court of Appeals in
its Resolution dated September 28, 2006.
Hence, this petition for review wherein the petitioner puts forward for resolution the following issues:

(A) WHETHER OR NOT THE NLRC, IN THE EXERCISE OF ITS INHERENT POWERS, COULD STILL REVIEW
ISSUES NOT BROUGHT DURING THE APPEAL;

(B) WHETHER OR NOT RESPONDENT COURT OF APPEALS EXERCISED GRAVE ABUSE OF DISCRETION IN
DISREGARDING (1) THE FINDINGS OF FACT OF THE NLRC; (2) THE PRINCIPLE OF SOCIAL JUSTICE; AND (3)
EXISTING JURISPRUDENCE WITH RESPECT TO AWARD OF FINANCIAL ASSISTANCE; and

(C) WHETHER OR NOT RESPONDENT COURT OF APPEALS EXHIBITED BIAS AND PARTIALITY WHEN IT
RENDERED THE SUBJECT DECISION AND RESOLUTION CONSIDERING THE HASTY AND IMPROVIDENT
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION TO FRUSTRATE PETITIONER IN IMPLEMENTING THE
FINAL AND EXECUTORY JUDGMENT OF THE NLRC RENDERED IN FAVOR OF PETITIONER.[11]

Anent the first issue, petitioner argues that the NLRC has the authority to review issues not brought
before it for appeal. Petitioner bases this argument on Article 218(c) of the Labor Code, which provides:

ART. 218. Powers of the Commission. - The Commission shall have the power and authority:

xxxx

(c) To conduct investigation for the determination of a question, matter or controversy within its
jurisdiction, proceed to hear and determine the disputes in the absence of any party thereto who has
been summoned or served with notice to appear, conduct its proceedings or any part thereof in public
or in private, adjourn its hearings to any time and place, refer technical matters or accounts to an expert
and to accept his report as evidence after hearing of the parties upon due notice, direct parties to be
joined in or excluded from the proceedings, correct, amend, or waive any error, defect or irregularity
whether in substance or in form, give all such directions as it may deem necessary or expedient in the
determination of the dispute before it, and dismiss any matter or refrain from further hearing or from
determining the dispute or part thereof, where it is trivial or where further proceedings by the
Commission are not necessary or desirable. (Emphasis supplied.)

Furthermore, petitioner attempts to reinforce his position by citing New Pacific Timber & Supply
Company, Inc. v. National Labor Relations Commission,[12] where the Court expounded on the powers of
the NLRC as provided for by Article 218(c) of the Labor Code, to wit:

Moreover, under Article 218(c) of the Labor Code, the NLRC may, in the exercise of its appellate powers,
"correct, amend or waive any error, defect or irregularity whether in substance or in form." Further,
Article 221 of the same provides that: "In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use
every and all reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process. x x x."[13] (Emphasis
supplied.)
We find petitioner's argument to be untenable.

Section 4(c), Rule VI of the 2002 Rules of Procedure of the NLRC, which was in effect at the time
respondents appealed the Labor Arbiter's decision, expressly provided that, on appeal, the NLRC shall
limit itself only to the specific issues that were elevated for review, to wit:

RULE VI

Appeals

Section 4. Requisites for Perfection of Appeal. x x x.

xxxx

(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with these Rules,
the Commission shall limit itself to reviewing and deciding specific issues that were elevated on appeal.
(Emphasis supplied.)

As a testament to its effectivity and the NLRC's continued implementation of this procedural policy, the
same provision was retained as Section 4(d), Rule VI of the 2005 Revised Rules of Procedure of the NLRC.

In the case at bar, the NLRC evidently went against its own rules of procedure when it passed upon the
issue of illegal dismissal although the question raised by respondents in their appeal was concerned
solely with the legality of the labor arbiter's award of financial assistance despite the finding that
petitioner was lawfully terminated.

To reiterate, the clear import of the aforementioned procedural rule is that the NLRC shall, in cases of
perfected appeals, limit itself to reviewing those issues which are raised on appeal. As a consequence
thereof, any other issues which were not included in the appeal shall become final and executory.

We are cognizant of the fact that Article 218(c) of the Labor Code grants the NLRC the authority to
"correct, amend or waive any error, defect or irregularity whether in substance or in form" in the
exercise of its appellate jurisdiction. However, a careful perusal of the body of jurisprudence wherein we
upheld the validity of the NLRC's invocation of that prerogative would reveal that the said cases involved
factual issues and circumstances materially dissimilar to the case at bar.

In New Pacific Timber,[14] which petitioner cited, we ruled that there was no grave abuse of discretion
on the part of the NLRC, using Article 218(c) as part basis, when it entertained the petition for relief filed
by a party and treated it as an appeal, even if it was filed beyond the reglementary period for filing an
appeal. Before that case, we invoked the same Labor Code provision in City Fair Corporation v. National
Labor Relations Commission[15] and Judy Philippines, Inc. v. National Labor Relations Commission[16] to
justify our ruling that the NLRC did not abuse its discretion when it allowed in both cases the appeal of a
party even if it was filed a day, or even a few days, late. Similarly, we held in Industrial Timber
Corporation v. Ababon,[17] that substantial justice is best served by permitting the NLRC to allow a
petition for relief filed by a party despite the earlier commission of a procedural defect of filing the
motion for reconsideration three days late on the strength of Article 218(c) and other pertinent labor law
provisions. In Pison-Arceo Agricultural and Development Corporation v. National Labor Relations
Commission,[18] we held that procedural rules governing service of summons are not strictly construed
in NLRC proceedings owing to the relaxation of technical rules of procedure in labor cases as well as to
Article 218(c). We likewise held in Aguanza v. Asian Terminal, Inc.,[19] that the insufficiency of a
supersedeas bond is a defect in form which the NLRC may waive. Furthermore, in Independent Sagay-
Escalante Planters, Inc. v. National Labor Relations Commission,[20] we ruled that the NLRC had ample
authority, under Article 218(c), to disregard the circumstance that the appeal fee had been tardily paid
by one party and to order both parties to present evidence before the Labor Arbiter in support of their
claims. Lastly, in Faeldonia v. Tong Yak Groceries[21] and Mt. Carmel College v. Resuena,[22] we used
Article 218(c) to justify the NLRC's reversal of the Labor Arbiter's factual conclusions. However, in both
cases, there was no objection that the NLRC passed upon issues that were not raised on appeal.

On the other hand, it is already settled in jurisprudence that the NLRC may not rely on Article 218(c) of
the Labor Code as basis for its act of reviewing an entire case above and beyond the sole legal question
raised. In Del Monte Philippines, Inc. v. National Labor Relations Commission,[23] which was correctly
pointed out by the Court of Appeals as a case that is on all fours with the case at bar, we held that the
NLRC cannot, under the pretext of correcting serious errors of the Labor Arbiter in the interest of justice,
expand its power of review beyond the issues elevated by an appellant, to wit:

The issue presented for adjudication in this petition is whether or not there was grave abuse of
discretion on the part of the NLRC in reversing the labor arbiter's decision.

We rule in the affirmative.

An appeal from a decision, award or order of the labor arbiter must be brought to the NLRC within ten
(10) calendar days from receipt of such decision, award or order, otherwise, the same becomes final and
executory [Art. 223, Labor Code; Rule VIII, Sec. 1(a), Revised Rules of the NLRC]. Moreover, the rules of
the NLRC expressly provide that on appeal, the Commission shall limit itself only to the specific issues
that were elevated for review, all other matters being final and executory [Rule VIII, Sec. 5(c), Revised
Rules of the NLRC, italics supplied].

In the present case, petitioner, aggrieved by the labor arbiter's decision ordering the extension of
financial assistance to Galagar despite the finding that his termination was for just cause, specifically
limited his appeal to a single legal question, i.e., the validity of the award of financial assistance to an
employee dismissed for pilfering company property. On the other hand, private respondent did not
appeal.

When petitioner limited the issue on appeal, necessarily the NLRC may review only that issue raised. All
other matters, including the issue of the validity of private respondent's dismissal, are final. If private
respondent wanted to challenge the finding of a valid dismissal, he should have appealed his case
seasonably to the NLRC. By raising new issues in the reply to appeal, private respondent is in effect
appealing his case although he has, in fact, allowed his case to become final by not appealing within the
reglementary period. A reply/opposition to appeal cannot take the place of an appeal. Therefore, in this
case, the dismissal of the complaint for illegal dismissal and the denial of the prayer for reinstatement,
having become final, can no longer be reviewed.

Justifying its right to review the entire case and not just the sole legal question raised, public respondent
relied on Article 218 (c) of the Labor Code. In the resolution denying the motion for reconsideration,
public respondent quoted that portion which provides that the NLRC may in the exercise of its appellate
power "correct, amend or waive any error, defect or irregularity whether in substance or in form."

Such reliance is misplaced.

The Labor Code provision, read in its entirety, states that the NLRC's power to correct errors, whether
substantial or formal, may be exercised only in the determination of a question, matter or controversy
within its jurisdiction [Art. 218, Labor Code]. Therefore, by considering the arguments and issues in the
reply/opposition to appeal which were not properly raised by timely appeal nor comprehended within
the scope of the issue raised in petitioner's appeal, public respondent committed grave abuse of
discretion amounting to excess of jurisdiction.

The contention that the NLRC may nevertheless look into other issues although not raised on appeal
since it is not bound by technical rules of procedure, is likewise devoid of merit.

The law does not provide that the NLRC is totally free from "technical rules of procedure", but only that
the rules of evidence prevailing in courts of law or equity shall not be controlling in proceedings before
the NLRC [Art. 221, Labor Code]. This is hardly license for the NLRC to disregard and violate the
implementing rules it has itself promulgated. Having done so, the NLRC committed grave abuse of
discretion.[24] (Emphases supplied.)

The Court reiterated the foregoing ruling in Torres v. National Labor Relations Commission[25] and
United Placement International v. National Labor Relations Commission.[26]

With regard to the second assignment of error which essentially involves the determination of factual
issues, we are reminded that, in a petition under Rule 45 of the Rules of Court, only questions of law, not
of fact, may be raised before the Court.[27] However, where the findings of the NLRC contradict those of
the Labor Arbiter, the Court, in the exercise of equity jurisdiction, may look into the records of the case
and reexamine the questioned findings.[28]

In the case at bar, we are constrained to reexamine the factual findings of the Labor Arbiter and the
Court of Appeals, on one side, and of the NLRC, on the other, since they have divergent appreciations of
the facts of this case.

Petitioner argues that the NLRC had established that there existed serious doubt between the evidence
presented by the parties and, thus, the NLRC was correct in resolving the doubt in petitioner's favor
following jurisprudence which states that if doubt exists between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter.[29]

The argument is unmeritorious.

This is not a case where there is mere doubt between the evidence of the parties; but the question here
is, whether in the first place, there was substantial evidence for petitioner's claim in his complaint that
he was actually dismissed from the service of respondents on November 26, 2001 (as alleged in his
Complaint) or November 27, 2001 (as alleged in his Position Paper) when he purportedly refused to sign
on November 26, 2001 blank project employment contracts.

It was incorrect for the NLRC to conclude that doubt exists between the evidence of both parties, thus,
necessitating a ruling in favor of petitioner, because a careful examination of the records of this case
would reveal that there was no adequate evidentiary support for petitioner's purported cause of action
-- actual illegal dismissal.

As shown by the records, inconsistent with his claim that he was actually dismissed on November 26 or
27, 2001, petitioner applied for and was granted a week long leave from November 29 to December 6,
2001. Petitioner did not deny that he indeed filed and signed the leave application form submitted by
respondents as an attachment to their position paper. He merely claimed that he went on leave since he
was not given any work assignment by the Company. However, the leave application form which bore his
signature clearly stated that his reason for going on leave was "to settle [his] personal problem."[30]

Indeed, the NLRC gravely abused its discretion in reversing the Labor Arbiter's decision on mere
conjectures and insubstantial grounds. In its Resolution dated May 9, 2003, the NLRC concluded that
petitioner "was not allowed to work in his former position because he was already replaced"[31] merely
on the basis of the handwritten notation that stated "Who will replace him?"[32] found on the Leave
Application Form which petitioner himself filled-up and signed. The same notation could reasonably be
interpreted as asking who will be substituting petitioner for the duration of his leave. It was speculative
at best for the NLRC, in resolving respondents' motion for reconsideration, to rule that the notation
meant permanent replacement simply because the words "in the meantime" were lacking.[33] Contrary
to the NLRC's interpretation of this notation, it, in fact, belied petitioner's contention that he was already
dismissed or had no existing work assignment for, if so, there would be no need for him to file a leave
application and for the employer to find someone to replace him. In any event, such notation cannot be
credibly construed as substantial proof of petitioner's alleged illegal dismissal.

The NLRC further erroneously concluded that petitioner was illegally dismissed since during the several
mandatory conferences between the parties, respondents purportedly never asked petitioner to go back
to work without signing the alleged blank project employment contracts. From that circumstance, the
NLRC inferred that respondents were no longer in need of petitioner's services. This rationalization is
difficult to accept because it goes against the pronouncement of the Labor Arbiter in his Decision dated
June 26, 2002. The Labor Arbiter who presided during the mandatory preliminary conferences plainly
stated in his Decision that respondent corporation, through its representative during preliminary
conference, denied the contract of project employment and confirmed the availability of the same
employment to petitioner without any demotion in rank or diminution of benefits.[34] Thus, the Labor
Arbiter concluded that "complainant's refusal to resume employment without valid cause and instead
demanded separation pay and backwages is tantamount to resignation."[35]
To reiterate, petitioner did not appeal from the foregoing findings of the Labor Arbiter and he should be
deemed to have accepted those factual findings. If he had truly felt aggrieved, petitioner himself would
have questioned the Labor Arbiter's findings with the NLRC. Instead of pursuing all legal remedies to
protect his rights, petitioner did not even file any opposition or comment to respondents' Appeal
Memorandum with the NLRC. He only participated in the proceedings again when the NLRC had already
rendered a decision in his favor and he opposed respondents' motion for reconsideration of the NLRC
decision.

In petitioner's Reply and Memorandum filed with this Court, petitioner's counsel belatedly offered the
explanation that the appeal of the Labor Arbiter's decision was not filed for he failed to contact his client
in time.[36] We find that we cannot give credence to this excuse. On record is a registry return card that
showed that petitioner received his copy of the Labor Arbiter's decision by mail on July 19, 2002 even
before his counsel did on August 1, 2002. It is difficult to believe that petitioner, after receiving the Labor
Arbiter's decision, would not himself contact his lawyer regarding the same. Verily, it is settled in
jurisprudence that a party that did not appeal a judgment is bound by the same and he cannot obtain
from the appellate court any affirmative relief other than those granted, if any, in the decision of the
lower court or administrative body.[37]

Also in connection with the second issue, petitioner argued in his Memorandum that, assuming without
admitting that there was no illegal dismissal, the award of financial assistance was in accordance with
existing jurisprudence pursuant to the principle of social justice. On this point, we agree with petitioner.
Eastern Shipping Lines, Inc v. Sedan[38] bears certain parallelisms with the present controversy. In
Eastern, the employer likewise questioned the grant of financial assistance on the ground that the
employee's refusal to report back to work, despite being duly notified of the need for his service, is
tantamount to voluntary resignation. In that case, however, we ruled:

We are not unmindful of the rule that financial assistance is allowed only in instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. Neither are we unmindful of this Court's pronouncements in Arc-Men Food Industries
Corporation v. NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court ruled that when there
is no dismissal to speak of, an award of financial assistance is not in order.

But we must stress that this Court did allow, in several instances, the grant of financial assistance. In the
words of Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of
social justice and exceptional circumstances, and as an equitable concession. The instant case equally
calls for balancing the interests of the employer with those of the worker, if only to approximate what
Justice Laurel calls justice in its secular sense. [39] (Emphases supplied.)

There appears to be no reason why petitioner, who has served respondent corporation for more than
eight years without committing any infraction, cannot be extended the reasonable financial assistance of
P18,000.00 as awarded by the Labor Arbiter on equity considerations.

We see no merit in respondents' contention that petitioner was guilty of insubordination or

abandonment. Significantly, the Labor Arbiter made no finding that petitioner was guilty of
insubordination or abandonment. It would appear that a few days after the expiration of his applied for
leave, petitioner filed his complaint for illegal actual dismissal. Other than their self-serving allegations,
respondents offered no proof that upon the expiration of petitioner's leave they directed petitioner to
report to work but petitioner willfully failed to comply with said directive. On the contrary, in their own
position paper, respondents prayed, aside from the dismissal of the complaint, that petitioner be
directed by the Labor Arbiter to return to work and only when petitioner fails to comply with such order
did they pray that petitioner be considered to have abandoned his work.[40] The Labor Arbiter did not
grant this particular relief prayed for by respondents but instead awarded financial assistance to
petitioner.

In some cases where there is neither a dismissal nor abandonment, we have previously held that
separation pay may be awarded under appropriate circumstances. Thus, in Indophil Acrylic Mfg. Corp. v.
National Labor Relations Commission,[41] wherein the employer claimed that the employee had
resigned/abandoned his work while the employee believed that he had been terminated, the Court held:

We have turned a heedful eye on all the pleadings and evidence submitted by the parties and have
concluded that there was NO DISMISSAL. Setting aside the other arguments of the parties which we find
irrelevant, attention is called to the letter dated October 2, 1989 of petitioner's Personnel Manager, Mr.
Nicasio B. Gaviola, to private respondent which the latter does not dispute, the full text of which reads:

"Records show that you have not been reporting to (sic) work since September 16, 1989 up to this
writing. For what reason, we are not aware.

With this letter, you are required to report to this office and explain your unauthorized absences within
three (3) days upon receipt hereof.

Failure to report as required shall mean that we will consider you having resigned for abandonment of
job." (sic)

Clearly, therefore, petitioner had disregarded private respondent's previous resignation and still
considers him its employee. It follows, that at the time private respondent filed his complaint for illegal
dismissal before the Labor Arbiter, on October 4, 1989, petitioner has not dismissed him.

xxxx

There being no dismissal of private respondent by petitioner to speak of, the status quo between them
should be maintained as a matter of course. But there is no denying that their relationship must have
been ruptured. Taking into account the misconception of private respondent that he was dismissed and
the October 2, 1989 letter of petitioner, the parties could have easily settled their controversy at the
inception of the proceedings before the Labor Arbiter. This they failed to do. Thus, in lieu of
reinstatement, petitioner is ordered to grant separation pay to private respondent. x x x.[42] (Emphases
supplied.)

Applying the above ratiocination by analogy and in accordance with equity, we uphold the Labor
Arbiter's award of financial assistance as proper in this case.
Lastly, with regard to the third issue, petitioner argues that the former Special Twenty-Second Division of
the Court of Appeals exhibited its bias and partiality when it issued a temporary restraining order (TRO)
to stop and frustrate the enforcement of the decision rendered by the NLRC despite the fact that only
one of its member associate justices granted the same without the concurrence of the two other
member associate justices who merely concurred subsequently.

The argument is without merit.

In fact, the issue is hardly contentious. The granting of a TRO by a justice of the Court of Appeals who is
the ponente of the case, even without the concurrence of the other associate justices assigned in the
division, is allowed under Section 5, Rule VI of the 2002 Internal Rules of the Court of Appeals, to wit:

Section 5. Action by a Justice. - All members of the Division shall act upon an application for a temporary
restraining order and writ of preliminary injunction. However, if the matter is of extreme urgency, and a
Justice is absent, the two other justices shall act upon the application. If only the ponente is present,
then he shall act alone upon the application. The action of the two Justices or of the ponente shall
however be submitted on the next working day to the absent member or members of the Division for
ratification, modification or recall. (Emphases supplied.)

The records of this case would attest to the urgency of the situation which necessitated the exceptionally
prompt issuance of the TRO at issue. When the TRO was issued, the NLRC Regional Arbitration Branch
No. XI was already in the process of enforcing the assailed Resolution of the NLRC dated May 9, 2003 as
evidenced by its issuance of a Notice of Hearing[43] for a pre-execution conference which was impelled
by a motion made by petitioner.[44] The pre-execution conference was conducted as scheduled, thus,
respondents filed with the Court of Appeals an Urgent Motion for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction.[45]

In view of the urgency of the situation and in order to prevent the petition of respondents from
becoming moot and academic, Court of Appeals Associate Justice Romulo V. Borja, the Chairman of the
Twenty-Second Division, issued a Resolution dated June 14, 2006, granting the TRO prayed for by
respondents.[46] Nonetheless, the grant of said TRO was subsequently concurred in by the rest of the
members of the Division, namely Associate Justices Antonio L. Villamor and Ramon R. Garcia, in their
separate Resolutions both dated June 19, 2006.[47] Clearly, the issuance of the TRO at issue was in
accordance with the 2002 Internal Rules of the Court of Appeals.

WHEREFORE, the petition is PARTLY GRANTED. The assailed Decision dated July 28, 2006 as well as the
Resolution dated September 28, 2006 of the Court of Appeals in CA-G.R. SP No. 81703 are AFFIRMED
WITH THE MODIFICATION that the award of financial assistance is REINSTATED. The Labor Arbiter's
Decision dated June 26, 2002 is AFFIRMED in toto.

SO ORDERED.

• Villaruel v. Yeo Han Guan, June 1, 2011

PERALTA, J.:
Assailed in the present petition are the Decision1 and Resolution2 of the Court of Appeals (CA) dated
February 16, 2005 and August 2, 2005, respectively, in CA-G.R. SP No. 79105. The CA Decision modified
the March 31, 2003 Decision of the National Labor Relations Commission (NLRC) in NLRC NCR CA
028050-01, while the CA Resolution denied petitioner's Motion for Reconsideration.

The antecedents of the case are as follows:

On February 15, 1999, herein petitioner filed with the NLRC, National Capital Region, Quezon City a
Complaint3 for payment of separation pay against Yuhans Enterprises.

Subsequently, in his Amended Complaint and Position Paper4 dated December 6, 1999, petitioner
alleged that in June 1963, he was employed as a machine operator by Ribonette Manufacturing
Company, an enterprise engaged in the business of manufacturing and selling PVC pipes and is owned
and managed by herein respondent Yeo Han Guan. Over a period of almost twenty (20) years, the
company changed its name four times. Starting in 1993 up to the time of the filing of petitioner's
complaint in 1999, the company was operating under the name of Yuhans Enterprises. Despite the
changes in the company's name, petitioner remained in the employ of respondent. Petitioner further
alleged that on October 5, 1998, he got sick and was confined in a hospital; on December 12, 1998, he
reported for work but was no longer permitted to go back because of his illness; he asked that
respondent allow him to continue working but be assigned a lighter kind of work but his request was
denied; instead, he was offered a sum of P15,000.00 as his separation pay; however, the said amount
corresponds only to the period between 1993 and 1999; petitioner prayed that he be granted separation
pay computed from his first day of employment in June 1963, but respondent refused. Aside from
separation pay, petitioner prayed for the payment of service incentive leave for three years as well as
attorney's fees.

On the other hand, respondent averred in his Position Paper5 that petitioner was hired as machine
operator from March 1, 1993 until he stopped working sometime in February 1999 on the ground that
he was suffering from illness; after his recovery, petitioner was directed to report for work, but he never
showed up. Respondent was later caught by surprise when petitioner filed the instant case for recovery
of separation pay. Respondent claimed that he never terminated the services of petitioner and that
during their mandatory conference, he even told the latter that he could go back to work anytime but
petitioner clearly manifested that he was no longer interested in returning to work and instead asked for
separation pay.

On November 27, 2000, the Labor Arbiter handling the case rendered judgment in favor of petitioner.
The dispositive portion of the Labor Arbiter's Decision reads, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant and against
herein respondent, as follows:

1. Ordering the respondents to pay separation benefits equivalent to one-half (½) month salary per year
of service, a fraction of six months equivalent to one year to herein complainant based on the
complainant's length of service reckoned from June 1963 up to October 1998 as provided under Article
284 of the Labor Code, the same computed by the Computation and Examination Unit which we hereby
adopt and approved (sic) as our own in the amount of NINETY-ONE THOUSAND FOUR HUNDRED FORTY-
FIVE PESOS (P91,445.00);

2. Ordering the respondents to pay service incentive leave equivalent to fifteen days' salary in the
amount of THREE THOUSAND FIFTEEN PESOS (P3,015.00).

All other claims are dismissed for lack of merit.

SO ORDERED.6

Aggrieved, respondent filed an appeal with the NLRC.

On March 31, 2003, the Third Division of the NLRC rendered its Decision7 dismissing respondent's
appeal and affirming the Labor Arbiter's Decision.

Respondent filed a Motion for Reconsideration,8 but the same was denied by the NLRC in a Resolution9
dated May 30, 2003.

Respondent then filed with the CA a petition for certiorari under Rule 65 of the Rules of Court.

On February 16, 2005, the CA promulgated its presently assailed Decision disposing as follows:

WHEREFORE, premises considered, the petition is partially GRANTED. The award of separation pay is
hereby DELETED, but the Decision insofar as it awards private respondent [herein petitioner] service
incentive leave pay of three thousand and fifteen pesos (P3,015.00) stands. The NLRC is permanently
ENJOINED from partially executing its Decision dated November 27, 2000 insofar as the award of
separation pay is concerned; or if it has already effected execution, it should order the private
respondent to forthwith restitute the same.

SO ORDERED.10

Herein petitioner filed his Motion for Reconsideration11 of the CA Decision, but it was denied by the CA
via a Resolution12 dated August 2, 2005.

Hence, the instant petition based on the following assignment of errors:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FAILURE TO APPRECIATE THE ADMISSION
BY [PETITIONER] OF THE FACT AND VALIDITY OF HIS TERMINATION BY THE [RESPONDENT].

II

[THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED] IN DENYING [PETITIONER'S] ENTITLEMENT TO

SEPARATION PAY UNDER ARTICLE 284 OF THE LABOR CODE AND UNDER THE OMNIBUS RULES
IMPLEMENTING THE LABOR CODE.
III

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE BURDEN OF PROOF
THAT AN EMPLOYEE IS SUFFERING FROM DISEASE THAT HAS TO BE TERMINATED REST[S] UPON THE
EMPLOYER IN ORDER FOR THE EMPLOYEE TO BE ENTITLED TO SEPARATION PAY.

IV

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE DELETION OF THE AWARD OF
SEPARATION PAY TO THE [PETITIONER].13

The Court finds the petition without merit.

The assigned errors in the instant petition essentially boil down to the question of whether petitioner is
entitled to separation pay under the provisions of the Labor Code, particularly Article 284 thereof, which
reads as follows:

An employer may terminate the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to
the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (½) month salary for every year of service whichever is greater, a fraction of
at least six months being considered as one (1) whole year.

A plain reading of the abovequoted provision clearly presupposes that it is the employer who terminates
the services of the employee found to be suffering from any disease and whose continued employment
is prohibited by law or is prejudicial to his health as well as to the health of his co-employees. It does not
contemplate a situation where it is the employee who severs his or her employment ties. This is precisely
the reason why Section 8,14 Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, directs
that an employer shall not terminate the services of the employee unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot be
cured within a period of six (6) months even with proper medical treatment.

Hence, the pivotal question that should be settled in the present case is whether respondent, in fact,
dismissed petitioner from his employment.

A perusal of the Decisions of the Labor Arbiter and the NLRC would show, however, that there was no
discussion with respect to the abovementioned issue. Both lower tribunals merely concluded that
petitioner is entitled to separation pay under Article 284 of the Labor Code without any explanation. The
Court finds no convincing justification, in the Decision of the Labor Arbiter on why petitioner is entitled
to such pay. In the same manner, the NLRC Decision did not give any rationalization as the gist thereof
simply consisted of a quoted portion of the appealed Decision of the Labor Arbiter.

On the other hand, the Court agrees with the CA in its observation of the following circumstances as
proof that respondent did not terminate petitioner's employment: first, the only cause of action in
petitioner's original complaint is that he was "offered a very low separation pay"; second, there was no
allegation of illegal dismissal, both in petitioner's original and amended complaints and position paper;
and, third, there was no prayer for reinstatement.

In consonance with the above findings, the Court finds that petitioner was the one who initiated the
severance of his employment relations with respondent. It is evident from the various pleadings filed by
petitioner that he never intended to return to his employment with respondent on the ground that his
health is failing. Indeed, petitioner did not ask for reinstatement. In fact, he rejected respondent's offer
for him to return to work. This is tantamount to resignation.

Resignation is defined as the voluntary act of an employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no
other choice but to disassociate himself from his employment.15

It may not be amiss to point out at this juncture that aside from Article 284 of the Labor Code, the award
of separation pay is also authorized in the situations dealt with in Article 28316 of the same Code and
under Section 4 (b), Rule I, Book VI of the Implementing Rules and Regulations of the said Code17 where
there is illegal dismissal and reinstatement is no longer feasible. By way of exception, this Court has
allowed grants of separation pay to stand as "a measure of social justice" where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on his moral character.18
However, there is no provision in the Labor Code which grants separation pay to voluntarily resigning
employees. In fact, the rule is that an employee who voluntarily resigns from employment is not entitled
to separation pay, except when it is stipulated in the employment contract or CBA, or it is sanctioned by
established employer practice or policy.19 In the present case, neither the abovementioned provisions
of the Labor Code and its implementing rules and regulations nor the exceptions apply because
petitioner was not dismissed from his employment and there is no evidence to show that payment of
separation pay is stipulated in his employment contract or sanctioned by established practice or policy of
herein respondent, his employer.

Since petitioner was not terminated from his employment and, instead, is deemed to have resigned
therefrom, he is not entitled to separation pay under the provisions of the Labor Code.

The foregoing notwithstanding, this Court, in a number of cases, has granted financial assistance to
separated employees as a measure of social and compassionate justice and as an equitable concession.
Taking into consideration the factual circumstances obtaining in the present case, the Court finds that
petitioner is entitled to this kind of assistance.

Citing Eastern Shipping Lines, Inc. v. Sedan,20 this Court, in the more recent case of Eastern Shipping
Lines v. Antonio,21 held:

But we must stress that this Court did allow, in several instances, the grant of financial assistance. In the
words of Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of
social justice and exceptional circumstances, and as an equitable concession. The instant case equally
calls for balancing the interests of the employer with those of the worker, if only to approximate what
Justice Laurel calls justice in its secular sense.
In this instance, our attention has been called to the following circumstances: that private respondent
joined the company when he was a young man of 25 years and stayed on until he was 48 years old; that
he had given to the company the best years of his youth, working on board ship for almost 24 years; that
in those years there was not a single report of him transgressing any of the company rules and
regulations; that he applied for optional retirement under the company's non-contributory plan when
his daughter died and for his own health reasons; and that it would appear that he had served the
company well, since even the company said that the reason it refused his application for optional
retirement was that it still needed his services; that he denies receiving the telegram asking him to
report back to work; but that considering his age and health, he preferred to stay home rather than risk
further working in a ship at sea.

In our view, with these special circumstances, we can call upon the same "social and compassionate
justice" cited in several cases allowing financial assistance. These circumstances indubitably merit
equitable concessions, via the principle of "compassionate justice" for the working class. x x x

In the present case, respondent had been employed with the petitioner for almost twelve (12) years. On
February 13, 1996, he suffered from a "fractured left transverse process of fourth lumbar vertebra,"
while their vessel was at the port of Yokohama, Japan. After consulting a doctor, he was required to rest
for a month. When he was repatriated to Manila and examined by a company doctor, he was declared fit
to continue his work. When he reported for work, petitioner refused to employ him despite the
assurance of its personnel manager. Respondent patiently waited for more than one year to embark on
the vessel as 2nd Engineer, but the position was not given to him, as it was occupied by another person
known to one of the stockholders. Consequently, for having been deprived of continued employment
with petitioner's vessel, respondent opted to apply for optional retirement. In addition, records show
that respondent's seaman's book, as duly noted and signed by the captain of the vessel was marked
"Very Good," and "recommended for hire." Moreover, respondent had no derogatory record on file over
his long years of service with the petitioner.

Considering all of the foregoing and in line with Eastern, the ends of social and compassionate justice
would be served best if respondent will be given some equitable relief. Thus, the award of P100,000.00
to respondent as financial assistance is deemed equitable under the circumstances.22

While the abovecited cases authorized the grant of financial assistance in lieu of retirement benefits, the
Court finds no cogent reason not to employ the same guiding principle of compassionate justice applied
by the Court, taking into consideration the factual circumstances obtaining in the present case. In this
regard, the Court finds credence in petitioner's contention that he is in the employ of respondent for
more than 35 years. In the absence of a substantial refutation on the part of respondent, the Court
agrees with the findings of the Labor Arbiter and the NLRC that respondent company is not distinct from
its predecessors but, in fact, merely continued the operation of the latter under the same owners and
the same business venture. The Court further notes that there is no evidence on record to show that
petitioner has any derogatory record during his long years of service with respondent and that his
employment was severed not by reason of any infraction on his part but because of his failing physical
condition. Add to this the willingness of respondent to give him financial assistance. Hence, based on the
foregoing, the Court finds that the award of P50,000.00 to petitioner as financial assistance is deemed
equitable under the circumstances.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED with MODIFICATION by awarding petitioner with financial assistance in the
amount of P50,000.00.

SO ORDERED.

• Nacar V. Gallery Frames, August 13, 2013

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the Court
of Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9, 2009 denying petitioner’s
motion for reconsideration.

The factual antecedents are undisputed.

Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the
National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe
Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he
was dismissed from employment without a valid or just cause. Thus, petitioner was awarded backwages
and separation pay in lieu of reinstatement in the amount of ₱158,919.92. The dispositive portion of the
decision, reads:

With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that
complainant was dismissed from employment for a just or valid cause. All the more, it is clear from the
records that complainant was never afforded due process before he was terminated. As such, we are
perforce constrained to grant complainant’s prayer for the payments of separation pay in lieu of
reinstatement to his former position, considering the strained relationship between the parties, and his
apparent reluctance to be reinstated, computed only up to promulgation of this decision as follows:

SEPARATION PAY

Date Hired = August 1990

Rate = ₱198/day

Date of Decision = Aug. 18, 1998

Length of Service = 8 yrs. & 1 month

₱198.00 x 26 days x 8 months = ₱41,184.00

BACKWAGES

Date Dismissed = January 24, 1997

Rate per day = ₱196.00

Date of Decisions = Aug. 18, 1998

a) 1/24/97 to 2/5/98 = 12.36 mos.

₱196.00/day x 12.36 mos. = ₱62,986.56

b) 2/6/98 to 8/18/98 = 6.4 months

Prevailing Rate per day = ₱62,986.00

₱198.00 x 26 days x 6.4 mos. = ₱32,947.20

TOTAL = ₱95.933.76

xxxx

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of

constructive dismissal and are therefore, ordered:

To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six
pesos and 56/100 (₱62,986.56) Pesos representing his separation pay;

To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred thirty-
three and 36/100 (₱95,933.36) representing his backwages; and

All other claims are hereby dismissed for lack of merit.

SO ORDERED.4

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated
February 29, 2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter. Respondents filed a
motion for reconsideration, but it was denied.6

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000, the
CA issued a Resolution dismissing the petition. Respondents filed a Motion for Reconsideration, but it
was likewise denied in a Resolution dated May 8, 2001.7

Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no
reversible error on the part of the CA, this Court denied the petition in the Resolution dated April 17,
2002.8

An Entry of Judgment was later issued certifying that the resolution became final and executory on May
27, 2002.9 The case was, thereafter, referred back to the Labor Arbiter. A pre-execution conference was
consequently scheduled, but respondents failed to appear.10

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages be
computed from the date of his dismissal on January 24, 1997 up to the finality of the Resolution of the
Supreme Court on May 27, 2002.11 Upon recomputation, the Computation and Examination Unit of the
NLRC arrived at an updated amount in the sum of ₱471,320.31.12

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to
collect from respondents the total amount of ₱471,320.31. Respondents filed a Motion to Quash Writ of
Execution, arguing, among other things, that since the Labor Arbiter awarded separation pay of
₱62,986.56 and limited backwages of ₱95,933.36, no more recomputation is required to be made of the
said awards. They claimed that after the decision becomes final and executory, the same cannot be
altered or amended anymore.14 On January 13, 2003, the Labor Arbiter issued an Order15 denying the
motion. Thus, an Alias Writ of Execution16 was issued on January 14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting
the appeal in favor of the respondents and ordered the recomputation of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final
and executory. Consequently, another pre-execution conference was held, but respondents failed to
appear on time. Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the
earlier recomputed judgment award in the sum of ₱471,320.31.18

The records of the case were again forwarded to the Computation and Examination Unit for
recomputation, where the judgment award of petitioner was reassessed to be in the total amount of
only ₱147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original
amount as determined by the Labor Arbiter in his Decision dated October 15, 1998, pending the final
computation of his backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment award
that was due to petitioner in the amount of ₱147,560.19, which petitioner eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award
to include the appropriate interests.19

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount of
₱11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced
considering that it was the one that became final and executory. However, the Labor Arbiter reasoned
that since the decision states that the separation pay and backwages are computed only up to the
promulgation of the said decision, it is the amount of ₱158,919.92 that should be executed. Thus, since
petitioner already received ₱147,560.19, he is only entitled to the balance of ₱11,459.73.
Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its Resolution22
dated September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was likewise denied in
the Resolution23 dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.

On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since
petitioner no longer appealed the October 15, 1998 Decision of the Labor Arbiter, which already became
final and executory, a belated correction thereof is no longer allowed. The CA stated that there is nothing
left to be done except to enforce the said judgment. Consequently, it can no longer be modified in any
respect, except to correct clerical errors or mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9,
2009.

Hence, the petition assigning the lone error:

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED GRAVE
ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING THE QUESTIONED
RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, 2005 ORDER OF LABOR ARBITER
MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF LABOR ARBITER
LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME DECISION.26

Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor
Arbiter’s decision, the same is not final until reinstatement is made or until finality of the decision, in
case of an award of separation pay. Petitioner maintains that considering that the October 15, 1998
decision of the Labor Arbiter did not become final and executory until the April 17, 2002 Resolution of
the Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May 27, 2002, the
reckoning point for the computation of the backwages and separation pay should be on May 27, 2002
and not when the decision of the Labor Arbiter was rendered on October 15, 1998. Further, petitioner
posits that he is also entitled to the payment of interest from the finality of the decision until full
payment by the respondents.

On their part, respondents assert that since only separation pay and limited backwages were awarded to
petitioner by the October 15, 1998 decision of the Labor Arbiter, no more recomputation is required to
be made of said awards. Respondents insist that since the decision clearly stated that the separation pay
and backwages are "computed only up to [the] promulgation of this decision," and considering that
petitioner no longer appealed the decision, petitioner is only entitled to the award as computed by the
Labor Arbiter in the total amount of ₱158,919.92. Respondents added that it was only during the
execution proceedings that the petitioner questioned the award, long after the decision had become
final and executory. Respondents contend that to allow the further recomputation of the backwages to
be awarded to petitioner at this point of the proceedings would substantially vary the decision of the
Labor Arbiter as it violates the rule on immutability of judgments.

The petition is meritorious.

The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals
(Sixth Division),27 wherein the issue submitted to the Court for resolution was the propriety of the
computation of the awards made, and whether this violated the principle of immutability of judgment.
Like in the present case, it was a distinct feature of the judgment of the Labor Arbiter in the above-cited
case that the decision already provided for the computation of the payable separation pay and
backwages due and did not further order the computation of the monetary awards up to the time of the
finality of the judgment. Also in Session Delights, the dismissed employee failed to appeal the decision of
the labor arbiter. The Court clarified, thus:

In concrete terms, the question is whether a re-computation in the course of execution of the labor
arbiter's original computation of the awards made, pegged as of the time the decision was rendered and
confirmed with modification by a final CA decision, is legally proper. The question is posed, given that the
petitioner did not immediately pay the awards stated in the original labor arbiter's decision; it delayed
payment because it continued with the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the
original labor arbiter framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with
finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of
reinstatement, backwages, attorney's fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the labor arbiter
made shows that it was time-bound as can be seen from the figures used in the computation. This part,
being merely a computation of what the first part of the decision established and declared, can, by its
nature, be re-computed. This is the part, too, that the petitioner now posits should no longer be re-
computed because the computation is already in the labor arbiter's decision that the CA had affirmed.
The public and private respondents, on the other hand, posit that a re-computation is necessary because
the relief in an illegal dismissal decision goes all the way up to reinstatement if reinstatement is to be
made, or up to the finality of the decision, if separation pay is to be given in lieu reinstatement.

That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place,
also made a computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC
Rules of Procedure which requires that a computation be made. This Section in part states:

[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable,
shall embody in any such decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the labor arbiter's
decision. As we noted above, this implication is apparent from the terms of the computation itself, and
no question would have arisen had the parties terminated the case and implemented the decision at
that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of
illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to the
NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC decision is final, reviewable
only by the CA on jurisdictional grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a
timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority in
affirming the payment of 13th month pay and indemnity, lapsed to finality and was subsequently
returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the
original labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he
apparently read the figures originally ordered to be paid to be the computation due had the case been
terminated and implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the award
to include the separation pay and the backwages due up to the finality of the CA decision that fully
terminated the case on the merits. Unfortunately, the labor arbiter's approved computation went
beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards the
final CA decision had deleted - specifically, the proportionate 13th month pay and the indemnity awards.
Hence, the CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially

considered the labor arbiter's original decision in accordance with its basic component parts as we
discussed above. To reiterate, the first part contains the finding of illegality and its monetary
consequences; the second part is the computation of the awards or monetary consequences of the
illegal dismissal, computed as of the time of the labor arbiter's original decision.28

Consequently, from the above disquisitions, under the terms of the decision which is sought to be
executed by the petitioner, no essential change is made by a recomputation as this step is a necessary
consequence that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in that
decision.29 A recomputation (or an original computation, if no previous computation has been made) is
a part of the law – specifically, Article 279 of the Labor Code and the established jurisprudence on this
provision – that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to
add up until full satisfaction, as expressed under Article 279 of the Labor Code. The recomputation of the
consequences of illegal dismissal upon execution of the decision does not constitute an alteration or
amendment of the final decision being implemented. The illegal dismissal ruling stands; only the
computation of monetary consequences of this dismissal is affected, and this is not a violation of the
principle of immutability of final judgments.30

That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid
as it is the risk that it ran when it continued to seek recourses against the Labor Arbiter's decision. Article
279 provides for the consequences of illegal dismissal in no uncertain terms, qualified only by
jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that
happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the
reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares that
the employment relationship ended so that separation pay and backwages are to be computed up to
that point.31

Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v. Court
of Appeals,32 the Court laid down the guidelines regarding the manner of computing legal interest, to
wit:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.33

Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796
dated May 16, 2013, approved the amendment of Section 234 of Circular No. 905, Series of 1982 and,
accordingly, issued Circular No. 799,35 Series of 2013, effective July 1, 2013, the pertinent portion of
which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2
of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.

Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for Banks and
Sections 4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would
govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and
the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the
case of Eastern Shipping Lines40 and Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions,
before its amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per annum effective
July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and
not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until
June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate
of interest when applicable.

Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. Bangko
Sentral Monetary Board,41 this Court affirmed the authority of the BSP-MB to set interest rates and to
issue and enforce Circulars when it ruled that "the BSP-MB may prescribe the maximum rate or rates of
interest for all loans or renewals thereof or the forbearance of any money, goods or credits, including
those for loans of low priority such as consumer loans, as well as such loans made by pawnshops,
finance companies and similar credit institutions. It even authorizes the BSP-MB to prescribe different
maximum rate or rates for different types of borrowings, including deposits and deposit substitutes, or
loans of financial intermediaries."

Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013,
said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.1awp++i1

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines42
are accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts
is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of recoverable damages.1âwphi1

II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.

When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from
such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in
CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED and SET ASIDE.
Respondents are Ordered to Pay petitioner:

(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to May
27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and executory;

(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per
year of service; and

(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27,
2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits
awarded and due to petitioner in accordance with this Decision.

SO ORDERED.

• Integrated Microelectronics V. Pionilla, August 28, 2013

PERLAS-BERNABE, J.:

The Court hereby resolves the Motion for Reconsideration1 filed by petitioner Integrated
Microelectronics, Inc. (IMI) from its Resolution2 dated January 14, 2013, denying its petition for review
on certiorari3 which assailed the Decision4 dated July 28, 2011 and Resolution5 dated January 16, 2012
of the Court of Appeals (CA) in CA-G.R. SP No. 113274 finding respondent Adonis A. Pionilla (Pionilla) to
have been illegally dismissed. For clarity, the Court briefly recounts the antecedents of this case.

The Facts

On November 14, 1996, Pionilla was hired by IMI as its production worker. On May 5, 2005, Pionilla
received a notice from IMI requiring him to explain the incident which occurred the day before where he
was seen escorting a lady to board the company shuttle bus at the Alabang Terminal. It was reported by
the bus marshall that the lady was wearing a company identification card (ID) – which serves as a free
pass for shuttle bus passengers – even if she was just a job applicant at IMI. In this regard, Pionilla
admitted that he lent his ID to the lady who turned out to be his relative. He further intimated that he
risked lending her his ID to save on their transportation expenses. Nevertheless, he apologized for his
actions.6

A Conscience Committee (committee) was subsequently formed to investigate the matter. During the
committee hearing, Pionilla admitted that at the time of the incident, he had two IDs in his name as he
lost his original ID in November 2004 but was able to secure a temporary ID later. As Pionilla and his
relative were about to board the shuttle bus, they were both holding separate IDs, both in his name.
Based on the foregoing, IMI found Pionilla guilty of violating Article 6.12 of the Company Rules and
Regulations (CRR) which prohibits the lending of one’s ID since the same is considered a breach of its
security rules and carries the penalty of dismissal. Subsequently, or on August 17, 2005, Pionilla received
a letter dated August 16, 2005 informing him of his dismissal from service. Three days after, he filed a
complaint for illegal dismissal with damages against IMI.7

On May 17, 2007, the Labor Arbiter (LA) rendered a Decision8 finding Pionilla to have been illegally
dismissed by IMI and, as such, ordered the latter to reinstate him to his former position and to pay him
backwages in the amount of P417,818.78. The LA held that Pionilla was harshly penalized,9 observing
that the latter did not breach the security of the company premises since his companion was not able to
enter the said premises nor board the shuttle bus.10 The LA added that the misdeed was not tainted
with any wrongful intent as it was merely impelled by a mistaken notion of comradeship (“pakikisama”)
and gratitude (“utang na loob”) on Pionilla’s part.11 Further, the LA held that no dishonesty can be
attributed to Pionilla’s act of keeping his old ID as this appeared to be a new charge, or at the very least,
was merely incidental to the first offense of lending a company ID to another.12 Dissatisfied, IMI
elevated the matter to the National Labor Relations Commission (NLRC).

On appeal, the NLRC, through a Decision dated June 30, 2008,13 reversed the LA’s ruling, finding
Pionilla’s dismissal to be valid. It pointed out that Pionilla’s act of lending his temporary ID was willful
and intentional as he, in fact, admitted and apologized for the same.14 The NLRC further ruled that
Pionilla’s attitude in violating the CRR could be treated as perverse as bolstered by his failure to
surrender his temporary ID despite locating the original one.15 Dissatisfied, Pionilla filed a petition for
certiorari before the CA.

On July 28, 2011, the CA rendered a Decision,16 granting Pionilla’s petition. It found that while IMI’s
regulations on company IDs were reasonable, the penalty of dismissal was too harsh and not
commensurate to the misdeed committed. It also stated that the while the right of the employer to
discipline is beyond question, it, nevertheless, remains subject to reasonable regulation.17 It further
noted that Pionilla worked with IMI for a period of nine years without any derogatory record and even
observed that his performance rating had always been “outstanding.”18 Undaunted, IMI moved for
reconsideration which was, however, denied in a Resolution19 dated January 16, 2012.

In view of the CA’s ruling, IMI filed a petition for review on certiorari before the Court which was equally
denied in a Resolution20 dated January 14, 2013, pronouncing that there was no reversible error on the
part of the CA in finding Pionilla to have been illegally dismissed. The Court ruled that the imposition of
the penalty of dismissal was too harsh and incommensurate to the infraction he committed, this
especially considering his nine years of unblemished service. Hence, the present motion for
reconsideration.

The Issue Before the Court

The essential issue for the Court’s resolution is whether or not its Resolution dated January 14, 2013
should be reconsidered. Among others, IMI contends that to award Pionilla reinstatement and full
backwages would not only be excessive and unfair, but would be contrary to existing principles of law
and jurisprudence.21

The Court’s Ruling

The motion for reconsideration is partly granted.

As a general rule, an illegally dismissed employee is entitled to reinstatement (or separation pay, if
reinstatement is not viable) and payment of full backwages. In certain cases, however, the Court has
carved out an exception to the foregoing rule and thereby ordered the reinstatement of the employee
without backwages on account of the following: (a) the fact that dismissal of the employee would be too
harsh of a penalty; and (b) that the employer was in good faith in terminating the employee. The
aforesaid exception was recently applied in the case of Pepsi-Cola Products, Phils., Inc. v. Molon,22
wherein the Court, citing several precedents, held as follows:

An illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if

reinstatement is no longer viable, and backwages.23 In certain cases, however, the Court has ordered
the reinstatement of the employee without backwages considering the fact that (1) the dismissal of the
employee would be too harsh a penalty; and (2) the employer was in good faith in terminating the
employee. For instance, in the case of Cruz v. Minister of Labor and Employment24 the Court ruled as
follows:

The Court is convinced that petitioner's guilt was substantially established. Nevertheless, we agree with
respondent Minister's order of reinstating petitioner without backwages instead of dismissal which may
be too drastic. Denial of backwages would sufficiently penalize her for her infractions. The bank officials
acted in good faith. They should be exempt from the burden of paying backwages. The good faith of the
employer, when clear under the circumstances, may preclude or diminish recovery of backwages. Only
employees discriminately dismissed are entitled to backpay.

Likewise, in the case of Itogon-Suyoc Mines, Inc. v. National Labor Relations Commission,25 the Court
pronounced that “the ends of social and compassionate justice would therefore be served if private
respondent is reinstated but without backwages in view of petitioner's good faith.”

The factual similarity of these cases to Remandaban’s situation deems it appropriate to render the same
disposition.26 (Emphasis and underscoring in the original)

In this case, the Court observes that: (a) the penalty of dismissal was too harsh of a penalty to be
imposed against Pionilla for his infractions; and (b) IMI was in good faith when it dismissed Pionilla as his
dereliction of its policy on ID usage was honestly perceived to be a threat to the company’s security. In
this respect, since these concurring circumstances trigger the application of the exception to the rule on
backwages as enunciated in the above-cited cases, the Court finds it proper to accord the same
disposition and consequently directs the deletion of the award of backwages in favor of Pionilla,
notwithstanding the illegality of his dismissal.

WHEREFORE, the motion for reconsideration is PARTLY GRANTED. The Court’s Resolution dated January
14, 2013 is hereby MODIFIED, directing the deletion of the award of backwages in favor of respondent
Adonis A. Pionilla.

SO ORDERED.

• United Tourist Promotion V. Kemplin, February 5, 2014

REYES, J.:

United Tourist Promotions (UTP), a sole proprietorship business entity engaged in the printing and
distribution of promotional brochures and maps for tourists, and its registered owner, Ariel D. Jersey
(Jersey), are now before us with a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of
Court to assail the Decision2 rendered by the Court of Appeals (CA) on June 29, 2012 and the
Resolution3 thereafter issued on January 16, 2013 in CA–G.R. SP No. 118971. The assailed decision and
resolution affirmed in toto the rulings of the Sixth Division of the National Labor Relations Commission
(NLRC) and Labor Arbiter Leandro M. Jose (LA Jose) finding that Harland B. Kemplin (Kemplin) was
illegally dismissed as President of UTP.

Antecedents

In 1995, Jersey, with the help of two American expatriates, Kemplin and the late Mike Dunne, formed
UTP.
In 2002, UTP employed Kemplin to be its President for a period of five years, to commence on March 1,
2002 and to end on March 1, 2007, “renewable for the same period, subject to new terms and
conditions”.4

Kemplin continued to render his services to UTP even after his fixed term contract of employment
expired. Records show that on May 12, 2009, Kemplin, signing as President of UTP, entered into
advertisement agreements with Pizza Hut and M. Lhuillier.5

On July 30, 2009,UTP’s legal counsel sent Kemplin a letter,6 which, in part,
reads:chanRoblesvirtualLawlibrary

We would like to inform you that your Employment Contract had been expired since March 1, 2007 and
never been renewed. So[,] it is clear [that] you are no longer [an] employee as President of [UTP]
considering the expiration of your employment contract. However, because of your past services to our
client’s company despite [the fact that] your service is no longer needed by his company[,] as token[,] he
tolerated you to come in the office [and] as such[,] you were given monthly commissions with
allowances.

But because of your inhuman treatment x x x [of] the rank and file employees[,] which caused great
damage and prejudices to the company as evidenced [by] those cases filed against you[,] specifically[:]
(1) x x x for Grave Oral [T]hreat pending for Preliminary Investigation, Pasay City Prosecutor’s Office x x
x[;] (2) x x x for Summary Deportation[,] BID, Pasay City Prosecutor’s Office; and (3) x x x for Grave
Coercion and Grave Threats, we had no other recourse but to give you this notice to cease and desist
from entering the premises of the main office[,] as well as the branch offices of [UTP] from receipt
hereof for the protection and safety of the company[,] as well as to the employees and to avoid further
great damages that you may cause to the company x x x.7ChanRoblesVirtualawlibrary

On August 10, 2009, Kemplin filed before Regional Arbitration Branch No. 111 of the NLRC a Complaint8
against UTP and its officers, namely, Jersey, Lorena Lindo9 and Larry Jersey,10 for: (a) illegal dismissal; (b)
non–payment of salaries, 13th month and separation pay, and retirement benefits; (c) payment of
actual, moral and exemplary damages and monthly commission of P200,0000.00; and (d) recovery of the
company car, which was forcibly taken from him, personal laptop, office paraphernalia and personal
books.

In Kemplin’s Position Paper,11 which he filed before LA Jose, he claimed that even after the expiration of
his employment contract on March 1, 2007, he rendered his services as President and General Manager
of UTP. In December of 2008, he began examining the company’s finances, with the end in mind of
collecting from delinquent accounts of UTP’s distributors. After having noted some accounting
discrepancies, he sent e–mail messages to the other officers but he did not receive direct replies to his
queries. Subsequently, on July 30, 2009, he received a notice from UTP’s counsel ordering him to cease
and desist from entering the premises of UTP offices.

UTP, on its part, argued that the termination letter sent to Kemplin on July 30, 2009 was based on (a) the
expiration of the fixed term employment contract they had entered into, and (b) an employer’s
prerogative to terminate an employee, who commits criminal and illegal acts prejudicial to business. UTP
alleged that Kemplin bad–mouthed, treated his co–workers as third class citizens, and called them
“brown monkeys”. Kemplin’s presence in the premises of UTP was merely tolerated and he was given
allowances due to humanitarian considerations.12

The LA’s Decision

On June 25, 2010, LA Jose rendered a Decision,13 the dispositive portion of which
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the following findings are made:

1. [Kemplin] is found to be a regular employee;

2. [Kemplin] is adjudged to have been illegally dismissed even as [UTP and Jersey] are held liable
therefor;

3. Consequently, [UTP and Jersey] are ordered to reinstate [Kemplin] to his former position without loss
of seniority rights and other privileges, with backwages initially computed at this time at [P]219,200.00;

4. The reinstatement aspect of this decision is immediately executory even as [UTP and Jersey] are
enjoined to submit a report of compliance therewith within ten (10) days from receipt hereof;

5. [UTP and Jersey] are further ordered to pay [Kemplin] his salary for July 2009 of [P]20,000.00 and 13th
month pay for the year 2009 in the sum of [P]20,000.00;

6. [UTP and Jersey] are assessed 10% attorney’s fee of [P]25,920.00 in favor of [Kemplin].

All other claims are dismissed for lack of merit.

SO ORDERED.14ChanRoblesVirtualawlibrary

LA Jose’s ratiocinations are:chanRoblesvirtualLawlibrary

[Kemplin] was able to show that he was still officially connected with [UTP] as he signed in his capacity as
President of [UTP] an (sic) advertisement agreement[s] with Pizza Hut and M. Lhuillier Phils. as late as
May 12, 2009. This only goes to show that [UTP and Jersey’s] theory of toleration has no basis in fact.

It would appear now, per record, that [Kemplin] was allowed to continue performing and suffered to
work much beyond the expiration of his contract. Such being the case, [Kemplin’s] fixed term
employment contract was converted to a regular one under Art. 280 of the Labor Code, as amended
(Viernes vs. NLRC, et al., G.R. No. 108405, April 4, 2003).

[Kemplin’s] tenure having now been converted to regular employment, he now enjoys security of tenure
under Art. 279 of the Labor Code, as amended. Simply put, [Kemplin] may only be dismissed for cause
and after affording him the procedural requirement of notice and hearing. Otherwise, his dismissal will
be illegal.
Be that as it may, [UTP and Jersey] proceeded to argue that [Kemplin] was not illegally terminated, for
his termination was according to Art. 282 of the Labor Code, as amended, i.e., loss of trust and
confidence allegedly for various and serious offenses x x x.

However, upon closer scrutiny, in trying to justify [Kemplin’s] dismissal on the ground of loss of trust and
confidence, [UTP and Jersey] failed to observe the procedural requirements of notice and hearing, or
more particularly, the two–notice rule. It would appear that [UTP and Jersey’s] x x x cease and desist
letter compressed the two notices in one. Besides, the various and serious offenses alluded thereto were
not legally established before [Kemplin’s] separation. Ostensibly, [Kemplin] was not confronted with
these offenses and given the opportunity to explain himself.

x x x [R]espondents miserably failed to discharge their onus probandi. Hence, illegal dismissal lies.

xxx

The claim for non–payment of salary for July 2009 appears to be meritorious for failure of [UTP and
Jersey] to prove payment thereof when they have the burden of proof to do so.

The same ruling applies to the claim for 13th month pay.

However, the claims for commissions, company car, laptop, office paraphernalia and personal books may
not be given due course for failure of [Kemplin] to provide the specifics of his claims and/or sufficient
basis thereof when the burden of proof is reposed in him.15ChanRoblesVirtualawlibrary

The Decision of the NLRC

On January 21, 2011, the NLRC affirmed LA Jose’s Decision.16 However, Lorena Lindo and Larry Jersey
were expressly excluded from assuming liability for lack of proof of their involvement in Kemplin’s
dismissal. The NLRC declared:chanRoblesvirtualLawlibrary

[A]fter the expiration of [Kemplin’s] fixed term employment, his employment from March 2, 2007 until
his separation therefrom on July 30, 2009 is classified as regular pursuant to the provisions of Article 280
of the Labor Code, to wit:chanRoblesvirtualLawlibrary

ART. 280. Regular and casual employment. – The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and
his employment shall continue while such activity exists.

The aforesaid Article 280 of the Labor Code, as amended, classifies employees into three (3) categories,
namely: (1) regular employees or those whose work is necessary or desirable to the usual business of
the employer; (2) project employees or those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed [are] seasonal in nature
and the employment is for the duration of the season; and (3) casual employees or those who are
neither regular nor project employees. Regular employees are further classified into: (1) regular
employees by nature of work; and (2) regular employees by years of service. The former refers to those
employees who perform a particular activity which is necessary or desirable in the usual business or
trade of the employer, regardless of their length of service; while the latter refers to those employees
who have been performing the job, regardless of the nature thereof, for at least a year. (Rowell Industrial
Corporation vs. Court of Appeals, G.R. No. 167714, March 7, 2007)

Considering that he continued working as President for UTP for about one (1) year and five (5) months
and since [his] employment is not covered by another fixed term employment contract, [Kemplin’s]
employment after the expiration of his fixed term employment is already regular. Therefore, he is
guaranteed security of tenure and can only be removed from service for cause and after compliance with
due process. This is notwithstanding [UTP and Jersey’s] insistence that they merely tolerated [Kemplin’s]
“consultancy” for humanitarian reasons.

In termination cases, the employer bears the burden of proving that the dismissal of the employee is for
a just or an authorized cause. Failure to dispose of the burden would imply that the dismissal is not
lawful, and that the employee is entitled to reinstatement, back wages and accruing benefits. Moreover,
dismissed employees are not required to prove their innocence of the employer’s accusations against
them. (San Miguel Corporation vs. National Labor Relations Commission and William L. Friend, Jr., G.R.
No. 153983, May 26, 2009).

In this case, [UTP and Jersey] failed to prove the existence of just cause for his termination. Their
allegation of loss of trust and confidence was raised only in their position paper and was never posed
before [Kemplin] in order that he may be able to answer to the charge. In fact, he was merely told to
cease and desist from entering the premises. He was never afforded due process as he was not notified
of the charges against him and given the opportunity to be heard. Thus, there was never any proven just
cause for [Kemplin’s] termination, which makes it, therefore, illegal. x x x.17 (Underscoring
supplied)chanroblesvirtualawlibrary

The CA’s Decision

On June 29, 2012, the CA rendered the herein assailed Decision18 affirming the disquisitions of the LA
and NLRC. The CA stated that:chanRoblesvirtualLawlibrary

[Kemplin’s] presence for humanitarian reasons is purely self–serving and belied by the evidence on
record. In fact, [UTP and Jersey’s] alleged document denominated as Revocation of Power of Attorney
(executed on November 24, 2008 or MORE THAN one year from the expiration of [Kemplin’s]
employment contract) will only confirm that [Kemplin] continued rendering work x x x beyond March 1,
2007. x x x.

xxx

Moreover, if indeed [Kemplin’s] relationship with UTP after the expiration of the former’s employment
contract was based on [UTP and Jersey’s] mere tolerance, why then did [they] have to “dismiss”
[Kemplin] based on alleged loss of trust and confidence? Clearly, [UTP’s and Jersey’s] allegation in their
Position Paper (before LA Jose) that [Kemplin] was “formally given notice of his termination as in [sic]
indicated on the Notice of Termination Letter dated July 20, 2009,” is already an indication, if not an
admission, that [Kemplin] was, indeed, still in the employ of UTP albeit without a new or renewed
contract of employment.

xxx

The validity of an employer’s dismissal from service hinges on the satisfaction of the two substantive
requirements for a lawful termination. x x x [T]he procedural aspect. And x x x the substantive aspect.

Records are bereft of any evidence that [Kemplin] was notified of the alleged causes for his possible
dismissal. Neither was there any notice sent to him to afford him an opportunity to air his side and
defenses. The alleged Notice of Termination Letter sent by [UTP and Jersey] miserably failed to comply
with the twin–notice requirement under the law. x x x

xxx

We likewise sustain the finding of the [NLRC] that [UTP and Jersey] failed to prove the existence of just
cause for [Kemplin’s] termination. [UTP and Jersey’s] allegation of loss of trust and confidence was raised
only in their Position Paper and was never posed before [Kemplin] in order that he may be able to
answer to the charge. It is a basic principle that in illegal dismissal cases, the burden of proof rests upon
the employer to show that the dismissal of the employee is for a just cause and failure to do so would
necessarily mean that the dismissal is not justified.19 (Citations omitted)chanroblesvirtualawlibrary

On January 16, 2013, the CA issued the herein assailed Resolution20 denying UTP and Jersey’s Motion
for Reconsideration.21

Hence, the instant petition anchored on the following issues:

Whether or not the CA erred when it:

(a) ruled that the termination of [Kemplin] was invalid or unjust;

(b) invalidated the termination of [Kemplin] for [UTP and Jersey’s] failure to afford him due process of
law;

(c) stated that the issue [of] “loss of trust and confidence” cannot be raised for the first time on appeal;
and

(d) failed to apply the doctrine of strained relations in lieu of reinstatement.22

UTP and Jersey’s Allegations

In support of the instant petition, UTP and Jersey reiterate their averments in the proceedings below.
They likewise emphasize that Kemplin is a fugitive from justice since warrants of arrest for grave oral
defamation and grave coercion23 had been issued against him by the Metropolitan Trial Court (MTC) of
Pasay City, and for qualified theft by the Regional Trial Court (RTC) of Angeles City. Kemplin’s co–workers
likewise complained about his alleged improprieties, lack of proper decorum, immorality and grave
misconduct. Kemplin also blocked UTP’s website and diverted all links towards his own site.
Consequently, UTP lost both its customers and revenues. UTP, then, as an employer, has the right to
exercise its management prerogative of terminating Kemplin, who has been committing acts inimical to
business.24

Further, citing Wenphil Corporation v. National Labor Relations Commission,25 UTP and Jersey argue that
even if it were to be assumed that procedural due process was not observed in terminating Kemplin, still,
the dismissal due to just cause should not be invalidated. Instead, a fine should just be imposed as
indemnity.26

UTP and Jersey also challenge the CA’s holding that the court need not resolve the issue of loss of trust
and confidence since it was only belatedly raised in the Position Paper filed before the LA. It is argued
that the issue was timely raised before the proper forum and Kemplin had all the opportunity to
contradict the charges against him, but he chose not to do so.27

UTP and Jersey likewise posit that a strained relationship between them and Kemplin had arisen due to
the several criminal and civil cases they had filed and which are now pending against the latter. Hence,
even if the CA were correct in holding that there was illegal dismissal, Kemplin’s reinstatement is not
advisable, practical and viable. A separation pay should just be paid instead.28

Kemplin’s Comment

In Kemplin’s Comment,29 he sought the dismissal of the instant petition.

He insists that both procedural and substantive due process were absent when he was dismissed from
service. Kemplin alleges that Jersey merely want to wrest the business away after the former initiated
new checking and collection procedures relative to UTP’s finances. Kemplin also laments that Jersey
caused him to answer for baseless criminal offenses, for which no bail can be posted. Specifically, the
indictment for qualified theft before the RTC of Angeles City involves a car registered in UTP’s name, but
which was actually purchased using Kemplin’s money.30

Kemplin further emphasizes that “the doctrine of strained relations should not be applied
indiscriminately,”31 especially where “the differences of the employer with the employee are neither
personal nor physical[,] much less serious in nature[.]”32
This Court’s Ruling

The instant petition is partially meritorious.

The first two issues raised are factual in nature, hence, beyond the ambit of a petition filed under Rule
45 of the Rules of Court.

It is settled that Rule 45 limits us merely to the review of questions of law raised against the assailed CA
decision.33 The Court is generally bound by the CA’s factual findings, except only in some instances,
among which is, when the said findings are contrary to those of the trial court or administrative body
exercising quasi–judicial functions from which the action originated.34

In the case before us now, the LA, NLRC and CA uniformly ruled that Kemplin was dismissed sans
substantive and procedural due process. While we need not belabor the first two factual issues
presented herein, it bears stressing that we find the rulings of the appellate court and the labor tribunals
as amply supported by substantial evidence.

Specifically, we note the advertisement agreements35 with Pizza Hut and M. Lhuillier entered into by
Kemplin, who signed the documents as President of UTP on May 12, 2009, or more than two years after
the supposed expiration of his employment contract. They validate Kemplin’s claim that he, indeed,
continued to render his services as President of UTP well beyond March 2, 2007.

Moreover, in the letter36 dated July 30, 2009,Kemplin was ordered to cease and desist from entering the
premises of UTP.

In Unilever Philippines, Inc. v. Maria Ruby M. Rivera,37 the Court laid down in detail the steps on how to
comply with procedural due process in terminating an employee, viz:chanRoblesvirtualLawlibrary

(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 (5) calendar
days from receipt of the notice to give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. 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. 282 is being charged against the employees.

(2) After serving the first notice, the employers 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. Moreover, this conference or hearing could be used by the parties as an opportunity to come to
an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment. (Underlining ours)38ChanRoblesVirtualawlibrary

Prescinding from the above, UTP’s letter sent to Kemplin on July 30, 2009 is a lame attempt to comply
with the twin notice requirement provided for in Section 2, Rule XXIII, Book V of the Rules Implementing
the Labor Code.39

The charges against Kemplin were not clearly specified. While the letter stated that Kemplin’s
employment contract had expired, it likewise made general references to alleged criminal suits filed
against him.40 One who reads the letter is inevitably bound to ask if Kemplin is being terminated due to
the expiration of his contract, or by reason of the pendency of suits filed against him. Anent the
pendency of criminal suits, the statement is substantially bare. Besides, an employee’s guilt or innocence
in a criminal case is not determinative of the existence of a just or authorized cause for his dismissal.41
The pendency of a criminal suit against an employee, does not, by itself, sufficiently establish a ground
for an employer to terminate the former.

It also bears stressing that the letter failed to categorically indicate which of the policies of UTP did
Kemplin violate to warrant his dismissal from service. Further, Kemplin was never given the chance to
refute the charges against him as no hearing and investigation were conducted. Corollarily, in the
absence of a hearing and investigation, the existence of just cause to terminate Kemplin could not have
been sufficiently established.

Kemplin should have been promptly apprised of the issue of loss of trust and confidence in him before
and not after he was already dismissed.

UTP and Jersey challenge the CA’s disquisition that it need not resolve the issue of loss of trust and
confidence considering that the same was only raised in the Position Paper which they filed before LA
Jose.

UTP and Jersey’s stance is untenable.

In Lawrence v. National Labor Relations Commission,42 the Court is emphatic

that:chanRoblesvirtualLawlibrary

Considering that Lawrence has already been fired, the belated act of LEP in attempting to show a just
cause in lieu of a nebulous one cannot be given a semblance of legality. The legal requirements of notice
and hearing cannot be supplanted by the notice and hearing in labor proceedings. The due process
requirement in the dismissal process is different from the due process requirement in labor proceedings
and both requirements must be separately observed x x x. Thus, LEP’s method of “Fire the employee and
let him explain later” is obviously not in accord with the mandates of law. x x
x.43ChanRoblesVirtualawlibrary

Clearly then, UTP was not exempted from notifying Kemplin of the charges against him. The fact that
Kemplin was apprised of his supposed offenses, through the Position Paper filed by UTP and Jersey
before LA Jose, did not cure the defects attending his dismissal from employment.

While we agree with the LA, NLRC and CA’s findings that Kemplin was illegally dismissed, grounds exist
compelling us to modify the order of reinstatement and payment of 13th month benefit.

UTP and Jersey lament that the CA failed to apply the doctrine of strained relations to justify the award
of separation pay in lieu of reinstatement.

APO Chemical Manufacturing Corporation v. Bides44 is instructive anent the instances when separation
pay and not reinstatement shall be ordered. Thus:chanRoblesvirtualLawlibrary

The Court is well aware that reinstatement is the rule and, for the exception of “strained relations” to
apply, it should be proved that it is likely that, if reinstated, an atmosphere of antipathy and antagonism
would be generated as to adversely affect the efficiency and productivity of the employee concerned.

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand, such
payment liberates the employee from what could be a highly oppressive work environment. On the
other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ
a worker it could no longer trust. Moreover, the doctrine of strained relations has been made applicable
to cases where the employee decides not to be reinstated and demands for separation pay.45 (Citations
omitted)chanroblesvirtualawlibrary

Considering that Kemplin’s dismissal occurred in 2009, there is much room to doubt the viability,
desirability and practicability of his reinstatement as UTP’s President. Besides, as a consequence of the
unsavory accusations hurled by the contending parties against each other, Kemplin’s reinstatement is not
likely to create an efficient and productive work environment, hence, prejudicial to business and all the
persons concerned.

We likewise find the award of 13th month benefit to Kemplin as improper.

In Torres v. Rural Bank of San Juan, Inc.,46 we stated that:chanRoblesvirtualLawlibrary

Being a managerial employee, the petitioner is not entitled to 13th month pay. Pursuant to
Memorandum Order No. 28, as implemented by the Revised Guidelines on the Implementation of the
13th Month Pay Law dated November 16, 1987, managerial employees are exempt from receiving such
benefit without prejudice to the granting of other bonuses, in lieu of the 13th month pay, to managerial
employees upon the employer’s discretion.47 (Citation omitted)chanroblesvirtualawlibrary

Hence, Kemplin, who had rendered his services as UTP’s President, a managerial position, is clearly not
entitled to be paid the 13th month benefit.

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision on June 29, 2012 and the
Resolution thereafter issued on January 16, 2013 rendered by the Court of Appeals in CA–G.R. SP No.
118971 finding that Harland B. Kemplin was illegally dismissed are AFFIRMED with MODIFICATIONS. The
award to Harland B. Kemplin of a 13th month benefit is hereby DELETED. In lieu of his reinstatement, he
is AWARDED SEPARATION PAY to be computed at the rate of one (1) month pay for every year of service,
with a fraction of at least six (6) months considered as one whole year to be reckoned from the time of
his employment on March 1, 2002 until the finality of this Decision.48United Tourist Promotions and
Ariel D. Jersey are further ORDERED TO PAY Harland B. Kemplin legal interest of six percent (6%) per
annum of the total monetary awards computed from the finality of this Decision until full satisfaction
thereof.49

The Labor Arbiter is hereby DIRECTED to re–compute the awards according to the above.

SO ORDERED.

• University of Pangasinan v. Fernandez, November 12, 2014

REYES, J.:

University of Pangasinan, Inc. (UPI), an educational institution, and its former officials, Cesar Duque, Juan
Llamas Amor and Dominador Reyes (collectively referred to as the petitioners), are before this Court
with a petition for review on certiorari1 filed under Rule 45 of the Rules of Court to assail the Decision2
rendered by the Court of Appeals (CA) on November 5, 2013 and the Resolution3 thereafter issued on
February 7, 2014 in CA-GR. SP No. 107230. The CA reversed and set aside the Decision4 dated July 21,
2008 and Resolution5 dated November 11, 2008 of the National Labor Relations Commission's (NLRC)
First Division in NLRC-NCR CANo. 027116-01 (AE-09-06) granting the appeal filed by the petitioners
against the Order6 dated August 22, 2006 of Labor Arbiter [LA] Luis D. Flores (LA Flores). The CA, in
effect, reinstated LA Flores' order approving an updated computation of the money claims of Florentino
Fernandez (Florentino) and his now deceased wife, Nilda Fernandez (Nilda),7 both faculty members of
UPl, who were illegally dismissed from service on May 9, 2000 for alleged dishonesty, abuse of authority
and unbecoming conduct.ChanRoblesVirtualawlibrary

Antecedents

The CA aptly summarized the facts of the case up to the filing before it of the Petition for Certiorari8 by
Florentino and the heirs of Nilda (respondents), viz:chanroblesvirtuallawlibrary

This case arose from a complaint for illegal dismissal filed by [Florentino and Nilda] on May 18, 2000
against [UPl], its President Cesar Duque, Executive Vice-President Juan Llamas Amor and Director for
Student Affairs Dominador Reyes x x x.

In a Decision dated November 6, 2000, [Labor Arbiter Rolando D. Gambito (LA Gambito)] ruled that
[Florentino and Nilda] were illegally dismissed by [the petitioners]. The dispositive portion of the
Decision reads:chanroblesvirtuallawlibrary

"ACCORDINGLY, judgment is hereby rendered as follows:chanroblesvirtuallawlibrary

1. Declaring that [the petitioners] are not liable for unfair labor practice;cralawlawlibrary

2. Declaring that [Florentino and Nilda] were dismissed from their positions as college instructors
without just and valid cause;cralawlawlibrary

3. Ordering [UPl] and/or its president Cesar T. Duque, and vice-president, Juan Llamas Amor to pay
[Florentino and Nilda] backwages, allowances and other benefits computed from the date of their
dismissal on May 9, 2000 up to November 6, 2000, date of promulgation of decision;cralawlawlibrary

4. Ordering that instead of reinstatement of [Florentino and Nilda] to their former positions, [the
petitioners] should pay them separation pay equivalent to one (1) month salary for every year of service,
a fraction of at least six (6) months shall be considered as one (1) whole year;cralawlawlibrary

5. Ordering the [petitioners] to pay [Florentino and Nilda] attorney's fees in the amount of
P20,000[.00];cralawlawlibrary

6. Denying [Florentino and Nilda's] claim for moral and exemplary damages and all other claims for want
of merit.

COMPUTATION OF AWARD:

(1) BACKWAGES (May 9-November 6, 2000);

a)

[Florentino]

P10,706.95 (mo. rate) x 5 mos. &

21 days

= P63,754.82

b)

[Nilda]

P11,282.28 (mo. rate) x 5 mos. &

21 days

= P67.180.83

TOTAL BACKWAGES
P 130,935.65

(2)

Separation Pay:

[Florentino]

P10,706.95x 26 years

P278,380.70

[Nilda]

P11,282.28x29 years

P327,186.12

TOTAL

P605,566.82

ATTORNEY'S FEES:

P 20,000.00

TOTAL AWARD:

BACKWAGES

P130,935.65

SEPARATION PAY

P605,566.82

ATTORNEY'S FEES

P 20,000.00

P756,502.47

SO ORDERED."

[The petitioners] interposed an appeal to the NLRC, which affirmed [LA Gambito's] Decision in a
Resolution dated June 29, 2001 xxx[.]

XXXX

[The petitioners] filed a Motion for Reconsideration which was granted by the NLRC in a Resolution
dated February 21, 2002, the dispositive portion of which reads:chanroblesvirtuallawlibrary

"WHEREFORE, finding compelling reasons to reverse Our previous ruling, the Motion for Reconsideration
is hereby GRANTED, the Resolution dated June 29, 2001 is hereby SET ASIDE and the decision of [LA
Gambito] REVERSED. The complaint is hereby

DISMISSED with costs against [Florentino and Nilda].

SO ORDERED."

Aggrieved, [Florentino and Nilda] filed a Petition for Certiorari with [the CA] to annul the NLRC's
Resolution dated February 21, 2002. On September 13, 2004, [the CA] rendered a Decision granting the
petition. The dispositive portion thereof reads:chanroblesvirtuallawlibrary

"WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed resolution dated
February 21, 2002 of x x x NLRC (First Division) in NLRC NCR Case No. SUB-RAB 01-07-05-0092-00; NLRC
NCR CA No. 027116-2001 is hereby REVERSED and SET ASIDE. The decision of [LA Gambito] dated
November 6, 2000 is hereby REINSTATED.

SO ORDERED."

[UPI] appealed [the CA's] Decision to the Supreme Court but which was denied by the Supreme Court in
a Resolution dated February 21, 2005 on the ground that [UPI] failed to properly verify its petition in
accordance with Section 1, Rule 45 in relation to Section 4, Rule 7, and A.M. No. 00-2-10-SC. [UPI's]
motion for reconsideration was likewise denied with finality by the Supreme Court in a Resolution dated
June 6, 2005.

As a consequence, an Entry of Judgment was issued by the Supreme Court declaring its Resolution dated
February 21, 2005 final and executory as of July 11, 2005.

Subsequently, [Florentino and Nilda] moved for a re-computation of their award to include their
backwages and other benefits from the date of the decision of [LA Gambito] up to the finality of the
decision on July 11, 2005. They likewise moved for the issuance of a writ of execution. During the pre-
execution conference, [UPI] questioned the re-computation of [Florentino and Nilda's] backwages and
awards. In view of a stand-off, [LA Flores] required both parties to submit their respective computations
and justifications.

On August 22, 2006, [LA Flores] issued an Order ruling as follows:chanroblesvirtuallawlibrary

"Before Us is an Omnibus Motion filed by [UPI] through its legal counsel alleging among other things the
adoption of the final decision of [LA Gambito] dated November 6, 2000.

"xxx Please take note that x x x the decision rendered by the [CA] reinstating the decision of [LA
Gambito] xxx was declared final and executory by no less than the Supreme Court of the Philippines by
its issuance of a final entry of Judgment dated July 11, 2005.
Hence, there is a need to update and upgrade the computation of money claims and separation pay
which has amounted now to P2,165,467.02 as finally completed by our Labor Arbitration Associate Galo
Regino L. Esperanza hereto attached as Annex "A".

The pending motion to Dismiss is hereby set aside for lack of merit.

The substitution of [the] heirs of [Nilda] is hereby granted.

SO ORDERED."

On the same date (August 22, 2006), [LA Flores] issued a writ of execution.

[UPI] filed a Motion for Reconsideration of the above Order but it was denied by [LA Flores] in an Order
dated September 12, 2006 on the ground that no motion for reconsideration of any order or decision is
allowed under Section 19, Rule V of the NLRC Rules of Procedure.

In another Order likewise dated September 12, 2006, [LA Flores] denied [UPI's] Motion to Quash Writ of
Execution and directed the sheriff to proceed with the due execution of the writ.

[The petitioners] interposed an appeal to the NLRC questioning [LA Flores'] Orders dated August 22,
2006 and September 12, 2006 basically alleging that [Florentino and Nilda] are only entitled to the
amount of P756,502.47 awarded by [LA Gambito] in the Decision dated November 6, 2000, and not the
recomputed amount of P2,165,467.02.

In the assailed Decision dated July 21, 2008, the NLRC granted the appeal, x x x

xxxx

[Florentino and Nilda] filed a Motion for Reconsideration but it was denied by the NLRC in a Resolution
dated November 11, 2008 x x x[.]

x x x x9 (Citations omitted and italics in the original)

Proceedings before the CA

The respondents filed before the CA a Petition for Certiorari10 primarily anchored on the issue of what
the proper basis was for the computation of backwages and benefits to be paid to an employee. They
claimed that the reckoning period should be from the time of illegal dismissal on May 9, 2000 up to the
finality of the decision to be executed on July 11, 2005 as stated in the Entry of Judgment. Further, an
interest of 12% per annum should be imposed upon the total adjudged award.

On November 5, 2013, the CA rendered the assailed Decision, the decretal portion of which
reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the Petition for Certiorari is GRANTED. The Decision dated July 21,
2008 and Resolution dated November 11, 2008 of the [NLRC] are REVERSED and SET ASIDE and [LA
Flores'] Order dated August 22, 2006 is REINSTATED.
[The petitioners] are ORDERED to PAY [the respondents] the following:chanroblesvirtuallawlibrary

1) backwages computed from May 9, 2000 (the date when [Florentino and Nilda] were illegally dismissed
from employment) up to July 11, 2005 (the date of the finality of the Supreme Court's Resolution per
Entry of Judgment);cralawlawlibrary

2) separation pay computed from [Florentino and Nilda's] respective first day[s] of employment with
[UPI] up to July 11, 2005 at the rate of one month pay per year of service;cralawlawlibrary

3) attorney's fees in the amount of P20,000.00; and

4) legal interest of twelve percent (12%) per annum of the total monetary awards computed from July
11, 2005 until their full satisfaction.

The [LA] is hereby ORDERED to make another re-computation according to the above directives.

SO ORDERED.11

In explaining its decision, the CA cited the following reasons:chanroblesvirtuallawlibrary

We are mindful of the principle of immutability of judgment [and] that the fallo embodies the court's
decisive action on the issue/s posed, and is thus the part of the decision that must be enforced during
execution. However, said doctrine finds no application in the case at bench.

It must be stressed that in illegal dismissal cases, the re-computation of backwages and similar benefits
is merely an inevitable consequence of the delay in paying the awards stated in the [LA's] decision. The
instant controversy is not novel and was settled and adequately explained by the Supreme Court in the
case of Session Delights Ice Cream and Fast Foods vs. [CA], viz:chanroblesvirtuallawlibrary

xxxx

In concrete terms, the question is whether a re-computation in the course of execution of the [LA's]
original computation of the awards made, pegged as of the time the decision was rendered and
confirmed with modification by a final CA decision, is legally proper. The question is posed, given that the
petitioner did not immediately pay the awards stated in the original [LA's] decision; it delayed payment
because it continued with the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the
original [LA] framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with
finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of
reinstatement, backwages, attorney's fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the [LA] made
shows that it was time-bound as can be seen from the figures used in the computation. This part, being
merely a computation of what the first part of the decision established and declared, can, by its nature,
be re-computed. This is the part, too, that the petitioner now posits should no longer be re-computed
because the computation is already in the [LA's] decision that the CA had affirmed. The public and
private respondents, on the other hand, posit that a re-computation is necessary because the relief in an
illegal dismissal decision goes all the way up to reinstatement if reinstatement is to be made, or up to the
finality of the decision, if separation pay is to be given in lieu reinstatement.

That the [LA's] decision, at the same time that it found that an illegal dismissal had taken place, also
made a computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC
Rules of Procedure which requires that a computation be made. This Section in part states:

[T]he [LA] of origin, in cases involving monetary awards and at all events, as far as practicable, shall
embody in any such decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the [LA's] decision. As
we noted above, this implication is apparent from the terms of the computation itself, and no question
would have arisen had the parties terminated the case and implemented the decision at that point.

xxxx

We see no error in the CA decision confirming that a re-computation is necessary as it essentially

considered the [LA's] original decision in accordance with its basic component parts as we discussed
above. To reiterate, the first part contains the finding of illegality and its monetary consequences; the
second part is the computation of the awards or monetary consequences of the illegal dismissal,
computed as of the time of the [LA's] original decision.

To illustrate these points, had the case involved a pure money claim for a specific sum (e.g., salary for a
specific period) or a specific benefit (e.g., 13l month pay for a specific year) made by a former employee,
the [LA's] computation would admittedly have continuing currency because the sum is specific and any
variation may only be on the interests that may run from the finality of the decision ordering the
payment of the specific sum.

In contrast with a ruling on a specific pure money claim, is a claim that relates to status (as in this case,
where the claim is the legality of the termination of the employment relationship). In this type of cases,
the decision or ruling is essentially declaratory of the status and of the rights, obligations and monetary
consequences that flow from the declared status (in this case, the payment of separation pay and
backwages and attorney's fees when illegal dismissal is found). When this type of decision is executed,
what is primarily implemented is the declaratory finding on the status and the rights and obligations of
the parties therein; the arising monetary consequences from the declaration only follow as component
of the parties' rights and obligations.

In the present case, the CA confirmed that indeed an illegal dismissal had taken place, so that separation
pay in lieu of reinstatement and backwages should be paid. How much that separation pay would be,
would ideally be stated in the final CA decision; if not, the matter is for handling and computation by the
[LA] of origin as the labor official charged with the implementation of decisions before the NLRC.
As the CA correctly pointed out, the basis for the computation of separation pay and backwages is Article
279 of the Labor Code, as amended, which reads:

"xxx An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement."

xxxx

Consistent with what we discussed above, we hold that under the terms of the decision under execution,
no essential change is made by a re-computation as this step is a necessary consequence that flows from
the nature of the illegality of dismissal declared in that decision. A re-computation (or an original
computation, if no previous computation has been made) is a part of the law - specifically, Article 279 of
the Labor Code and the established jurisprudence on this provision - that is read into the decision. By the
nature of an illegal dismissal case, the reliefs continue to add on until full satisfaction, as expressed
under Article 279 of the Labor Code. The re-computation of the consequences of illegal dismissal upon
execution of the decision does not constitute an alteration or amendment of the final decision being
implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this
dismissal is affected and this is not a violation of the principle of immutability of final judgments.

xxxx

That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot avoid
as it is the risk that it ran when it continued to seek recourses against the [LA's] decision. Article 279
provides for the consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence
in its interpretation of when separation pay in lieu of reinstatement is allowed. When that happens, the
finality of the illegal dismissal decision becomes the reckoning point instead of the reinstatement that
the law decrees. In allowing separation pay, the final decision effectively declares that the employment
relationship ended so that separation pay and backwages are to be computed up to that point. The
decision also becomes a judgment for money from which another consequence flows - the payment of
interest in case of delay. This was what the CA correctly decreed when it provided for the payment of the
legal interest of 12% from the finality of the judgment, in accordance with our ruling in Eastern Shipping
Lines, Inc. v. [CA].

x x x The strict legalism in limiting the computation of the backwages and other benefits simply because
the Decision of the [LA] provided a computation only up to the date of the promulgation of his Decision
on November 6, 2000 cannot override or prejudice the substantive rights of an illegally dismissed
employee under the law and extant jurisprudence.

Likewise, pursuant to the above ruling of the Supreme Court, the monetary award in favor of [the
respondents] should earn legal interest at the rate of 12% from July 11, 2005, the date of the finality of
the Decision, as a necessary consequence of [the petitioners'] legal actions in questioning the execution
of the [LA's] Decision x x x.
xxxx

With regard to [the respondents'] claims for additional attorney's fees as well as moral and exemplary
damages, suffice it to state that the [LA] has already awarded [in their favor] the amount of P20,000.00
as attorney's fees but denied [their] claim for damages in his Decision dated November 6, 2000. Any
modification, which effectively increases or decreases the original amount awarded as attorney's fees is
not included or contemplated in the discussion above on re-computation of monetary awards. Pursuant
to the Session Delights Ice Cream and Fast Foods ruling, the award of attorney's fees involves a specific
sum and "would have continuing currency". If at all, the attorney's fees awarded in favor of [the
respondents] will earn legal interest pursuant to the rules laid down in Eastern Shipping Lines vs. [CA].

[The respondents'] claim for moral and exemplary damages was correctly denied by the [LA]. While their
dismissal may be illegal, there was no showing that [the petitioners] acted in bad faith, x x x.12 (Citations
omitted)

The CA, in the herein assailed Resolution issued on February 7, 2014, denied the petitioners' Motion for
Reconsideration.13ChanRoblesVirtualawlibrary

Issues

Unperturbed, the petitioners seek to reverse the CA's ruling by presenting before this Court the
arguments below:chanroblesvirtuallawlibrary

A.

A FINAL AND EXECUTORY DECISION IS IMMUTABLE AND CAN NO LONGER BE MODIFIED. THE ORDER OF
[LA] FLORES, AS SUSTAINED IN THE ASSAILED RULINGS, CANNOT MODIFY THE FINAL AND EXECUTORY
GAMBITO DECISION.ChanRoblesVirtualawlibrary

B.

EVEN ASSUMING ARGUENDO THAT THE RE-COMPUTATION OF AWARDS IS VALID, [UPI] IS NOT LIABLE TO
PAY BACKWAGES AND SEPARATION PAY FOR THE FULL PERIOD FROM 06 NOVEMBER 2000 UP TO 11 JULY
2005. RESPONDENTS WERE NOT REINSTATED IN THE GAMBITO DECISION.ChanRoblesVirtualawlibrary

C.

RESPONDENTS ARE NOT ENTITLED TO BACKWAGES AND SEPARATION PAY BEYOND THEIR RETIREMENT
AGES. NEITHER ARE THEY ENTITLED TO LEGAL INTEREST AT 12%.14chanrobleslaw

In support of the instant petition, the petitioners allege that the doctrines enunciated in Session Delights
Ice Cream and Fast Foods v. Court of Appeals (Sixth Division)15 do not apply in the case at bar. LA
Gambito explicitly qualified the award of backwages and separation pay to be computed from the date
of dismissal up to November 6, 2000. The said qualification appears both in the immutable and
computation portions of the judgment.16
The petitioners also lament that the writ of execution issued by LA Flores included an award of 13th
month pay, which is nowhere to be found in LA Gambito's decision.17

It is further claimed that the petitioners did not immediately satisfy LA Gambito's award because the
NLRC reversed the same. Hence, the petitioners cannot be faulted for relying upon the NLRC decision
and defending it before the CA. Consequently, even if backwages and separation pay were really due,
their computation should not include the period from February 21, 2002 to September 13, 2004,18
during which time the NLRCs disquisition that there was no illegal dismissal stood.19

The petitioners likewise aver that since Florentine and Nilda turned 60 on December 11, 2002 and April
30, 2002, respectively, backwages and separation pay could only be computed up to those dates. Under
both UPI's retirement plan and Article 28720 of the Labor Code, 60 is the optional retirement age. On
July 18, 2005, Florentino and Nilda filed separate claims for retirement benefits. They, in effect, had
admitted that 60 and not 65 is the retirement age for UPI's faculty members. Relevantly, in Espejo v.
NLRC,21 the Court ruled that an employee may retire, or may be retired by his employer upon reaching
the age of 60.[22

Lastly, the petitioners cite Nacar v. Gallery Frames23 to argue that legal interest should only be 6% and
not 12%.24

In their Comment,25cralawred the respondents insist that Florentine's compulsory retirement was due
only on the day before he turned 65 on December 11, 2002. Nilda, on the other hand, would have been
retired only on the day before she died on May 7, 2006.26 The respondents likewise claim that 12% and
not 6% should be imposed upon the award as annual interest.ChanRoblesVirtualawlibrary

Ruling of the Court

This Court affirms but modifies the ruling of the CA.

The issues, being interrelated, shall be discussed jointly.

Updating the computation of awards to include as well backwages and separation pay corresponding to
the period after the rendition of LA Gambito's decision on November 6, 2000 up to its finality on July 11,
2005 is not violative of the principle of immutability of a final and executory judgment.

This Court need not belabor the first two issues raised since they have been amply discussed by the CA
in the assailed decision and resolution.

In Session Delights aptly quoted by the CA and reiterated in several cases including Nacar and Gonzales v.
Solid Cement Corporation,27 the Court was emphatic that:chanroblesvirtuallawlibrary

[N]o essential change is made by a re-computation as this step is a necessary consequence that flows
from the nature of the illegality of dismissal declared in that decision. A re-computation (or an original
computation, if no previous computation has been made) is a part of the law—specifically, Article 279 of
the Labor Code and the established jurisprudence on this provision—that is read into the decision. By
the nature of an illegal dismissal case, the reliefs continue to add on until full satisfaction, as expressed
under Article 279 of the Labor Code. The re-computation of the consequences of illegal dismissal upon
execution of the decision does not constitute an alteration or amendment of the final decision being
implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this
dismissal is affected and this is not a violation of the principle of immutability of final judgments.

xxxx

That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot avoid
as it is the risk that it ran when it continued to seek recourses against the labor arbiter's decision. Article
279 provides for the consequences of illegal dismissal in no uncertain terms, qualified only by
jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that
happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the
reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares that
the employment relationship ended so that separation pay and backwages are to be computed up to
that point, x x x.28 (Citation omitted and underscoring ours)

Prescinding from the above, the Court finds no reversible error committed by the CA when it affirmed LA
Flores' Order dated August 22, 2006, which allowed the updating beyond November 6, 2000 of the
computation of backwages and separation pay awarded to the respondents. The CA correctly ruled that
the backwages should be computed from May 9, 2000, the date of illegal dismissal, up to July 11, 2005,
the date of the Entry of Judgment, while separation pay should be reckoned from the respective first
days of employment of Florentino and Nilda up to July 11, 2005 as well.

While the dispositive portion of the herein assailed CA decision did not explicitly refer to the 13th month
pay, its inclusion in the computation approved by LA Flores is proper.

Presidential Decree No. 85129 (P.D. No. 851) is the law directing the 13th month payment. On the other
hand, Article 279 of the Labor Code in part provides that an illegally-dismissed employee shall be
entitled to full backwages, inclusive of allowances, and other benefits or their monetary equivalent
computed from the time compensation was withheld up to the time of actual reinstatement.

In Gonzales, a final and executory decision of the LA did not explicitly award the 13th month pay. During
the execution proceedings, the NLRC included it in the computation. The CA deleted the same. This
Court thereafter ruled that the CA abused its discretion since "the 13th month pay fell due x x x by legal
mandate."30

In the body and dispositive portion of LA Gambito's Decision31 dated November 6, 2000, which became
final and executory on July 11, 2005, he did not explicitly include the 13th month pay in the award.
However, the decision stated that Florentino and Nilda were entitled to full backwages and other
benefits.

Subsequently, the Labor Arbitration Associate's updated computation of the award32 included the 13th
month pay and was approved by LA Flores through the latter's August 22, 2006 Order. The NLRC set
aside LA Flores' order, but the CA reinstated the same. The dispositive portion of the CA decision
expressly ordered the award of backwages, separation pay, attorney's fees and legal interest, but
conspicuously absent was a reference to the inclusion of the 13th month pay.33

The Court finds that despite the CA's non-explicit reference to the 13th month pay, following the
doctrine in Gonzales, its inclusion in the computation is proper. Entitlement to it is a right granted by P.D.
No. 851. Besides, the computation of award for backwages and other benefits is a mere legal
consequence of the finding that there was illegal dismissal.34

In computing the backwages and benefits awarded to the respondents, the reckoning period is not
interrupted by the NLRC's reversal of LA Gambito's finding of illegal dismissal.

The petitioners argue that even if backwages and benefits were really due, the computation should not
include the period from February 21, 2002 to September 13, 2004, during which time the NLRC's
disquisition that there was no illegal dismissal stood.

The argument fails to persuade.

In Gonzales, the Court stated that the increase in the amount that the corporation had to pay "is a
consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against
the [LA's] decision."35

Further, in Reyes v. NLRC, et al,36 the Court declared that:chanroblesvirtuallawlibrary

One of the natural consequences of a finding that an employee has been illegally dismissed is the
payment of backwages corresponding to the period from his dismissal up to actual reinstatement. The
statutory intent of this matter is clearly discernible. The payment of backwages allows the employee to
recover from the employer that which he has lost by way of wages as a result of his dismissal. Logically, it
must be computed from the date of petitioner's illegal dismissal up to the time of actual reinstatement.
There can be no gap or interruption, lest we defeat the very reason of the law in granting the same, x x
x.37 (Citation omitted and underscoring ours)

Although in Reyes, the issue relates to the delay in filing of the complaint for illegal dismissal from the
time of termination, there is no preclusion to apply the doctrine that there should be no gap or
interruption in the reckoning period during which the dismissed employee is entitled to backwages and
benefits. The statutory intent in the award of backwages and benefits is clear. Further, as declared in
Gonzales, an employer takes a risk in assailing the LA's finding of illegal dismissal, but there is no
insulation from the consequences therefrom.

The CA properly imposed a legal interest upon the total monetary award reckoned from the Entry of
Judgment on July 11, 2005 until full satisfaction thereof, but the Court modifies the rate indicated in the
assailed decision to conform to the doctrine in Nacar.

In Gonzales, the Court stated that when there is a finding of illegal dismissal and an award of backwages
and separation pay, "[t]he decision also becomes a judgment for money from which another
consequence flows—the payment of interest in case of delay."38

Again in Gonzales, the Court instructed that legal interest is imposable upon the "total unpaid judgment
amount, from the time x x x the decision (on the merits in the original case) became final."39

In the case at bar, the CA properly imposed the legal interest upon the total monetary award even if
none was explicitly included in the fine print of LA Gambito's decision and LA Flores' order. The
imposition of legal interest is not to be considered as an alteration of the final judgment to be executed.
The legal interest is already deemed read into the decision.

As to the correct rate of imposable interest, the petitioners argue that only 6% and not 12% is mandated
pursuant to the ruling in Nacar.

Nacar is instructive anent the rate of interest imposable upon the total adjudged monetary award,
viz:chanroblesvirtuallawlibrary

[T]he Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated May 16,
2013, approved the amendment of Section 240 of Circular No. 905, Series of 1982 and, accordingly,
issued Circular No. 799,41Series of 2013. effective July 1, 2013, the pertinent portion of which
reads:chanroblesvirtuallawlibrary

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2
of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are
hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would
govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and
the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the
case of Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions,
before its amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per annum effective
July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and
not retroactively. Consequently, the twelve percent (12%)per annum legal interest shall apply only until
June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate
of interest when applicable.
xxxx

Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013,
said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.42 (Some citations omitted and underscoring ours)

In Nacar, during the execution proceedings, the LA, NLRC and the CA did not impose a legal interest upon
the total adjudged award. Thereafter, this Court granted the petition filed before it by the dismissed
employee pleading for the imposition upon the monetary award of the legal interest, which the Court
declared to be 12% per annum from the date of the Entry of Judgment on May 27, 2002 to June 30,
2013, and 6% per annum from July 1, 2013 until their full satisfaction.

Similarly, in the case of Florentino and Nilda, LA Gambito's decision became final and executory on July
11, 2005, during which time, the prevailing rate of legal interest was 12%. Note, however, that LA
Gambito's decision and subsequently, even LA Flores' Order, dated August 22, 2006, made no explicit
award of legal interest. As discussed above though, the imposition of the legal interest is already deemed
read into the decision and order. For the same reason, the CA, in the herein assailed decision, expressly
included the said interest in the computation.

In Nacar, and in the case before this Court now", the judgments finding that the employees were illegally
dismissed became final and executory before July 1, 2013. In both cases too, the said judgments did not
explicitly include the imposition of the legal interest upon the total adjudged award. In the case of
Florentino and Nilda, it was the CA, which first expressly included the legal interest in the equation. In
Nacar, this Court made the explicit inclusion and pegged the rate at 12% from the date of the Entry of
Judgment up to June 30, 2013, and at 6% from July 1, 2013 until full satisfaction thereof. The
circumstances in the instant petition are similar to the foregoing, hence, Nacar finds application.
Consequently, the Court imposes upon the total adjudged award an interest of 12% interest per annum
reckoned from July 11, 2005 until June 30, 2013. The interest of 6% per annum is imposed from July 1,
2013 until full satisfaction of the judgment award.

The computation of backwages and

separation pay due to Florentino and Nilda

properly includes the period from 2002 to 2005.

The petitioners point out that Florentino and Nilda turned 60 on December 11, 2002 and April 30, 2002,
respectively. Thus, backwages and separation pay could only be computed up to those dates since under
both UPI's retirement plan and Article 287 of the Labor Code, 60 is the optional retirement age. Further,
on July 18, 2005, Florentino and Nilda filed separate claims for retirement benefits, hence, effectively
admitting that 60 and not 65 is the retirement age for UPI's faculty members.

Nilda and Florentino were born on April 30, 1942 and December 11, 1942, respectively. In 2002, both
had turned 60 and can opt to retire. The Court cannot, however, agree that this is the cut-off date for the
computation of backwages and separation pay due to them because of the reason's discussed below.
First, 60 is merely an optional but not the mandatory retirement age. Second, the evidence submitted do
not show at whose option it is to retire the faculty members before the age of 65. Third, there is no
proof whatsoever that the faculty members of UPI indeed retire at 60 years of age. Fourth, Florentino
and Nilda filed claims for retirement pay in 2005 when they were both 63, hence, their acts did not
necessarily constitute an admission that 60 is the retirement age for UPI's faculty members.

In view of the above, the Court finds that no mistake was committed by LA Flores and the CA in allowing
the computation of backwages and separation pay due to Florentino and Nilda to include the period
beyond 2002.

WHEREFORE, premises considered, the Decision of the Court of Appeals rendered on November 5, 2013,
and the Resolution issued on February 7, 2014 in CA-G.R. SP No. 107230 are AFFIRMED with
MODIFICATIONS. The petitioners herein, University of Pangasinan, Inc. and its former officials, Cesar
Duque, Juan Llamas Amor and Dominador Reyes are ORDERED TO PAY Florentino Fernandez and the
Heirs of Nilda Fernandez the following:chanroblesvirtuallawlibrary

(1) backwages, including the 13th month pay, to be computed from May 9, 2000, the date of illegal
dismissal from employment, up to July 11, 2005, the date of finality of the Court Resolution in G.R. No.
166103 per Entry of Judgment;cralawlawlibrary

(2) separation pay computed from Florentino Fernandez and Nilda Fernandez's respective first days of
employment with the University of Pangasinan, Inc. up to July 11, 2005 at the rate of one month pay per
year of service;cralawlawlibrary

(3) attorney's fees in the amount of P20,000.00; and

(4) interest of twelve percent (12%) per annum of the total monetary award, computed from July 11,
2005 to June 30, 2013, and six percent (6%) per annum from July 1,2013 until full satisfaction.

The LABOR ARBITER is hereby ORDERED to make a RECOMPUTATION of the total monetary benefits
awarded and due to Florentino Fernandez and Nilda Fernandez in accordance with this Resolution.

SO ORDERED.

• Wenphil Corporation v. Abing, April 7, 2014

BRION, J.:

We resolve this petition for review on certiorari1 under Rule 45 of the Rules of Court, challenging the
August 31, 2012 decision2 and the June 20, 2013 resolution3 (assailed CA rulings) of the Court of
Appeals (CA) in CA-G.R. SP No. 117366.

These assailed CA rulings annulled and set aside the March 26, 2010 Decision4 and September 15, 20105
resolution (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC CA No. 02-8233-01
(Rl-08).
The NLRC rulings, in turn, fully affirmed the November 16, 2007 Order6 of the Labor Arbiter (LA) in
NLRC-NCR Case Nos. 30-03-00993-00 and 30-03-01020-00. The LA’s order found that an illegal dismissal
took place. Thus, the LA directed petitioner Wenphil Corporation (Wenphil) to pay respondents Almer
Abing and Anabelle Tuazon (respondents) their backwages for the period from February 15, 2002 to
November 8, 2002, pursuant to the rule that an order of reinstatement is immediately executory even
pending appeal.7

Factual Antecedents

This case stemmed from a complaint for illegal dismissal filed by the respondents against Wenphil,
docketed as NLRC NCR Case No. 30-03-00993-00.

On December 8, 2000, LA Geobel A. Bartolabac ruled8 that the respondents had been illegally dismissed
by Wenphil. According to the LA, the allegation of serious misconduct against the respondents had no
factual and legal basis.9 Consequently, LA Bartolabac ordered Wenphil to immediately reinstate the
respondents to their respective positions or to equivalent ones, whether actuall or in the payroll. Also,
the LA ordered Wenphil to pay the respondents their backwages from February 3, 2000 until the date of
their actual reinstatement.10

Because of the unfavorable LA decision, Wenphil appealed to the NLRC on April 16, 200111. In the
meantime, the respondents moved for the immediate execution of the LA’s December 8, 2000
decision.12

On October 29, 2001, Wenphil and the respondents entered into a compromise agreement13 before LA
Bartolabac. They agreed to the respondents’ payroll reinstatement while Wenphil’s appeal with the NLRC
was ongoing. Wenphil also agreed to pay the accumulated salaries of the respondents for the payroll
period from April 5, 2001 until October 15, 2001.14 As for the remaining payroll period starting October
16, 2001, Wenphil committed itself to credit the respective salaries of the respondents to their ATM
payroll accounts until such time that the questioned decision of LA Bartolabac is either modified,
amended or reversed by the Honorable National Labor Relations Commission.15

On January 30, 2002, the NLRC issued a resolution16 affirming LA Bartolabac’s decision with
modifications. Instead of ordering the respondents’ reinstatement, the NLRC directed Wenphil to pay the
respondents their respective separation pay at the rate of one (1) month salary for every year of service.
Also, the NLRC found that while the respondents had been illegally dismissed, they had not been illegally
suspended. Thus, the period from February 3 to February 28, 2000 during which the respondents were
on preventive suspension – was excluded by the NLRC in the computation of the respondents’
backwages.17

Subsequently, Wenphil moved for the reconsideration18 of the NLRC’s January 30, 2002 resolution, but
the NLRC denied the motion in another resolution dated September 24, 2002.19

Wenphil thereafter went up to the CA via a petition for certiorari to question the NLRC’s January 30,
2002 and September 24, 2002 resolutions.20 On August 27, 2003, the CA rendered its decision21
reversing the NLRC’s finding that the respondents had been illegally dismissed. According to the CA,
there was enough evidence to show that the respondents had been guilty of serious misconduct; thus,
their dismissal was for a valid cause.22 The respondents moved for the reconsideration of the CA’s
decision.23 In a resolution24 dated February 23, 2004, the CA denied the respondents’ motion.

On appeal to the Supreme Court (SC) via Rule 45 (docketed as G.R. No. 16244725 and dated December
27, 2006), the SC denied the respondents petition for review on certiorari26 and affirmed the CA’s
August 27, 2003 decision and February 23, 2004 resolution. The respondents did not file any motion for
reconsideration to question the SC’s decision; thus, the decision became final and executory on February
15, 2007.27

The Labor Arbitration Rulings

Sometime after the SC’s decision in G.R. No. 162447 became final and executory, the respondents filed
with LA Bartolabac a motion for computation and issuance of writ of execution.28 The respondents
asserted in this motion that although the CA’s ruling on the absence of illegal dismissal (as affirmed by
the SC) was adverse to them, under the law and settled jurisprudence, they were still entitled to
backwages from the time of their dismissal until the NLRC’s decision finding them to be illegally
dismissed was reversed with finality.29

LA Bartolabac granted the respondents’ motion and, in an order dated November 16, 2007,30 directed
Wenphil to pay each complainant their salaries on reinstatement covering the period from February 15,
2002 (the date Wenphil last paid the respondents’ respective salaries) to November 8, 2002 (since the
NLRC’s decision finding the respondents illegally dismissed became final and executory on February 28,
2002).

Both parties appealed to the NLRC to question LA Bartolabac’s November 16, 2007 order.31 Wenphil
argued that the respondents were no longer entitled to payment of backwages in view of the
compromise agreement they executed on October 29, 2001. According to Wenphil, the compromise
agreement provided that Wenphil’s obligation to pay the respondents’ backwages should cease as soon
as LA Bartolabac’s decision was "modified, amended or reversed" by the NLRC. Since the NLRC modified
the LA’s ruling by ordering the payment of separation pay in lieu of reinstatement, then the respondents,
under the terms of the compromise agreement, were entitled to backwages only up to the finality of the
NLRC decision.32

The respondents questioned in their appeal the determined period for the computation of their
backwages; they posited that the period for payment should end, not on November 8, 2002, but on
February 14, 2007, since the SC’s decision which upheld the CA’s ruling became final and executory on
February 15, 2007.33

The NLRC denied the parties’ respective appeals in its decision dated March 26, 201034 and affirmed in
toto the LA’s order. Both parties moved for the reconsideration of the NLRC’s decision but the NLRC
denied their respective motions in the resolution of September 15, 2010.35
The CA’s Ruling

In its decision dated August 31, 2012,36 the CA reversed the NLRC rulings and prescribed a different
computation period.

The CA ruled that the NLRC committed grave abuse of discretion when it affirmed the LA’s computed
period which was from February 15, 2002 to November 8, 2002. In arriving at this conclusion, the CA
cited the case of Pfizer v. Velasco37 where this Court ruled that even if the order of reinstatement of the
Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the
dismissed employee’s wages during the period of appeal until reversal by the higher court.38 The CA
construed this "higher court" to be the CA, not the SC.

The CA reasoned out that it was a "higher court" than the NLRC when it reversed the NLRC’s rulings;
thus, the period for computation should end when it promulgated its decision reversing that of the
NLRC, and not on the date when the SC affirmed its decision.

The CA likewise held that the compromise agreement did not contain any waiver of rights for any award
the respondents might have received when the NLRC changed or modified the LA’s award.39

The Petition

In its petition for review with this Court, Wenphil maintained that the respondents were no longer
entitled to payment of backwages in view of the modification of the LA’s ruling by the NLRC pursuant
with their October 29, 2001 compromise agreement.

Wenphil argued that the CA utterly disregarded the terms of the parties’ compromise agreement whose
terms were very clear; the agreement reads:

3. That for the payroll period from October 16-31 and thereafter, their [respondents] salaries (net of
withholding tax, SSS, Philhealth and Pag-ibig) shall be credited every 10th and 25th of the succeeding
months through their respective ATM employee’s account until such time that the questioned decision
of the Honorable Labor Arbiter Geobel Bartolabac is modified, amended or reversed by the Honorable
Labor Relations Commission.40 [emphasis ours]

It was Wenphil’s assertion that since the NLRC’s decision partly changed the decision of LA Bartolabac by
ordering payment of separation pay in lieu of reinstatement, the NLRC decision was a "modification" that
should operate to remove Wenphil’s obligation to pay the respondents’ backwages for the period of the
CA’s reversal of the NLRC’s illegal dismissal ruling.41 According to Wenphil, the words of the compromise
agreement left no room for interpretation as to the parties’ intentions;42 as a valid agreement between
the parties, it must be given effect and respected by the court.

Wenphil also contended that the CA’s cited Pfizer case cannot apply to the present case since there was
no compromise agreement in Pfizer where the dismissed employee waived her entitlement to
backwages.43
Finally, Wenphil claimed that the reliefs of reinstatement and backwages are only available to illegally
dismissed employees. A ruling that the respondents were still entitled to reinstatement pay
notwithstanding the validity of their dismissal, would amount to the court’s tolerance of an unjust and
equitable situation.44

The Court’s Ruling

We resolve to DENY the petition. An order of reinstatement is immediately executory even pending
appeal. The employer has the obligation to reinstate and pay the wages of the dismissed employee
during the period of appeal until reversal by the higher court.

Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory,
even pending appeal. The employee shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation, or at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement."

The Court discussed reason behind this legal policy in Aris v. NLRC,45 where it explained:

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy
which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the
working-man. These provisions are the quintessence of the aspirations of the workingman for
recognition of his role in the social and economic life of the nation, for the protection of his rights, and
the promotion of his welfare… These duties and responsibilities of the State are imposed not so much to
express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary
social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an
indispensable partner for the nation's progress and stability. [emphasis ours]

Since the decision is immediately executory, it is the duty of the employer to comply with the order of
reinstatement, which can be done either actually or through payroll reinstatement. As provided under
Article 223 of the Labor Code, this immediately executory nature of an order of reinstatement is not
affected by the existence of an ongoing appeal. The employer has the duty to reinstate the employee in
the interim period until a reversal is decreed by a higher court or tribunal.

In the case of payroll reinstatement, even if the employer’s appeal turns the tide in its favor, the
reinstated employee has no duty to return or reimburse the salary he received during the period that the
lower court or tribunal’s governing decision was for the employee’s illegal dismissal.

Otherwise, the situation would run counter to the immediately executory nature of an order of
reinstatement. The case of Garcia v. Philippine Airlines46 is enlightening on this point:

Even outside the theoretical trappings of the discussion and into the mundane realities of human
experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter
could harm, more than help, a dismissed employee. The employee, to make both ends meet, would
necessarily have to use up the salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the
employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to
refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available.1âwphi1
Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and
raring to return to work.

We see the situation discussed above to be present in the case before us as Wenphil observed the
mandate of Article 223 to immediately comply with the order of reinstatement by the LA. On October
29, 2001, while Wenphil’s appeal with the NLRC was pending, it entered into a compromise agreement
with the respondents. In this agreement, Wenphil committed to reinstate the respondents in its payroll.
However, the commitment came with a condition: Wenphil stipulated that its obligation to pay the
wages due to the respondents would cease if the decision of the LA would be "modified, amended or
reversed" by the NLRC.47

Thus, when the NLRC rendered its decision on the appeal affirming the LA’s finding that the respondents
were illegally dismissed, but modifying the award of reinstatement to payment of separation pay,
Wenphil stopped paying the respondents’ wages.

The reinstatement salaries due to the respondents were, by their nature, payment of unworked
backwages. These were salaries due to the respondents because they had been prevented from working
despite the LA and the NLRC findings that they had been illegally dismissed.

We point out that reinstatement and backwages are two separate reliefs available to an illegally
dismissed employee. The normal consequences of a finding that an employee has been illegally
dismissed are: first, that the employee becomes entitled to reinstatement to his former position without
loss of seniority rights; and second, the payment of backwages covers the period running from his illegal
dismissal up to his actual reinstatement.48 These two reliefs are not inconsistent with one another and
the labor arbiter can award both simultaneously.

Moreover, the relief of separation pay may be granted in lieu of reinstatement but it cannot be a
substitute for the payment of backwages. In instances where reinstatement is no longer feasible because
of strained relations between the employee and the employer, separation pay should be granted. In
effect, an illegally dismissed employee should be entitled to either reinstatement – if viable, or
separation pay if reinstatement is no longer be viable, plus backwages in either instance.49 The rationale
for such policy of distinction was vividly explained in Santos v. NLRC under these terms:50

Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-
availability of the other. Separation pay was awarded in favor of petitioner Lydia Santos because the
NLRC found that her reinstatement was no longer feasible or appropriate. As the term suggests,
separation pay is the amount that an employee receives at the time of his severance from the service
and, as correctly noted by the Solicitor General in his Comment, is designed to provide the employee
with "the wherewithal during the period that he is looking for another employment." In the instant case,
the grant of separation pay was a substitute for immediate and continued re-employment with the
private respondent Bank. The grant of separation pay did not redress the injury that is intended to be
relieved by the second remedy of backwages, that is, the loss of earnings that would have accrued to the
dismissed employee during the period between dismissal and reinstatement. Put a little differently,
payment of backwages is a form of relief that restores the income that was lost by reason of unlawful
dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period
the dismissed employee must undergo before locating a replacement job. It was grievous error
amounting to grave abuse of discretion on the part of the NLRC to have considered an award of
separation pay as equivalent to the aggregate relief constituted by reinstatement plus payment of
backwages under Article 280 of the Labor Code. The grant of separation pay was a proper substitute only
for reinstatement; it could not be an adequate substitute both for reinstatement and for backwages. In
effect, the NLRC in its assailed decision failed to give to petitioner the full relief to which she was entitled
under the statute. [emphasis ours]

Apparently, when the NLRC changed the LA’s decision (specifically, the order to award separation pay in
lieu of reinstatement), Wenphil read this to mean to be the "modification" envisioned in the compromise
agreement, Wenphil likewise effectively concluded that separation pay and backwages are the same or
are interchangeable reliefs. This conclusion can be deduced from Wenphil’s insistence not to pay the
respondent’s remaining backwages under its erroneous reasoning that this was the effect of the NLRC’s
order to Wenphil to pay separation pay in lieu of reinstatement.

We emphasize that the basis for the payment of backwages is different from that of the award of
separation pay. Separation pay is granted where reinstatement is no longer advisable because of strained
relations between the employee and the employer. Backwages represent compensation that should have
been earned but were not collected because of the unjust dismissal. The basis for computing separation
pay is usually the length of the employee’s past service, while that for backwages is the actual period
when the employee was unlawfully prevented from working.51

Had Wenphil really wanted to put a stop to the running of the period for the payment of the
respondents’ backwages, then it should have immediately complied with the NLRC’s order to award the
employees their separation pay in lieu of reinstatement. This action would have immediately severed the
employer-employee relationship. However, the records are bereft of any evidence that Wenphil actually
paid the respondents’ separation pay. Thus, the employer-employee relationship between Wenphil and
the respondents never ceased and the employment status remained pending and uncertain until the CA
actually rendered its decision that the respondents had not been illegally dismissed. In the context of the
parties’ agreement, it was only at this point that the payment of backwages should have stopped.

A compromise agreement should not be contrary to law, morals, good customs and public policy.

While it is true that a compromise agreement is binding between the parties and becomes the law
between them,52 it is also a rule that to be valid, a compromise agreement must not be contrary to law,
morals, good customs and public policy.53

In the present case, the parties’ compromise agreement simply provided that Wenphil’s obligation to pay
the respondents’ backwages shall end the moment the NLRC modifies, amends or reverses the illegal
dismissal decision of LA Bartolabac. On its face, there is nothing invalid with such stipulation. Indeed,
had the NLRC reversed the LA, the obligation to pay backwages would have stopped. The NLRC, however,
did not decree a reversal of the finding of illegal dismissal. In fact, it affirmed the illegal dismissal
conclusion, confining itself merely to a modification of the consequences of the illegal dismissal – from
reinstatement to the payment of separation pay.

This "modification" of course we cannot accept; the option under the legal policy is solely limited to a
ruling that the respondents had not been illegally dismissed. Otherwise, we would be violating the Labor
Code’s policy entitling illegally dismissed employees to their right to backwages even during the period
of appeal. As we held in the case of Garcia v. Philippine Airlines:54

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court. It settles the view that
the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-
admit them to work under the same terms and conditions prevailing prior to their dismissal, or to
reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must
pay the employee’s salaries. [emphasis ours]

This ruling embodies a principle and policy of the law that cannot be watered down by any lesser
agreement except perhaps when backwages are already earned entitlements that the employee chooses
to surrender for a valuable consideration (and even then, the consideration must at least be equitable).
This legal policy emphasizes, too, the rule that separation pay cannot be a substitute for backwages but
only for reinstatement. The award of separation pay is not inconsistent with the payment of backwages.
Thus, until a higher court’s or tribunal’s reversal of the finding that an employee had been illegally
dismissed, the employee would be entitled to receive his reinstatement salary or backwages during the
period of appeal until such reversal. This is in line with the Labor Code’s policy that an order of
reinstatement, which can either be actual or through the payroll, is immediately executory and is not
affected by the period of appeal.

Period for Computation of Backwages

The records show that the inconsistency between the labor arbitration rulings and the CA’s ruling was on
the period for the computation of such backwages and not on whether the respondents were still
entitled to such backwages during the period of appeal until the reversal of the finding of illegal
dismissal.

According to the LA, whose ruling the NLRC affirmed, the period for computation should be from
February 15, 2002 until November 8, 2002 since the NLRC’s decision which affirmed the LA’s finding of
illegal dismissal became final and executory on November 8, 2002. The LA started the counting of the
period on February 15, 2002 since that was the day when Wenphil last paid the respondents’ backwages.

On the other hand, the CA, in setting aside the NLRC’s rulings, relied on the case of Pfizer v. Velasco
where we ruled that the backwages of the dismissed employee should be granted during the period of
appeal until reversal by a higher court. Since the first CA decision which found that the respondents had
not been illegally dismissed was promulgated on August 27, 2003, then the reversal by the higher court
was effectively made on August 27, 2003.

As against this view, the respondents argued that the period for payment of their backwages should end
on February 14, 2007 since the SC decision in G.R. No. 162447 which affirmed the CA’s findings that the
respondents had not been legally dismissed became final and executory on February 15, 2007.

Among these views, the commanding one is the rule in Pfizer, which merely echoes the rulings we made
in the cases of Roquero v. Philippine Airlines55 and Garcia v. Philippine Airlines56 that the period for
computing the backwages due to the respondents during the period of appeal should end on the date
that a higher court reversed the labor arbitration ruling of illegal dismissal. In this case, the higher court
which first reversed the NLRC’s ruling was not the SC but rather the CA. In this light, the CA was correct
when it found that that the period of computation should end on August 27, 2003. The date when the
SC’s decision became final and executory need not matter as the rule in Roquero, Garcia and Pfizer
merely referred to the date of reversal, not the date of the ultimate finality of such reversal.

As a last minor detail, we do not agree with the CA that the date of computation should start on
February 15, 2002. Rather, it should be on February 16, 2002. The respondents themselves admitted in
their motion for computation and issuance of writ of execution that the last date when they were paid
their backwages was on February 15, 2002. To start the computation on the same date would result to a
duplication of wages for this day; thus, computation should start on the following date - February 16,
2002.

WHEREFORE, in light of these considerations, we hereby DENY the petition. The Court of Appeals'
decision dated August 31, 2012 and resolution dated June 20, 2013, which annulled and set aside the
March 26, 2010 decision and September 15, 2010 resolution of the NLRC, are hereby AFFIRMED with
MODIFICATION. The period for the computation of backwages of respondents Almer R. Abing and
Anabelle M. Tuazon should be from February 16, 2002 until August 27, 2003, when the Court of Appeals
promulgated its decision reversing the NLRC' s finding of illegal dismissal. No costs.

SO ORDERED.

• CICM Mission Seminaries v. Perez, January 18, 2017

MENDOZA, J.:

In this petition for review on certiorari[1] under Rule 45 of the Rules of Court, petitioner C.I.C.M. Mission
Seminaries (Maryhurst, Maryheights, Maryshore and Maryhill) School of Theology, Inc., and Fr. Romeo
Nimez, CICM (petitioners), seek the review of the May 27, 2015 Decision[2] and September 7, 2015
Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP. No. 137132.

In the assailed rulings, the CA dismissed the petitioners' petition for certiorari filed under Rule 65 of the
Rules of Court questioning the September 8, 2014 Resolution of the National Labor Relations
Commission (NLRC) in LER Case No. 07-205-14, which affirmed the July 10, 2014 Order of the Labor
Arbiter (LA) in NLRC Case No. NCR-12-14242-07, issued in favor of Maria Veronica C. Perez (respondent).

The Antecedents

This controversy is an offshoot of an illegal dismissal case filed by the respondent against the petitioners.
In its June 16, 2008 Decision, the LA recognized respondent's right to receive from the petitioners
backwages and separation pay in lieu of reinstatement. Thus, it ordered the petitioners to pay
respondent the aggregate amount of P286,670.58. The LA decision was affirmed by the NLRC, by the CA
and by this Court in G.R. No. 200490.

The decision became final and executory on October 4, 2012, as evidenced by the Entry of Judgment.
Consequently, respondent moved for the issuance of a writ of execution. The petitioners opposed and
moved for the issuance of a certificate of satisfaction of judgment, alleging that their obligation had been
satisfied by the release of the cash bond in the amount of P272,337.05 to respondent.

In its July 10, 2014 Order, the LA ruled that the cash bond posted by the petitioners was insufficient to
satisfy their obligation. Thus, it ordered the issuance of a writ of execution, to wit:

After evaluation, this Office deems it proper to grant [respondent's] Motion for Issuance of Writ of
Execution. The fact that [petitioner CICM's] cash bond has been released to respondent in the amount of
P272,337.05 does not mean full satisfaction of the award as petitioner CICM insists.

The Decision dated 16 June 200[8] which was affirmed by the Commission, the Court of Appeals and the
Supreme Court specifically states that [respondent] is entitled to backwages and separation pay until the
finality of the Decision. Further, the Resolution of the Court of Appeals dated February 2, 2012 stressed
the need to recompute the monetary award specifically with regard to the payment of backwages,
separation pay and attorney's fees, so as to update the total monetary award to which respondent is
entitled in accordance with prevailing laws and jurisprudence.

This Office therefore ordered the recomputation of complainant's award of additional backwages from
07 June 2008 until 04 October 2012, the finality of the Supreme Court decision, and additional
separation pay also until 04 October 2012. The total award therefore is P1,847,088.89. From this amount
should be deducted the amount respondent received at P272,337.05. Thus, the additional backwages
and separation pay due is P1,575,751.84. Since there is no more legal hindrance in the enforcement of
the judgment; this Office orders the issuance of the writ of execution.[4]

Undaunted, the petitioners elevated an appeal before the NLRC. Nevertheless, in its September 8, 2014
Decision, the NLRC affirmed the ruling of the LA.

Aggrieved, the petitioners filed a petition for certiorari with the CA.
Meanwhile, the LA issued an undated writ of execution addressed to the Sheriff, who, in tum,
implemented it by garnishing upon CICM's bank deposit with BPI Family Savings Bank. CICM moved for
the urgent quashal of the said writ and for the garnishment to be lifted.

On January 14, 2015, the LA issued an order lifting the notice of garnishment made on CICM's bank
accounts. Nonetheless, on April 13, 2015, the LA still ordered the issuance of a writ of execution to
enforce the balance of the judgment award. The dispositive portion reads:

WHEREFORE, premises considered, the Urgent Motion to Quash Writ of Execution is granted. The Writ of
Execution dated 3 October 2014 is hereby ordered quashed effective immediately. The Motion to Lift
Garnishment of CICM Missionaries, Inc.'s account with BPI Family Savings Bank will be lifted upon
release of its bond covered by BPI Check No. 0000704053 in the amount of P266,670.58 (O.R. No.
6742637) to [respondent].

Let a Writ of Execution be issued against [petitioners] to enforce the balance of the judgment award.[5]

On May 27, 2015, the CA dismissed the petition filed by the petitioners. The petitioners moved for
reconsideration. In its September 7, 2015 Resolution, the CA denied their motion.

Hence, this petition.

The petitioners, therefore, ask this Court to determine "what should be the legal basis for the
computation of the backwages and separation pay of an illegally dismissed employee in a case where
reinstatement was not ordered despite appeals made by said employee which [delayed] the final
resolution of the issue on reinstatement."[6]

The petitioners challenge the affirmation by the CA and NLRC of the July 10, 2014 Order of the LA, which
recomputed respondent's award of additional backwages and separation pay until October 4, 2012, the
finality of this Court's decision in G.R. No. 200490. They argue that the computation of backwages and
separation pay of respondent should be only up to June 16, 2008, the date when the LA rendered her
decision in the main case and which was also the date when reinstatement was refused. They contend
that although the cases cited by the CA - Surima v. NLRC,[7] Gaco v. NLRC,[8] Oscar Ledesma and
Company v. NLRC,[9] Labor v. NLRC, [10] Rasonable v. NLRC [11] and Bustamante v. NLRC,[12] commonly
held that the computation of the separation pay and backwages shall be up to the time of finality of this
Court's decision, the same were not applicable to their case. They point varying factual antecedents and
claim that in the cases mentioned, the employers were the ones who appealed, thereby delaying the
resolution of the illegal dismissal cases before the LA. Thus, the increase in the awards should necessarily
be shouldered by the employer. This circumstance, however, is not present in this case. In other words,
they posit that if the employer caused the delay in satisfying the judgment award, the computation
should be up to the finality of the case. If it were the employee's fault, as in this case, the computation
should only run until the time actual reinstatement is no longer possible nor practicable.[13]

In her Comment,[14] respondent argued that the recomputation of the total monetary award should be
until October 4, 2012 (the date when the main case became final); and that her appeal of the main case
should not prejudice her as she had the right to file the same.

In their Reply,[15] the petitioners contended that the computation made by the LA in the main case,
which has become final and executory, could no longer be disturbed following the doctrine of
immutability of judgment.

The Court's Ruling

The Court finds no merit in the petition.

To begin with, the petitioners failed to append the required affidavit of service. The rule is, such affidavit
is essential to due process and the orderly administration of justice even if it is used merely as proof that
service has been made on the other party.[16] The utter disregard of this requirement as held in a catena
of cases cannot be justified by harking to substantial justice and the policy of liberal construction of the
Rules. Indeed, technical rules of procedure are not meant to frustrate the ends of justice. Rather, they
serve to effect the proper and orderly disposition of cases and, thus, effectively prevent the clogging of
court dockets.[17] Thus, in Ferrer v. Villanueva,[18] the Court held that petitioner's failure to append the
proof of service to his petition for certiorari was a fatal defect.

Hence, the denial of this case is in order.

For the guidance of the bench and the bar, however, the Court opts to also delve into the merits of the
case.

As a precept, the Court's duty in a Rule 45 petition, assailing the decision of the CA in a labor case
elevated to it through a Rule 65 petition, is limited only to the determination of whether the CA
committed an error in judgment in declaring the absence or existence, as the case may be, of grave
abuse of discretion on the part of the NLRC.[19]

As a consequence, the Court shall examine only whether the CA erred in not finding grave abuse of
discretion when the NLRC affirmed the LA's findings that the separation pay in lieu of reinstatement as
well as backwages due to respondent should be recomputed until the finality of the Court's decision in
G.R. No. 200490, despite the fact that the delay in the resolution of the said case was brought about by
respondent herself.

On this point, the Court rules in the negative.

Grave abuse of discretion, which has been defined as a capricious and whimsical exercise of judgment so
patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law,[20] requires proof that the CA committed errors such that its decision was not made in
contemplation of law. The burden of proof rests upon the party who asserts.[21]

The petitioners, however, failed to carry out such burden.

The decision of the CA is based on long standing jurisprudence that in the event the aspect of
reinstatement is disputed, backwages, including separation pay, shall be computed from the time of
dismissal until the finality of the decision ordering the separation pay. In Gaco v. NLRC,[22] it was ruled
that with respect to the payment of backwages and separation pay in lieu of reinstatement of an illegally
dismissed employee, the period shall be reckoned from the time compensation was withheld up to the
finality of this Court's decision. This was reiterated in Surima v. NLRC [23] and Session Delights Ice Cream
and Fast Foods v. CA.[24]

The reason for this was explained in Bani Rural Bank, Inc. v. De Guzman.[25] When there is an order of
separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or subsequently
ordered in light of a supervening event making the award of reinstatement no longer possible), the
employment relationship is terminated only upon the finality of the decision ordering the separation
pay. The finality of the decision cuts-off the employment relationship and represents the final settlement
of the rights and obligations of the parties against each other. Hence, backwages no longer accumulate
upon the finality of the decision ordering the payment of separation pay because the employee is no
longer entitled to any compensation from the employer by reason of the severance of his employment.
One cannot, therefore, attribute patent error on the part of the CA when it merely affirmed the NLRC's
conclusion, which was clearly based on jurisprudence.

Plainly, it does not matter if the delay caused by an appeal was brought about by the employer or by the
employee. The rule is, if the LA's decision, which granted separation pay in lieu of reinstatement, is
appealed by any party, the employer-employee relationship subsists and until such time when decision
becomes final and executory, the employee is entitled to all the monetary awards awarded by the LA.

In this case, respondent remained an employee of the petitioners pending her partial appeal. Her
employment was only severed when this Court, in G.R. No. 200490, affirmed with finality the rulings of
the CA and the labor tribunals declaring her right to separation pay instead of actual reinstatement.
Accordingly, she is entitled to have her backwages and separation pay computed until October 4, 2012,
the date when the judgment of this Court became final and executory, as certified by the Clerk of Court,
per the Entry of Judgment in G.R. No. 200490.

The Court would not have expected the CA and the NLRC to rule contrary to the above pronouncements.
If it were otherwise, all employees who are similarly situated will be forced to relinquish early on their
fight for reinstatement, a remedy, which the law prefers over severance of employment relation.
Furthermore, to favor the petitioners' position is nothing short of a derogation of the State's policy to
protect the rights of workers and their welfare under Article II, Section 8 of the 1987 Constitution.[26]

The petitioners, nonetheless, claim that it was not their fault why the amounts due ballooned to the
present level. They are mistaken. Suffice it to state that had they not illegally dismissed respondent, they
will not be where they are today. They took the risk and must suffer the consequences.

Finally, the Court disagrees with the petitioners' assertion that a recomputation would violate the
doctrine of immutability of judgment. It has been settled that no essential change is made by a
recomputation as this step is a necessary consequence that flows from the nature of the illegality of
dismissal declared in that decision. By the nature of an illegal dismissal case, the reliefs continue to add
on until full satisfaction thereof. The recomputation of the awards stemming from an illegal dismissal
case does not constitute an alteration or amendment of the final decision being implemented. The illegal
dismissal ruling stands; only the computation of the monetary consequences of the dismissal is affected
and this is not a violation of the principle of immutability of final judgments.[27]

WHEREFORE, the petition is DENIED. The Temporary Restraining Order issued by this Court on February
3, 2016 is hereby LIFTED.

SO ORDERED.

K. Appeal Bond

• McBurnie v. Ganzon, EGI-Managers, Inc., October 17, 2013

REYES, J.:

For resolution are the –

(1) third motion for reconsideration1 filed by Eulalio Ganzon (Ganzon), EGI-Managers, Inc. (EGI) and E.
Ganzon, Inc. (respondents) on March 27, 2012, seeking a reconsideration of the Court’s Decision2 dated
September 18, 2009 that ordered the dismissal of their appeal to the National Labor Relations
Commission (NLRC) for failure to post additional appeal bond in the amount of ₱54,083,910.00; and

(2) motion for reconsideration3 filed by petitioner Andrew James McBurnie (McBurnie) on September
26, 2012, assailing the Court en banc’s Resolution4 dated September 4, 2012 that (1) accepted the case
from the Court’s Third Division and (2) enjoined the implementation of the Labor Arbiter’s (LA) decision
finding him to be illegally dismissed by the respondents.

Antecedent Facts

The Decision dated September 18, 2009 provides the following antecedent facts and proceedings –

On October 4, 2002, McBurnie, an Australian national, instituted a complaint for illegal dismissal and
other monetary claims against the respondents. McBurnie claimed that on May 11, 1999, he signed a
five-year employment agreement5 with the company EGI as an Executive Vice-President who shall
oversee the management of the company’s hotels and resorts within the Philippines. He performed
work for the company until sometime in November 1999, when he figured in an accident that compelled
him to go back to Australia while recuperating from his injuries. While in Australia, he was informed by
respondent Ganzon that his services were no longer needed because their intended project would no
longer push through.

The respondents opposed the complaint, contending that their agreement with McBurnie was to jointly
invest in and establish a company for the management of hotels. They did not intend to create an
employer-employee relationship, and the execution of the employment contract that was being invoked
by McBurnie was solely for the purpose of allowing McBurnie to obtain an alien work permit in the
Philippines. At the time McBurnie left for Australia for his medical treatment, he had not yet obtained a
work permit.
In a Decision6 dated September 30, 2004, the LA declared McBurnie as having been illegally dismissed
from employment, and thus entitled to receive from the respondents the following amounts: (a)
US$985,162.00 as salary and benefits for the unexpired term of their employment contract, (b)
₱2,000,000.00 as moral and exemplary damages, and (c) attorney’s fees equivalent to 10% of the total
monetary award.

Feeling aggrieved, the respondents appealed the LA’s Decision to the NLRC.7 On November 5, 2004, they
filed their Memorandum of Appeal8 and Motion to Reduce Bond9, and posted an appeal bond in the
amount of ₱100,000.00. The respondents contended in their Motion to Reduce Bond, inter alia, that the
monetary awards of the LA were null and excessive, allegedly with the intention of rendering them
incapable of posting the necessary appeal bond. They claimed that an award of "more than ₱60 Million
Pesos to a single foreigner who had no work permit and who left the country for good one month after
the purported commencement of his employment" was a patent nullity.10 Furthermore, they claimed
that because of their business losses that may be attributed to an economic crisis, they lacked the
capacity to pay the bond of almost ₱60 Million, or even the millions of pesos in premium required for
such bond.

On March 31, 2005, the NLRC denied11 the motion to reduce bond, explaining that "in cases involving
monetary award, an employer seeking to appeal the [LA’s] decision to the Commission is unconditionally
required by Art. 223, Labor Code to post bond in the amount equivalent to the monetary award x x x."12
Thus, the NLRC required from the respondents the posting of an additional bond in the amount of
₱54,083,910.00.

When their motion for reconsideration was denied,13 the respondents decided to elevate the matter to
the Court of Appeals (CA) via the Petition for Certiorari and Prohibition (With Extremely Urgent Prayer
for the Issuance of a Preliminary Injunction and/or Temporary Restraining Order)14 docketed as CA-G.R.
SP No. 90845.

In the meantime, in view of the respondents’ failure to post the required additional bond, the NLRC
dismissed their appeal in a Resolution15 dated March 8, 2006. The respondents’ motion for
reconsideration was denied on June 30, 2006.16 This prompted the respondents to file with the CA the
Petition for Certiorari (With Urgent Prayers for the Immediate Issuance of a Temporary Restraining Order
and a Writ of Preliminary Injunction)17 docketed as CA-G.R. SP No. 95916, which was later consolidated
with CA-G.R. SP No. 90845.

CA-G.R. SP Nos. 90845 and 95916

On February 16, 2007, the CA issued a Resolution18 granting the respondents’ application for a writ of
preliminary injunction. It directed the NLRC, McBurnie, and all persons acting for and under their
authority to refrain from causing the execution and enforcement of the LA’s decision in favor of
McBurnie, conditioned upon the respondents’ posting of a bond in the amount of ₱10,000,000.00.
McBurnie sought reconsideration of the issuance of the writ of preliminary injunction, but this was
denied by the CA in its Resolution19 dated May 29, 2007.
McBurnie then filed with the Court a Petition for Review on Certiorari20 docketed as G.R. Nos. 178034
and 178117, assailing the CA Resolutions that granted the respondents’ application for the injunctive
writ. On July 4, 2007, the Court denied the petition on the ground of McBurnie’s failure to comply with
the 2004 Rules on Notarial Practice and to sufficiently show that the CA committed any reversible
error.21 A motion for reconsideration was denied with finality in a Resolution22 dated October 8, 2007.

Unyielding, McBurnie filed a Motion for Leave (1) To File Supplemental Motion for Reconsideration and
(2) To Admit the Attached Supplemental Motion for Reconsideration,23 which was treated by the Court
as a second motion for reconsideration, a prohibited pleading under Section 2, Rule 56 of the Rules of
Court. Thus, the motion for leave was denied by the Court in a Resolution24 dated November 26, 2007.
The Court’s Resolution dated July 4, 2007 then became final and executory on November 13, 2007;
accordingly, entry of judgment was made in G.R. Nos. 178034 and 178117.25

In the meantime, the CA ruled on the merits of CA-G.R. SP No. 90845 and CA-G.R. SP No. 95916 and
rendered its Decision26 dated October 27, 2008, allowing the respondents’ motion to reduce appeal
bond and directing the NLRC to give due course to their appeal. The dispositive portion of the CA
Decision reads:

WHEREFORE, in view of the foregoing, the petition for certiorari and prohibition docketed as CA GR SP
No. 90845 and the petition for certiorari docketed as CA GR SP No. 95916 are GRANTED. Petitioners’
Motion to Reduce Appeal Bond is GRANTED. Petitioners are hereby DIRECTED to post appeal bond in the
amount of ₱10,000,000.00. The NLRC is hereby DIRECTED to give due course to petitioners’ appeal in CA
GR SP No. 95916 which is ordered remanded to the NLRC for further proceedings.

SO ORDERED.27

On the issue28 of the NLRC’s denial of the respondents’ motion to reduce appeal bond, the CA ruled
that the NLRC committed grave abuse of discretion in immediately denying the motion without fixing an
appeal bond in an amount that was reasonable, as it denied the respondents of their right to appeal
from the decision of the LA.29 The CA explained that "(w)hile Art. 223 of the Labor Code requiring bond
equivalent to the monetary award is explicit, Section 6, Rule VI of the NLRC Rules of Procedure, as
amended, recognized as exception a motion to reduce bond upon meritorious grounds and upon posting
of a bond in a reasonable amount in relation to the monetary award."30

On the issue31 of the NLRC’s dismissal of the appeal on the ground of the respondents’ failure to post
the additional appeal bond, the CA also found grave abuse of discretion on the part of the NLRC,
explaining that an appeal bond in the amount of ₱54,083,910.00 was prohibitive and excessive.
Moreover, the appellate court cited the pendency of the petition for certiorari over the denial of the
motion to reduce bond, which should have prevented the NLRC from immediately dismissing the
respondents’ appeal.32

Undeterred, McBurnie filed a motion for reconsideration. At the same time, the respondents moved that
the appeal be resolved on the merits by the CA. On March 3, 2009, the CA issued a Resolution33 denying
both motions. McBurnie then filed with the Court the Petition for Review on Certiorari34 docketed as
G.R. Nos. 186984-85.

In the meantime, the NLRC, acting on the CA’s order of remand, accepted the appeal from the LA’s
decision, and in its Decision35 dated November 17, 2009, reversed and set aside the Decision of the LA,
and entered a new one dismissing McBurnie’s complaint. It explained that based on records, McBurnie
was never an employee of any of the respondents, but a potential investor in a project that included said
respondents, barring a claim of dismissal, much less, an illegal dismissal. Granting that there was a
contract of employment executed by the parties, McBurnie failed to obtain a work permit which would
have allowed him to work for any of the respondents.36 In the absence of such permit, the employment
agreement was void and thus, could not be the source of any right or obligation.

Court Decision dated September 18, 2009

On September 18, 2009, the Third Division of this Court rendered its Decision37 which reversed the CA
Decision dated October 27, 2008 and Resolution dated March 3, 2009. The dispositive portion reads:

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP Nos. 90845
and 95916 dated October 27, 2008 granting respondents’ Motion to Reduce Appeal Bond and ordering
the National Labor Relations Commission to give due course to respondents’ appeal, and its March 3,
2009 Resolution denying petitioner’s motion for reconsideration, are REVERSED and SET ASIDE. The
March 8, 2006 and June 30, 2006 Resolutions of the National Labor Relations Commission in NLRC NCR
CA NO. 042913-05 dismissing respondents’ appeal for failure to perfect an appeal and denying their
motion for reconsideration, respectively, are REINSTATED and AFFIRMED.

SO ORDERED.38

The Court explained that the respondents’ failure to post a bond equivalent in amount to the LA’s
monetary award was fatal to the appeal.39 Although an appeal bond may be reduced upon motion by an
employer, the following conditions must first be satisfied: (1) the motion to reduce bond shall be based
on meritorious grounds; and (2) a reasonable amount in relation to the monetary award is posted by the
appellant. Unless the NLRC grants the motion to reduce the cash bond within the 10-day reglementary
period to perfect an appeal from a judgment of the LA, the employer is mandated to post the cash or
surety bond securing the full amount within the said 10-day period.40 The respondents’ initial appeal
bond of ₱100,000.00 was grossly inadequate compared to the LA’s monetary award.

The respondents’ first motion for reconsideration41 was denied by the Court for lack of merit via a
Resolution42 dated December 14, 2009.

Meanwhile, on the basis of the Court’s Decision, McBurnie filed with the NLRC a motion for
reconsideration with motion to recall and expunge from the records the NLRC Decision dated November
17, 2009.43 The motion was granted by the NLRC in its Decision44 dated January 14, 2010.45

Undaunted by the denial of their first motion for reconsideration of the Decision dated September 18,
2009, the respondents filed with the Court a Motion for Leave to Submit Attached Second Motion for
Reconsideration46 and Second Motion for Reconsideration,47 which motion for leave was granted in a
Resolution48 dated March 15, 2010. McBurnie was allowed to submit his comment on the second
motion, and the respondents, their reply to the comment. On January 25, 2012, however, the Court
issued a Resolution49 denying the second motion "for lack of merit," "considering that a second motion
for reconsideration is a prohibited pleading x x x."50

The Court’s Decision dated September 18, 2009 became final and executory on March 14, 2012. Thus,
entry of judgment51 was made in due course, as follows:

ENTRY OF JUDGMENT

This is to certify that on September 18, 2009 a decision rendered in the above-entitled cases was filed in
this Office, the dispositive part of which reads as follows:

xxxx

and that the same has, on March 14, 2012 become final and executory and is hereby recorded in the
Book of Entries of Judgments.52

The Entry of Judgment indicated that the same was made for the Court’s Decision rendered in G.R. Nos.
186984-85.

On March 27, 2012, the respondents filed a Motion for Leave to File Attached Third Motion for
Reconsideration, with an attached Motion for Reconsideration (on the Honorable Court’s 25 January
2012 Resolution) with Motion to Refer These Cases to the Honorable Court En Banc.53 The third motion
for reconsideration is founded on the following grounds:

I.

THE PREVIOUS 15 MARCH 2010 RESOLUTION OF THE HONORABLE COURT ACTUALLY GRANTED
RESPONDENTS’ "MOTION FOR LEAVE TO SUBMIT A SECOND MOTION FOR RECONSIDERATION."

HENCE, RESPONDENTS RESPECTFULLY CONTEND THAT THE SUBSEQUENT 25 JANUARY 2012 RESOLUTION
CANNOT DENY THE " SECOND MOTION FOR RECONSIDERATION " ON THE GROUND THAT IT IS A
PROHIBITED PLEADING. MOREOVER, IT IS RESPECTFULLY CONTENDED THAT THERE ARE VERY PECULIAR
CIRCUMSTANCES AND NUMEROUS IMPORTANT ISSUES IN THESE CASES THAT CLEARLY JUSTIFY GIVING
DUE COURSE TO RESPONDENTS’ "SECOND MOTION FOR RECONSIDERATION," WHICH ARE:

II.

THE 10 MILLION PESOS BOND WHICH WAS POSTED IN COMPLIANCE WITH THE OCTOBER 27, 2008
DECISION OF THE COURT OF APPEALS IS A SUBSTANTIAL AND SPECIAL MERITORIOUS CIRCUMSTANCE TO
MERIT RECONSIDERATION OF THIS APPEAL.

III.

THE HONORABLE COURT HAS HELD IN NUMEROUS LABOR CASES THAT WITH RESPECT TO ARTICLE 223
OF THE LABOR CODE, THE REQUIREMENTS OF THE LAW SHOULD BE GIVEN A LIBERAL INTERPRETATION,
ESPECIALLY IF THERE ARE SPECIAL MERITORIOUS CIRCUMSTANCES AND ISSUES.

IV. THE LA’S JUDGMENT WAS PATENTLY VOID SINCE IT AWARDS MORE THAN ₱60 MILLION PESOS TO A
SINGLE FOREIGNER WHO HAD NO WORK PERMIT, AND NO WORKING VISA.

V.

PETITIONER MCBURNIE DID NOT IMPLEAD THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) IN
HIS APPEAL HEREIN, MAKING THE APPEAL INEFFECTIVE AGAINST THE NLRC.

VI.

NLRC HAS DISMISSED THE COMPLAINT OF PETITIONER MCBURNIE IN ITS NOVEMBER 17, 2009 DECISION.

VII.

THE HONORABLE COURT’S 18 SEPTEMBER 2009 DECISION WAS TAINTED WITH VERY SERIOUS
IRREGULARITIES.

VIII.

GR NOS. 178034 AND 178117 HAVE BEEN INADVERTENTLY INCLUDED IN THIS CASE.

IX.

THE HONORABLE COURT DID NOT DULY RULE UPON THE OTHER VERY MERITORIOUS ARGUMENTS OF
THE RESPONDENTS WHICH ARE AS FOLLOWS:

(A) PETITIONER NEVER ATTENDED ANY OF ALL 14 HEARINGS BEFORE THE [LA] (WHEN 2 MISSED
HEARINGS MEAN DISMISSAL).

(B) PETITIONER REFERRED TO HIMSELF AS A "VICTIM" OF LEISURE EXPERTS, INC., BUT NOT OF ANY OF
THE RESPONDENTS.

(C) PETITIONER’S POSITIVE LETTER TO RESPONDENT MR. EULALIO GANZON CLEARLY SHOWS THAT HE
WAS NOT ILLEGALLY DISMISSED NOR EVEN DISMISSED BY ANY OF THE RESPONDENTS AND PETITIONER
EVEN PROMISED TO PAY HIS DEBTS FOR ADVANCES MADE BY RESPONDENTS.

(D) PETITIONER WAS NEVER EMPLOYED BY ANY OF THE RESPONDENTS. PETITIONER PRESENTED WORK
FOR CORONADO BEACH RESORT WHICH IS [NEITHER] OWNED NOR CONNECTED WITH ANY OF THE
RESPONDENTS.

(E) THE [LA] CONCLUDED THAT PETITIONER WAS DISMISSED EVEN IF THERE WAS ABSOLUTELY NO
EVIDENCE AT ALL PRESENTED THAT PETITIONER WAS DISMISSED BY THE RESPONDENTS.

(F) PETITIONER LEFT THE PHILIPPINES FOR AUSTRALIA JUST 2 MONTHS AFTER THE START OF THE
ALLEGED EMPLOYMENT AGREEMENT, AND HAS STILL NOT RETURNED TO THE PHILIPPINES AS
CONFIRMED BY THE BUREAU OF IMMIGRATION.
(G) PETITIONER COULD NOT HAVE SIGNED AND PERSONALLY APPEARED BEFORE THE NLRC
ADMINISTERING OFFICER AS INDICATED IN THE COMPLAINT SHEET SINCE HE LEFT THE COUNTRY 3
YEARS BEFORE THE COMPLAINT WAS FILED AND HE NEVER CAME BACK.54

On September 4, 2012, the Court en banc55 issued a Resolution56 accepting the case from the Third
Division. It also issued a temporary restraining order (TRO) enjoining the implementation of the LA’s
Decision dated September 30, 2004. This prompted McBurnie’s filing of a Motion for Reconsideration,57
where he invoked the fact that the Court’s Decision dated September 18, 2009 had become final and
executory, with an entry of judgment already made by the Court.

Our Ruling

In light of pertinent law and jurisprudence, and upon taking a second hard look of the parties’ arguments
and the records of the case, the Court has ascertained that a reconsideration of this Court’s Decision
dated September 18, 2009 and Resolutions dated December 14, 2009 and January 25, 2012, along with
the lifting of the entry of judgment in G.R. No. 186984-85, is in order.

The Court’s acceptance of the

third motion for reconsideration

At the outset, the Court emphasizes that second and subsequent motions for reconsideration are, as a
general rule, prohibited. Section 2, Rule 52 of the Rules of Court provides that "no second motion for
reconsideration of a judgment or final resolution by the same party shall be entertained." The rule rests
on the basic tenet of immutability of judgments. "At some point, a decision becomes final and executory
and, consequently, all litigations must come to an end."58

The general rule, however, against second and subsequent motions for reconsideration admits of settled
exceptions. For one, the present Internal Rules of the Supreme Court, particularly Section 3, Rule 15
thereof, provides:

Sec. 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 banc 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.

x x x x (Emphasis ours)

In a line of cases, the Court has then entertained and granted second motions for reconsideration "in the
higher interest of substantial justice," as allowed under the Internal Rules when the assailed decision is
"legally erroneous," "patently unjust" and "potentially capable of causing unwarranted and irremediable
injury or damage to the parties." In Tirazona v. Philippine EDS Techno-Service, Inc. (PET, Inc.),59 we also
explained that a second motion for reconsideration may be allowed in instances of "extraordinarily
persuasive reasons and only after an express leave shall have been obtained."60 In Apo Fruits
Corporation v. Land Bank of the Philippines,61 we allowed a second motion for reconsideration as the
issue involved therein was a matter of public interest, as it pertained to the proper application of a basic
constitutionally-guaranteed right in the government’s implementation of its agrarian reform program. In
San Miguel Corporation v. NLRC,62 the Court set aside the decisions of the LA and the NLRC that favored
claimants-security guards upon the Court’s review of San Miguel Corporation’s second motion for
reconsideration. In Vir-Jen Shipping and Marine Services, Inc. v. NLRC, et al.,63 the Court en banc
reversed on a third motion for reconsideration the ruling of the Court’s Division on therein private
respondents’ claim for wages and monetary benefits.

It is also recognized that in some instances, the prudent action towards a just resolution of a case is for
the Court to suspend rules of procedure, for "the power of this Court to suspend its own rules or to
except a particular case from its operations whenever the purposes of justice require it, cannot be
questioned."64 In De Guzman v. Sandiganbayan,65 the Court, thus, explained:

The rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice.
Their strict and rigid application, which would result in technicalities that tend to frustrate rather than
promote substantial justice, must always be avoided. Even the Rules of Court envision this liberality. This
power to suspend or even disregard the rules can be so pervasive and encompassing so as to alter even
that which this Court itself has already declared to be final, as we are now compelled to do in this case. x
x x.

xxxx

The Rules of Court was conceived and promulgated to set forth guidelines in the dispensation of justice
but not to bind and chain the hand that dispenses it, for otherwise, courts will be mere slaves to or
robots of technical rules, shorn of judicial discretion. That is precisely why courts in rendering real justice
have always been, as they in fact ought to be, conscientiously guided by the norm that when on the
balance, technicalities take a backseat against substantive rights, and not the other way around. Truly
then, technicalities, in the appropriate language of Justice Makalintal, "should give way to the realities of
the situation." x x x.66 (Citations omitted)

Consistent with the foregoing precepts, the Court has then reconsidered even decisions that have
attained finality, finding it more appropriate to lift entries of judgments already made in these cases. In
Navarro v. Executive Secretary,67 we reiterated the pronouncement in De Guzman that the power to
suspend or even disregard rules of procedure can be so pervasive and compelling as to alter even that
which this Court itself has already declared final. The Court then recalled in Navarro an entry of
judgment after it had determined the validity and constitutionality of Republic Act No. 9355, explaining
that:

Verily, the Court had, on several occasions, sanctioned the recall of entries of judgment in light of
attendant extraordinary circumstances. The power to suspend or even disregard rules of procedure can
be so pervasive and compelling as to alter even that which this Court itself had already declared final. In
this case, the compelling concern is not only to afford the movants-intervenors the right to be heard
since they would be adversely affected by the judgment in this case despite not being original parties
thereto, but also to arrive at the correct interpretation of the provisions of the [Local Government Code
(LGC)] with respect to the creation of local government units. x x x.68 (Citations omitted)

In Munoz v. CA,69 the Court resolved to recall an entry of judgment to prevent a miscarriage of justice.
This justification was likewise applied in Tan Tiac Chiong v. Hon. Cosico,70 wherein the Court held that:

The recall of entries of judgments, albeit rare, is not a novelty. In Muñoz v. CA , where the case was
elevated to this Court and a first and second motion for reconsideration had been denied with finality ,
the Court, in the interest of substantial justice, recalled the Entry of Judgment as well as the letter of
transmittal of the records to the Court of Appeals.71 (Citation omitted)

In Barnes v. Judge Padilla,72 we ruled:

A final and executory judgment can no longer be attacked by any of the parties or be modified, directly
or indirectly, even by the highest court of the land.

However, this Court has relaxed this rule in order to serve substantial justice considering (a) matters of
life, liberty, honor or property, (b) the existence of special or compelling circumstances, (c) the merits of
the case, (d) a cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules, (e) a lack of any showing that the review sought is merely frivolous and dilatory,
and (f) the other party will not be unjustly prejudiced thereby.73 (Citations omitted)

As we shall explain, the instant case also qualifies as an exception to, first, the proscription against
second and subsequent motions for reconsideration, and second, the rule on immutability of judgments;
a reconsideration of the Decision dated September 18, 2009, along with the Resolutions dated
December 14, 2009 and January 25, 2012, is justified by the higher interest of substantial justice.

To begin with, the Court agrees with the respondents that the Court’s prior resolve to grant , and not just
merely note, in a Resolution dated March 15, 2010 the respondents’ motion for leave to submit their
second motion for reconsideration already warranted a resolution and discussion of the motion for
reconsideration on its merits. Instead of doing this, however, the Court issued on January 25, 2012 a
Resolution74 denying the motion to reconsider for lack of merit, merely citing that it was a "prohibited
pleading under Section 2, Rule 52 in relation to Section 4, Rule 56 of the 1997 Rules of Civil Procedure, as
amended."75 In League of Cities of the Philippines (LCP) v. Commission on Elections,76 we reiterated a
ruling that when a motion for leave to file and admit a second motion for reconsideration is granted by
the Court, the Court therefore allows the filing of the second motion for reconsideration. In such a case,
the second motion for reconsideration is no longer a prohibited pleading. Similarly in this case, there was
then no reason for the Court to still consider the respondents’ second motion for reconsideration as a
prohibited pleading, and deny it plainly on such ground. The Court intends to remedy such error through
this resolution.

More importantly, the Court finds it appropriate to accept the pending motion for reconsideration and
resolve it on the merits in order to rectify its prior disposition of the main issues in the petition. Upon
review, the Court is constrained to rule differently on the petitions. We have determined the grave error
in affirming the NLRC’s rulings, promoting results that are patently unjust for the respondents, as we
consider the facts of the case, pertinent law, jurisprudence, and the degree of the injury and damage to
the respondents that will inevitably result from the implementation of the Court’s Decision dated
September 18, 2009.

The rule on appeal bonds

We emphasize that the crucial issue in this case concerns the sufficiency of the appeal bond that was
posted by the respondents. The present rule on the matter is Section 6, Rule VI of the 2011 NLRC Rules
of Procedure, which was substantially the same provision in effect at the time of the respondents’ appeal
to the NLRC, and which reads:

RULE VI

APPEALS

Sec. 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 cash or surety bond. The
appeal bond shall either be in cash or surety in an amount equivalent to the monetary award, exclusive
of damages and attorney’s fees.

xxxx

No motion to reduce bond shall be entertained except on meritorious grounds and upon the posting of a
bond in a reasonable amount in relation to the monetary award.

The filing of the motion to reduce bond without compliance with the requisites in the preceding
paragraph shall not stop the running of the period to perfect an appeal. (Emphasis supplied)

While the CA, in this case, allowed an appeal bond in the reduced amount of ₱10,000,000.00 and then
ordered the case’s remand to the NLRC, this Court’s Decision dated September 18, 2009 provides
otherwise, as it reads in part:

The posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards
from the decision of the Labor Arbiter. The lawmakers clearly intended to make the bond a mandatory
requisite for the perfection of an appeal by the employer as inferred from the provision that an appeal
by the employer may be perfected "only upon the posting of a cash or surety bond." The word "only"
makes it clear that the posting of a cash or surety bond by the employer is the essential and exclusive
means by which an employer’s appeal may be perfected. x x x.

Moreover, the filing of the bond is not only mandatory but a jurisdictional requirement as well, that must
be complied with in order to confer jurisdiction upon the NLRC. Non-compliance therewith renders the
decision of the Labor Arbiter final and executory. This requirement is 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 is intended to discourage employers from using an appeal to delay or evade their
obligation to satisfy their employees’ just and lawful claims.

xxxx

Thus, it behooves the Court to give utmost regard to the legislative and administrative intent to strictly
require the employer to post a cash or surety bond securing the full amount of the monetary award
within the 10[-]day reglementary period. Nothing in the Labor Code or the NLRC Rules of Procedure
authorizes the posting of a bond that is less than the monetary award in the judgment, or would deem
such insufficient posting as sufficient to perfect the appeal.

While the bond may be reduced upon motion by the employer, this is subject to the conditions that (1)
the motion to reduce the bond shall be based on meritorious grounds; and (2) a reasonable amount in
relation to the monetary award is posted by the appellant, otherwise the filing of the motion to reduce
bond shall not stop the running of the period to perfect an appeal. The qualification effectively requires
that unless the NLRC grants the reduction of the cash bond within the 10-day reglementary period, the
employer is still expected to post the cash or surety bond securing the full amount within the said 10-day
period. If the NLRC does eventually grant the motion for reduction after the reglementary period has
elapsed, the correct relief would be to reduce the cash or surety bond already posted by the employer
within the 10-day period.77 (Emphasis supplied; underscoring ours)

To begin with, the Court rectifies its prior pronouncement – the unqualified statement that even an
appellant who seeks a reduction of an appeal bond before the NLRC is expected to post a cash or surety
bond securing the full amount of the judgment award within the 10-day reglementary period to perfect
the appeal.

The suspension of the period to

perfect the appeal upon the filing of

a motion to reduce bond

To clarify, the prevailing jurisprudence on the matter provides that the filing of a motion to reduce bond,
coupled with compliance with the two conditions emphasized in Garcia v. KJ Commercial78 for the grant
of such motion, namely, (1) a meritorious ground, and (2) posting of a bond in a reasonable amount,
shall suffice to suspend the running of the period to perfect an appeal from the labor arbiter’s decision
to the NLRC.79 To require the full amount of the bond within the 10-day reglementary period would only
render nugatory the legal provisions which allow an appellant to seek a reduction of the bond. Thus, we
explained in Garcia:

The filing of a motion to reduce bond and compliance with the two conditions stop the running of the
period to perfect an appeal. x x x

xxxx
The NLRC has full discretion to grant or deny the motion to reduce bond, and it may rule on the motion
beyond the 10-day period within which to perfect an appeal. Obviously, at the time of the filing of the
motion to reduce bond and posting of a bond in a reasonable amount, there is no assurance whether
the appellant’s motion is indeed based on "meritorious ground" and whether the bond he or she posted
is of a "reasonable amount." Thus, the appellant always runs the risk of failing to perfect an appeal.

x x x In order to give full effect to the provisions on motion to reduce bond, the appellant must be
allowed to wait for the ruling of the NLRC on the motion even beyond the 10-day period to perfect an
appeal. If the NLRC grants the motion and rules that there is indeed meritorious ground and that the
amount of the bond posted is reasonable, then the appeal is perfected. If the NLRC denies the motion,
the appellant may still file a motion for reconsideration as provided under Section 15, Rule VII of the
Rules. If the NLRC grants the motion for reconsideration and rules that there is indeed meritorious
ground and that the amount of the bond posted is reasonable, then the appeal is perfected. If the NLRC
denies the motion, then the decision of the labor arbiter becomes final and executory.

xxxx

In any case, the rule that the filing of a motion to reduce bond shall not stop the running of the period to
perfect an appeal is not absolute. The Court may relax the rule. In Intertranz Container Lines, Inc. v.
Bautista, the Court held:

"Jurisprudence tells us that in labor cases, an appeal from a decision involving a monetary award may be
perfected only upon the posting of cash or surety bond. The Court, however, has relaxed this
requirement under certain exceptional circumstances in order to resolve controversies on their merits.
These circumstances include: (1) fundamental consideration of substantial justice; (2) prevention of
miscarriage of justice or of unjust enrichment; and (3) special circumstances of the case combined with
its legal merits, and the amount and the issue involved."80 (Citations omitted and emphasis ours)

A serious error of the NLRC was its outright denial of the motion to reduce the bond, without even
considering the respondents’ arguments and totally unmindful of the rules and jurisprudence that allow
the bond’s reduction. Instead of resolving the motion to reduce the bond on its merits, the NLRC insisted
on an amount that was equivalent to the monetary award, merely explaining:

We are constrained to deny respondents’ motion for reduction. As held by the Supreme Court in a recent
case, in cases involving monetary award, an employer seeking to appeal the Labor Arbiter’s decision to
the Commission is unconditionally required by Art. 223, Labor Code to post bond in the amount
equivalent to the monetary award (Calabash Garments vs. NLRC, G.R. No. 110827, August 8, 1996). x x
x81 (Emphasis ours)

When the respondents sought to reconsider, the NLRC still refused to fully decide on the motion. It
refused to at least make a preliminary determination of the merits of the appeal, as it held:

We are constrained to dismiss respondents’ Motion for Reconsideration. Respondents’ contention that
the appeal bond is excessive and based on a decision which is a patent nullity involves the merits of the
case. x x x82

Prevailing rules and jurisprudence

allow the reduction of appeal bonds.

By such haste of the NLRC in peremptorily denying the respondents’ motion without considering the
respondents’ arguments, it effectively denied the respondents of their opportunity to seek a reduction
of the bond even when the same is allowed under the rules and settled jurisprudence. It was equivalent
to the NLRC’s refusal to exercise its discretion, as it refused to determine and rule on a showing of
meritorious grounds and the reasonableness of the bond tendered under the circumstances.83 Time and
again, the Court has cautioned the NLRC to give Article 223 of the Labor Code, particularly the provisions
requiring bonds in appeals involving monetary awards, a liberal interpretation in line with the desired
objective of resolving controversies on the merits.84 The NLRC’s failure to take action on the motion to
reduce the bond in the manner prescribed by law and jurisprudence then cannot be countenanced.
Although an appeal by parties from decisions that are adverse to their interests is neither a natural right
nor a part of due process, it is an essential part of our judicial system. Courts should proceed with
caution so as not to deprive a party of the right to appeal, but rather, ensure that every party has the
amplest opportunity for the proper and just disposition of their cause, free from the constraints of
technicalities.85 Considering the mandate of labor tribunals, the principle equally applies to them.

Given the circumstances of the case, the Court’s affirmance in the Decision dated September 18, 2009 of
the NLRC’s strict application of the rule on appeal bonds then demands a re-examination. Again, the
emerging trend in our jurisprudence is to afford every party-litigant the amplest opportunity for the
proper and just determination of his cause, free from the constraints of technicalities.86 Section 2, Rule I
of the NLRC Rules of Procedure also provides the policy that "the Rules shall be liberally construed to
carry out the objectives of the Constitution, the Labor Code of the Philippines and other relevant
legislations, and to assist the parties in obtaining just, expeditious and inexpensive resolution and
settlement of labor disputes."87

In accordance with the foregoing, although the general rule provides that an appeal in labor cases from a
decision involving a monetary award may be perfected only upon the posting of a cash or surety bond,
the Court has relaxed this requirement under certain exceptional circumstances in order to resolve
controversies on their merits. These circumstances include: (1) the fundamental consideration of
substantial justice; (2) the prevention of miscarriage of justice or of unjust enrichment; and (3) special
circumstances of the case combined with its legal merits, and the amount and the issue involved.88
Guidelines that are applicable in the reduction of appeal bonds were also explained in Nicol v. Footjoy
Industrial Corporation.89 The bond requirement in appeals involving monetary awards has been and
may be relaxed in meritorious cases, including instances in which (1) there was substantial compliance
with the Rules, (2) surrounding facts and circumstances constitute meritorious grounds to reduce the
bond, (3) a liberal interpretation of the requirement of an appeal bond would serve the desired objective
of resolving controversies on the merits, or (4) the appellants, at the very least, exhibited their
willingness and/or good faith by posting a partial bond during the reglementary period.90
In Blancaflor v. NLRC,91 the Court also emphasized that while Article 22392 of the Labor Code, as
amended by Republic Act No. 6715, which requires a cash or surety bond in an amount equivalent to the
monetary award in the judgment appealed from may be considered a jurisdictional requirement for the
perfection of an appeal, nevertheless, adhering to the principle that substantial justice is better served
by allowing the appeal on the merits to be threshed out by the NLRC, the foregoing requirement of the
law should be given a liberal interpretation.

As the Court, nonetheless, remains firm on the importance of appeal bonds in appeals from monetary
awards of LAs, we stress that the NLRC, pursuant to Section 6, Rule VI of the NLRC Rules of Procedure,
shall only accept motions to reduce bond that are coupled with the posting of a bond in a reasonable
amount. Time and again, we have explained that the bond requirement imposed upon appellants in
labor cases is intended to ensure the satisfaction of awards that are made in favor of appellees, in the
event that their claims are eventually sustained by the courts.93 On the part of the appellants, its
posting may also signify their good faith and willingness to recognize the final outcome of their appeal.

At the time of a motion to reduce appeal bond’s filing, the question of what constitutes "a reasonable
amount of bond" that must accompany the motion may be subject to differing interpretations of
litigants. The judgment of the NLRC which has the discretion under the law to determine such amount
cannot as yet be invoked by litigants until after their motions to reduce appeal bond are accepted.

Given these limitations, it is not uncommon for a party to unduly forfeit his opportunity to seek a
reduction of the required bond and thus, to appeal, when the NLRC eventually disagrees with the party’s
assessment. These have also resulted in the filing of numerous petitions against the NLRC, citing an
alleged grave abuse of discretion on the part of the labor tribunal for its finding on the sufficiency or
insufficiency of posted appeal bonds.

It is in this light that the Court finds it necessary to set a parameter for the litigants’ and the NLRC’s
guidance on the amount of bond that shall hereafter be filed with a motion for a bond’s reduction. To
ensure that the provisions of Section 6, Rule VI of the NLRC Rules of Procedure that give parties the
chance to seek a reduction of the appeal bond are effectively carried out, without however defeating the
benefits of the bond requirement in favor of a winning litigant, all motions to reduce bond that are to be
filed with the NLRC shall be accompanied by the posting of a cash or surety bond equivalent to 10% of
the monetary award that is subject of the appeal, which shall provisionally be deemed the reasonable
amount of the bond in the meantime that an appellant’s motion is pending resolution by the
Commission. In conformity with the NLRC Rules, the monetary award, for the purpose of computing the
necessary appeal bond, shall exclude damages and attorney’s fees.94 Only after the posting of a bond in
the required percentage shall an appellant’s period to perfect an appeal under the NLRC Rules be
deemed suspended.

The foregoing shall not be misconstrued to unduly hinder the NLRC’s exercise of its discretion, given that
the percentage of bond that is set by this guideline shall be merely provisional. The NLRC retains its
authority and duty to resolve the motion and determine the final amount of bond that shall be posted
by the appellant, still in accordance with the standards of "meritorious grounds" and "reasonable
amount". Should the NLRC, after considering the motion’s merit, determine that a greater amount or the
full amount of the bond needs to be posted by the appellant, then the party shall comply accordingly.
The appellant shall be given a period of 10 days from notice of the NLRC order within which to perfect
the appeal by posting the required appeal bond.

Meritorious ground as a condition

for the reduction of the appeal bond

In all cases, the reduction of the appeal bond shall be justified by meritorious grounds and accompanied
by the posting of the required appeal bond in a reasonable amount.

The requirement on the existence of a "meritorious ground" delves on the worth of the parties’
arguments, taking into account their respective rights and the circumstances that attend the case. The
condition was emphasized in University Plans Incorporated v. Solano,95 wherein the Court held that
while the NLRC’s Revised Rules of Procedure "allows the [NLRC] to reduce the amount of the bond, the
exercise of the authority is not a matter of right on the part of the movant, but lies within the sound
discretion of the NLRC upon a showing of meritorious grounds."96 By jurisprudence, the merit referred
to may pertain to an appellant’s lack of financial capability to pay the full amount of the bond,97 the
merits of the main appeal such as when there is a valid claim that there was no illegal dismissal to justify
the award,98 the absence of an employer-employee relationship,99 prescription of claims,100 and other
similarly valid issues that are raised in the appeal.101 For the purpose of determining a "meritorious
ground", the NLRC is not precluded from receiving evidence, or from making a preliminary
determination of the merits of the appellant’s contentions.102

In this case, the NLRC then should have considered the respondents’ arguments in the memorandum on
appeal that was filed with the motion to reduce the requisite appeal bond. Although a consideration of
said arguments at that point would have been merely preliminary and should not in any way bind the
eventual outcome of the appeal, it was apparent that the respondents’ defenses came with an indication
of merit that deserved a full review of the decision of the LA. The CA, by its Resolution dated February
16, 2007, even found justified the issuance of a preliminary injunction to enjoin the immediate execution
of the LA’s decision, and this Court, a temporary restraining order on September 4, 2012.

Significantly, following the CA’s remand of the case to the NLRC, the latter even rendered a Decision that
contained findings that are inconsistent with McBurnie’s claims. The NLRC reversed and set aside the
decision of the LA, and entered a new one dismissing McBurnie’s complaint. It explained that McBurnie
was not an employee of the respondents; thus, they could not have dismissed him from employment.
The purported employment contract of the respondents with the petitioner was qualified by the
conditions set forth in a letter dated May 11, 1999, which reads:

May 11, 1999

MR. ANDREW MCBURNIE

Re: Employment Contract

Dear Andrew,

It is understood that this Contract is made subject to the understanding that it is effective only when the
project financing for our Baguio Hotel project pushed through.

The agreement with EGI Managers, Inc. is made now to support your need to facilitate your work permit
with the Department of Labor in view of the expiration of your contract with Pan Pacific.

Regards,

Sgd. Eulalio Ganzon (p. 203, Records)103

For the NLRC, the employment agreement could not have given rise to an employer-employee
relationship by reason of legal impossibility. The two conditions that form part of their agreement,
namely, the successful completion of the project financing for the hotel project in Baguio City and
McBurnie’s acquisition of an Alien Employment Permit, remained unsatisfied.104 The NLRC concluded
that McBurnie was instead a potential investor in a project that included Ganzon, but the said project
failed to pursue due to lack of funds. Any work performed by McBurnie in relation to the project was
merely preliminary to the business venture and part of his "due diligence" study before pursuing the
project, "done at his own instance, not in furtherance of the employment contract but for his own
investment purposes."105 Lastly, the alleged employment of the petitioner would have been void for
being contrary to law, since it is undisputed that McBurnie did not have any work permit. The NLRC
declared:

Absent an employment permit, any employment relationship that McBurnie contemplated with the
respondents was void for being contrary to law. A void or inexistent contract, in turn, has no force and
effect from the beginning as if it had never been entered into. Thus, without an Alien Employment
Permit, the "Employment Agreement" is void and could not be the source of a right or obligation. In
support thereof, the DOLE issued a certification that McBurnie has neither applied nor been issued an
Alien Employment Permit (p. 204, Records).106

McBurnie moved to reconsider, citing the Court’s Decision of September 18, 2009 that reversed and set
aside the CA’s Decision authorizing the remand. Although the NLRC granted the motion on the said
ground via a Decision107 that set aside the NLRC’s Decision dated November 17, 2009, the findings of
the NLRC in the November 17, 2009 decision merit consideration, especially since the findings made
therein are supported by the case records.

In addition to the apparent merit of the respondents’ appeal, the Court finds the reduction of the appeal
bond justified by the substantial amount of the LA’s monetary award. Given its considerable amount, we
find reason in the respondents’ claim that to require an appeal bond in such amount could only deprive
them of the right to appeal, even force them out of business and affect the livelihood of their
employees.108 In Rosewood Processing, Inc. v. NLRC,109 we emphasized: "Where a decision may be
made to rest on informed judgment rather than rigid rules, the equities of the case must be accorded
their due weight because labor determinations should not be ‘secundum rationem but also secundum
caritatem.’"110

What constitutes a reasonable

amount in the determination of the

final amount of appeal bond

As regards the requirement on the posting of a bond in a "reasonable amount," the Court holds that the
final determination thereof by the NLRC shall be based primarily on the merits of the motion and the
main appeal.

Although the NLRC Rules of Procedure, particularly Section 6 of Rule VI thereof, provides that the bond
to be posted shall be "in a reasonable amount in relation to the monetary award ," the merit of the
motion shall always take precedence in the determination. Settled is the rule that procedural rules were
conceived, and should thus be applied in a manner that would only aid the attainment of justice. If a
stringent application of the rules would hinder rather than serve the demands of substantial justice, the
former must yield to the latter.111

Thus, in Nicol where the appellant posted a bond of ₱10,000,000.00 upon an appeal from the LA’s award
of ₱51,956,314.00, the Court, instead of ruling right away on the reasonableness of the bond’s amount
solely on the basis of the judgment award, found it appropriate to remand the case to the NLRC, which
should first determine the merits of the motion. In University Plans,112 the Court also reversed the
outright dismissal of an appeal where the bond posted in a judgment award of more than
₱30,000,000.00 was ₱30,000.00. The Court then directed the NLRC to first determine the merit, or lack
of merit, of the motion to reduce the bond, after the appellant therein claimed that it was under
receivership and thus, could not dispose of its assets within a short notice. Clearly, the rule on the
posting of an appeal bond should not be allowed to defeat the substantive rights of the parties.113

Notably, in the present case, following the CA’s rendition of its Decision which allowed a reduced appeal
bond, the respondents have posted a bond in the amount of ₱10,000,000.00. In Rosewood, the Court
deemed the posting of a surety bond of ₱50,000.00, coupled with a motion to reduce the appeal bond,
as substantial compliance with the legal requirements for an appeal from a ₱789,154.39 monetary
award "considering the clear merits which appear, res ipsa loquitor, in the appeal from the LA’s Decision,
and the petitioner’s substantial compliance with rules governing appeals."114 The foregoing
jurisprudence strongly indicate that in determining the reasonable amount of appeal bonds, the Court
primarily considers the merits of the motions and appeals.

Given the circumstances in this case and the merits of the respondents’ arguments before the NLRC, the
Court holds that the respondents had posted a bond in a "reasonable amount", and had thus complied
with the requirements for the perfection of an appeal from the LA’s decision. The CA was correct in
ruling that:

In the case of Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees Association, President Rodolfo
Jimenez, and members, Reynaldo Fajardo, et al. vs. NLRC, Nueva Ecija I Electric Cooperative, Inc. (NEECO
I) and Patricio de la Peña (GR No. 116066, January 24, 2000), the Supreme Court recognized that: "the
NLRC, in its Resolution No. 11-01-91 dated November 7, 1991 deleted the phrase "exclusive of moral and
exemplary damages as well as attorney’s fees in the determination of the amount of bond, and provided
a safeguard against the imposition of excessive bonds by providing that "(T)he Commission may in
meritorious cases and upon motion of the appellant, reduce the amount of the bond."

In the case of Cosico, Jr. vs. NLRC, 272 SCRA 583, it was held:

"The unreasonable and excessive amount of bond would be oppressive and unjust and would have the
effect of depriving a party of his right to appeal."

xxxx

In dismissing outright the motion to reduce bond filed by petitioners, NLRC abused its discretion. It
should have fixed an appeal bond in a reasonable amount. Said dismissal deprived petitioners of their
right to appeal the Labor Arbiter’s decision.

xxxx

NLRC Rules allow reduction of appeal bond on meritorious grounds (Sec. 6, Rule VI, NLRC Rules of
Procedure). This Court finds the appeal bond in the amount of ₱54,083,910.00 prohibitive and excessive,
which constitutes a meritorious ground to allow a motion for reduction thereof.115

The foregoing declaration of the Court requiring a bond in a reasonable amount, taking into account the
merits of the motion and the appeal, is consistent with the oft-repeated principle that letter-perfect
rules must yield to the broader interest of substantial justice.116

The effect of a denial of the appeal

to the NLRC

In finding merit in the respondents’ motion for reconsideration, we also take into account the
unwarranted results that will arise from an implementation of the Court’s Decision dated September 18,
2009. We emphasize, moreover, that although a remand and an order upon the NLRC to give due course
to the appeal would have been the usual course after a finding that the conditions for the reduction of
an appeal bond were duly satisfied by the respondents, given such results, the Court finds it necessary to
modify the CA’s order of remand, and instead rule on the dismissal of the complaint against the
respondents.

Without the reversal of the Court’s Decision and the dismissal of the complaint against the respondents,
McBurnie would be allowed to claim benefits under our labor laws despite his failure to comply with a
settled requirement for foreign nationals.

Considering that McBurnie, an Australian, alleged illegal dismissal and sought to claim under our labor
laws, it was necessary for him to establish, first and foremost, that he was qualified and duly authorized
to obtain employment within our jurisdiction. A requirement for foreigners who intend to work within
the country is an employment permit, as provided under Article 40, Title II of the Labor Code which
reads:

Art. 40. Employment permit for non-resident aliens. Any alien seeking admission to the Philippines for
employment purposes and any domestic or foreign employer who desires to engage an alien for
employment in the Philippines shall obtain an employment permit from the Department of Labor.

In WPP Marketing Communications, Inc. v. Galera,117 we held that a foreign national’s failure to seek an
employment permit prior to employment poses a serious problem in seeking relief from the Court.118
Thus, although the respondent therein appeared to have been illegally dismissed from employment, we
explained:

This is Galera’s dilemma: Galera worked in the Philippines without proper work permit but now wants to
claim employee’s benefits under Philippine labor laws.

xxxx

The law and the rules are consistent in stating that the employment permit must be acquired prior to
employment. The Labor Code states: "Any alien seeking admission to the Philippines for employment
purposes and any domestic or foreign employer who desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the Department of Labor." Section 4, Rule XIV, Book
I of the Implementing Rules and Regulations provides:

"Employment permit required for entry. – No alien seeking employment, whether as a resident or non-
resident, may enter the Philippines without first securing an employment permit from the Ministry. If an
alien enters the country under a non-working visa and wishes to be employed thereafter, he may be
allowed to be employed upon presentation of a duly approved employment permit."

Galera cannot come to this Court with unclean hands. To grant Galera’s prayer is to sanction the violation
of the Philippine labor laws requiring aliens to secure work permits before their employment. We hold
that the status quo must prevail in the present case and we leave the parties where they are. This ruling,
however, does not bar Galera from seeking relief from other jurisdictions.119 (Citations omitted and
underscoring ours)

Clearly, this circumstance on the failure of McBurnie to obtain an employment permit, by itself,
necessitates the dismissal of his labor complaint.

Furthermore, as has been previously discussed, the NLRC has ruled in its Decision dated November 17,
2009 on the issue of illegal dismissal. It declared that McBurnie was never an employee of any of the
respondents.120 It explained:

All these facts and circumstances prove that McBurnie was never an employee of Eulalio Ganzon or the
respondent companies, but a potential investor in a project with a group including Eulalio Ganzon and
Martinez but said project did not take off because of lack of funds.
McBurnie further claims that in conformity with the provision of the employment contract pertaining to
the obligation of the respondents to provide housing, respondents assigned him Condo Unit # 812 of the
Makati Cinema Square Condominium owned by the respondents. He was also allowed to use a Hyundai
car. If it were true that the contract of employment was for working visa purposes only, why did the
respondents perform their obligations to him?

There is no question that respondents assigned him Condo Unit # 812 of the MCS, but this was not free
of charge. If it were true that it is part of the compensation package as employee, then McBurnie would
not be obligated to pay anything, but clearly, he admitted in his letter that he had to pay all the expenses
incurred in the apartment.

Assuming for the sake of argument that the employment contract is valid between them, record shows
that McBurnie worked from September 1, 1999 until he met an accident on the last week of October.
During the period of employment, the respondents must have paid his salaries in the sum of
US$26,000.00, more or less.

However, McBurnie failed to present a single evidence that [the respondents] paid his salaries like
payslip, check or cash vouchers duly signed by him or any document showing proof of receipt of his
compensation from the respondents or activity in furtherance of the employment contract. Granting
again that there was a valid contract of employment, it is undisputed that on November 1, 1999,
McBurnie left for Australia and never came back. x x x.121 (Emphasis supplied)

Although the NLRC’s Decision dated November 17, 2009 was set aside in a Decision dated January 14,
2010, the Court’s resolve to now reconsider its Decision dated September 18, 2009 and to affirm the CA’s
Decision and Resolution in the respondents’ favor effectively restores the NLRC’s basis for rendering the
Decision dated November 17, 2009.

More importantly, the NLRC’s findings on the contractual relations between McBurnie and the
respondents are supported by the records.

First, before a case for illegal dismissal can prosper, an employer-employee relationship must first be
established.122 Although an employment agreement forms part of the case records, respondent Ganzon
signed it with the notation "per my note."123 The respondents have sufficiently explained that the note
refers to the letter124 dated May 11, 1999 which embodied certain conditions for the employment’s
effectivity. As we have previously explained, however, the said conditions, particularly on the successful
completion of the project financing for the hotel project in Baguio City and McBurnie’s acquisition of an
Alien Employment Permit, failed to materialize. Such defense of the respondents, which was duly
considered by the NLRC in its Decision dated November 17, 2009, was not sufficiently rebutted by
McBurnie.

Second, McBurnie failed to present any employment permit which would have authorized him to obtain
employment in the Philippines. This circumstance negates McBurnie’s claim that he had been
performing work for the respondents by virtue of an employer-employee relationship. The absence of
the employment permit instead bolsters the claim that the supposed employment of McBurnie was
merely simulated, or did not ensue due to the non-fulfillment of the conditions that were set forth in the
letter of May 11, 1999.

Third, besides the employment agreement, McBurnie failed to present other competent evidence to
prove his claim of an employer-employee relationship. Given the parties’ conflicting claims on their true
intention in executing the agreement, it was necessary to resort to the established criteria for the
determination of an employer-employee relationship, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee’s conduct.125 The rule of thumb remains: the onus probandi falls on the claimant to establish
or substantiate the claim by the requisite quantum of evidence. Whoever claims entitlement to the
benefits provided by law should establish his or her right thereto.126 McBurnie failed in this
regard.1âwphi1 As previously observed by the NLRC, McBurnie even failed to show through any
document such as payslips or vouchers that his salaries during the time that he allegedly worked for the
respondents were paid by the company. In the absence of an employer-employee relationship between
McBurnie and the respondents, McBurnie could not successfully claim that he was dismissed, much less
illegally dismissed, by the latter. Even granting that there was such an employer-employee relationship,
the records are barren of any document showing that its termination was by the respondents’ dismissal
of McBurnie.

Given these circumstances, it would be a circuitous exercise for the Court to remand the case to the
NLRC, more so in the absence of any showing that the NLRC should now rule differently on the case’s
merits. In Medline Management, Inc. v. Roslinda,127 the Court ruled that when there is enough basis on
which the Court may render a proper evaluation of the merits of the case, the Court may dispense with
the time-consuming procedure of remanding a case to a labor tribunal in order "to prevent delays in the
disposition of the case," "to serve the ends of justice" and when a remand "would serve no purpose save
to further delay its disposition contrary to the spirit of fair play."128 In Real v. Sangu Philippines, Inc.,129
we again ruled:

With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed
petitioner’s complaint for lack of jurisdiction. In cases such as this, the Court normally remands the case
to the NLRC and directs it to properly dispose of the case on the merits. "However, when there is enough
basis on which a proper evaluation of the merits of petitioner’s case may be had, the Court may dispense
with the time-consuming procedure of remand in order to prevent further delays in the disposition of
the case." "It is already an accepted rule of procedure for us to strive to settle the entire controversy in a
single proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records, the
pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve the ends of
justice instead of remanding the case to the lower court for further proceedings." x x x.130 (Citations
omitted)

It bears mentioning that although the Court resolves to grant the respondents’ motion for
reconsideration, the other grounds raised in the motion, especially as they pertain to insinuations on
irregularities in the Court, deserve no merit for being founded on baseless conclusions. Furthermore, the
Court finds it unnecessary to discuss the other grounds that are raised in the motion, considering the
grounds that already justify the dismissal of McBurnie’s complaint.

All these considered, the Court also affirms its Resolution dated September 4, 2012; accordingly,
McBurnie’s motion for reconsideration thereof is denied.

WHEREFORE, in light of the foregoing, the Court rules as follows:

(a) The motion for reconsideration filed on September 26, 2012 by petitioner Andrew James McBurnie is
DENIED;

(b) The motion for reconsideration filed on March 27, 2012 by respondents Eulalio Ganzon, EGI-
Managers, Inc. and E. Ganzon, Inc. is GRANTED.

(c) The Entry of Judgment issued in G.R. Nos. 186984-85 is LIFTED. This Court’s Decision dated
September 18, 2009 and Resolutions dated December 14, 2009 and January 25, 2012 are SET ASIDE. The
Court of Appeals Decision dated October 27, 2008 and Resolution dated March 3, 2009 in CA-G.R. SP No.
90845 and CA-G.R. SP No. 95916 are AFFIRMED WITH MODIFICATION. In lieu of a remand of the case to
the National Labor Relations Commission, the complaint for illegal dismissal filed by petitioner Andrew
James McBurnie against respondents Eulalio Ganzon, EGI-Managers, Inc. and E. Ganzon, Inc. is
DISMISSED.

Furthermore, on the matter of the filing and acceptance of motions to reduce appeal bond, as provided
in Section 6, Rule VI of the 2011 NLRC Rules of Procedure, the Court hereby RESOLVES that henceforth,
the following guidelines shall be observed:

(a) The filing o a motion to reduce appeal bond shall be entertained by the NLRC subject to the following
conditions: (1) there is meritorious ground; and (2) a bond in a reasonable amount is posted;

(b) For purposes o compliance with condition no. (2), a motion shall be accompanied by the posting o a
provisional cash or surety bond equivalent to ten percent (10,) of the monetary award subject o the
appeal, exclusive o damages and attorney's fees;

(c) Compliance with the foregoing conditions shall suffice to suspend the running o the 1 0-day
reglementary period to perfect an appeal from the labor arbiter's decision to the NLRC;

(d) The NLRC retains its authority and duty to resolve the motion to reduce bond and determine the final
amount o bond that shall be posted by the appellant, still in accordance with the standards o
meritorious grounds and reasonable amount; and

(e) In the event that the NLRC denies the motion to reduce bond, or requires a bond that exceeds the
amount o the provisional bond, the appellant shall be given a fresh period o ten 1 0) days from notice o
the NLRC order within which to perfect the appeal by posting the required appeal bond.

SO ORDERED.

• Sara Lee v. Macatlang, June 4, 2014

PEREZ, J.:

The dilemma of the appeal bond in labor cases is epochal, present whenever the amount of monetary
award becomes debatably impedimental to the completion of remedies. Such instances exaggerate the
ambivalence between rigidity and liberality in the application of the requirement that the bond must be
equal to the arbiter’s award. The rule of reasonableness in the determination of the compliant amount
of the bond has been formulated to allow the review of the arbiter’s award. However, that rule
seemingly becomes inadequate when the award staggers belief but is, nonetheless, supported by the
premises of the controversy. The enormity of the award cannot prevent the settlement of the dispute.
The amount of award may vary case-to-case. But the law remains constant.

Before us are six (6) consolidated petitions for review on certiorari pertaining to the ₱3,453,664,710.66
(₱3.45 Billion) appeal bond, which, as mandated by Article 233 of the Labor Code, is equivalent to the
monetary award adjudged by the labor arbiter in the cases. The first 5 petitions seek a relaxation of the
rule while the last petition urges its strict interpretation.

Petitioners in G.R. Nos. 180147,180148, 180149,180150, and 180319 are Sara Lee Philippines, Inc. (SLPI),
Aris Philippines, Inc. (Aris), Sara Lee Corporation (SLC), Atty. Cesar Cruz (Cruz), and Fashion Accessories
Philippines, Inc. (FAPI), respectively and shall be collectively referred to as the "Corporations."

SLPI is a domestic corporation engaged in the manufacture and distribution of personal care products
and is a subsidiary of SLC.

Aris is a domestic corporation engaged in the business of producing gloves and other apparel.2

FAPI is a corporation engaged in the manufacture of knitted products.3

SLC, a corporation duly organized and existing under the laws of the United States of America, is a
stockholder of Aris. It exercised control over Aris, FAPI, and SLPI which were all its subsidiaries or
affiliates.4

Cruz was the external counsel of Aris at the time of its closure. When Aris filed for its dissolution, Cruz
became the Vice-President and Director of Aris.5

The petition docketed as G.R. No. 180685 is filed by Emilinda D. Macatlang and 5,983 other former
employees of Aris. Emilinda D. Macatlang allegedly represents the employees whose employment was
terminated upon the closure of Aris.

I.

This controversy stemmed from a Notice of Permanent Closure filed by Aris on 4 September 1995 with
the Department of Labor and Employment stating that it will permanently cease its operations effective
9 October 1995. All employees of Aris were duly informed.

Aris Philippines Workers Confederation of Filipino Workers (Union), which represents 5,9846 rank-and-
file employees of Aris, staged a strike for violation of duty to bargain collectively,7 union busting and
illegal closure.8

After conciliation, the parties entered into an agreement whereby Aris undertook to pay its employees
the benefits which accrued by virtue of the company’s closure, which settlement amounted to ₱419
Million9 and an additional ₱15 Million10 Benevolent Fund to the Union. On 26 October 1995, FAPI was
incorporated.11 When said incorporation came to the knowledge of the affected employees, they all
filed 63 separate complaints against Aris for illegal dismissal. The complaints were consolidated before
the labor arbiter. Later amendments to the complaint included as respondents SLC, SLP, FAPI and Cruz,
and Emilinda D. Macatlang, et al.,is captioned as the complainant, represented in the suit by Emilinda D.
Macatlang. The complaints alleged that FAPI is engaged in the manufacture and exportation of the same
articles manufactured by Aris; that there was a mass transfer of Aris’ equipment and employees to FAPI’s
plant in Muntinlupa, Rizal; that contractors of Aris continued as contractors of FAPI; and that the export
quota of Aris was transferred to FAPI.12 Essentially, the complainants insisted that FAPI was organized by
the management of Aris to continue the same business of Aris, thereby intending to defeat their right to
security of tenure. They likewise impleaded in their subsequent pleadings that SLC and SLP are the major
stockholders of FAPI, and Cruz as Vice-President and Director of Aris.

Aris countered that it had complied with all the legal requirements for a valid closure of business
operations; that it is not, in any way, connected with FAPI, which is a separate and distinct corporation;
that the contracts of Aris with its contractors were already terminated; and that there is no truth to the
claim that its export quota with Garments and Textile Export Board was transferred to FAPI because the
export quota is non-transferable.13

On 30 October 2004, the Labor Arbiter rendered judgment finding the dismissal of 5,984 complainants
as illegal and awarding them separation pay and other monetary benefits amounting to
₱3,453,664,710.86.14 The dispositive portion of the decision read:

WHEREFORE, premises all considered, judgment is hereby rendered dismissing the complaint for unfair
labor practice (ULP); declaring that complainants were illegally dismissed; ordering respondents to
jointly and severally pay them separation pay at one (1) month for every year of service; backwages from
the time their compensation was withheld until the promulgation of this Decision[,] ₱5,000.00 moral
damages and ₱5,000.00 exemplary damages for each of them, and eight percent (8%) attorney’s fee of
the total monetary award, less the separation pay they received upon closure of API.

All other claims are hereby DISMISSED.

Attached and marked as Annexes "A" to "A-117" and shall form part of this decision are the lists of
complainants and their respective monetary awards.15

Upon receipt of a copy of the aforesaid decision, the Corporations filed their Notice of Appeal with
Motion to Reduce Appeal Bond and To Admit Reduced Amount with the National Labor Relations
Commission (NLRC). They asked the NLRC to reduce the appeal bond to ₱1 Million each on the grounds
that it is impossible for any insurance company to cover such huge amount and that, in requiring them to
post in full the appeal bond would be tantamount to denying them their right to appeal.16 Aris claimed
that it was already dissolved and undergoing liquidation. SLC added that it is not the employer of
Emilinda D. Macatlang, et al., and that the latter had already received from Aris their separation pay and
other benefits amounting to ₱419,057,348.24, which covers practically more than 10% of the monetary
award.17 FAPI, for its part, claimed that its total assets would not be enough to answer for even a small
portion of the award. To compel it to post a bond might result in complete stoppage of operations. FAPI
also cited the possibility that the assailed decision once reviewed will be reversed and set aside.18 The
Corporations posted a total of ₱4.5 Million.

Emilinda D. Macatlang, et al., opposed the motion by asserting that failure to comply with the bond
requirement is a jurisdictional defect since an appeal may only be perfected upon posting of a cash bond
equivalent to the monetary award provided by Article 223 of the Labor Code.19

In light of the impossibility for any surety company to cover the appeal bond and the huge economic
losses which the companies and their employees might suffer if the ₱3.45 Billion bond is sustained, the
NLRC granted the reduction of the appeal bond. The NLRC issued an Order dated 31 March 200620
directing the Corporations to post an additional ₱4.5 Million bond, bringing the total posted bond to ₱9
Million. The dispositive portion of the Order provides: WHEREFORE, premises considered, respondents
are hereby ordered to post bond, either in cash, surety or property, in the additional amount of FOUR
MILLION FIVE HUNDRED THOUSAND PESOS (₱4,500,000.00) within an INEXTENDIBLE period of FIFTEEN
(15) calendar days from receipt hereof. To the said extent, the Motion for Reduction is granted. Failure to
render strict compliance with the Order entered herein shall render the dismissal of the appeal and the
decision sought for review, as final and executory.21

Emilinda D. Macatlang, et al., filed a petition for certiorari before the Court of Appeals, docketed as CA-
G.R. SP No. 96363. They charged the NLRC with grave abuse of discretion in giving due course to the
appeal of petitioners despite the gross insufficiency of the cash bond. They declared that the appeal
bond must be equivalent to the amount of the award.22 Another petition, this time by Pacita Abelardo,
et al., was also filed before the Court of Appeals and docketed as CA-G.R. SP No. 95919.

The Corporations filed a Motion to Dismiss the petition in CA-G.R. SP No. 95919 on the grounds of
forum-shopping, absence of authorization from the employees for Emilinda D. Macatlang to file said
petition, and for failure to state the material dates.23

While the case was pending, the NLRC issued a Resolution on 19 December 2006 setting aside the
Decision of the labor arbiter and remanding the case to the "forum of origin for further proceedings."24

In view of this related development, the Corporations filed their respective Manifestation and Motion
dated 30 January 2007 praying for the dismissal of the petition for certiorari for being moot and
academic.

On 26 March 2007, the Court of Appeals proceeded to reverse and set aside the 31 March 2006 NLRC
Resolution and deemed it reasonable under the circumstances of the case to order the posting of an
additional appeal bond of ₱1 Billion. The dispositive portion of the decision decreed:
WHEREFORE, premises considered, the March 31, 2006 Decision of the 2nd Division of the National
Labor Relations Commission, in NLRC NCR CA No. 046685-05, which reduced the required Php 3.453
BILLION Pesos appeal bond to a paltry9 Million Pesos, is hereby REVERSED and SET ASIDE and a new one
issued, to ensure availability of hard cash or reliable surety, on which victorious laborers could rely,
DIRECTING private respondents to POST additional appeal bond in the amount of Php 1 BILLION Pesos,
in cash or surety, within thirty (30) days from finality of this judgment, as pre-requisite to perfecting
appeal.25

All parties filed their Motion for Reconsideration but were later denied by the Court of Appeals in a
Resolution26 dated 22 October 2007.

II.

Six (6) petitions for review on certiorariof the Decision of the Court of Appeals were filed before this
Court. They were docketed and entitled as follows: 1) G.R. No. 180147: Sara Lee Philippines, Inc. v.
Emilinda D. Macatlang, et al.; 2) G.R. No. 180148: Aris Philippines, Inc. v. Emilinda D. Macatlang, et al.; 3)
G.R. No. 180149: Sara Lee Corporation v. Emilinda D. Macatlang, et al.; 4) G.R. No. 180150: Cesar C. Cruz
v. Emilinda D. Macatlang, et al.; 5) G.R. No. 180319: Fashion Accessories Phils., Inc. v. Emilinda D.
Macatlang, et al.; and 6) G.R. No. 180685: Emilinda D. Macatlang, et al. v. NLRC. In Resolutions dated 28
January 2008 and 18 February 2008, this Court resolved to consolidate these six (6) cases.27

The Corporations argue that the Court of Appeals committed serious error in not dismissing Emilinda D.
Macatlang, et al.’s petition due to the filing of two (2) separate petitions for certiorari, namely: Emilinda
Macatlang, et al. v. Aris Philippines in CA-G.R. SP No. 96363 (Macatlang petition) and Pacita S. Abelardo
v. NLRC, Aris Philippines, et al. in CAG.R. SP No. 95919 (Abelardo petition). These two petitions, the
Corporations aver, raise identical causes of action, subject matters and issues, which are clearly violative
of the rule against forum-shopping. Moreover, the petitioners in the Abelardo petition28 consist of 411
employees,29 all of whom are also petitioners in the Macatlang petition. The Corporations question the
authority of Emilinda D. Macatlang to file and sign the verification and certification of non-forum
shopping because Resolusyon Bilang09-01-1998 (Resolusyon) dated 5 September 1998 did not make any
specific reference or authority that Emilinda D. Macatlang can sign the verification and certification
against forum shopping on behalf of the other complainants. The Corporations claim that the
Macatlang’s petition failed to state the material dates, such as when the NLRC order and resolution were
received and when the motion for reconsideration thereof was filed.30

The Corporations impute another error on the Court of Appeals when it did not dismiss the petition for
being moot and academic despite the fact that on 19 December 2006, the NLRC had already set aside
the decision of the Labor Arbiter. They defend the validity of the NLRC resolution in the absence of a
temporary restraining order or writ of preliminary injunction issued by the Court of Appeals.31

The Corporations assail the Court of Appeals in directing the posting of an additional appeal bond of ₱1
Billion. They contend that the Court of Appeals overlooked the fact that Macatlang, et al., had already
received their separation pay of ₱419 Million and ₱15 Million Benevolent Fund which went to the
union.32 The Court of Appeals also failed to exclude the amount awarded to complainants as damages
which under the NLRC Rules have to be excluded. The Corporations seek a liberal interpretation to the
requirement of posting of appeal bond in that the NLRC has the power and authority to set a reduced
amount of appeal bond.33

SLPI also adds that their right to due process was allegedly violated for the following reasons: first, it was
never impleaded in the complaints; second, the requirements of service of summons by publication
were not complied with as admitted by the labor arbiter himself thereby making it defective; and third,
there was no showing that there was prior resort to service of summons to the duly authorized officer of
the company before summons by publication was made to SLPI.34

FAPI slams the Court of Appeals for touching on the merits of the case when the only issue brought to its
attention is the NLRC’s ruling on the appeal bond. FAPI argues that the Court of Appeals has no basis in
stating that: (1) there were 7,637 employees of Aris who were already laid off and became complainants
when there are in fact only 5,984 employees of Aris involved in the illegal dismissal case; (2) that the
₱419 Million was not proven to have been paid to the complainants when as a matter of fact, records of
the NLRC revealed that the amount was actually paid by Aris to its employees; and (3) that a dummy
subsidiary referring to FAPI was formed when records disclose that the ownership, incorporators,
officers, capitalization, place of business, and product manufactured by FAPI and Aris are different.35

On the other hand, Emilinda D. Macatlang, et al., in their petition for review on certiorari assert that the
appeal of the Corporations had not been perfected in accordance with Article 223 of the Labor Code
when they failed to post the amount equivalent to the monetary award in the judgment appealed from
amounting to ₱3.45 Billion. Emilinda D. Macatlang, et al., submit that the ₱1 Billion bond is not
equivalent to the monetary award of ₱3.45 Billion. More importantly, Emilinda D. Macatlang, et al.,
accused the Court of Appeals of extending the period of appeal by prescribing an additional amount to
be paid within a reasonable period of time, which period it likewise determined, in contravention of
Article 223 of the Labor Code. Emilinda D. Macatlang, et al., expound that the filing of a bond outside the
period of appeal, even with the filing of a motion to reduce bond, would not stop the running of the
period of appeal. Emilinda D. Macatlang, et al., opine that the Court of Appeals has not been conferred
the power to legislate hence it should have strictly followed Article 223 of the Labor Code, as the same
was clear.36

In an Urgent Manifestation and Motion, the Corporations informed this Court of a Resolution dated 30
March 2009 by the Third Division of this Court entitled, "Gabriel Fulido, et al. v. Aris Philippines, Inc."
docketed as G.R. No. 185948 (Fulido case) denying the petition for review filed by complainants in that
case. The Corporations intimate that the petitioners in the Fulido case are also former employees of Aris
whose employments were terminated as a result of Aris’ permanent closure. Petitioners submit that
Emilinda D. Macatlang, et al., and petitioners in the Fulidocase filed illegal dismissal cases before the
NLRC seeking identical reliefs. Considering the identity in essential facts and basic issues involved,
petitioners argue that there is compelling reason to adopt and incorporate by reference the conclusion
reached in the Fulido case.37

III.
The issues raised in these consolidated cases can be summarized as follows:

1. Whether the filing of two (2) petitions for certiorari, namely: the Macatlang petition and the Abelardo
petition constitutes forum shopping.

2. Whether Emilinda D. Macatlang was duly authorized to sign the verification and certificate of non-
forum shopping attached to the Macatlang petition.

3. Whether the petition should be dismissed for failure to state the material dates.

4. Whether the service of summons by publication on SLC is defective.

5. Whether the subsequent NLRC ruling on the merits during the pendency of the petition questioning
an interlocutory order renders the instant petition moot and academic.

6. Whether the appeal bond may be reduced.

Before we proceed to the gist of this controversy, we shall resolve the first 3 procedural issues first.

IV.

The Corporations claim that the group of Macatlang committed forum shopping by filing two petitions
before the Court of Appeals.

Forum shopping is the act of a litigant who repetitively avails of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and on the
same essential facts and circumstances, and all raising substantially the same issues either pending in or
already resolved adversely by some other court, to increase his chances of obtaining a favorable decision
if not in one court, then in another.38

What is pivotal in determining whether forum shopping exists or not is the vexation caused the courts
and parties-litigants by a party who asks different courts and/or administrative agencies to rule on the
same or related cases and/or grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different courts and/or administrative agencies
upon the same issues.39

Forum shopping exists when the elements of litis pendentia are present, and when a final judgment in
one case will amount to res judicatain the other. For litis pendentia to be a ground for the dismissal of an
action, there must be: (a) identity of the parties or at least such as to represent the same interest in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts;
and (c) the identity in the two cases should be such that the judgment which may be rendered in one
would, regardless of which party is successful, amount to res judicata in the other.40

The Macatlang petition was filed on 8 September 2006 while the Abelardo petition was filed 10 days
later, or on 18 September 2006. Indeed, these two petitions assailed the same order and resolution of
the NLRC in NLRC CA No. 046685-05, entitled Emilinda Macatlang, et al. v. Aris Philippines, Inc., et al.,
and sought for the dismissal of the Corporations’ appeal for non-perfection because of failure to post the
required appeal bond. A judgment in either case would have, if principles are correctly applied,
amounted to res judicatain the other.

At first glance, it appears that there is also identity of parties in both petitions which is indicative of
forum-shopping. The Macatlang petition consists of 5,984 dismissed employees of Aris while the
Abelardo petition has 411 dismissed employees, all of which were already included as petitioners in the
Macatlang petition. With respect to these 411 petitioners, they could be declared guilty of forum
shopping when they filed the Abelardo petition despite the pendency of the Macatlang petition. As a
matter of fact, the Abelardo petition was dismissed by the Court of Appeals in a Resolution dated 17
November2006 on the ground of a defective certification on non-forum shopping, among others.41 The
Abelardo petition appears to be defective as the petition itself was replete with procedural infirmities
prompting the Court of Appeals to dismiss it outright. Instead of curing the defects in their petition,
petitioners in Abelardo revealed that pertinent documents which should have been attached with their
petition were actually submitted before the Sixteenth Division of the Court of Appeals where the
Macatlang petition was pending. Evidently, petitioners in Abelardo have foreknowledge of an existing
petition but nevertheless proceeded to file another petition and omitting to mention it in their
certification on non-forum shopping, either intentionally or not. Clearly, the petitioners in the Abelardo
petition committed forum shopping.

Now, should the act of these 411 employees prejudice the rights of the 5,573 other complainants in the
Macatlang petition? The answer is no. Forum shopping happens when there is identity of the parties or
at least such as to represent the same interest in both actions. We do not agree that the 411 petitioners
of the Abelardo petition are representative of the interest of all petitioners in Macatlang petition. First,
the number is barely sufficient to comprise the majority of petitioners in Macatlang petition. Second, it
would be the height of injustice to dismiss the Macatlang petition which evidently enjoys the support of
an overwhelming majority due to the mistake committed by petitioners in the Abelardo petition. In the
absence of substantial similarity between the parties in Macatlang and Abelardo petitions, we find that
the petitioners in Macatlang petition did not commit forum shopping. This view was implicitly shared by
the Thirteenth Division of the Court of Appeals when it did not bother to address the issue of forum
shopping raised by petitioners therein precisely because at the time it rendered the assailed decision,
the Abelardo petition had already been summarily dismissed.

V.

Next, the Corporations complain that Macatlang was not duly authorized to sign the verification and
certification of non-forum shopping which accompanied the main petition before the Court of Appeals.
They anchored their argument on Resolusyon, which reads in part:

1. Aming binigyan ng karapatan sina ERNESTO R. ARELLANO AT/O VILLAMOR MOSTRALES, aming mga
abogado/legal advisers ng Arellano & Associates at si EMILINDA D. MACATLANG, aming head
complainant, bilang aming ATTORNEYS-IN-FACT para katawanin at kanilang gampanan ang mga
sumusunod na Gawain alinsunod sa aming kagustuhan:
a. Na, kami ay katawanin sa kaso o mga kaso laban sa mga nabanggit na Kompanya: ARIS, FAPI ATSARA
LEE CORP./SARA LEE PHILS., INC.at sa mga opisyales ng mga nabanggit; pirmahan ang anumang demanda
o "complaint" at lahat namga kaukulang papeles tulad ng Position Paper, Reply, Rejoinder,
Memorandumat iba pang papeles na may kinalaman o patungkol sakasong ito simula sa NLRC, Court of
Appeals, hanggang sa Korte Suprema;

b. Na, aming malayang iniaatangsa kanila ang karapatan upang makipagkasundo sa mga nademanda sa
pamamagitan ng isang "Compromise Agreement"o Kasunduan, gayon din ang karapatang tanggapin ang
kabuuang kabayaran sa aregluhan sa kaso na ayon sa kanilang pagsusuri ay mabuti at makatarungan para
sa amin, kaakibat ng aming mga pirmang tanda ng pagsang-ayon ito bilang mayoria na nagdemanda o
tanggapin ang kabuuang bayad sa pagtatapos ng kaso, bilang aming kinatawan at ATTORNEYS-IN-FACT;

c. Na, sa kanilang puspusan at matapat na paghawak sa naturang kaso, aming ibibigay ang sampung
porsiyento (10%)ng aming "total claims"bilang attorney’s fees ng aming humawak na abogado/legal
adviser: sina Atty. Ernesto R. Arellano and/or Villamor A. Mostrales at gayon din sa karagdagang panagot
sa kanilang ginastos, gagastusin sa pagtatanggol ng kaso bilang miscellaneous expensessa kanilang
ma[a]yos na pagsulong at pagtangan ng aming pangkalahatang interes sa naturang kaso.42

From the foregoing document, it can easily be gleaned that Macatlang was assigned by the complainants
as their attorney-in-fact to perform the following acts: 1) to represent them in the case/cases filed
against Aris, FAPI, SLC, and SLPI; sign any complaint, pleadings, or any other documents pertinent or
related to the instant case brought before the NLRC, Court of Appeals, and Supreme Court; 2) to enter
into any compromise agreement or settlement; and 3) to receive the full payment as a consequence of
any settlement. The first act necessarily encompasses the authority to sign any document related to
NLRC NCR No. 00-04-03677-98. The petition for review on certiorari is one of these documents. Supreme
Court Circular Nos. 28-91 and 04-94 require a Certification of Non-Forum Shopping in any initiatory
pleading filed before the Supreme Court and the Court of Appeals while Section 1, Rule 45 of the Rules
of Civil Procedure requires the petition for review on certiorari to be verified, thereby making the
verification and certification of non-forum shopping essential elements of a petition for review on
certiorari, which Macatlang herself was authorized under the Resolusyon to sign.

VI.

The Corporations argue that the case before the Court of Appeals should have been dismissed for failure
of Macatlang to state the material dates in the petition. Section 3, Rule 46 of the Rules of Court
mandates that in a petition for certiorari before the Court of Appeals, the material dates showing when
notice of the judgment orfinal order or resolution assailed was received, when the motion for
reconsideration was filed, and when notice of the denial thereof was received, must be indicated. Under
the same rule, failure to state the material dates shall be a ground for dismissal of the petition. The
rationale for the requirement is to enable the appellate court to determine whether the petition was
filed within the period fixed in the rules.43 However, the strict requirements of the law may be
dispensed with in the interest of justice. It may not be amiss to point out this Court’s ruling in the case of
Acaylar, Jr. v. Harayo,44 and we quote:
We also agree with the petitioner that failure to state the material dates is not fatal to his cause of
action, provided the date of his receipt, i.e., 9 May 2006, of the RTC Resolution dated 18 April 2006
denying his Motion for Reconsideration is duly alleged in his Petition. In the recent case of Great
Southern Maritime Services Corporation v. Acuña, we held that "the failure to comply with the rule on a
statement of material dates in the petition may be excused since the dates are evident from the
records." The more material date for purposes of appeal to the Court of Appeals is the date of receipt of
the trial court's order denying the motion for reconsideration. The other material dates may be gleaned
from the records of the case if reasonably evident.45

In the instant case, the Corporations alleged in their petition before the Court of Appeals that when they
received the Resolution of the NLRC on 6 July 2006, it can be determined whether the appeal to the
Court of Appeals was filed within the 60-day reglementary period. And as a matter of fact, the appeal
was filed on 8 September 2006, and well within the 60-day period.

VII.

Having disposed the procedural issues, we now tackle the Corporations’ arguments, in the main, calling
for a reduction of the appeal bond.

Well-settled is the doctrine that appeal is not a constitutional right, but a mere statutory privilege.
Hence, parties who seek to avail themselves of it must comply with the statutes or rules allowing it.46
The primary rule governing appeal from the ruling of the labor arbiter is Article 223 of the Labor Code
which provides:

Art. 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10)calendar days from receipt of such
decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds:

a. If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter;

b. If the decision, order or award was secured through fraud or coercion, including graft and corruption;

c. If made purely on questions of law; and d. If serious errors in the findings of facts are raised which
would cause grave or irreparable damage or injury to the appellant.

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. (Emphasis
supplied).

Article 223, under Presidential Decree No. 442, was amended by Republic Act No. 6715 to include the
provision on the posting of a cash or surety bond as a precondition to the perfection of appeal.

The requisites for perfection of appeal as embodied in Article 223, as amended, are: 1) payment of
appeal fees; 2) filing of the memorandum of appeal; and 3) payment of the required cash or surety
bond.47 These requisites must be satisfied within 10days from receipt of the decision or order appealed
from.

In YBL v. NLRC,48 the Court was more liberal in construing Article 223. The NLRC dismissed the appeal for
failure to post the bond. The Court favored the appellant partly because the appeal was made just after
six (6) days from the effectivity of the Interim Rules of Republic Act No. 6715. The Court observed that
both parties did not know about the new rule yet.

It is presumed that an appeal bond is only necessary in cases where the labor arbiter’s decision or order
contains a monetary award. Conversely, when the labor arbiter does not state the judgment award,
posting of bond may be excused.

In YBL, the exact total amount due to the private respondents as separation pay was not stated which
would have been the basis of the bond that is required to be filed by petitioners under the said law.

From an award of backwages and overtime pay by the labor arbiter in Rada v. NLRC,49 petitioner therein
failed to post the supersedeas bond. Nevertheless, the Court gave due course to the appeal for "the
broader interests of justice and the desired objective of resolving controversies on the merits." The
amount of the supersedeas bond could not be determined and it was only in the NLRC order that the
amount was specified and which bond, after extension granted by the NLRC, was timely filed by
petitioner.

In the same vein, the Court in Blancaflor v. NLRC,50 excused the failure of appellant to post a bond due
to the failure of the Labor Arbiter to state the exact amount of back wages and separation pay due.

Citing Taberrah v. NLRC51 and National Federation of Labor Union v. Hon. Ladrido III,52 the Court in
Orozco v. The Fifth Division of the Court of Appeals53 postulated that "respondents cannot be expected
to post such appeal bond equivalent to the amount of the monetary award when the amount thereof
was not included in the decision of the labor arbiter." The computation of the amount awarded to
petitioner was not stated clearly in the decision of the labor arbiter, hence, respondents had no basis in
determining the amount of the bond to be posted.

Furthermore, when the judgment award is based on a patently erroneous computation, the appeal bond
equivalent to the amount of the monetary award is not required to be posted. Erectors, Inc. v. NLRC54 is
a good example on this point. The NLRC’s order to post a bond of ₱1,576,224.00 was nullified because
the bond was erroneously computed on the basis of the salary which the employee was no longer
receiving at the time of his separation.

Also, since the computation of the award in Star Angel Handicraft v. NLRC55 was based on erroneous
wage and that a big portion of the award had already prescribed, the non-posting of appeal bond was
excused.

In Dr. Postigo v. Phil. Tuberculosis Society, Inc.,56 respondent deferred the posting of the surety bond in
view of the alleged erroneous computation by the labor arbiter of the monetary award. While the labor
arbiter awarded ₱5,480,484.25 as retirement benefits, only ₱5,072,277.73, according to the
respondent's computation, was due and owing to the petitioners.

In sum, the NLRC may dispense of the posting of the bond when the judgment award is: (1) not stated
or(2) based on a patently erroneous computation. Sans these two (2) instances, the appellant is
generally required to post a bond to perfect his appeal.

The Court adhered to a strict application of Article 223 when appellants do not post an appeal bond at
all. By explicit provision of law, an appeal is perfected only upon the posting of a cash or surety bond.
The posting of the appeal bond within the period provided by law is not merely mandatory but
jurisdictional.57 The reason behind the imposition of this requirement is enunciated in Viron Garments
Mfg. Co., Inc. v. NLRC,58 thus:

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.59

Thus, when petitioners, in the cases of Ong v. Court of Appeals,60 Rural Bank of Coron (Palawan), Inc. v.
Cortes,61 Sy v. ALC,62 Ciudad Fernandina Food Corporation Employees Union-Association Labor Unions
v. Court of Appeals,63 and Stolt-Nielsen Maritime Services, Inc. v. NLRC,64 did not post a full or partial
appeal bond, it was held that no appeal was perfected. A longer look on past rulings would show that

In Nationwide Security and Allied Services, Inc. v. NLRC,65 it was found that petitioners had funds from
its other businesses to post the required bond. The Court did not find as acceptable petitioner’s excuse,
that "[using] funds from sources other than that earned from [its company is not] a sound business
judgment" to exempt it from posting an appeal bond.

Petitioner’s failure in Mers Shoes Mfg, Inc. v. NLRC,66 to post the required bond within the reglementary
period after it has been ordered reduced, justified the dismissal of its appeal.

The labor arbiter’s decision in Santos v. Velarde67 stated the exact award of backwages to be paid by
petitioner, thus the Court affirmed the dismissal of the appeal by the non-payment of the appeal bond
within the 10-day period provided by law.

Even if petitioner in Heritage Hotel Manila v. NLRC68 questioned as basis of the appeal bond the
computation of the monetary award, the Court did not excuse it from posting a bond in a reasonable
amount or what it believed to be the correct amount.

In Banahaw Broadcasting Corporation v. Pacana III,69 the NLRC issued an order denying petitioner’s
motion for recomputation of the monetary award and ordered it to post the required bond within 10
days.

When BBC further demonstrated its unwillingness by completely ignoring this warning and by filing a
Motion for Reconsideration on an entirely new ground, we held that the NLRC cannot be said to have
committed grave abuse of discretion by making good its warning to dismiss the appeal.70

Upon the other hand, the Court did relax the rule respecting the bond requirement to perfect appeal in
cases where: (1) there was substantial compliance with the Rules, (2) surrounding facts and
circumstances constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the
requirement of an appeal bond would serve the desired objective of resolving controversies on the
merits, or (4) the appellants, at the very least, exhibited their willingness and/or good faith by posting a
partial bond during the reglementary period.71

In Lopez v. Quezon City Sports Club Inc.,72 the posting of the amount of ₱4,000,000.00 simultaneously
with the filing of the motion to reduce the bond to that amount, as well as the filing of the
memorandum of appeal, all within the reglementary period, altogether constitute substantial
compliance with the Rules. In Intertranz Container Lines, Inc. v. Bautista,73 this Court has relaxed the
appeal bond requirement when it was clear from the records that petitioners never intended to evade
the posting of an appeal bond. In Semblante v. Court of Appeals,74 the Court stated that the rule on the
posting of an appeal bond cannot defeat the substantive rights of respondents to be free from an
unwarranted burden of answering for an illegal dismissal for which they were never responsible. It was
found that respondents, not being petitioners’ employees, could never have been dismissed legally or
illegally. In the recent case of Garcia v. KJ Commercial,75 respondent showed willingness to post a partial
bond when it posted a ₱50,000.00 cash bond upon filing of a motion to reduce bond. In addition, when
respondent’s motion for reconsideration was denied, it posted the full surety bond.

The old NLRC Rules of Procedure, which took effect in 5 November 1993,76 provides:

SECTION 6. Bond. — In case the decision of a Labor Arbiter POEA Administrator and Regional Director or
his duly authorized hearing officer involves a monetary award, an appeal by the employer shall be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission or the Supreme Court in an amount equivalent to the monetary award,
exclusive of moral and exemplary damages and attorney’s fees.

The employer as well as counsel shall submit a joint declaration under oath attesting that the surety
bond posted is genuine and that it shall be in effect until final disposition of the case.

The Commission may, in meritorious cases and upon Motion of the Appellant, reduce the amount of the
bond. (As amended by Nov. 5, 1993) (Emphasis Supplied).

Thus, appellants are given the option to file a motion to reduce the amount of bond only in meritorious
cases. In the NLRC New Rules of Procedure promulgated in 2002, another qualification to the reduction
of an appeal bond was added in Section 6 thereof:

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. (Emphasis Supplied).

Said Rules significantly provide that:

The filing of the motion to reduce bond without compliance with the requisites in the preceding
paragraphs, shall not stop the running of the period to perfect an appeal.

Clearly therefore, the Rules only allow the filing of a motion to reduce bond on two (2) conditions: (1)
that there is meritorious ground and (2) a bond in a reasonable amount is posted. Compliance with the
two conditions stops the running of the period to perfect an appeal provided that they are complied
within the 10-day reglementary period.

In Ramirez v. Court of Appeals,77 the Court did not find any merit to reduce the bond. Although Ramirez
posted an appeal bond, the same was insufficient, as it was not equivalent to the monetary award of the
Labor Arbiter. Moreover, when Ramirez sought a reduction of the bond, he merely said that the bond
was excessive and baseless without amplifying why he considered it as such.

The grounds to be cited in the motion to reduce must be valid and acceptable. For instance, in Pasig
Cylinder, Mfg., Corp. v. Rollo,78 we found as acceptable reason for reducing the appeal bond the
downscaling of their operations considered together with the amount of the monetary award appealed.
In University Plans Incorporated v. Solano,79 the fact of receivership was considered as a meritorious
ground in reducing the appeal bond.

Since the intention is merely to give the NLRC an idea of the justification for the reduced bond, the
evidence for the purpose would necessarily be less than the evidence required for a ruling on the
merits.80 As a matter of fact, in Star Angel, the NLRC was ordered to make a preliminary determination
on the merits for granting a reduction of the appeal bond. In University Plans, the Court took into
consideration the fact that petitioner was under receivership and it was possible that petitioner has no
liquid asset and it could not raise the amount of more than ₱3Million within a period of 10-days from
receipt of the Labor Arbiter’s judgment. Therefore, the Court ordered a remand of the case to the NLRC
for the conduct of preliminary determination of the merit or lack of merit of petitioner’s motion to
reduce bond. The Court adopted the ruling in Nicol v. Footjoy Industrial Corp., where the case was also
remanded to the NLRC to determine the merits of the motion to reduce in view of our finding that the
NLRC in that case gravely abused its discretion when it dismissed Footjoy’s appeal, without even
receiving evidence from which it could have determined the merit or lack of it of the motion to reduce
the appeal bond.

In the recent case of McBurnie v. Ganzon,81 we held that merit may "pertain to an appellant’s lack of
financial capability to pay the full amount of the bond, the merits of the main appeal such as when there
is a valid claim that there was no illegal dismissal to justify the award, the absence of an employer-
employee relationship, prescription of claims, and other similarly valid issues that are raised in the
appeal. For the purpose of determining a ‘meritorious ground,’ the NLRC is not precluded from receiving
evidence, or from making a preliminary determination of the merits of the appellant’s contentions."82

In order to toll the running of the period to appeal once the motion for reduction is filed, McBurnie has
set a parameter on what amount is reasonable for such purpose:

To ensure that the provisions of Section 6, Rule VI of the NLRC Rules of Procedure that give parties the
chance to seek a reduction of the appeal bond are effectively carried out, without however defeating the
benefits of the bond requirement in favor of a winning litigant, all motions to reduce bond that are to be
filed with the NLRC shall be accompanied by the posting of a cash or surety bond equivalent to 10% of
the monetary award that is subject of the appeal, which shall provisionally be deemed the reasonable
amount of the bond in the meantime that an appellant’s motion is pending resolution by the
Commission. In conformity with the NLRC Rules, the monetary award, for the purpose of computing the
necessary appeal bond, shall exclude damages and attorney’s fees. Only after the posting of a bond in
the required percentage shall an appellant’s period to perfect an appeal under the NLRC Rules be
deemed suspended.83 (Emphasis and underline supplied).

While McBurnie has effectively addressed the preliminary amount of the bond to be posted in order to
toll the running of the period to appeal, there is no hard and fast rule in determining whether the
additional bond to be posted is reasonable in relation to the judgment award.

In Rosewood Processing Inc. v. NLRC,84 we found the reduced bond of ₱50,000.00 acceptable as
substantial compliance relative to the ₱789,000.00 judgment award. In Nicol, the ₱10 Million bond was
enough to perfect appeal from a ₱51.9 Million judgment award.

In Lopez v. Quezon City Sports Club, Inc., the NLRC ordered the posting of an additional ₱6 Million and
held as compliant a ₱10 Million bond relative to the judgment award of ₱27 Million. In Pasig Cylinder
Mfg. Corp. v. Rollo, we ruled that the reduced appeal bond of ₱100,00.00 satisfies the requirement for
an appeal from the judgment award of ₱3.13 Million. In University Plans, the ₱30,000.00 bond was
accepted in perfecting an appeal from a ₱3.013 Million judgment.

In the case at bar, the motion to reduce bond filed by the Corporations was resolved by the NLRC in the
affirmative when it found that there are meritorious grounds in reducing the bond such as the huge
amount of the award and impossibility of proceeding against the Corporations’ properties which
correspond to a lower valuation. Also, the NLRC took into consideration the fact of partial payment of
₱419 Million. The NLRC found the ₱4.5 Million bond posted by the Corporations as insufficient, hence
ordering them to post an additional ₱4.5 Million. Thus, ₱9 Million was held as the amount of the bond as
reduced.

The Court of Appeals found the amount of the appeal bond adjudged by the NLRC as measly and
insufficient and raised it to ₱1 Billion. The appellate court rationalized:

The required Php3.453 BILLION appeal bond sought to be reduced by the private respondents is
equivalent to an average of Php452,140.00 separation pay for each of the 7,637 employees held to be
illegally dismissed by the employer who sought a reduction of the required Php3.453 BILLION appeal
bond because the employer allegedly put up Php428 Million which consists of the Php419 MILLION
unpaid commitment plus the Php9 Million already paid-up cash appeal bond.

Even if we consider Php 419 MILLION unpaid commitment plus the Php 9 Million already paid-up cash
appeal bond, the unpaid appeal bond is still Php 3.025 BILLION. Php428 Million is still miniscule
compared to the Php3.025 BILLION unpaid portion of the appeal bond. What the 7,637 workers need is
cash or surety guaranty in the event of renewed victory on appeal for the 7,637 petitioners-employees
who were awarded one month salary for every year of service as separation pay totaling Php3.453
BILLION Pesos. Php419 MILLION Pesos promise and the Php3.025 BILLION unpaid appeal bond both
become more obscure if the employer would be permitted to subsequently employ artifices to evade
execution of judgment.

The decision to reduce the amount of appeal bond is not a blanket power to the NLRC, because the
discretion is not unbridled and is subject to strict guidelines because Art. 223 of the Labor Codeis a rule
of jurisdiction that affords little leeway for liberal interpretation. The order of the NLRC reducing the
required appeal bond from Php 3.453 BILLION Pesos to only Php 9 MILLION Pesos is in grave abuse of its
discretion and therefore void, not to mention that it is per se unreasonable and without factual basis.

We have considered the circumstances and evidence presented in this case relative to the motion to
reduce appeal bond.1âwphi1 We have taken into consideration the Php 419 MILLION unpaid
commitment plus the Php 9 Million already paid-up cash appeal bond, and the resulting unpaid appeal
bond which is still Php 3.025 BILLION. We still deem it proper under the law and the Constitution for the
protection of labor that private respondents be required as pre-requisite to perfecting appeal, to POST,
within thirty (30) days from finality of this judgment, additional appeal bond of Php 1 BILLION Pesos, in
cash or surety, which amount is even less than one-third (1/3) of the original appeal bond required by
law, which We hold to be reasonable under the circumstances and to be based on the evidence
presented in this case. The additional appeal bond of Php 1 BILLION is equivalent to an average of Php
130,941.46 (instead of the original average of Php452,140.00) for each of the alleged illegally dismissed
7,637 workers.85 Notably, the computation of the judgment award in this case includes damages.

The NLRC Interim Rules on Appeals under Republic Act No. 6715 specifically provides that damages shall
be excluded in the determination of the appeal bond, thus:

SECTION 7. Bond. In case of a judgment of the Labor Arbiter involving a monetary award, an appeal by
the employer shall be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in an amount equivalent to the monetary award in
the judgment appealed from.

For purposes of the bond required under Article 223 of the Labor Code, as amended, the monetary
award computed as of the date of promulgation of the decision appealed from shall be the basis of the
bond. For this purpose, moral and exemplary damages shall not be included in fixing the amount of the
bond.

Pending the issuance of the appropriate guidelines for accreditation, bonds posted by bonding
companies duly accredited by the regular courts, shall be acceptable. (Emphasis supplied). When the
rules were amended in 1993, attorney’s fees were also excluded in the judgment award for the purpose
of computing the appeal bond, viz:

SECTION 6. BOND. - In case the decision of the Labor Arbiter, POEA Administrator and Regional Director
or his duly authorized hearing officer involves a monetary award, an appeal by the employer shall be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission or the Supreme Court in an amount equivalent to the monetary award,
exclusive of moral and exemplary damages and attorney’s fees.

Subsequently, in an amendment by NLRC Resolution No. 01-02, Series of 2002, the rules in effect at the
time the appeal bond was interposed by the Corporations, the provision on exclusion of damages and
attorney’s fees was retained:86

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 cash or surety
bond. The appeal bond shall either be in cash or surety in an amount equivalent to the monetary award,
exclusive of damages and attorney’s fees.

Thus, under the applicable rules, damages and attorney’s fees are excluded from the computation of the
monetary award to determine the amount of the appeal bond. We shall refer to these exclusions as
"discretionaries," as distinguished from the "mandatories" or those amounts fixed in the decision to
which the employee is entitled upon application of the law on wages. These mandatories include awards
for backwages, holiday pay, overtime pay, separation pay and 13th month pay.

As a matter of fact, in Erectors, Inc. v. NLRC,87 it was concluded that no bond is required if an appeal
raises no question other than as regards the award of moral and/or exemplary damages. In Cosico, Jr., v.
NLRC,88 the employer was held to have substantially complied with the requirement when it posted the
bond on time based on the monetary award for backwages and thirteenth month pay, excluding the
exorbitant award for moral and exemplary damages.

The judgment award in the instant case amounted to an immense ₱3.45 Billion. The award is broken
down as follows: backwages, separation pay, moral and exemplary damages. For purposes of
determining the reasonable amount of the appeal bond, we reduce the total amount of awards as
follows:

The mandatories comprise the backwages and separation pay. The daily wage rate of an employee of
Aris ranges from ₱170-₱200. The average years of service ranges from 5-35 years. The backwages were
computed at 108 months or reckoned from the time the employees were actually terminated until the
finality of the Labor Arbiter’s Decision. Approximately, the amount to be received by an employee,
exclusive of damages and attorney’s fees, is about ₱600,000.00. The Labor Arbiter granted moral
damages amounting to ₱10,000.00, and another ₱10,000.00 as exemplary damages. The total number of
employees receiving ₱20,000.00 each for damages is 5,984, bringing the total amount of damages to
₱119,680,000.00. This amount should be deducted as well as the ₱419 Million unpaid commitment plus
the P 9 Million already paid-up cash appeal bond from the actual amount to determine the amount on
which to base the appeal bond. Thus, the total amount is ₱2.9 Billion.

We sustain the Court of Appeals in so far as it increases the amount of the required appeal bond. But we
deem it reasonable to reduce the amount of the appeal bond to ₱725 Million. This directive already
considers that the award if not illegal, is extraordinarily huge and that no insurance company would be
willing to issue a bond for such big money. The amount of ₱725 Million is approximately 25% of the basis
above calculated. It is a balancing of the constitutional obligation of the state to afford protection to
labor which, specific to this case, is assurance that in case of affirmance of the award, recovery is not
negated; and on the other end of the spectrum, the opportunity of the employer to appeal.

By reducing the amount of the appeal bond in this case, the employees would still be assured of at least
substantial compensation, in case a judgment award is affirmed. On the other hand, management will
not be effectively denied of its statutory privilege of appeal.

VIII.

The Corporations invoked the decision issued by the NLRC last 19 December 2006 which set aside the
labor arbiter’s decision and ordered remand of the case to the forum of origin to have the instant
petitions dismissed for being moot.

When the NLRC granted the motion to reduce the appeal bond and the Corporations posted the
required additional bond, the appeal was deemed to have been perfected. The act of the NLRC in
deciding the case was based on petitioner’s appeal of the labor arbiter’s ruling, which it deemed to have
been perfected and therefore, ripe for decision.

Prudence however dictates that the NLRC should not have decided the case on its merits during the
pendency of the instant petition. The very issue raised in the petitions determines whether or not the
appeal by the Corporations has been perfected. Until its resolution, the NLRC should have held in
abeyance the resolution of the case to prevent the case from being mooted. The NLRC decision was
issued prematurely.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 96363 dated 26 March 2007 is
MODIFIED. The Corporations are directed to post 1!725 Million, in cash or surety bond, within TEN ( 10)
days from the receipt of this DECISION. The Resolution of the NLRC dated 19 December 2006 is VACATED
for being premature and the NLRC is DIRECTED to act with dispatch to resolve the merits of the case
upon perfection of the appeal.

SO ORDERED.

• Balite v. SS Ventures, Feb. 2015

PEREZ, J.:

This is a Petition for Review on Certiorari pursuant to Rule 45 of the Revised Rules of Court, assailing the
18 June 2010 Decision1 rendered by the Tenth Division of the Court of Appeals in CA-G.R. SP No. 109589.
In its assailed decision, the appellate court reversed the Resolution of the National Labor Relations
Commission (NLRC) which denied the Motion to Reduce Appeal Bond filed by respondents SS Ventures
International, Inc., Sung Sik Lee and Evelyn Rayala

In a Resolution2 dated 30 December 2010, the appellate court refused to reconsider its earlier decision.
The Facts

Respondent SS Ventures International, Inc. is a domestic corporation duly engaged in the business of
manufacturing footwear products for local sales and export abroad. It is represented in this action by
respondents Sung Sik Lee and Evelyn Rayala. Petitioners Andy Balite (Balite), Monaliza Bihasa (Bihasa)
and Delfin Anzaldo (Anzaldo) were regular employees of the respondent company until their
employments were severed for violation of various company policies.

For his part, Balite was issued a Show Cause Memorandum by the respondent company on 4 August
2005 charging him with the following infractions: (1) making false reports, malicious and fraudulent
statements and rumor-mongering against the company; (2) threatening and intimidating co-workers; (3)
refusing to cooperate in the conduct of investigation; and (4) gross negligence in the care and use of the
company property resulting in the damage of the finished products. After respondent found Balite’s
explanation insufficient, he was dismissed from employment, through a Notice of Termination on 6
September 2005.

Bihasa, on the other hand, was charged with absence without leave on two occasions and with improper
behavior, stubbornness, arrogance and uncooperative attitude towards superiors and employees. Bihasa
was likewise terminated from the service on 5 May 2006 after her explanation in an administrative
investigation was found unsatisfactory by the respondent company.

Anzaldo was also dismissed from employment after purportedly giving him due process. The records of
the infractions he committed as well as the date of his termination, however, are not borne by the
records.

Consequently, the three employees charged respondents with illegal dismissal and recovery of
backwages, 13th month pay and attorney’s fees before the Labor Arbiter.

In refuting the allegations of the petitioners, respondents averred that petitioners were separated from
employment for just causes and after affording them procedural due process of law.

On 30 December 2007, the Labor Arbiter rendered a Decision3 in favor of petitioners and held that
respondents are liable for illegal dismissal for failing to comply with the procedural and substantive
requirements in terminating employment. The decretal portion of the Labor Arbiter Decision
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, [petitioners] are hereby found to have been illegally dismissed even
as respondents are held liable therefore.

Consequently, respondent corporation is hereby ordered to reinstate [petitioners] to their former

positions without loss of seniority rights and other privileges with backwages initially computed at this
time and reflected below.

The reinstatement aspect of this decision is immediately executory and thus respondents are hereby
required to submit a report of compliance therewith within ten (10) days from receipt thereof.
Respondent corporation is likewise ordered to pay [petitioners] their 13th month pay and 10% attorney’s
fees.

Backwages

13th month pay

Attorney’s fees

1. Andy Balite

P162,969.04

P 17,511.00

P 18,048.00

2. Delfin Anzaldo

158,299.44

17,511.00

17,511.00

3. Monaliza Bihasa

116,506.62

17,511.00

13,401.75

All other claims are dismissed for lack of factual or legal basis.4

Aggrieved, respondents interposed an appeal by filing a Notice of Appeal and paying the corresponding
appeal fee. However, instead of filing the required appeal bond equivalent to the total amount of the
monetary award which is P490,308.00, respondents filed a Motion to Reduce the Appeal Bond to
P100,000.00 and appended therein a manager’s check bearing the said amount. Respondents cited
financial difficulty as justification for their inability to post the appeal bond in full owing to the partial
shutdown of respondent company’s operations.

In a Resolution5 dated 27 November 2008, the NLRC dismissed the appeal filed by the respondents for
non-perfection. The NLRC ruled that posting of an appeal bond equivalent to the monetary award is
indispensable for the perfection of the appeal and the reduction of the appeal bond, absent any showing
of meritorious ground to justify the same, is not warranted in the instant case.

Similarly ill-fated was respondents’ Motion for Reconsideration which was denied by the NLRC in a
Resolution6 dated 30 April 2009.

On certiorari, the Court of Appeals reversed the NLRC Decision and allowed the relaxation of the rule on
posting of the appeal bond. According to the appellate court, there was substantial compliance with the
rules for the perfection of an appeal because respondents seasonably filed their Memorandum of
Appeal and posted an appeal bond in the amount of P100,000.00. While the amount of the appeal bond
posted was not equivalent to the monetary award, the Court of Appeals ruled that respondents were
able to sufficiently prove their incapability to post the required amount of bond.7 The Court of Appeals
disposed in this wise:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, finding grave abuse of discretion on the part of the [NLRC], the
instant petition is GRANTED. The [NLRC’s] Resolutions dated November 27, 2008 and April 30, 2009,
respectively, are hereby SET ASIDE. [The NLRC] is hereby directed to decide petitioners’ appeal on the
merits.8

In a Resolution9 dated 30 December 2010, the Court of Appeals refused to reconsider its earlier
decision.

Petitioners are now before this Court via this instant Petition for Review on Certiorari10 praying that the
Court of Appeals Decision and Resolution be reversed and set aside on the ground
that:chanRoblesvirtualLawlibrary

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT REVERSED THE RESOLUTION OF THE
NLRC DISMISSING RESPONDENTS’ APPEAL FOR NON-PERFECTION THEREOF.11

The Court’s Ruling

Petitioners, in assailing the appellate court’s decision, argue that posting of an appeal bond in full is not
only mandatory but a jurisdictional requirement that must be complied with in order to confer
jurisdiction upon the NLRC. They posit that the posting of an insufficient amount of appeal bond, as in
this case, resulted to the non-perfection of the appeal rendering the decision of the Labor Arbiter final
and executory.

Banking on the appellate court’s decision, respondents, for their part, urge the Court to relax the rules
on appeal underscoring on the so-called “utmost good faith” they demonstrated in filing a Motion to
Reduce Appeal Bond and in posting a cash bond in the amount of P100,000.00. In justifying their
inability to post the required appeal bond, respondents reasoned that respondent company is in dire
financial condition due to lack of orders from customers constraining it to temporarily shut down its
operations resulting in significant loss of revenues. Respondents now plea for the liberal interpretation of
the rules so that the case can be threshed out on the merits, and not on technicality.

Time and again we reiterate the established rule that in the exercise of the Supreme Court’s power of
review, the Court is not a trier of facts12 and does not routinely undertake the re-examination of the
evidence presented by the contending parties during the trial of the case considering that the findings of
facts of labor officials who are deemed to have acquired expertise in matters within their respective
jurisdiction are generally accorded not only respect, but even finality, and are binding upon this Court,
when supported by substantial evidence.13chanroblesvirtuallawlibrary

The NLRC ruled that no appeal had been perfected on time because of respondents’ failure to post the
required amount of appeal bond. As a result of which, the decision of the Labor Arbiter has attained
finality. The Court of Appeals, on the contrary, allowed the relaxation of the rules and held that
respondents were justified in failing to pay the required appeal bond. Despite the non-posting of the
appeal bond in full, however, the appellate court deemed that respondents were able to seasonably
perfect their appeal before the NLRC, thereby directing the NLRC to resolve the case on the merits.

The pertinent rule on the matter is Article 223 of the Labor Code, as amended, which sets forth the rules
on appeal from the Labor Arbiter’s monetary award:chanRoblesvirtualLawlibrary

ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders. x x x.

xxxx

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.
(Emphases ours).cralawred

Implementing the aforestated provisions of the Labor Code are the provisions of Rule VI of the 2011
Rules of Procedure of the NLRC on perfection of appeals which read:chanRoblesvirtualLawlibrary

Section. 1. Periods of Appeal. - Decisions, awards or orders of the Labor Arbiter shall be final and
executory unless appealed to the Commission by any or both parties within ten (10) calendar days from
receipt thereof. x x x If the 10th day or the 5th day, as the case may be, falls on a Saturday, Sunday or
holiday, the last day to perfect the appeal shall be the first working day following such Saturday, Sunday
or holiday.

xxxx

Section 4. Requisites for Perfection of Appeal. – (a) The appeal shall be:chanRoblesvirtualLawlibrary

(1)

filed within the reglementary period as provided in Section 1 of this Rule;

(2)

verified by the appellant himself/herself in accordance with Section 4, Rule 7 of the Rules of Court ,as
amended;
(3)

in the form a of a memorandum of appeal which shall state the grounds relied upon and the arguments
in support thereof; the relief prayed for; and with a statement of the date when the appellant received
the appealed decision, award or order;

(4)

in three (3) legibly typewritten or printed copies; and

(5)

accompanied by:

i)

proof of payment of the required appeal fee and legal research fee;

ii)

posting of cash or surety bond as provided in Section 6 of this Rule; and

iii)

proof of service upon the other parties.

xxxx

(b) A mere notice of appeal without complying with the other requisites aforestated shall not stop the
running of the period for perfecting an appeal.

xxxx

Section 5. Appeal Fee. - The appellant shall pay the prevailing appeal fee and legal research fee to the
Regional Arbitration Branch or Regional Office of origin, and the official receipt of such payment shall
form part of the records of the case.

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

xxxx

The Commission through the Chairman may on justifiable grounds blacklist a bonding company,
notwithstanding its accreditation by the Supreme Court.cralawred

These statutory and regulatory provisions explicitly provide that an appeal from the Labor Arbiter to the
NLRC must be perfected within ten calendar days from receipt of such decisions, awards or orders of the
Labor Arbiter. In a judgment involving a monetary award, the appeal shall be perfected only upon (1)
proof of payment of the required appeal fee; (2) posting of a cash or surety bond issued by a reputable
bonding company; and (3) filing of a memorandum of appeal.14chanroblesvirtuallawlibrary

In McBurnie v. Ganzon,15 we harmonized the provision on appeal that its procedures are fairly applied
to both the petitioner and the respondent, assuring by such application that neither one or the other
party is unfairly favored. We pronounced that the posting of a cash or surety bond in an amount
equivalent to 10% of the monetary award pending resolution of the motion to reduce appeal bond shall
be deemed sufficient to perfect an appeal, to wit:chanRoblesvirtualLawlibrary

It is in this light that the Court finds it necessary to set a parameter for the litigants’ and the NLRC’s
guidance on the amount of bond that shall hereafter be filed with a motion for a bond’s reduction. To
ensure that the provisions of Section 6, Rule VI of the NLRC Rules of Procedure that give parties the
chance to seek a reduction of the appeal bond are effectively carried out, without however defeating the
benefits of the bond requirement in favor of a winning litigant, all motions to reduce bond that are to be
filed with the NLRC shall be accompanied by the posting of a cash or surety bond equivalent to 10% of
the monetary award that is subject of the appeal, which shall provisionally be deemed the reasonable
amount of the bond in the meantime that an appellant’s motion is pending resolution by the
Commission. In conformity with the NLRC Rules, the monetary award, for the purpose of computing the
necessary appeal bond, shall exclude damages and attorney’s fees. Only after the posting of a bond in
the required percentage shall an appellant’s period to perfect an appeal under the NLRC Rules be
deemed suspended.cralawred

The rule We set in McBurnie was clarified by the Court in Sara Lee Philippines v. Ermilinda Macatlang.16
Considering the peculiar circumstances in Sara Lee, We determined what is the reasonable amount of
appeal bond. We underscored the fact that the amount of 10% of the award is not a permissible bond
but is only such amount that shall be deemed reasonable in the meantime that the appellant’s motion is
pending resolution by the Commission. The actual reasonable amount yet to be determined is
necessarily a bigger amount. In an effort to strike a balance between the constitutional obligation of the
state to afford protection to labor on the one hand, and the opportunity afforded to the employer to
appeal on the other, We considered the appeal bond in the amount of P725M which is equivalent to 25%
of the monetary award sufficient to perfect the appeal, viz.:chanRoblesvirtualLawlibrary

We sustain the Court of Appeals in so far as it increases the amount of the required appeal bond. But we
deem it reasonable to reduce the amount of the appeal bond to P725 Million. This directive already
considers that the award if not illegal, is extraordinarily huge and that no insurance company would be
willing to issue a bond for such big money. The amount of P725 Million is approximately 25% of the basis
above calculated. It is a balancing of the constitutional obligation of the state to afford protection to
labor which, specific to this case, is assurance that in case of affirmance of the award, recovery is not
negated; and on the other end of the spectrum, the opportunity of the employer to appeal.

By reducing the amount of the appeal bond in this case, the employees would still be assured of at least
substantial compensation, in case a judgment award is affirmed. On the other hand, management will
not be effectively denied of its statutory privilege of appeal.cralawred

In line with Sara Lee and the objective that the appeal on the merits to be threshed out soonest by the
NLRC, the Court holds that the appeal bond posted by the respondent in the amount of P100,000.00
which is equivalent to around 20% of the total amount of monetary bond is sufficient to perfect an
appeal. With the employer’s demonstrated good faith in filing the motion to reduce the bond on
demonstrable grounds coupled with the posting of the appeal bond in the requested amount, as well as
the filing of the memorandum of appeal, the right of the employer to appeal must be upheld. This is in
recognition of the importance of the remedy of appeal, which is an essential part of our judicial system
and the need to ensure that every party litigant is given the amplest opportunity for the proper and just
disposition of his cause freed from the constraints of technicalities.17chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition is DENIED. The assailed Decision and Resolution of the
Court of Appeals are hereby AFFIRMED.

SO ORDERED.