SECOND DIVISION

[ G.R. No. 218984, January 24, 2018 ]

ARMANDO M. TOLENTINO (DECEASED), HEREIN REPRESENTED BY HIS SURVIVING SPOUSE
MERLA F. TOLENTINO AND CHILDREN NAMELY: MARIENELA, ALYSSA, ALEXA, AND AZALEA,
ALL SURNAMED TOLENTINO, PETITIONERS, VS. PHILIPPINE AIRLINES, INC., RESPONDENT.

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. Petitioners [1] Merla F. Tolentino, as
the surviving spouse of Armando M. Tolentino (Tolentino), and Marienela, Alyssa, Alexa and Azalea, all
surnamed Tolentino, as the children of Tolentino, challenge the  30 September 2014 Decision[2] and 10 June 2015
Reso1ution[3] of the Court of  Appeals (CA) in CA-G.R. SP No. 132519 which affirmed the 28 June 2013 
Decision[4] and 27 August 2013 Resolution[5] of the National Labor Relations  Commission (NLRC) and the 14
March 2013 Decision[6] of the Labor Arbiter.
The Facts

Tolentino was hired by respondent Philippine Airlines, Inc. (PAL) as a flight engineer on 22 October 1971. By 16
July 1999, Tolentino had the rank of A340/A330 Captain. As a pilot, Tolentino was a member of the Airline Pilots
Association of the Philippines (ALPAP), which had a collective bargaining agreement (CBA) with PAL.

On 5 June 1998, ALPAP members went on strike. On 7 June 1998, the Secretary of Labor issued an Order
requiring all striking officers and members of ALPAP to return to work within 24 hours from receipt of the Order
and requiring PAL management to accept them under the same terms and conditions of employment prior to the
strike. On 8 June 1998, the Secretary of Labor served the Order on the officers of ALPAP. While the union
officers and members had until 9 June 1998 to comply with the directive of the Secretary of Labor, some pilots –
including Tolentino – continued to participate in the strike.

On 26 June 1998, when Tolentino and other striking pilots returned to work, PAL refused to readmit these
returning pilots. Thus, they filed a complaint for illegal lockout against PAL. On 20 July 1998, Tolentino reapplied
for employment with PAL as a newly hired pilot, and thus voluntarily underwent the six months probationary
period. After less than a year, Tolentino tendered his resignation effective 16 July 1999.

Meanwhile, on 1 June 1999, the Secretary of Labor issued a Resolution declaring the strike conducted by ALPAP
on 5 June 1998 illegal for being procedurally infirm and in open defiance of the return-to-work order of 7 June
1998. Members and officers of ALPAP who participated in the strike in defiance of the 7 June 1998 return-to-
work order were declared to have lost their employment status. This resolution was affirmed by this Court on 10
April 2002.

Tolentino worked for a foreign airline, and thereafter returned to the Philippines. Upon his return, he informed
PAL of his intention of collecting his separation and/or retirement benefits under the CBA. PAL refused to pay
Tolentino the separation and/or retirement benefits as stated in the CBA. Tolentino filed his complaint against
PAL for non-payment of holiday pay, rest day pay, separation pay, and retirement benefits with prayer for the
payment of damages and attorney's fees.

The Ruling of the Labor Arbiter

On 14 March 2013, the Labor Arbiter rendered his Decision dismissing the complaint of Tolentino. The Labor
Arbiter found that Tolentino was not entitled to separation pay and other benefits as he was not illegally dismissed,
having participated in the illegal strike and defied the return-to-work order of the Secretary of Labor. The Labor
Arbiter also denied the claim for retirement benefits because Tolentino resigned from work less than a year after
he was rehired by PAL. The Decision states in part:

Since it is admitted that complainant participated in a strike prohibited by the law and the Secretary
of Labor's. Return To Work Order, he was validly dismissed and is therefore not entitled to
 separation pay. As for his claims for holiday pay and rest day pay, it should be emphasized that he
was considered a new hire when he rejoined Philippine Airlines in July 1998. Complainant
underwent the probationary period which ended only on January 25, 1999. Six [6] months later, he
tendered his resignation effective July 16, 1999. Given these, complainant cannot tuck [sic] in
whatever seniority or benefits he had prior to the cessation of his employment on June 9, 1998.[7]

On 4 April 2013, petitioners appealed the Decision of the Labor Arbiter to the NLRC.[8]

The Ruling of the NLRC

On 28 June 2013, the NLRC affirmed the Decision of the Labor Arbiter, finding that Tolentino was not entitled to
holiday pay, rest day pay, separation pay, retirement benefits, and moral and exemplary damages. [9] The NLRC
found that (1) the severance of Tolentino's employment was not due to any of the authorized causes under the
Labor Code of the Philippines; (2) Tolentino was validly terminated from employment because of his participation
in the illegal strike; and (3) when he resigned after he reapplied with PAL, he was not able to complete the
required period of five years of continuous service under the CBA.

The Motion for Reconsideration[10] was denied by the NLRC in its Resolution dated 27 August 2013.[11] Thereafter,
petitioners filed a petition for certiorari under Rule 65 before the CA on 4 November 2013.[12]

The Ruling of the CA

In a Decision dated 30 September 2014, the CA affirmed, with modification, the 28 June 2013 Decision and 27
August 2013 Resolution of the NLRC. The CA found that under the CBA, Tolentino was entitled to the payment
of his vacation time and days off earned but not taken. The CA held:

Considering the foregoing provisions, Tolentino's separation from work entitles him to payment of
his vacation time and days off earned but not taken. Tolentino has rendered 25 continuous years of
service to respondent company, hence, he is entitled to 27 calendar days of paid annual vacation
leave. Furthermore, considering that the CBA only mentions separation from the company to justify
the claim for vacation pay, but is silent on the forfeiture of the benefit upon valid tern1ination of an
employee from the service, we are constrained to grant the same, in light of the rule that in case of
doubt, labor contracts shall be construed in favor of the worker.

WHEREFORE, the June 28, 2013 Decision and August 27, 2013 Resolution of the NLRC are
AFFIRMED, with MODIFICATION, ordering private respondent Philippine Airlines, Inc. to pay
Tolentino's accrued vacation leave equivalent to 27 calendar days of his salary.[13]

Petitioners filed a Motion for Partial Reconsideration dated 1 November 2014 alleging that Tolentino was entitled
to (1) the retirement benefits under the CBA; (2) the return of his equity in the retirement fund under the PAL
Pilots' Retirement Benefit Plan; and (3) the payment of moral and exemplary damages and attorney's fees.[14]

On the other hand, PAL filed its Motion for Partial Reconsideration dated 3 November 2014. In its Motion, PAL
argued that Tolentino was not entitled to his supposed accrued vacation leave pay considering that (1) the payment
of his alleged benefits had already been dismissed by this Court; (2) he had never prayed for the payment of his
vacation leave pay; and (3) the company's policy on forfeiture of benefits and privileges upon the dismissal of an
employee prevails over the CBA.[15]

In a Resolution dated 10 June 2015,[16] the CA denied the Motion for Partial Reconsideration filed by petitioners.
Hence, this petition.

The Issues

Petitioners seek a partial reversal of the decision of the CA and raise the following arguments:
 [A.] The Honorable Court of Appeals seriously erred and committed grave abuse of discretion
when it did not rule that petitioner-heirs are entitled to receive Capt. Tolentino's retirement benefits
under the Collective Bargaining Agreement with respondent;

[B.] The Honorable Court of Appeals seriously erred and committed grave abuse of discretion when
it failed to rule that petitioner-heirs are entitled to the return of Capt. Tolentino's equity in the
retirement fund under the PAL Pilot[s'] Retirement Benefit Plan; and

[C.] The Honorable Court of Appeals seriously erred and committed grave abuse of discretion when
it failed to award petitioner-heirs with payment for damages and attorney's fees.[17]

The Ruling of the Court

We deny the petition.

An employee who knowingly defies a return-to-work order issued by the Secretary of Labor is deemed to have
committed an illegal act which is a just cause to dismiss the employee under Article 282 of the Labor Code.
In PAL, Inc. v. Acting Secretary of Labor,[18] we held:

A strike that is undertaken despite the issuance by the Secretary of Labor of an assumption and/or
certification is a prohibited activity and thus illegal. The union officers and members, as a result,
are deemed to have lost their employment status for having knowingly participated in an illegal act.
Stated differently, from the moment a worker defies a return-to-work order, he is deemed to have
abandoned his job. The loss of employment status results from the striking employees' own act
— an act which is illegal, an act in violation of the law and in defiance of authority. (Emphasis
supplied)

In fact, it has already been settled that those who participated in the 5 June 1998 strike of ALPAP are deemed to
have lost their employment status with PAL.[19] In Rodriguez v. Philippine Airlines, Inc.,[20] we held:

In the 1st ALPAP case, the Court upheld the DOLE Secretary's Resolution dated June 1, 1999
declaring that the strike of June 5, 1998 was illegal and all ALPAP officers and members who
participated therein had lost their employment status. The Court in the 2nd ALPAP case ruled
that even though the dispositive portion of the DOLE Secretary's Resolution did not specifically
enumerate the names of those who actually participated in the illegal strike, such omission cannot
prevent the effective execution of the decision in the 1st ALPAP case. The Court referred to the
records of the Strike and Illegal Lockout Cases, particularly, the logbook, which it unequivocally
pronounced as a "crucial and vital piece of evidence." In the words of the Court in the 2nd ALPAP
case, "[t]he logbook with the heading 'Return-To-Work Compliance/Returnees' bears their
individual signature[s] signifying their conformity that they were among those workers who
returned to work only on June 26, 1998 or after the deadline imposed by DOLE. x x x In fine, only
those returning pilots, irrespective of whether they comprise the entire membership of ALPAP, are
bound by the June 1, 1999 DOLE Resolution." (Emphasis supplied)

Thus, Tolentino, who did not deny his participation in the strike and his failure to promptly comply with the
return-to-work order of the Secretary of Labor, could not claim any retirement benefits because he did not retire –
he simply lost his employment status.

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the
employe whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former.
[21]
 It is clear, therefore, Tolentino had not retired from PAL – it was not a result of a voluntary agreement.
Tolentino lost his employment status because of his own actions.

Admittedly, Tolentino was hired again by PAL on 20 July 1998. [22] This was after he reapplied with the company.
He also voluntarily completed the probationary period of six months. It was made clear to Tolentino, and he
certainly admitted, that he was rehired on the condition that his employment would be as a new hire.
[23]
 Reemployment, on the condition that the employee will be treated as a new employee, is a valid exercise of the
employer's prerogative, as long as it is not done with anti-union motivation. In Enriquez v. Zamora,[24] this Court
held:

Enriquez and Ecarma were, therefore, new employees with entirely new seniority rankings when
they were readmitted by PAL on January 18, 1971 and January 12, 1971, respectively. Certainly,
PAL was merely exercising its prerogative as an employer when it imposed two conditions for the
reemployment of petitioners inasmuch as hiring or rehiring policies are matters for the company's
management to determine in the absence of an anti-union motivation.[25]

On 16 July 1999, or less than one year after he was rehired as a new pilot, Tolentino resigned from PAL. In this
instance, Tolentino had voluntarily resigned from work. However, the act of resignation alone does not entitle him
to retirement benefits which he claimed under the PAL-ALPAP Retirement Plan. Article VII of the PAL-ALPAP
Retirement Plan Rules and Regulations provides:

ARTICLE VII
Retirement Benefits

Section 1. Normal Retirement. (a) Any member who completes twenty (20) years of
service as a pilot for PAL or has flown 20,000 hours for PAL shall be eligible for
normal retirement. The normal retirement date is the date on which he completes
twenty (20) years of service or on which he logs his 20,000 hours as a pilot for PAL.
The Member who retires on his normal retirement shall be entitled either (a) to a
lump sum payment of P100,000.00 or (b) to such termination pay benefits to which
he may be entitled under existing laws, whichever is the greater amount.

Section 2. Late Retirement. Any Member who remains in the service of the

Company after his normal retirement date may retire either at his option or at the
option of the Company, and when so retired he shall be entitled either (a) to a lump
sum payment of P5,000.00 for each completed year of service rendered as a pilot, or
(b) to such termination pay benefits to which he may [sic] entitled under existing
laws, whichever is the greater amount.

Section 3. Resignation Benefit. Any Member who completes five (5) years of

continuous service with the Company may retire a[t] his option. In such event, he
shall only be entitled to the following percentage or P5,000.00 for each completed
year of service as a pilot, multiplied by the applicable percentage as shown below:

x x x x[26]

Based on the foregoing, Tolentino is not entitled to any of the retirement benefits under the PAL-ALPAP
Retirement Plan. He had not completed even one year of his new employment with PAL. The Rules and
Regulations of the PAL-ALPAP Retirement Plan provide that the member-pilot must have completed at least five
years of continuous service with PAL to be entitled to the resignation benefit. His resignation in July 1999, which
was only about a year from when he was rehired by the company, did not qualify him for such resignation benefit.

Petitioners argue that Tolentino had been a pilot for PAL for more than 20 years since his employment on 22
October 1971, and thus he was qualified for normal retirement under the first section of Article VII of the PAL-
ALPAP Retirement Plan.

We disagree.

For purposes of the retirement plan, the computation of Tolentino's length of service to the company should be
reckoned from the date he was rehired after his own voluntary application as a new pilot. His services from
October 1971 to June 1998 cannot be tacked to his new employment starting in July 1998 because the first
employment had already been finally terminated – not due to his voluntary resignation or retirement, but because
of termination due to just causes. Tolentino joined an illegal strike and defied the return-to-work order of the
Secretary of Labor. At this point, he had already lost his employment status with PAL.
Petitioners cannot rely on the case of Enriquez v. Zamora[27] to argue that once a pilot meets the requirements
under the CBA, the payment of the retirement benefits "ipso facto accrues and may be demanded when the
employment relationship is severed, regardless of the reason therefor" [28] because first,  there was no such
declaration in the cited case; second,  the issue in the case was about the seniority of the returning pilots;
and third, the case has an entirely different factual milieu from the case at bar. In Enriquez v. Zamora,[29] the pilots
tendered their mass resignation while in the present case, no resignation was tendered – Tolentino and the others
were terminated because of their participation in an illegal strike and their subsequent non-compliance with the
return-to-work order. The Court held that Enriquez was entitled to the retirement benefits because precisely, he
retired – he voluntarily severed his employment with PAL. While Enriquez argued that he did not genuinely desire
to terminate his employment and that the resignation was tendered as a matter of protest, the fact remained that a
resignation was tendered, and PAL had accepted it. On the other hand, in the present case, when Tolentino was
first separated from PAL, there was no resignation to speak of – nothing was tendered to PAL for it to accept.

The requirements under the PAL-ALPAP Retirement Plan must be present at the time the employee resigns or
retires from PAL. Unfortunately for Tolentino, when he finally tendered his resignation with PAL, he was no
longer compliant with the requirements for the retirement benefit – as a new hire, he only completed less than one
year of service. Therefore, he is not entitled to any retirement or resignation benefits under the PAL-ALPAP
Retirement Plan.

Retirement benefits, especially those which are given before the mandatory retirement age, are given as a form of
reward for the services rendered by the employee to the employer. [30] Thus, it would be contrary to the rationale of
retirement benefits to reward an employee who was terminated due to just cause, or who committed an act that was
enough to merit his dismissal.

Additionally, petitioners argue that Tolentino is also entitled to the equity in the retirement fund under the PAL
Pilots' Retirement Benefit Plan, which is separate from the retirement benefits under the PAL-ALPAP Retirement
Plan.

While we recognize that the two benefits are indeed separate and distinct from each other, we find that Tolentino is
entitled to neither.

The PAL Pilots' Retirement Benefit Plan is a retirement fund raised exclusively from the contributions of PAL.
[31]
 Contrary to petitioners' claim that the retirement fund comes from salary deductions, [32] we find that it is non-
contributory and there is no financial burden on the pilots for the establishment of this fund. The PAL Pilots'
Retirement Benefit Plan specifically provides:

2.9 "Retirement Fund" shall mean the company's contributions to the Trust Fund established
under or in connexion [sic] with this Plan in the Participant[s'] behalf plus/minus earnings/losses
and less expenses charged to the Fund and benefit payments previously made. The Retirement Fund
shall consist of the participants' equity and the forfeitures.

xxxx

6.1 The Plan will be wholly financed by the Company. No contributions will be required from
the participants of the Plan. The funding of the Plan and payment of the benefits hereunder shall
be provided for through the medium of a Retirement Fund held by a trustee under an appropriate
trust agreement. All contributions made by the Company to the Retirement Fund shall be solely and
exclusively for the benefit of the participants or their beneficiaries, and no part of said contributions
or its income shall be used for or diverted to purposes other than the exclusive benefit of such
employees and their beneficiaries. None whatsoever shall revert to the Company. [33] (Emphasis
supplied)

In Philippine Airlines, Inc. v. Airline Pilots Association of the Philippines,[34] this Court held:

The PAL Pilots' Retirement Benefit Plan is a retirement fund raised from contributions
exclusively from petitioner of amounts equivalent to 20% of each pilot's gross monthly pay. Upon
retirement, each pilot stands to receive the full amount of the contribution. In sum, therefore,
the pilot gets an amount equivalent to 240% of his gross monthly income for every year of service
 he rendered to petitioner. This is in addition to the amount of not less than P100,000.00 that he shall
receive under the 1967 Retirement Plan. (Boldfacing and underscoring supplied)

Again, similar to the retirement benefits under the PAL-ALPAP Retirement Plan, it is clear that the pilot must
have retired first before he receives the full amount of the contribution or the equity of the retirement fund. As
earlier established, Tolentino never retired. When he was first separated from work, it was not due to resignation
or retirement – he simply lost his employment status as a result of his participation in the illegal strike and failure
to promptly comply with the return-to-work order of the Secretary of Labor. When he resigned from work after
subsequently being rehired by PAL, it could not be said that he retired as he barely completed one year of service.
Simply put, he was not able to satisfy the retirement requirements. As Tolentino was not a retiring pilot, he was
not entitled to receive the return of equity in the retirement fund. Only pilots who are retiring – who have
satisfactorily met the requisites for retirement – are entitled to the full equity of the contribution. Moreover, since
the contribution to the fund was exclusively from PAL, with no participation from the employees, Tolentino is not
entitled to any amount from the PAL Pilots' Retirement Benefit Plan.

Further, we find that PAL's Personnel Policies and Procedures Manual, [35] which provides that generally, a
dismissed employee forfeits all his entitlements to the company benefits and privileges, is a valid employer policy
which is applicable to Tolentino. PAL's assertion that the loss of employment of Tolentino carried with it the
forfeiture of his benefits and privileges, which include retirement benefits under the PAL-ALPAP Retirement Plan
and the equity in the retirement fund under the PAL Pilots' Retirement Benefit Plan, is meritorious.

We also find no reversible error in the denial of Tolentino's claim for damages and attorney's fees. Based on the
foregoing, there is no basis to grant any of the damages claimed. Finally, we note that PAL did not question the
order for the payment of Tolentino's accrued vacation leave. Thus, this Court will not review the same.

WHEREFORE, the petition is DENIED. The assailed 30 September 2014 Decision and 10 June 2015 Resolution
of the Court of Appeals in CA-G.R. SP No. 132519 are AFFIRMED.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 218390, February 28, 2018 ]
HONGKONG BANK INDEPENDENT LABOR UNION (HBILU), PETITIONER, VS. HONGKONG AND
SHANGHAI BANKING CORPORATION LIMITED, RESPONDENT.

DECISION
VELASCO JR., J.:

The Case

For consideration is a Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the
Decision[1] and Resolution of the Court of Appeals (CA), dated October 23, 2014 and May 21, 2015, respectively,
in CA-G.R. SP No. 130798. The challenged rulings sustained the validity of the external credit check as a
condition before respondent could grant the application for salary loans of petitioner's members. This is
notwithstanding the non-mention of the said condition in the parties' Collective Bargaining Agreement (CBA).
The Facts

In 2001, the Bangko Sentral ng Pilipinas (BSP) issued the Manual of Regulations for Banks (MoRB). Relevant to
the instant case is Section X338 thereof which reads:

Banks may provide financial assistance to their officers and employees, as part of their fringe
benefits program, to meet housing, transportation, household and personal needs of their officers
and employees. Financing plans and amendments thereto shall be with prior approval of the
BSP. (emphasis added)

Pursuant to the above-cited provision, respondent Hongkong and Shanghai Banking Corporation Limited (HSBC),
on March 12, 2003, submitted its Financial Assistance Plan (Plan) to the BSP for approval. The Plan allegedly
contained a credit checking proviso stating that "[r]epayment defaults on existing loans and adverse information on
outside loans will be considered in the evaluation of loan applications." The BSP approved the Plan on May 5,
2003.[2] Said Plan was later amended thrice,[3] all of which amendments were approved by the BSP.[4]

Meanwhile, petitioner Hongkong Bank Independent Labor Union (HBILU), the incumbent bargaining agent of
HSBC's rank-and-file employees, entered into a CBA with the bank covering the period from April 1, 2010 to
March 31, 2012. Pertinent to the instant petition is Article XI thereof, which reads:

Article XI
Salary Loans

Section 1. Housing/house Improvement Loan. The BANK, or other financial

institution when appropriate, shall extend housing loan to qualified employees with
at least three (3) YEARS OF SERVICE, UP TO One Million Five Hundred
Thousand Pesos (P1,500,000.00) payable in twenty-five (25) years or up to the
retirement date of the employee, whichever comes first. Subject to BSP approval, an
additional Five Hundred Thousand Pesos (P500,000.00) can be availed subject to the
terms above with interest rate at the BLR less 3% but not less than six percent (6%)
per annum.

Section 2. Personal Loans. The BANK, or the Retirement Trust Fund Inc. or other
financial institutions, when appropriate, shall extend personal loan to qualified
employees, with at least 1 year service, up to six months basic pay of the employees
at six percent (6%) interest per annum, payable in three years.

Section 3. Car Loans. The BANK, or the Retirement Trust Fund Inc. or other
financial institutions when appropriate, shall extend a car loan to qualified
employees with at least 3 years service up to Five Hundred Fifty Thousand Pesos
(PHP550,000.00) payable in seven (7) years. Interest rate shall be six percent (6%)
 per annum.

Section 4. Credit Ratio. The availment of any of the foregoing loans shall be subject
to the BANK's credit ratio policy.

When the CBA was about to expire, the parties started negotiations for a new one to cover the period from April 1,
2012 to March 31, 2017. During the said negotiations, HSBC proposed amendments to the above quoted Article
XI allegedly to align the wordings of the CBA with its BSP approved Plan. Particularly, HSBC proposed the
deletion of Article XI, Section 4 (Credit Ratio) of the CBA, and the amendment of Sections 1 to 3 of the same
Article to read as follows:

Article XI
Salary Loans

Section 1. Housing/house Improvement Loan. Based on the Financial Assistance

Plan duly approved by Bangko Sentral ng Pilipinas (BSP), the BANK, or other
financial institution when appropriate, shall extend housing loan to qualified
employees with at least three (3) YEARS OF SERVICE UP TO One Million Five
Hundred Thousand Pesos (P1,500,000.00) payable in twenty-five (25) years or up to
the retirement date of the employee, whichever comes first, subject to employee's
credit ratio. An additional Five hundred thousand Pesos (P500,000.00) can be
availed subject to the terms above with interest rates at the BLR less 3% but not less
than six percent (6%) per annum.

Section 2. Personal Loans. Based on the financial Assistance Plan duly approved

by Bangko Sentral ng Pilipinas (BSP), the BANK, or other financial institutions
when appropriate, shall extend personal loan to qualified employees, with at least 1
year service, up to six months basic pay of the employees at six percent (6%) interest
per annum, payable in three (3) years, subject to employee's credit ratio.

Section 3. Car loans. Based on the Financial Assistance Plan duly approved by

Bangko Sentral ng Pilipinas (BSP), the BANK, or other financial institutions when
appropriate, shall extend a car loan to qualified employees with at least three years
service, up to Five Hundred Fifty Thousand Pesos (PHP550,000.00) payable in
seven (7) years. Interest rate shall be six percent (6%) per annum. (emphasis added)

HBILU vigorously objected to the proposed amendments, claiming that their insertions would curtail its members'
availment of salary loans. This, according to the Union, violates the existing exceptions set forth in  BSP Circular
423, Series of 2004,[5] and Section X338.3[6] of the MoRB. In view of HBILU's objection, HSBC withdrew its
proposed amendments and, consequently, Article XI remained unchanged.

Despite the withdrawal of the proposal, HSBC sent an e-mail to its employees on April 20, 2012 concerning the
enforcement of the Plan, including the Credit Checking provisions thereof. The e-mail reads:
Dear All

We wish to reiterate the following provisions included in the Financial Assistance Plan (FAP) as
approved by Bangko Sentral ng Pilipinas (BSP). Note that the FAP is the official guideline and
policy governing Staff Loans and Credit Cards.

>>>>CREDIT CHECKING

Below are the specific provisions included in the FAP regarding credit checking.

Housing Loan, Car Loan, Personal Loan & Computer/Club Repayment defaults on
Membership/Medical Equipment Loan information considered
applications.
Credit Card Repayment defaults on
information considered
existing loans and adverse
in the evaluation of loan
existing loans and adverse
in the evaluation of loan
 applications.

With the strict implementation of these provisions, adverse credit findings may result
to disapproval of loan or credit card applications. These findings will include the
following:

(1) Frequency of confirmed ADA failure on staff/commercial loans and credit cards (3 consecutive incidents
within the past 6 months or 6 incidents within the past 12 months). Note that applications with pending ADA
for investigation will only be processed upon confirmation of status (Confirmed or Reprieved);
(2) Adverse findings on HSBC cards; or
(3) Adverse findings from external credit checks.[7]

Thereafter, in September 2012, HBILU member Vince Mananghaya (Mananghaya) applied for a loan under the
provisions of Article XI of the CBA. His first loan application in March 2012 was approved, but adverse findings
from the external checks on his credit background resulted in the denial of his September application. [8] HBILU
then raised the denial as a grievance issue with the National Conciliation Mediation Board (NCMB). It argued that
the imposition of an additional requirement—the external credit checking prior to approval of any loan application
under Article XI of the CBA—is not sanctioned under the CBA. The Union emphasized that under the terms of
Article XI, there is no such requirement and that it cannot, therefore, be unilaterally imposed by HSBC.

Justifying its denial of the loan application, HSBC countered that the external credit check conducted in line with
Mananghaya's loan application was merely an implementation of the BSP-approved Plan. The adoption of the
Plan, HSBC stressed, is a condition sine qua non for any loan grant under Section X338 of the MoRB. Moreover,
the Credit Check policy has been in place since 2003, and is a sound practice in the banking industry to protect the
interests of the public and preserve confidence in banks.

The issue was then submitted for resolution by the NCMB Panel of Accredited Voluntary Arbitrators (the Panel).
[9]
 In the interim, the parties, on September 29, 2012, inked a new CBA for the period covering April 1, 2012 up to
March 31, 2017.[10]

NCMB-PVA Decision

On May 17, 2013, the Panel rendered a Decision finding for HSBC. It held that herein respondent, as an employer,
has the right to issue and implement guidelines for the availment of loan accommodations under the CBA as part
of its management prerogative. The repeated use of the term "qualified employees" in Article XI of the CBA was
deemed indicative of room for the adoption of further guidelines in the availment of the benefits thereunder. The
Panel also agreed that HSBC's Plan is not a new policy as it has already been approved by the BSP as early as
2003. Thus, the Panel ruled that the salary loan provisions under Article XI of the CBA must be read in
conjunction with the provisions of the Plan.

The Panel further discussed that HSBC's adoption of the Plan was not done for any whimsical or arbitrary reason,
but because the bank was constrained to comply with Section X338 of the MoRB. As a banking institution, HSBC
cannot divorce itself from the regulatory powers of the BSP. Observance of Section X338 of the MoRB was then
necessary before the bank could have been allowed to extend loan accommodations to its officers and employees.

On the basis thereof, the Panel held that they are not ready to rule that HSBC's Plan violates Article XI of the
CBA.

Aggrieved, HBILU elevated the case to the CA.

CA Decision

The CA sustained the findings and conclusions of the NCMB-PVA in toto  on the ratiocination that HSBC was
merely complying with Section X338 of the MoRB when it submitted the Plan to BSP. When BSP, in turn,
approved the said Plan, HSBC became legally bound to enforce its provisions, including the conduct of external
credit checks on its loan applicants.[11] The appellate court further ruled that the Plan should be deemed
incorporated in the CBA because it is a regulatory requirement of BSP without which the salary loan provisions of
the CBA are rendered inoperative.

Petitioner's motion for reconsideration having been denied by the CA thru its May 21, 2015 Resolution, HBILU
now seeks recourse from this Court.

The Issues

HBILU presents the following grounds to warrant the reversal of the assailed Decision, viz:

The decisions and resolutions of the Hon. Panel of Voluntary Arbitrators and the Hon. Court of
Appeals are tainted with grave abuse of discretion and it showed patent errors in the appreciation of
facts which led to wrong conclusions of law; or stated otherwise;

The Hon. Panel of Voluntary Arbitrators and Court of Appeals committed serious, reversible and
gross error in law in ruling that the Bank's Financial Assistance Plan as not in violation of Article
XI of the Parties' CBA revision on Salary Loans (Article XII of the new and existing CBA)[12]

Simply put, the issue for Oui resolution is whether or not HSBC could validly enforce the credit-checking
requirement under its BSP-approved Plan in processing the salary loan applications of covered employees even
when the said requirement is not recognized under the CBA.

Arguments of Petitioner

In support of its position, HBILU argues, among others, that HSBC failed to present in court the Plan that was
supposedly submitted to the BSP for approval, and to show that the requirement of external credit checking had
already been included therein.[13]  Too, said Plan is not a set of policies for salary loans that came from the BSP,
but was devised solely by HSBC.[14]

Furthermore, HBILU claims that it is not privy to the Plan and has not been consulted, much less informed, of the
impositions therein prior to its implementation. No proof was offered that the Plan had been disseminated to the
employees prior to the April 20, 2012 e-mail blast.[15]

Lastly, the implementation of the Plan, according to HBILU, is tantamount to diminution of benefits [16] and a
unilateral amendment of the existing CBA,[17] which are both proscribed under the Labor Code. Had the parties to
the CBA intended to include the external credit check as an additional condition to the availment of employee
salary loans, then it should have been plainly provided in their agreement.[18]

Arguments of Respondent

In its Comment, HSBC claims that the Plan is neither new nor was it issued on a mere whim or caprice. On the
contrary, the Plan was established as early as 2003, way before Mananghaya's application was denied, to conform
to Section X338 of the BSP MoRB. HSBC reminds the Court that the loan and credit accommodations could have
only formed part of the employees' fringe benefit program if they were extended through a financing scheme (i.e.,
the Plan) approved by the BSP.

Moreover, HSBC argues that the dissemination of the Plan via e-mail blast on April 20, 2012 was but a reiteration,
as opposed to a first publication. It contends that even prior to the establishment and approval of the Plan in 2003,
the then-loan policy already included the requirement on external credit checking. According to the bank, there
was already a provision that required the conduct of credit checking in the processing and evaluation of loan
applications in their General Policies on Loans, cascaded through the Intranet system to HSBC employees on
October 24, 2002, viz:
  
CREDIT CHECKING
  Repayment defaults on existing loans and adverse information on
outside loans will be considered in the evaluation of loan applications.

The union members cannot then feign ignorance of the external credit checking requirement in staff loan
applications, according to HSBC. Consequently, petitioner's bare denial of any knowledge about it cannot be given
any credence. Considering too that the Plan reiterating the requirement has been approved by the BSP in 2003,
HBILU slept on its rights when it questioned its strict imposition almost a decade after its issuance.

Finally, HSBC postulates that the non-mention of the Plan in the CBA is no justification for the bank to disregard
the same in processing employee loan applications. Provisions of applicable laws, especially those relating to
matters affected with public policy, are deemed written into the contract.[19]

Our Ruling

The petition is meritorious.

The constitutional right of employees

to participate in matters affecting
their benefits and the sanctity of the CBA

Preliminarily, it is crucial to stress that no less than the basic law of the land guarantees the rights of workers to
collective bargaining and negotiations as well as to participate in policy and decision-making processes affecting
their rights and benefits. Section 3, Article XIII of the 1987 Constitution provides:

Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.

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

Pursuant to said guarantee, Article 211 of the Labor Code, as amended, declares it a policy of the State:

(a) To promote and emphasize the primacy of free collective bargaining and
negotiations, including voluntary arbitration, mediation and conciliation, as modes of settling labor
or industrial disputes;

xxxx

(d) To promote the enlightenment of workers concerning their rights and obligations as union
members and as employees;

xxxx

(g) To ensure the participation of workers in decision and policy-making processes affecting
their rights, duties and welfare. (Emphasis ours)

Corollary thereto, Article 255 of the same Code provides:

ART. 255. EXCLUSIVE BARGAINING REPRESENTATION AND WORKERS

PARTICIPATION IN POLICY AND DECISION-MAKING.

xxxx

Any provision of law to the contrary notwithstanding, workers shall have the right, subject to
such rules and regulations as the Secretary of Labor and Employment may promulgate, to
participate in policy and decision-making process of the establishment where they are
employed insofar as said processes will directly affect their rights, benefits and welfare. For
this purpose, workers and employers may form labor-management councils: Provided, That the
representatives of the workers in such labor management councils shall be elected by at least the
majority of all employees in said establishment. (Emphasis and underscoring ours)
We deem it necessary to remind HSBC of the basic and well entrenched rule that although jurisprudence
recognizes the validity of the exercise by an employer of its management prerogative and will ordinarily not
interfere with such, this prerogative is not absolute and is subject to limitations imposed by law, collective
bargaining agreement, and general principles of fair play and justice.[20]

Indeed, being a product of said constitutionally-guaranteed right to participate, the CBA is, therefore, the law
between the parties and they are obliged to comply with its provisions.

Unilateral amendments to the CBA

violate Article 253 of the Labor Code

A collective bargaining agreement or CBA is the negotiated contract between a legitimate labor organization and
the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining
unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith
is mandated by the express policy of the law.[21]

In Faculty Association of Mapua Institute of Technology (FAMJT) v. Court of Appeals,[22] this Court was emphatic
in its pronouncement that the CBA during its lifetime binds all the parties. The provisions of the CBA must be
respected since its terms and conditions constitute the law between the parties. And until a new CBA is
executed by and between the parties, they are duty-bound to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement. [23]  This finds basis under Article 253 of
the Labor Code, which states:

ARTICLE 253. Duty to bargain collectively when there exists a collective bargaining

agreement. – When there is a collective bargaining agreement, the duty to bargain collectively shall
also mean that neither party shall terminate nor modify such agreement during its lifetime. x x
x It shall be the duty of both parties to keep the status quo and to continue in full force and
effect the terms and conditions of the existing agreement during the 60-day period and/or until a
new agreement is reached by the parties. (emphasis added)

In the present controversy, it is clear from the arguments and evidence submitted that the Plan was never made part
of the CBA. As a matter of fact, HBILU vehemently rejected the Plan's incorporation into the agreement. Due to
this lack of consensus, the bank withdrew its proposal and agreed to the retention of the original provisions of the
CBA. The subsequent implementation of the Plan's external credit check provisions in relation to employee loan
applications under Article XI of the CBA was then an imposition solely by HSBC.

In this respect, this Court is of the view that tolerating HSBC's conduct would be tantamount to allowing a blatant
circumvention of Article 253 of the Labor Code. It would contravene the express prohibition against the unilateral
modification of a CBA during its subsistence and even thereafter until a new agreement is reached. It would
unduly license HSBC to add, modify, and ultimately further restrict the grant of Salary Loans beyond the
terms of the CBA by simply adding stringent requirements in its Plan, and having the said Plan approved
by BSP in the guise of compliance with the MoRB.

HSBC's defense, that there was no modification of the CBA since the external credit check has been a long-
standing policy of the Bank applied to all of its employees, is inconvincing. Noteworthy is that the bank failed to
submit in evidence the very Plan that was supposedly approved by the BSP in 2003. Nevertheless, even if We
were to rely on the later versions of the Plan approved by the BSP, Our ruling will not change.

The only provision relative to the credit checking requirement under the 2006 and 2011 Plans is this and nothing
else:

CREDIT CHECKING
Repayment defaults on existing loans and adverse information on
outside loans will be considered m the evaluation of loan applications.
[24]
 
As for the manner in which said credit checking will be done, as well as any additional requirements that will be
imposed for the purpose, the 2006 Plan and even its later 2011 version are silent thereon. [25]  Nowhere in these
Plans can We find the requirement for the submission of an "Authority to Conduct Checks Form," as well as the
details on adverse credit finding, specifically:

With the strict implementation of these provisions, adverse credit findings may result to disapproval
of loan or credit card applications. These findings will include the following:

(1) Frequency of confirmed ADA failure on staff/commercial loans and credit cards (3 consecutive incidents
within the past 6 months or 6 incidents within the past 12 months). Note that applications with pending ADA
for investigation will only be processed upon confirmation of status (Confirmed or Reprieved);
(2) Adverse findings on HSBC cards; or
(3) Adverse findings from external credit checks.[26]

In fact, regrettably, HSBC's only documentary basis for proving that the credit checking requirement and the
manner of its enforcement have been set in place much earlier is the use of the term "reiterate" in its April 20, 2012
e-mail. Thus, we quote:

Dear All

We wish to reiterate the following provisions included in the Financial Assistance Plan (FAP) as
approved by Bangko Sentral ng Pilipinas (BSP).
xxx

20. Accordingly, the above email dated 20 April 2012 clearly indicates that the dissemination
therein of the FAP and its provisions is merely a reiteration, and not a first publication as the
Union now conveniently claims.[27] x x x (emphasis supplied)

What further convinces Us that the external credit check as well as the manner of its enforcement is a new
imposition by HSBC is the fact that the bank made no attempt to rebut HBILU's evidence that the former's
requirements for the grant of salary loans changed only after the April 20, 2012 email blast. HBILU
sufficiently proved that prior to the April 20, 2012 email, members of the bargaining unit were using only
four (4) documents in applying for a loan, to wit: 1) Application for Personal Loan Form; 2) Authority to
Deduct Form; 3) Set-Off of Retirement Fund Form; and 4) Promissory Note Form. [28] Thereafter, management
imposed a new set of requirements, which includes the "Authority to Conduct Checks Form."[29] As testified to by
Mananghaya, he only signed the first four (4) requirements for his March 2012 loan. However, for the September
2012 loan, he was asked to complete a new set of documents which included the Authority to Conduct Checks
Form.[30] Too, even the email itself states that said credit checking requirement, among others, is to be
strictly enforced effective May 2012.[31] Though HSBC claims that credit checking has been the bank's long-
standing policy, it failed to show that it indeed required such before its covered employees could avail of a
salary loan under the CBA prior to April 20, 2012—the date of the email blast.

Thus, no other conclusion can be had in this factual milieu other than the fact that HSBC's enforcement of credit
checking on salary loans under the CBA invalidly modified the latter's provisions thereon through the
imposition of additional requirements which cannot be found anywhere in the CBA.

If it were true that said credit checking under the Plan covers salary loans under the CBA, then the bank should
have negotiated for its inclusion thereon as early as the April 1, 2010 to March 31, 2012 CBA which it entered into
with HBILU. However, the express provisions of said CBA inked by the parties clearly make no reference to the
Plan. And even in the enforcement thereof, credit checking was not included as one of its requirements. This leads
Us to conclude that HSBC originally never intended the credit checking requirement under the Plan to apply to
salary loans under the CBA. At most, its application thereto is a mere afterthought, as evidenced by its sudden,
belated, and hurried enforcement on said salary loans via the disputed email blast.

In other words, it appears that, based on its actuations, HSBC never intended to apply the credit checking item
under the Plan to salary loans under the CBA. Otherwise, it would have enforced such requirement from the
moment the salary loans provisions under the old CBA were implemented, which it did not. It may be that said
requirement was being applied to other types of loans under the Plan, but based on the evidence presented, We
cannot say the same for salary loans under the CBA.

The minority argues that primacy is being accorded to the CBA over the Plan approved by the BSP. Such,
however, is not the case. We are not saying that the Plan should yield to the CBA. The point that we are driving at
in this lengthy discussion is that on the basis of the evidence presented, We are convinced that the credit checking
provision of the Plan was never intended to cover salary loans under the CBA. Otherwise, HSBC would have
implemented such the moment said salary loans under the previous CBA were made available to its covered
employees. Thus, HSBC cannot now insist on its imposition on loan applications under the disputed CBA
provision without violating its duty to bargain collectively.

If We were to allow this practice of leaving to HSBC the determination, formulation, and implementation of the
guidelines, procedures, and requirements for the availment of salary loans granted under the CBA, which
guidelines, procedures, and requirements unduly restrict the provisions of the CBA, this Court would in effect be
permitting HSBC to repeatedly violate its duty to bargain collectively under the guise of enforcing the general
terms of the Plan.

Salary loans subject of this case are

not covered by the credit checking
requirement under the MORB

In maintaining that the credit checking requirement under the MoRB should be deemed written into the CBA, the
minority makes reference to Sec. X304.1 of the 2011 MoRB in maintaining that financial institutions must look
into the obligor's repayment history, among other things, before approving a loan application. Said provision
reads:

§ X304.1 General guidelines. Consistent with safe and sound banking practices, a bank shall grant
loans or other credit accommodations only in amounts and for the periods of time essential for the
effective completion of the operation to be financed. Before granting loans or other credit
accommodations, a bank must ascertain that the borrower, co-maker, endorser, surety, and/or
guarantor, if applicable, is/are financially capable of fulfilling his/their commitments to the bank.
For this purpose, a bank shall obtain adequate information on his/their credit standing and financial
capacities x x x.

At this point it is well to draw attention to the fact that said provision is a general one as specifically indicated
thereat. It is also equally important to emphasize that Sec. X304.1 must be interpreted in conjunction with Section
X338.3, the provision which specifically applies to salary loans under the fringe benefit program of the bank.
Thus:

Subsection X338.3 Other conditions/limitations

The investment by a bank in equipment and other chattels under its fringe benefits program for
officers and employees shall be included in determining the extent of the investment of the bank in
real estate and equipment for purposes of Section 51 of R.A. No. 8791.

The investment by a bank in equipment and other chattels contemplated under these guidelines shall
not be for the purpose of profits in the course of business for the bank.

All loans or other credit accommodations to bank officers and employees, EXCEPT those
granted under the fringe benefit program of the bank, shall be subject to the same terms and
conditions imposed on the regular lending operations of the bank. Loans or other credit
accommodations granted to officers shall, in addition, be subject to the provisions of Section 36 of
R.A. No. 8791 and Sections X326 to X336 but not to the individual ceilings where such loans or
other credit accommodations are obtained under the bank's fringe benefits program. (emphasis ours)

In specifying that "[a]ll loans or other credit accommodations to bank officers and employees, except those
granted under the fringe benefit program of the bank, shall be subject to the same terms and conditions imposed
on the regular lending operations of the bank," Sec. X338.3 clearly excluded loans and credit accommodations
under the bank's fringe benefits program from the operation of Sec. X304.1. This fact is even recognized in
the dissent. To ignore this clear exception and insist on interpreting the general guidelines under Section X304.1
would be to renege from Our duty to apply a clear and unambiguous provision.[32]

It may also be argued that HSBC, being a bank, is statutorily required to conduct a credit check on all of its
borrowers, even though it be made under a loan accommodation scheme, applying Section 40 [33] of Republic Act
No. (RA) 8791 (General Banking Law of 2000). A reading of RA 8791, however, reveals that loan
accommodations to employees are not covered by said statute. Nowhere in the law does it state that its provisions
shall apply to loans extended to bank employees which are granted under the latter's fringe benefits program. Had
the law intended otherwise, it could have easily specified such, similar to what was done for directors, officers,
stockholders and their related interests under Section 36 thereof. This conclusion is supported by the very wording
of Subsection X338.3 of the MORB. To reiterate:

Subsection X338.3 Other conditions/limitations

The investment by a bank in equipment and other chattels under its fringe benefits program for
officers and employees shall be included in determining the extent of the investment of the bank in
real estate and equipment for purposes of Section 51 of R.A. No. 8791.

The investment by a bank in equipment and other chattels contemplated under these guidelines shall
not be for the purpose of profits in the course of business for the bank.

All loans or other credit accommodations to bank officers and employees, except those granted
under the fringe benefit program of the bank, shall be subject to the same terms and conditions
imposed on the regular lending operations of the bank. Loans or other credit accommodations
granted to officers shall, in addition, be subject to the provisions of Section 36 of R.A. No.
8791 and Sections X326 to X336 but not to the individual ceilings where Such loans or other credit
accommodations are obtained under the bank's fringe benefits program.

Notably, even though the provision covers loans extended to both bank officers and employees, paragraph 3
thereof singled out loans and credit accommodations granted to officers when it provided for the applicability of
RA 8791.

What the law does not include, it excludes.

These convince Us to conclude that RA 8791 only intended to cover loans by third persons and those extended to
directors, officers, stockholders and their related interests. Consequently, Section 40 thereof, which requires a bank
to ascertain that the debtor is capable of fulfilling his commitments to it before granting a loan or other credit
accommodation, does not automatically apply to the type of loan subject of the instant case.

Furthermore, it is inaccurate to state that credit checking is necessary, or even indispensable, in the grant of salary
loans to the bank's employees, since the business of banking is imbued with public interest and there is a fiduciary
relationship between the depositor and the bank. It is also incorrect to state that allowing bank employees to
borrow funds from their employer via salary loans without the prior conduct of a credit check is inconsistent with
this fiduciary obligation. This is so because there are other ways of securing payment of said salary loans other
than ascertaining whether the borrowing employee has the capacity to pay the loan. BSP Circular 423, Series of
2004 itself provides for such, thus:

Subsection X338.1 Mechanics. The mechanics of such financing plan shall have the following
minimum features:

Participation shall be limited to full-time and permanent officers and employees of the bank;

xxxx

The bank shall adopt measures to protect itself from losses such as by incorporating in the
plan or contract provisions requiring co-makers or co-signor, chattel, or real estate
mortgages, fire insurance, mortgage redemption insurance, assignment of money value of
leave credits, pension or retirement benefits. (Emphasis ours)
Additionally, both the BSP Circular 423, Series of 2004 and Section X338.3 of the MoRB provide for a safeguard
in order to protect the funds of the Bank's depositors while allowing the Bank to extend such benefits to its
employees, in that both require that:

The aggregate outstanding loans and other credit accommodations granted under the bank's
fringe benefits program, inclusive of those granted to officers in the nature of lease with
option to purchase, shall not exceed five percent (5%) of the bank's total loan portfolio.[34]

There are, therefore, sufficient safety nets consistent with the bank's fiduciary duty to its depositors even without
requiring the conduct of an external credit check in the availment of salary loans under the subject CBA. As a
matter of fact, there is no showing that the bank's finances suffered because it has been granting said salary loans
under the CBA without the external credit check.

Withal, We cannot subscribe to HSBC's position that its imposition of the credit checking requirement on salary
loans granted under the CBA is valid. The evidence presented convinces Us to hold that the credit checking
requirement imposed by HSBC under the questioned Plan which effectively and undoubtedly modified the
CBA provisions on salary loans was a unilateral imposition violative of HSBC's duty to bargain collectively
and, therefore, invalid. HSBC miserably failed to present even an iota of concrete documentary evidence that the
credit checking requirement has been imposed on salary loans even before the signing of the CBA subject of the
instant dispute and that the Plan was sufficiently disseminated to all concerned. In contrast, HBILU sufficiently
proved that HSBC violated its duty to bargain collectively under Article 253 of the Labor Code when it
unilaterally restricted the availment of salary loans under Article XI of the CA on the excuse of enforcing the Plan
approved by the BSP.

As this Court emphasized in Philippine Airlines, Inc. v. NLRC, industrial peace cannot be achieved if the
employees are denied their just participation in the discussion of matters affecting their rights,[35] more so in the
case at bar where the employees have been led to believe that they were given the chance to participate in
HSBC's policy-formulation with respect to the subject benefit, only to find out later that they would be
deprived of the fruits of said involvement.

On interpretation of CBAs

At this point, We deem it proper to recall the basics in resolving issues relating to the provisions and enforcement
of CBAs. In United Kimberly-Clark Employees Union Philippine Transport General Workers Organization
(UKCEU-PTGWO) v. Kimberly-Clark Philippines, Inc., this Court emphasized that:

As a general proposition, an arbitrator is confined to the interpretation and application of the

collective bargaining agreement. He does not sit to dispense his own brand of industrial justice: his
award is legitimate only in so far as it draws its essence from the CBA, i.e., when there is a rational
nexus between the award and the CBA under consideration. It is said that an arbitral award does not
draw its essence from the CBA; hence, there is an unauthorized amendment or alteration thereof, if:

1. It is so unfounded in reason and fact;

2. It is so unconnected with the working and purpose of the agreement;
3. It is without factual support in view of its language, its context, and any other indicia of the
parties' intention;
4. It ignores or abandons the plain language of the contract;
5. It is mistakenly based on a crucial assumption which concededly is a nonfact;
6. It is unlawful, arbitrary or capricious; and
7. It is contrary to public policy.

xxxx

If the terms of a CBA are clear and [leave] no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties stipulate that
the hirees must be presumed of employment qualification standards but fail to state such
qualification standards in said CBA, the VA may resort to evidence extrinsic of the CBA
to determine the full agreement intended by the parties. When a CBA may be expected to speak
 on a matter, but does not, its sentence imports ambiguity on that subject. The VA is not
merely to rely on the cold and cryptic words on the face of the CBA but is mandated
to discover the intention of the parties. Recognizing the inability of the parties to anticipate or
address all future problems, gaps may be left to be filled in by reference to the practices of the
industry, and the step which is equally a part of the CBA although not expressed in it. In order to
ascertain the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered The VA may also consider and rely upon negotiating and
contractual history of the parties, evidence of past practices interpreting ambiguous
provisions. The VA has to examine such practices to determine the scope of their agreement,
as where the provision of the CBA has been loosely formulated. Moreover, the CBA must be
construed liberally rather than narrowly and technically and the Court must place a practical and
realistic construction upon it.[36] (emphasis ours)

Thus, in resolving issues concerning CBAs, We must not forget that the foremost consideration therein is
upholding the intention of both parties as stated in the agreement itself, or based on their negotiations. Should it
appear that a proposition or provision has clearly been rejected by one party, and said provision was ultimately not
included in the signed CBA, then We should not simply disregard this fact. We are duty-bound to resolve the
question presented, albeit on a different ground, so long as it is consistent with law and jurisprudence and, more
importantly, does not ignore the intention of both parties. Otherwise, We would be substituting Our judgment in
place of the will of the parties to the CBA.

With these, We find no need to resolve the other matters presented.

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated October 23, 2014 and
Resolution dated May 21, 2015 of the Court of Appeals in CA-G.R. SP No. 130798 are
hereby REVERSED and SET ASIDE.

Respondent Hongkong and Shanghai Banking Corporation's Financial Assistance Plan, insofar as it unilaterally
imposed a credit checking proviso on the availment of Salary Loans by its employees under Article XI of the
2010-2012 CBA, is hereby declared legally ineffective and invalid for being in contravention of Article 253 of the
Labor Code.

SO ORDERED.
 EN BANC
[ G.R. No. 178083, March 13, 2018 ]
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP),
PETITIONER, VS. PHILIPPINE AIRLINES, INC., PATRIA CHIONG AND THE COURT OF
APPEALS, RESPONDENTS.

[A.M. No. 11-10-1-SC]

IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO. 178083 - FLIGHT ATTENDANTS
AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP) VS. PHILIPPINE AIRLINES, INC.,
ET AL.

RESOLUTION
BERSAMIN, J.:

In determining the validity of a retrenchment, judicial notice may be taken of the financial losses incurred by an
employer undergoing corporate rehabilitation. In such a case, the presentation of audited financial statements may
not be necessary to establish that the employer is suffering from severe financial losses.

Before the Court are the following matters for resolution, namely:
(a)
Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for Reconsideration of the
Decision of July 22, 2008 filed by respondents Philippine Airlines, Inc. (PAL) and Patria Chiong;[1] and

(b)
Motion for Reconsideration [Re: The Honorable Court's Resolution dated 13 March 2012][2] of petitioner Flight
Attendants and Stewards Association of the Philippines (FASAP).
Antecedents

To provide a fitting backgrounder for this resolution, we first lay down the procedural antecedents.

Resolving the appeal of FASAP, the Third Division of the Court[3] promulgated its decision on July 22, 2008
reversing the decision promulgated on August 23, 2006 by the Court of Appeals (CA) and entering a new one
finding PAL guilty of unlawful retrenchment,[4] disposing:
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP
No. 87956 dated August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiter's
findings of illegal retrenchment and its Resolution of May 29, 2007 denying the motion for reconsideration, are
REVERSED and SET ASIDE and a new one is rendered:
1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were covered by the
retrenchment and demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of seniority
rights and other privileges, and to pay them full backwages, inclusive of allowances and other monetary benefits
computed from the time of their separation up to the time of their actual reinstatement, provided that with respect
to those who had received their respective separation pay, the amounts of payments shall be deducted from their
backwages. Where reinstatement is no longer feasible because the positions previously held no longer exist,
respondent Corporation shall pay backwages plus, in lieu of reinstatement, separation pay equal to one (1) month
pay for every year of service;

3. ORDERING Philippine Airlines, Inc. to pay attorney's fees equivalent to ten percent (10%) of the total
monetary award.

Costs against respondent PAL.

SO ORDERED.[5]
The Third Division thereby differed from the decision of the Court of Appeals (CA), which had pronounced in its
appealed decision promulgated on August 23, 2006[6] that the remaining issue between the parties concerned the
manner by which PAL had carried out the retrenchment program.[7] Instead, the Third Division disbelieved the
veracity of PAL's claim of severe financial losses, and concluded that PAL had not established its severe financial
losses because of its non-presentation of audited financial statements. It further concluded that PAL had
implemented the retrenchment program in bad faith, and had not used fair and reasonable criteria in selecting the
employees to be retrenched.

After PAL filed its Motion for Reconsideration,[8] the Court, upon motion,[9] held oral arguments on the
following issues:
I

WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED

II

WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES BEFORE IMPLEMENTING ITS

RETRENCHMENT PROGRAM

III

WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN IMPLEMENTING THE

RETRENCHMENT PROGRAM

IV

WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY EXECUTED

Upon conclusion of the oral arguments, the Court directed the parties to explore a possible settlement and to
submit their respective memoranda.[10]

Unfortunately, the parties did not reach any settlement; hence, the Court, through the Special Third Division,[11]
resolved the issues on the merits through the resolution of October 2, 2009 denying PAL's motion for
reconsideration,[12] thus:
WHEREFORE, for lack of merit, the Motion for Reconsideration is hereby DENIED with FINALITY. The
assailed Decision dated July 22, 2008 is AFFIRMED with MODIFICATION in that the award of attorney's fees
and expenses of litigation is reduced to P2,000,000.00. The case is hereby REMANDED to the Labor Arbiter
solely for the purpose of computing the exact amount of the award pursuant to the guidelines herein stated.

No further pleadings will be entertained.

SO ORDERED.[13]
The Special Third Division was unconvinced by PAL's change of theory in urging the June 1998 Association of
Airline Pilots of the Philippines (ALPAP) pilots' strike as the reason behind the immediate retrenchment; and
observed that the strike was a temporary occurrence that did not require the immediate and sweeping retrenchment
of around 1,400 cabin crew.

Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion
for Reconsideration of the Decision of July 22, 2008.[14]

On October 5, 2009, the writer of the resolution of October 2, 2009 Justice Consuelo Ynares-Santiago,
compulsorily retired from the Judiciary. Pursuant to A.M. No. 99-8-09-SC,[15] G.R. No. 178083 was then raffled
to Justice Presbitero J. Velasco, Jr., a Member of the newly-constituted regular Third Division.[16] Upon the
Court's subsequent reorganization,[17] G.R. No. 178083 was transferred to the First Division where Justice
Velasco, Jr. was meanwhile re-assigned. Justice Velasco, Jr. subsequently inhibited himself from the case due to
personal reasons.[18] Pursuant to SC Administrative Circular No. 84-2007, G.R. No. 178083 was again re-raffled
to Justice Arturo D. Brion, whose membership in the Second Division resulted in the transfer of G.R. No. 178083
to said Division.[19]

On September 7, 2011, the Second Division denied with finality PAL's Second Motion for Reconsideration of the
Decision of July 22, 2008.[20]

Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a series of letters inquiring into
the propriety of the successive transfers of G.R. No. 178083.[21] His letters were docketed as A.M. No. 11-10-1-
SC.
On October 4, 2011, the Court En Banc issued a resolution:[22] (a) assuming jurisdiction over G.R. No. 178083;
(b) recalling the September 7, 2011 resolution of the Second Division; and (c) ordering the re-raffle of G.R. No.
178083 to a new Member-in-Charge.

Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues raised against the recall of the
resolution of September 7, 2011, the Court En Banc promulgated its resolution in A.M. No. 11-10-1-SC on March
13, 2012,[23] in which it summarized the intricate developments involving G.R. No. 178083, viz.:
To summarize all the developments that brought about the present dispute-expressed in a format that can more
readily be appreciated in terms of the Court en banc's ruling to recall the September 7, 2011 ruling - the FASAP
case, as it developed, was attended by special and unusual circumstances that saw:

(a) the confluence of the successive retirement of three Justices (in a Division of five Justices) who actually
participated in the assailed Decision and Resolution;

(b) the change in the governing rules-from the A.M.s to the IRSC regime-which transpired during the pendency of
the case;

(c) the occurrence of a series of inhibitions in the course of the case (Justices Ruben Reyes, Leonardo-De Castro,
Corona, Velasco, and Carpio), and the absences of Justices Sereno and Reyes at the critical time, requiring their
replacement; notably, Justices Corona, Carpio, Velasco and Leonardo-De Castro are the four most senior Members
of the Court;

(d) the three re-organizations of the divisions, which all took place during the pendency of the case, necessitating
the transfer of the case from the Third Division, to the First, then to the Second Division;

(e) the unusual timing of Atty. Mendoza's letters, made after the ruling Division had issued its Resolution of
September 7, 2011, but before the parties received their copies of the said Resolution; and

(f) finally, the time constraint that intervened, brought about by the parties' receipt on September 19, 2011 of the
Special Division's Resolution of September 7, 2011, and the consequent running of the period for finality
computed from this latter date; and the Resolution would have lapsed to finality after October 4, 2011, had it not
been recalled by that date.

All these developments, in no small measure, contributed in their own peculiar way to the confusing situations that
attended the September 7, 2011 Resolution, resulting in the recall of this Resolution by the Court en banc.[24]
In the same resolution of March 13, 2012, the Court En Banc directed the re-raffle of G.R. No. 178083 to the
remaining Justices of the former Special Third Division who participated in resolving the issues pursuant to
Section 7, Rule 2 of the Internal Rules of the Supreme Court, explaining:
On deeper consideration, the majority now firmly holds the view that Section 7, Rule 2 of the IRSC should have
prevailed in considering the raffle and assignment of cases after the 2nd MR was accepted, as advocated by some
Members within the ruling Division, as against the general rule on inhibition under Section 3, Rule 8. The
underlying constitutional reason, of course, is the requirement of Section 4(3), Article VIII of the Constitution
already referred to above.

The general rule on statutory interpretation is that apparently conflicting provisions should be reconciled and
harmonized, as a statute must be so construed as to harmonize and give effect to all its provisions whenever
possible. Only after the failure at this attempt at reconciliation should one provision be considered the applicable
provision as against the other.

Applying these rules by reconciling the two provisions under consideration, Section 3, Rule 8 of the IRSC should
be read as the general rule applicable to the inhibition of a Member-in-Charge.This general rule should, however,
yield where the inhibition occurs at the late stage of the case when a decision or signed resolution is assailed
through an MR. At that point, when the situation calls for the review of the merits of the decision or the signed
resolution made by a ponente (or writer of the assailed ruling), Section 3, Rule 8 no longer applies and must yield
to Section 7, Rule 2 of the IRSC which contemplates a situation when the ponente is no longer available, and calls
for the referral of the case for raffle among the remaining Members of the Division who acted on the decision or
on the signed resolution. This latter provision should rightly apply as it gives those who intimately know the facts
and merits of the case, through their previous participation and deliberations, the chance to take a look at the
decision or resolution produced with their participation.
To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition, but it must yield to the more specific
Section 7, Rule 2 of the IRSC where the obtaining situation is for the review on the merits of an already issued
decision or resolution and the ponente or writer is no longer available to act on the matter. On this basis, the
ponente, on the merits of the case on review, should be chosen from the remaining participating Justices, namely,
Justices Peralta and Bersamin.[25]
This last resolution impelled FASAP to file the Motion for Reconsideration [Re: The Honorable Court's
Resolution dated 13 March 2012], praying that the September 7, 2011 resolution in G.R. No. 178083 be reinstated.
[26]

We directed the consolidation of G.R. No. 178083 and A.M. No. 11-10-1-SC on April 17, 2012.[27]

Issues

PAL manifests that the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008 is its first motion for reconsideration vis-a-vis the October 2,
2009 resolution, and its second as to the July 22, 2008 decision. It states therein that because the Court did not
address the issues raised in its previous motion for reconsideration, it is re-submitting the same, viz.:
I

xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO THE FOLLOWING
COMPELLING EVIDENCE AND CIRCUMSTANCES CLEARLY SHOWING PALS; DIRE FINANCIAL
CONDITION AT THE TIME OF THE RETRENCHMENT: (A) PETITIONER'S ADMISSIONS OF PAL'S
FINANCIAL LOSSES; (B) THE UNANIMOUS FINDINGS OF THE SECURITIES AND EXCHANGE
COMMISSION (SEC), THE LABOR ARBITER, THE NATIONAL LABOR RELATIONS COMMISSION
(NLRC) AND THE COURT OF APPEALS CONFIRMING PAL'S FINANCIAL CRISIS; (C) PREVIOUS
CASES DECIDED BY THE HONORABLE COURT RECOGNIZING PAL'S DIRE FINANCIAL STATE; AND
(D) PAL BEING PLACED BY THE SEC UNDER SUSPENSION OF PAYMENTS AND CORPORATE
REHABILITATION AND RECEIVERSHIP

II

xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S CONCLUSION THAT PAL DID
NOT EXERCISE GOOD FAITH [IN] ITS PREROGATIVE TO RETRENCH EMPLOYEES

III

THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND REASONABLE CRITERIA
IN ASCERTAINING WHO WOULD BE RETRENCHED IS CONTRARY TO ESTABLISHED FACTS,
EVIDENCE ON RECORD AND THE FINDINGS OF THE NLRC AND THE COURT OF APPEALS[28]
PAL insists that FASAP, while admitting PAL's serious financial condition, only questioned before the Labor
Arbiter the alleged unfair and unreasonable measures in retrenching the employees;[29] that FASAP categorically
manifested before the NLRC, the CA and this Court that PAL's financial situation was not the issue but rather the
manner of terminating the 1,400 cabin crew; that the Court's disregard of FASAP's categorical admissions was
contrary to the dictates of fair play;[30] that considering that the Labor Arbiter, the NLRC and the CA
unanimously found PAL to have experienced financial losses, the Court should have accorded such unanimous
findings with respect and finality;[31] that its being placed under suspension of payments and corporate
rehabilitation and receivership already sufficiently indicated its grave financial condition;[32] and that the Court
should have also taken judicial notice of the suspension of payments and monetary claims filed against PAL that
had reached and had been consequently resolved by the Court.[33]

PAL describes the Court's conclusion that it was not suffering from tremendous financial losses because it was on
the road to recovery a year after the retrenchment as a mere obiter dictum that was relevant only in rehabilitation
proceedings; that whether or not its supposed "stand-alone" rehabilitation indicated its ability to recover on its own
was a technical issue that the SEC was tasked to determine in the rehabilitation proceedings; that at any rate, the
supposed track to recovery in 1999 and the capital infusion of $200,000,000.00 did not disprove the enormous
losses it was sustaining; that, on the contrary, the capital infusion accented the severe financial losses suffered
because the capital infusion was a condition precedent to the approval of the amended and restated rehabilitation
plan by the Securities and Exchange Commission (SEC) with the conformity of PAL's creditors; and that PAL
took nine years to exit from rehabilitation.[34]
As regards the implementation of the retrenchment program in good faith, PAL argues that it exercised sound
management prerogatives and business judgment despite its critical financial condition; that it did not act in due
haste in terminating the services of the affected employees considering that FASAP was being consulted thereon
as early as February 17, 1998; that it abandoned "Plan 14" due to intervening events, and instead proceeded to
implement "Plan 22" which led to the recall/rehire of some of the retrenched employees;[35] and that in selecting
the employees to be retrenched, it adopted a fair and reasonable criteria pursuant to the collective bargaining
agreement (CBA) where performance efficiency ratings and inverse seniority were basic considerations.[36]

With reference to the Court's resolution of October 2, 2009, PAL maintains that:
I

PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF PAL'S LABOR FORCE OF ABOUT
5,000 EMPLOYEES, INCLUDING THE 1,423 FASAP MEMBERS, WAS THE RESULT OF A CONFLUENCE
OF EVENTS, THE EXPANSION OF PAL'S FLEET, THE ASIAN FINANCIAL CRISIS OF 1997, AND ITS
CONSEQUENCES ON PAL'S OPERATIONS, AND THE PILOT'S STRIKE OF JUNE 1998, AND THAT PAL
SURVIVED BECAUSE OF THE IMPLEMENTATION OF ITS REHABILITATION PLAN (LATER
"AMENDED AND RESTATED REHABILITATION PLAN") WHICH INCLUDED AMONG ITS
COMPONENT ELEMENTS, THE REDUCTION OF LABOR FORCE

II

THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION OF THE NUMBER OF CABIN
CREW IN ACCORD WITH ITS ENTRY INTO REHABILITATION AND THE CONSEQUENT
TERMINATION OF EMPLOYMENT OF CABIN CREW PERSONNEL AS A VALID EXERCISE OF
MANAGEMENT PREROGATIVE

III

PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS FINANCIAL LOSSES, SO AS TO

JUSTIFY THE ENTRY INTO REHABILITATION AND THE CONSEQUENT REDUCTION OF CABIN
CREW PERSONNEL

IV

THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS NO SUFFICIENT BASIS FOR PAL
TO IMPLEMENT THE RETRENCHMENT OF CABIN CREW PERSONNEL

UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF LESS DRASTIC COST-CUTTING

MEASURES WAS NO LONGER POSSIBLE AND SHOULD NOT BE REQUIRED FOR A VALID
RETRENCHMENT; IN ANY EVENT, PAL HAD IMPLEMENTED LESS DRASTIC COST-CUTTING
MEASURES BEFORE IMPLEMENTING THE DOWNSIZING PROGRAM

VI

QUITCLAIMS WERE VALIDLY EXECUTED[37]

PAL contends that the October 2, 2009 resolution focused on an entirely new basis that of PAL's supposed change
in theory. It denies having changed its theory, however, and maintains that the reduction of its workforce had
resulted from a confluence of several events, like the flight expansion; the 1997 Asian financial crisis; and the
ALPAP pilots' strike.[38] PAL explains that when the pilots struck in June 1998, it had to decide quickly as it was
then facing closure in 18 days due to serious financial hemorrhage; hence, the strike came as the final blow.

PAL posits that its business decision to downsize was far from being a hasty, knee-jerk reaction; that the reduction
of cabin crew personnel was an integral part of its corporate rehabilitation, and, such being a management
decision, the Court could not supplant the decision with its own judgment' and that the inaccurate depiction of the
strike as a temporary disturbance was lamentable in light of its imminent financial collapse due to the concerted
action.[39]
PAL submits that the Court's declaration that PAL failed to prove its financial losses and to explore less drastic
cost-cutting measures did not at all jibe with the totality of the circumstances and evidence presented; that the
consistent findings of the Labor Arbiter, the NLRC, the CA and even the SEC, acknowledging its serious financial
difficulties could not be ignored or disregarded; and that the challenged rulings of the Court conflicted with the
pronouncements made in Garcia v. Philippine Airlines, Inc.[40] and related cases[41] that acknowledged PAL's
grave financial distress.

In its comment,[42] FASAP counters that a second motion for reconsideration was a prohibited pleading; that PAL
failed to prove that it had complied with the requirements for a valid retrenchment by not submitting its audited
financial statements; that PAL had immediately terminated the employees without prior resort to less drastic
measures; and that PAL did not observe any criteria in selecting the employees to be retrenched.

FASAP stresses that the October 4, 2011 resolution recalling the September 7, 2011 decision was void for failure
to comply with Section 14, Article VIII of the 1987 Constitution; that the participation of Chief Justice Renato C.
Corona who later on inhibited from G.R. No. 178083 had further voided the proceedings; that the 1987
Constitution did not require that a case should be raffled to the Members of the Division who had previously
decided it; and that there was no error in raffling the case to Justice Brion, or, even granting that there was error,
such error was merely procedural.

The issues are restated as follows:

Procedural

IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10-1-SC (RECALLING THE
SEPTEMBER 7, 2011 RESOLUTION) VOID FOR FAILURE TO COMPLY WITH SECTION 14, RULE VIII
OF THE 1987 CONSTITUTION?

II

MAY THE COURT ENTERTAIN THE SECOND MOTION FOR RECONSIDERATION FILED BY THE
RESPONDENT PAL?
Substantive

I
DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW PERSONNEL?
A

DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE THAT IT INCURRED SERIOUS FINANCIAL
LOSSES WHICH JUSTIFIED THE DOWNSIZING OF ITS CABIN CREW?

DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE RETRENCHMENT PROGRAM?

DID PAL COMPLY WITH SECTION 112 OF THE PAL-FASAP CBA IN SELECTING THE EMPLOYEES TO
BE RETRENCHED?
III

ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT PROGRAM, DID THE
RETRENCHED EMPLOYEES SIGN VALID QUITCLAIMS?
Ruling of the Court

After a thorough review of the records and all previous dispositions, we GRANT the Motion for Reconsideration
of the Resolution of October 2, 2009 and Second Motion for Reconsideration of the Decision of July 22, 2008
filed by PAL and Chiong; and DENY the Motion for Reconsideration [Re: The Honorable Court's Resolution
dated 13 March 2012][43] of FASAP.
Accordingly, we REVERSE the July 22, 2008 decision and the October 2, 2009 resolution; and AFFIRM the
decision promulgated on August 23, 2006 by the CA.

The resolution of October 4, 2011 was a valid issuance of the Court

The petitioner urges the Court to declare as void the October 4, 2011 resolution promulgated in A.M. No. 11-10-1-
SC for not citing any legal basis in recalling the September 7, 2011 resolution of the Second Division.

The urging of the petitioner is gravely flawed and mistaken.

The requirement for the Court to state the legal and factual basis for its decisions is found in Section 14, Article
VIII of the 1987 Constitution, which reads:
Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts
and the law on which it is based.
The constitutional provision clearly indicates that it contemplates only a decision, which is the judgment or order
that adjudicates on the merits of a case. This is clear from the text and tenor of Section 1, Rule 36 of the Rules of
Court, the rule that implements the constitutional provision, to wit:
Section 1. Rendition of judgments and final orders. A judgment or final order determining the merits of the case
shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law
on which it is based, signed by him, and filed with the clerk of court.
The October 4, 2011 resolution did not adjudicate on the merits of G.R. No. 178083. We explicitly stated so in the
resolution of March 13, 2012. What we thereby did was instead to exercise the Court's inherent power to recall
orders and resolutions before they attain finality. In so doing, the Court only exercised prudence in order to ensure
that the Second Division was vested with the appropriate legal competence in accordance with and under the
Court's prevailing internal rules to review and resolve the pending motion for reconsideration. We rationalized the
exercise thusly:
As the narration in this Resolution shows, the Court acted on its own pursuant to its power to recall its own orders
and resolutions before their finality. The October 4, 2011 Resolution was issued to determine the propriety of the
September 7, 2011 Resolution given the facts that came to light after the ruling Division's examination of the
records. To point out the obvious, the recall was not a ruling on the merits and did not constitute the reversal of the
substantive issues already decided upon by the Court in the FASAP case in its previously issued Decision (of July
22, 2008) and Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution was not meant and was
never intended to favor either party, but to simply remove any doubt about the validity of the ruling Division's
action on the case. The case, in the ruling Division's view, could be brought to the Court en banc since it is one of
"sufficient importance"; at the very least, it involves the interpretation of conflicting provisions of the IRSC with
potential jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to recommend a recall, there was no clear
indication of how they would definitively settle the unresolved legal questions among themselves. The only matter
legally certain was the looming finality of the September 7, 2011 Resolution if it would not be immediately
recalled by the Court en banc by October 4, 2011. No unanimity among the Members of the ruling Division could
be gathered on the unresolved legal questions; thus, they concluded that the matter is best determined by the Court
en banc as it potentially involved questions of jurisdiction and interpretation of conflicting provisions of the IRSC.
To the extent of the recommended recall, the ruling Division was unanimous and the Members communicated this
intent to the Chief Justice in clear and unequivocal terms.[44] (Bold underscoring for emphasis)
It should further be clear from the same March 13, 2012 resolution that the factual considerations for issuing the
recall order were intentionally omitted therefrom in obeisance to the prohibition against public disclosure of the
internal deliberations of the Court.[45]

Still, FASAP assails the impropriety of the recall of the September 7, 2011 resolution. It contends that the raffle of
G.R. No. 178083 to the Second Division had not been erroneous but in "full and complete consonance with
Section 4(3) Article VIII of the Constitution;"[46] and that any error thereby committed was only procedural, and
thus a mere "harmless error" that did not invalidate the prior rulings made in G.R. No. 178083.[47]

The contention of FASAP lacks substance and persuasion.

The Court carefully expounded in the March 13, 2012 resolution on the resulting jurisdictional conflict that arose
from the raffling of G.R. No. 178083 resulting from the successive retirements and inhibitions by several Justices
who at one time or another had been assigned to take part in the case. The Court likewise highlighted the
importance of referring the case to the remaining Members who had actually participated in the deliberations, for
not only did such participating Justices intimately know the facts and merits of the parties' arguments but doing so
would give to such Justices the opportunity to review their decision or resolution in which they had taken part. As
it turned out, only Justice Diosdado M. Peralta and Justice Lucas P. Bersamin were the remaining Members of the
Special Third Division, and the task of being in charge procedurally fell on either of them.[48] As such, it is
fallacious for FASAP to still insist that the previous raffle had complied with Section 4(3), Article VIII of the 1987
Constitution just because the Members of the Division actually took part in the deliberations.

FASAP is further wrong to insist on the application of the harmless error rule. The rule is embodied in Section 6,
Rule 51 of the Rules of Court, which states:
Section 6. Harmless error. No error in either the admission or the exclusion of evidence and no error or defect in
any ruling or order or in anything done or omitted by the trial court or by any of the parties is ground for granting a
new trial or for setting aside, modifying, or otherwise disturbing a judgment or order, unless refusal to take such
action appears to the court inconsistent with substantial justice. The court at every stage of the proceedings must
disregard any error or defect which does not affect the substantial rights of the parties.
The harmless error rule obtains during review of the things done by either the trial court or by any of the parties
themselves in the course of trial, and any error thereby found does not affect the substantial rights or even the
merits of the case. The Court has had occasions to apply the rule in the correction of a misspelled name due to
clerical error;[49] the signing of the decedents' names in the notice of appeal by the heirs;[50] the trial court's
treatment of the testimony of the party as an adverse witness during cross-examination by his own counsel;[51]
and the failure of the trial court to give the plaintiffs the opportunity to orally argue against a motion.[52] All of
the errors extant in the mentioned situations did not have the effect of altering the dispositions rendered by the
respective trial courts. Evidently, therefore, the rule had no appropriate application herein.

The Court sees no justification for the urging of FASAP that the participation of the late Chief Justice Corona
voided the recall order. The urging derives from FASAP's failure to distinguish the role of the Chief Justice as the
Presiding Officer of the Banc. In this regard, we advert to the March 13, 2012 resolution, where the Court made
the following observation:
A final point that needs to be fully clarified at this juncture, in light of the allegations of the Dissent is the role of
the Chief Justice in the recall of the September 7, 2011 Resolution. As can be seen from the xxx narration, the
Chief Justice acted only on the recommendation of the ruling Division, since he had inhibited himself from
participation in the case long before. The confusion on this matter could have been brought about by the Chief
Justice's role as the Presiding Officer of the Court en banc (particularly in its meeting of October 4, 2011), and the
fact that the four most senior Justices of the Court (namely, Justices Corona, Carpio, Velasco and Leonardo-De
Castro) inhibited from participating in the case. In the absence of any clear personal malicious participation, it is
neither correct nor proper to hold the Chief Justice personally accountable for the collegial ruling of the Court en
banc.[53] (Bold underscoring supplied for emphasis)
To reiterate, the Court, whether sitting En Banc or in Division, acts as a collegial body. By virtue of the
collegiality, the Chief Justice alone cannot promulgate or issue any decisions or orders. In Complaint of Mr.
Aurelio Indencia Arrienda Against SC Justices Puna, Kapunan, Pardo, Ynares Santiago,[54] the Court has
elucidated on the collegial nature of the Court in relation to the role of the Chief Justice, viz.:
The complainant's vituperation against the Chief Justice on account of what he perceived was the latter's refusal
"to take a direct positive and favorable action" on his letters of appeal overstepped the limits of proper conduct. It
betrayed his lack of understanding of a fundamental principle in our system of laws. Although the Chief Justice is
primus inter pares, he cannot legally decide a case on his own because of the Court's nature as a collegial body.
Neither can the Chief Justice, by himself, overturn the decision of the Court, whether of a division or the en banc.

There is only one Supreme Court from whose decisions all other courts are required to take their bearings. While
most of the Court's work is performed by its three divisions, the Court remains one court-single, unitary, complete
and supreme. Flowing from this is the fact that, while individual justices may dissent or only partially concur,
when the Court states what the law is, it speaks with only one voice. Any doctrine or principle of law laid down by
the court may be modified or reversed only by the Court en banc.[55]
Lastly, any lingering doubt on the validity of the recall order should be dispelled by the fact that the Court upheld
its issuance of the order through the March 13, 2012 resolution, whereby the Court disposed:
WHEREFORE, premises considered, we hereby confirm that the Court en banc has assumed jurisdiction over the
resolution of the merits of the motions for reconsideration of Philippine Airlines, Inc., addressing our July 22,
2008 Decision and October 2, 2009 Resolution; and that the September 7, 2011 ruling of the Second Division has
been effectively recalled. This case should now be raffled either to Justice Lucas P. Bersamin or Justice Diosdado
M. Peralta (the remaining members of the case) as Member-in-Charge in resolving the merits of these motions.
xxxx

The Flight Attendants and Stewards Association of the Philippines' Motion for Reconsideration of October 17,
2011 is hereby denied; the recall of the September 7, 2011 Resolution was made by the Court on its own before the
ruling's finality pursuant to the Court's power of control over its orders and resolutions. Thus, no due process issue
ever arose.

SO ORDERED.
II

PAL's Second Motion for Reconsideration of the Decision of July 22, 2008 could be allowed in the higher interest
of justice

FASAP asserts that PAL's Second Motion for Reconsideration of the Decision of July 22, 2008 was a prohibited
pleading; and that the July 22, 2008 decision was not anymore subject to reconsideration due to its having already
attained finality.

FASAP's assertions are unwarranted.

With the Court's resolution of January 20, 2010 granting PAL's motion for leave to file a second motion for
reconsideration,[56] PAL's Second Motion for Reconsideration of the Decision of July 22, 2008 could no longer
be challenged as a prohibited pleading. It is already settled that the granting of the motion for leave to file and
admit a second motion for reconsideration authorizes the filing of the second motion for reconsideration.[57]
Thereby, the second motion for reconsideration is no longer a prohibited pleading, and the Court cannot deny it on
such basis alone.[58]

Nonetheless, we should stress that the rule prohibiting the filing of a second motion for reconsideration is by no
means absolute. Although Section 2, Rule 52 of the Rules of Court disallows the filing of a second motion for
reconsideration,[59] the Internal Rules of the Supreme Court (IRSC) allows an exception, to wit:
Section 3. Second motion for reconsideration. The Court shall not entertain a second motion for reconsideration,
and any exception to this rule can only be granted in the higher interest of justice by the Court en 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.

In the Division, a vote of three Members shall be required to elevate a second motion for reconsideration to the
Court en banc.
The conditions that must concur in order for the Court to entertain a second motion for reconsideration are the
following, namely:
The motion should satisfactorily explain why granting the same would be in the higher interest of justice;

The motion must be made before the ruling sought to be reconsidered attains finality;

If the ruling sought to be reconsidered was rendered by the Court through one of its Divisions, at least three
members of the Division should vote to elevate the case to the Court En Banc; and

The favorable vote of at least two-thirds of the Court En Banc's actual membership must be mustered for the
second motion for reconsideration to be granted.[60]
Under the IRSC, a second motion for reconsideration may be allowed to prosper upon a showing by the movant
that a reconsideration of the previous ruling is necessary in the higher interest of justice. There is higher interest of
justice when the assailed decision is not only legally erroneous, but is likewise patently unjust and potentially
capable of causing unwarranted and irremediable injury or damage to the parties.[61]

PAL maintains that the July 22, 2008 decision contravened prevailing jurisprudence[62] that had recognized its
precarious financial condition;[63] that the decision focused on PAL's inability to prove its financial losses due to
its failure to submit audited financial statements; that the decision ignored the common findings on the serious
financial losses suffered by PAL made by the Labor Arbiter, the NLRC, the CA and even the SEC;[64] and that
the decision and the subsequent resolution denying PAL's motion for reconsideration would negate whatever
financial progress it had achieved during its rehabilitation.[65]

These arguments of PAL sufficed to show that the assailed decision contravened settled jurisprudence on PAL's
precarious financial condition. It cannot be gainsaid that there were other businesses undergoing rehabilitation that
would also be bound or negatively affected by the July 22, 2008 decision. This was the higher interest of justice
that the Court sought to address, which the dissent by Justice Leonen is adamant not to accept.[66] Hence, we
deemed it just and prudent to allow PAL's Second Motion for Reconsideration of the Decision of July 22, 2008.

It is timely to note, too, that the July 22, 2008 decision did not yet attain finality. The October 4, 2011 resolution
recalled the September 7, 2011 resolution denying PAL's first motion for reconsideration. Consequently, the July
22, 2008 decision did not attain finality.

The dissent by Justice Leonen nonetheless proposes a contrary view that both the July 22, 2008 decision and the
October 2, 2009 resolution had become final on November 4, 2009 upon the lapse of 15 days following PAL's
receipt of a copy of the resolution. To him, the grant of leave to PAL to file the second motion for reconsideration
only meant that the motion was no longer prohibited but it did not stay the running of the reglementary period of
15 days. He submits that the Court's grant of the motion for leave to file the second motion for reconsideration did
not stop the October 2, 2009 resolution from becoming final because a judgment becomes final by operation of
law, not by judicial declaration.[67]

The proposition of the dissent is unacceptable.

In granting the motion for leave to file the second motion for reconsideration, the Court could not have intended to
deceive the movants by allowing them to revel in some hollow victory. The proposition manifestly contravened
the basic tenets of justice and fairness.

As we see it, the dissent must have inadvertently ignored the procedural effect that a second motion for
reconsideration based on an allowable ground suspended the running of the period for appeal from the date of the
filing of the motion until such time that the same was acted upon and granted.[68] Correspondingly, granting the
motion for leave to file a second motion for reconsideration has the effect of preventing the challenged decision
from attaining finality. This is the reason why the second motion for reconsideration should present extraordinarily
persuasive reasons. Indeed, allowing pro forma motions would indefinitely avoid the assailed judgment from
attaining finality.[69]

By granting PAL's motion for leave to file a second motion for reconsideration, the Court effectively averted the
July 22, 2008 decision and the October 2, 2009 resolution from attaining finality. Worthy of reiteration, too, is that
the March 13, 2012 resolution expressly recalled the September 7, 2011 resolution.

Given the foregoing, the conclusion stated in the dissent that the Banc was divested of the jurisdiction to entertain
the second motion for reconsideration for being a "third motion for reconsideration;"[70] and the unfair remark in
the dissent that "[t]he basis of the supposed residual power of the Court En Banc to, take on its own, take
cognizance of Division cases is therefore suspect"[71] are immediately rejected as absolutely legally and factually
unfounded.

To start with, there was no "third motion for reconsideration" to speak of. The September 11, 2011 resolution
denying PAL's second motion for reconsideration had been recalled by the October 4, 2011 resolution. Hence,
PAL's motion for reconsideration remained unresolved, negating the assertion of the dissent that the Court was
resolving the second motion for reconsideration "for the second time."[72]

Also, the dissent takes issue against our having assumed jurisdiction over G.R. No. 178083 despite the clear
reference made in the October 4, 2011 resolution to Sections 3(m) and (n), Rule 2 of the IRSC. Relying largely on
the Court's construction of Section 4(3), Article VIII of the 1987 Constitution in Fortich v. Corona,[73] the dissent
opines that the Banc could not act as an appellate court in relation to the decisions of the Division;[74] and that the
Banc could not take cognizance of any case in the Divisions except upon a prior consulta from the ruling Division
pursuant to Section 3(m), in relation to Section 3(1), Rule 2 of the IRSC.[75]

The Court disagrees with the dissent's narrow view respecting the residual powers of the Banc.
Fortich v. Corona, which has expounded on the authority of the Banc to accept cases from the Divisions, is still the
prevailing jurisprudence regarding the construction of Section 4(3), Article VIII of the 1987 Constitution.
However, Fortich v. Corona does not apply herein. It is notable that Fortich v. Corona sprung from the results of
the voting on the motion for reconsideration filed by the Sumilao Farmers. The vote ended in an equally divided
Division ("two-two"). From there, the Sumilao Farmers sought to elevate the matter to the Banc based on Section
4(3), Article VIII because the required three-member majority vote was not reached. However, the factual milieu
in Fortich v. Corona is not on all fours with that in this case.

In the March 13, 2012 resolution, the Court recounted the exigencies that had prompted the Banc to take
cognizance of the matter, to wit:
On September 28, 2011, the Letters dated September 13 and 20, 2011 of Atty. Mendoza to Atty. Vidal (asking that
his inquiry be referred to the relevant Division Members who took part on the September 7, 2011 Resolution) were
"NOTED" by the regular Second Division. The Members of the ruling Division also met to consider the queries
posed by Atty. Mendoza. Justice Brion met with the Members of the ruling Division (composed of Justices Brion,
Peralta, Perez, Bersamin, and Mendoza), rather than with the regular Second Division (composed of Justices
Carpio, Brion, Perez, and Sereno), as the former were the active participants in the September 7, 2011 Resolution.

In these meetings, some of the Members of the ruling Division saw the problems pointed out above, some of
which indicated that the ruling Division might have had no authority to rule on the case. Specifically, their
discussions centered on the application of A.M. No. 99-8-09-SC for the incidents that transpired prior to the
effectivity of the IRSC, and on the conflicting rules under the IRSC - Section 3, Rule 8 on the effects of inhibition
and Section 7, Rule 2 on the resolution of MRs.

A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be made among the other Members of the
same Division who participated in rendering the decision or resolution and who concurred therein, which should
now apply because the ruling on the case is no longer final after the cast had been opened for review on the merits.
In other words, after acceptance by the Third Division, through Justice Velasco, of the 2nd MR, there should have
been a referral to raffle because the excepting qualification that the Clerk of Court cited no longer applied; what
was being reviewed were the merits of the case and the review should be by the same Justices who had originally
issued the original Decision and the subsequent Resolution, or by whoever of these Justices are still left in the
Court, pursuant to the same A.M. No. 99-8-09-SC.

On the other hand, the raffle to Justice Brion was made by applying AC No. 84-2007 that had been superseded by
Section 3, Rule 8 of the IRSC. Even the use of this IRSC provision, however, would not solve the problem, as its
use still raised the question of the provision that should really apply in the resolution of the MR: should it be
Section 3, Rule 8 on the inhibition of a Member-in-Charge, or Section 7, Rule 2 of the IRSC on the inhibition of
the ponente when an MR of a decision and a signed resolution was filed. xxx

xxxx xxxx xxxx

A comparison of these two provisions shows the semantic sources of the seeming conflict: Section 7, Rule 2 refers
to a situation where the ponente has retired, is no longer a Member of the Court, is disqualified, or has inhibited
himself from acting on the case; while Section 3, Rule 8 generally refers to the inhibition of a Member-in-Charge
who does not need to be the writer of the decision or resolution under review.

Significantly, Section 7, Rule 2 expressly uses the word ponente (not Member-in-Charge) and refers to a specific
situation where the ponente (or the writer of the Decision or the Resolution) is no longer with the Court or is
otherwise unavailable to review the decision or resolution he or she wrote. Section 3, Rule 8, on the other hand,
expressly uses the term Member-in-Charge and generally refers to his or her inhibition, without reference to the
stage of the proceeding when the inhibition is made.

Under Section 7, Rule 2, the case should have been re-raffled and assigned to anyone of Justices Nachura (who did
not retire until June 13, 2011), Peralta, or Bersamin, either (1) after the acceptance of the 2nd MR (because the
original rulings were no longer final); or (2) after Justice Velasco's inhibition because the same condition existed,
i.e., the need for a review by the same Justices who rendered the decision or resolution. As previously mentioned,
Justice Nachura participated in both the original Decision and the subsequent Resolution, and all three Justices
were the remaining Members who voted on the October 2, 2009 Resolution. On the other hand, if Section 3, Rule
8 were to be solely applied after Justice Velasco's inhibition, the Clerk of Court would be correct in her assessment
and the raffle to Justice Brion, as a Member outside of Justice Velasco's Division, was correct.
These were the legal considerations that largely confronted the ruling Division in late September 2011 when it
deliberated on what to do with Atty. Mendoza's letters.

The propriety of and grounds for the recall of the September 7, 2011 Resolution

Most unfortunately, the above unresolved questions were even further compounded in the course of the
deliberations of the Members of the ruling Division when they were informed that the parties received the ruling
on September 19, 2011, and this ruling would lapse to finality after the 15th day, or after October 4, 2011.

Thus, on September 30, 2011 (a Friday), the Members went to Chief Justice Corona and recommended, as a
prudent move, that the September 7, 2011 Resolution be recalled at the very latest on October 4, 2011, and that the
case be referred to the Court en banc for a ruling on the questions Atty. Mendoza asked. The consequence, of
course, of a failure to recall their ruling was for that Resolution to lapse to finality. After finality, any recall for
lack of jurisdiction of the ruling Division might not be understood by the parties and could lead to a charge of flip-
flopping against the Court. The basis for the referral is Section 3(n), Rule 2 of the IRSC, which provides:

RULE 2.

OPERATING STRUCTURES
Section 3. Court en banc matters and cases. - The Court en banc shall act on the following matters and cases:

xxxx

(n) cases that the Court en banc deems of sufficient importance to merit its attention[.]
Ruling positively, the Court en banc duly issued its disputed October 4, 2011 Resolution recalling the September
7, 2011 Resolution and ordering the re-raffle of the case to a new Member-in-Charge. Later in the day, the Court
received PAL's Motion to Vacate (the September 7, 2011 ruling) dated October 3, 2011. This was followed by
FASAP's MR dated October 17, 2011 addressing the Court Resolution of October 4, 2011. The FASAP MR
mainly invoked the violation of its right to due process as the recall arose from the Court's ex parte consideration
of mere letters from one of the counsels of the parties.

As the narration in this Resolution shows, the Court acted on its own pursuant to its power to recall its own orders
and resolutions before their finality. The October 4, 2011 Resolution was issued to determine the propriety of the
September 7, 2011 Resolution given the facts that came to light after the ruling Division's examination of the
records. To point out the obvious, the recall was not a ruling on the merits and did not constitute the reversal of the
substantive issues already decided upon by the Court in the FASAP case in its previously issued Decision (of July
22, 2008) and Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution was not meant and was
never intended to favor either party, but to simply remove any doubt about the validity of the ruling Division's
action on the case. The case, in the ruling Division's view, could be brought to the Court en banc since it is one of
"sufficient importance"; at the very least, it involves the interpretation of conflicting provisions of the IRSC with
potential jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to recommend a recall, there was no clear
indication of how they would definitively settle the unresolved legal questions among themselves. The only matter
legally certain was the looming finality of the September 7, 2011 Resolution if it would not be immediately
recalled by the Court en banc by October 4, 2011. No unanimity among the Members of the ruling Division could
be gathered on the unresolved legal questions; thus, they concluded that the matter is best determined by the Court
en banc as it potentially involved questions of jurisdiction and interpretation of conflicting provisions of the IRSC.
To the extent of the recommended recall, the ruling Division was unanimous and the Members communicated this
intent to the Chief Justice in clear and unequivocal terms.[76] (Bold scoring supplied for emphasis)
It is well to stress that the Banc could not have assumed jurisdiction were it not for the initiative of Justice Arturo
V. Brion who consulted the Members of the ruling Division as well as Chief Justice Corona regarding the
jurisdictional implications of the successive retirements, transfers, and inhibitions by the Members of the ruling
Division. This move by Justice Brion led to the referral of the case to the Banc in accordance with Section 3(1),
Rule 2 of the IRSC that provided, among others, that any Member of the Division could request the Court En Banc
to take cognizance of cases that fell under paragraph (m). This referral by the ruling Division became the basis for
the Banc to issue its October 4, 2011 resolution.

For sure, the Banc, by assuming jurisdiction over the case, did not seek to act as appellate body in relation to the
acts of the ruling Division, contrary to the dissent's position.[77] The Banc's recall of the resolution of September
7, 2011 should not be so characterized, considering that the Banc did not thereby rule on the merits of the case, and
did not thereby reverse the July 22, 2008 decision and the October 2, 2009 resolution. The referral of the case to
the Banc was done to address the conflict among the provisions of the IRSC that had potential jurisdictional
implications on the ruling made by the Second Division.

At any rate, PAL constantly raised in its motions for reconsideration that the ruling Division had seriously erred
not only in ignoring the consistent findings about its precarious financial situation by the Labor Arbiter, the
NLRC, the CA and the SEC, but also in disregarding the pronouncements by the Court of its serious fiscal
condition. To be clear, because the serious challenge by PAL against the ruling of the Third Division was anchored
on the Third Division's having ignored or reversed settled doctrines or principles of law, only the Banc could
assume jurisdiction and decide to either affirm, reverse or modify the earlier decision. The rationale for this
arrangement has been expressed in Lu v. Lu Ym[78] thuswise:
It is argued that the assailed Resolutions in the present cases have already become final, since a second motion for
reconsideration is prohibited except for extraordinarily persuasive reasons and only upon express leave first
obtained; and that once a judgment attains finality, it thereby becomes immutable and unalterable, however unjust
the result of error may appear.

The contention, however, misses an important point. The doctrine of immutability of decisions applies only to
final and executory decisions. Since the present cases may involve a modification or reversal of a Court-ordained
doctrine or principle, the judgment rendered by the Special Third Division may be considered unconstitutional,
hence, it can never become final. It finds mooring in the deliberations of the framers of the Constitution:
On proposed Section 3(4), Commissioner Natividad asked what the effect would be of a decision that violates the
proviso that "no doctrine or principle of law laid down by the court in a decision rendered en banc or in division
may be modified or reversed except by the court en banc." The answer given was that such a decision would be
invalid. Following up, Father Bernas asked whether the decision, if not challenged, could become final and
binding at least on the parties. Romulo answered that, since such a decision would be in excess of jurisdiction, the
decision on the case could be reopened anytime. (emphasis and underscoring supplied)
A decision rendered by a Division of this Court in violation of this constitutional provision would be in excess of
jurisdiction and, therefore, invalid. Any entry of judgment may thus be said to be "inefficacious" since the decision
is void for being unconstitutional.

While it is true that the Court en banc exercises no appellate jurisdiction over its Divisions, Justice Minerva
Gonzaga-Reyes opined in Firestone and concededly recognized that "[t]he only constraint is that any doctrine or
principle of law laid down by the Court, either rendered en banc or in division, may be overturned or reversed only
by the Court sitting en banc."

That a judgment must become final at some definite point at the risk of occasional error cannot be appreciated in a
case that embroils not only a general allegation of "occasional error" but also a serious accusation of a violation of
the Constitution, viz., that doctrines or principles of law were modified or reversed by the Court's Special Third
Division August 4, 2009 Resolution.

The law allows a determination at first impression that a doctrine or principle laid down by the court en banc or in
division may be modified or reversed in a case which would warrant a referral to the Court En Banc. The use of
the word "may" instead of "shall" connotes probability, not certainty, of modification or reversal of a doctrine, as
may be deemed by the Court. Ultimately, it is the entire Court which shall decide on the acceptance of the referral
and, if so, "to reconcile any seeming conflict, to reverse or modify an earlier decision, and to declare the Court's
doctrine."

The Court has the power and prerogative to suspend its own rules and to exempt a case from their operation if and
when justice requires it, as in the present circumstance where movant filed a motion for leave after the prompt
submission of a second motion for reconsideration but, nonetheless, still within 15 days from receipt of the last
assailed resolution.[79]
Lastly, the dissent proposes that a unanimous vote is required to grant PAL's Second Motion for Reconsideration
of the Decision of July 22, 2008.[80] The dissent justifies the proposal by stating that "[a] unanimous court would
debate and deliberate more fully compared with a nonunanimous court."[81]

The radical proposal of the dissent is bereft of legal moorings. Neither the 1987 Constitution nor the IRSC
demands such unanimous vote. Under Section 4(2), Article VIII of the 1987 Constitution, decisions by the Banc
shall be attained by a "concurrence of a majority of the Members who actually took part in the deliberations on the
issues in the case and voted thereon." As a collegial body, therefore, the Court votes after deliberating on the case,
and only a majority vote is required,[82] unless the 1987 Constitution specifies otherwise. In all the deliberations
by the Court, dissenting and concurring opinions are welcome, they being seen as sound manifestations of "the
license of individual Justices or groups of Justices to separate themselves from "the Court's" adjudication of the
case before them,"[83] thus:
[C]oncurring and dissenting opinions serve functions quite consistent with a collegial understanding of the Court.
Internally within the Court itself-dissent promotes and improves deliberation and judgment. Arguments on either
side of a disagreement test the strength of their rivals and demand attention and response. The opportunity for
challenge and response afforded by the publication of dissenting and concurring opinions is a close and
sympathetic neighbor of the obligation of reasoned justification.

Externally for lower courts, the parties, and interested bystanders-concurring and dissenting opinions are important
guides to the dynamic "meaning" of a decision by the Court. From a collegial perspective, dissenting and
concurring opinions offer grounds for understanding how individual Justices, entirely faithful to their Court's
product, will interpret that product. The meaning each Justice brings to the product of her Court will inevitably be
shaped by elements of value and judgment she brings to the interpretive endeavor; her dissent from the Court's
conclusions in the case in question is likely to be dense with insight into these aspects of her judicial persona.[84]
III

PAL implemented a valid retrenchment program

Retrenchment or downsizing is a mode of terminating employment initiated by the employer through no fault of
the employee and without prejudice to the latter, resorted to by management during periods of business recession,
industrial depression or seasonal fluctuations or during lulls over shortage of materials. It is a reduction in
manpower, a measure utilized by an employer to minimize business losses incurred in the operation of its business.
[85]

Anent retrenchment, Article 298[86] of the Labor Code provides as follows:

Article 298. Closure of Establishment and Reduction of Personnel. - The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry
of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment
or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of
at least six (6) months shall be considered one (1) whole year.
Accordingly, the employer may resort to retrenchment in order to avert serious business losses. To justify such
retrenchment, the following conditions must be present, namely:
1. The retrenchment must be reasonably necessary and likely to prevent business losses;

2. The losses, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or, if only
expected, are reasonably imminent;

3. The expected or actual losses must be proved by sufficient and convincing evidence;

4. The retrenchment must be in good faith for the advancement of its interest and not to defeat or circumvent the
employees' right to security of tenure; and

5. There must be fair and reasonable criteria in ascertaining who would be dismissed and who would be retained
among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain
workers.[87]
Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial losses because it did not submit its
audited financial statements as evidence; (2) observe good faith in implementing the retrenchment program; and
(3) apply a fair and reasonable criteria in selecting who would be terminated.

Upon a critical review of the records, we are convinced that PAL had met all the standards in effecting a valid
retrenchment.
 A

PAL's serious financial losses were duly established

PAL was discharged of the burden to prove serious financial losses in view of FASAP's admission

PAL laments the unfair and unjust conclusion reached in the July 22, 2008 decision to the effect that it had not
proved its financial losses due to its non-submission of audited financial statements. It points out that the matter of
financial losses had not been raised as an issue before the Labor Arbiter, the NLRC, the CA, and even in the
petition in G.R. No. 178083 in view of FASAP's admission of PAL having sustained serious losses; and that PAL's
having been placed under rehabilitation sufficiently indicated the financial distress that it was suffering.

It is quite notable that the matter of PAL's financial distress had originated from the complaint filed by FASAP
whereby it raised the sole issue of "Whether or not respondents committed Unfair Labor Practice."[88] FASAP
believed that PAL, in terminating the 1,400 cabin crew members, had violated Section 23, Article VII and Section
31, Article IX of the 1995-2000 PAL-FASAP CBA. Interestingly, FASAP averred in its position paper therein that
it was not opposed to the retrenchment program because it understood PAL's financial troubles; and that it was
only questioning the manner and lack of standard in carrying out the retrenchment, thus:
At the outset, it must be pointed out that complainant was never opposed to the retrenchment program itself, as it
understands respondent PAL's financial troubles. In fact, complainant religiously cooperated with respondents in
their quest for a workable solution to the company-threatening problem. Attached herewith as Annexes "A" to "D"
are the minutes of its meetings with respondent PAL's representatives showing complainant's active participation
in the deliberations on the issue.

What complainant vehemently objects to are the manner and the lack of criteria or standard by which the
retrenchment program was implemented or carried out, despite the fact that there are available criteria or standard
that respondents could have utilized or relied on in reducing its workforce. In adopting a retrenchment program
that was fashioned after the evil prejudices and personal biases of respondent Patria Chiong, respondent PAL
grossly violated at least two important provisions of its CBA with complainant - Article VII, Section 23 and
Article IX, Sections 31 and 32.[89]
These foregoing averments of FASAP were echoed in its reply[90] and memorandum[91] submitted to the Labor
Arbiter.

Evidently, FASAP's express recognition of PAL's grave financial situation meant that such situation no longer
needed to be proved, the same having become a judicial admission[92] in the context of the issues between the
parties. As a rule, indeed, admissions made by parties in the pleadings, or in the course of the trial or other
proceedings in the same case are conclusive, and do not require further evidence to prove them.[93] By FASAP's
admission of PAL's severe financial woes, PAL was relieved of its burden to prove its dire financial condition to
justify the retrenchment. Thusly, PAL should not be taken to task for the non-submission of its audited financial
statements in the early part of the proceedings inasmuch as the non-submission had been rendered irrelevant.

Yet, the July 22, 2008 decision ignored the judicial admission and unfairly focused on the lack of evidence of
PAL's financial losses. The Special Third Division should have realized that PAL had been discharged of its duty
to prove its precarious fiscal situation in the face of FASAP's admission of such situation. Indeed, PAL did not
have to submit the audited financial statements because its being in financial distress was not in issue at all.

Nonetheless, the dissent still insists that PAL should be faulted for failing to prove its substantial business losses,
and even referred to several decisions of the Court[94] wherein the employers had purportedly established their
serious business losses as a requirement for a valid retrenchment.

Unfortunately, the cases cited by the dissent obviously had no application herein because they originated from
either simple complaints of illegal retrenchment, or unfair labor practice, or additional separation pay.[95]

LVN Pictures originated from a complaint for unfair labor practice (ULP) based on Republic Act No. 874
(Industrial Peace Act). The allegations in the complaint concerned interference, discrimination and refusal to
bargain collectively. The Court pronounced therein that the employer (LVN Pictures) did not resort to ULP
because it was able to justify its termination, closure and eventual refusal to bargain collectively through the
financial statements showing that it continually incurred serious financial losses. Notably, the Court did not
interfere with the closure and instead recognized LVN's management prerogative to close its business and dismiss
its employees.

North Davao Mining was a peculiar case, arising from a complaint for additional separation pay, among others.
The Court therein held that separation pay was not required if the reason for the termination was due to serious
business losses. It clarified that Article 283 (now Art. 298) governed payment of separation benefits in case of
closure of business not due to serious business losses. When the reason for the closure was serious business losses,
the employer shall not be required to grant separation pay to the terminated employees.

In Manatad, the complaint for illegal dismissal was based on the allegation that the retrenchment program was
illegal because the employer was gaining profits. Hence, the core issue revolved around the existence (or absence)
of grave financial losses that would justify retrenchment.

In the cited cases, the employers had to establish that they were incurring serious business losses because it was
the very issue, if not intricately related to the main issue presented in the original complaints. In contrast, the sole
issue herein as presented by FASAP to the Labor Arbiter was the "manner of retrenchment," not the basis for
retrenchment. FASAP itself, in representation of the retrenched employees, had admitted in its position paper, as
well as in its reply and memorandum submitted to the Labor Arbiter the fact of serious financial losses hounding
PAL. In reality, PAL was not remiss by not proving serious business losses. FASAP's admission of PAL's
financial distress already established the latter's precarious financial state.

Judicial notice could be taken of the financial losses incurred; the presentation of audited financial statements was
not required in such circumstances

The July 22, 2008 decision recognized that PAL underwent corporate rehabilitation. In seeming inconsistency,
however, the Special Third Division refused to accept that PAL had incurred serious financial losses, observing
thusly:
The audited financial statements should be presented before the Labor Arbiter who is in the position to evaluate
evidence. They may not be submitted belatedly with the Court of Appeals, because the admission of evidence is
outside the sphere of the appellate court's certiorari jurisdiction. Neither can this Court admit in evidence audited
financial statements, or make a ruling on the question of whether the employer incurred substantial losses
justifying retrenchment on the basis thereof, as this Court is not a trier of facts. Even so, this Court may not be
compelled to accept the contents of said documents blindly and without thinking.

xxxx

In the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which would
justify the retrenchment of more than 1,400 of its cabin crew personnel. Although the Philippine economy was
gravely affected by the Asian financial crisis, however, it cannot be assumed that it has likewise brought PAL to
the brink of bankruptcy. Likewise, the fact that PAL underwent corporate rehabilitation does not automatically
justify the retrenchment of its cabin crew personnel.[96] (Emphasis supplied)
Indeed, that a company undergoes rehabilitation sufficiently indicates its fragile financial condition. It is rather
unfortunate that when PAL petitioned for rehabilitation the term "corporate rehabilitation" still had no clear
definition. Presidential Decree No. 902-A,[97] the law then applicable, only set the remedy.[98] Section 6(c) and
(d) of P.D. No. 902-A gave an insight into the precarious state of a distressed corporation requiring the
appointment of a receiver or the creation of a management committee, viz.:
xxxx

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing
public and creditors: Provided, however, That the Commission may, in appropriate cases, appoint a rehabilitation
receiver of corporations, partnerships or other associations not supervised or regulated by other government
agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court,
such functions and powers as are provided for in the succeeding paragraph d) hereof: Provided, further, That the
Commission may appoint a rehabilitation receiver of corporations, partnerships or other associations supervised or
regulated by other government agencies, such as banks and insurance companies, upon request of the government
agency concerned: Provided, finally, That upon appointment of a management committee, rehabilitation receiver,
board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations
under management or receivership pending before any court, tribunal, board or body shall be suspended
accordingly.

d) To create and appoint a management committee, board, or body upon petition or motu propio to undertake the
management of corporations, partnerships or other associations not supervised or regulated by other government
agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets
or other properties of paralyzation of business operations of such corporations or entities which may be prejudicial
to the interest of minority stockholders, parties-litigants or the general public: Provided, further, That the
Commission may create or appoint a management committee, board or body to undertake the management of
corporations, partnerships or other associations supervised or regulated by other government agencies, such as
banks and insurance companies, upon request of the government agency concerned.

The management committee or rehabilitation receiver, board or body shall have the power to take custody of, and
control over, all the existing assets and property of such entities under management; to evaluate the existing assets
and liabilities, earnings and operations of such corporations, partnerships or other associations; to determine the
best way to salvage and protect the interest of the investors and creditors; to study, review and evaluate the
feasibility of continuing operations and restructure and rehabilitate such entities if determined to be feasible by the
Commission. It shall report and be responsible to the Commission until dissolved by order of the Commission:
Provided, however, That the Commission may; on the basis of the findings and recommendation of the
management committee, or rehabilitation receiver, board or body, or on its own findings; determine that the
continuance in business of such corporation or entity would not be feasible or profitable nor work to the best
interest of the stockholders, parties-litigants, creditors, or the general public, order the dissolution of such
corporation entity and its remaining assets liquidated accordingly. The management committee or rehabilitation
receiver, board or body may overrule or revoke the actions of the previous management and board of directors of
the entity or entities under management notwithstanding any provision of law, articles of incorporation or by-laws
to the contrary.

The management committee, or rehabilitation receiver, board or body shall not be subject to any action, claim or
demand for, or in connection with, any act done or omitted to be done by it in good faith in the exercise of its
functions, or in connection with the exercise of its power herein conferred. (Bold underscoring supplied for
emphasis)
After having been placed under corporate rehabilitation and its rehabilitation plan having been approved by the
SEC on June 23, 2008, PAL's dire financial predicament could not be doubted. Incidentally, the SEC's order of
approval came a week after PAL had sent out notices of termination to the affected employees. It is thus difficult
to ignore the fact that PAL had then been experiencing difficulty in meeting its financial obligations long before its
rehabilitation.

Moreover, the fact that airline operations were capital intensive but earnings were volatile because of their
vulnerability to economic recession, among others.[99] The Asian financial crisis in 1997 had wrought havoc
among the Asian air carriers, PAL included.[100] The peculiarities existing in the airline business made it easier to
believe that at the time of the Asian financial crisis, PAL incurred liabilities amounting to P90,642,933,919.00,
which were way beyond the value of its assets that then only stood at P85,109,075,351.

Also, the Court cannot be blind and indifferent to current events affecting the society[101] and the country's
economy,[102] but must take them into serious consideration in its adjudication of pending cases. In that regard,
Section 2, Rule 129 of the Rules of Court recognizes that the courts have discretionary authority to take judicial
notice of matters that are of public knowledge, or are capable of unquestionable demonstration, or ought to be
known to judges because of their judicial functions.[103] The principle is based on convenience and expediency in
securing and introducing evidence on matters that are not ordinarily capable of dispute and are not bona fide
disputed.[104]

Indeed, the Labor Arbiter properly took cognizance of PAL's substantial financial losses during the Asian financial
crisis of 1997.[105] On its part, the NLRC recognized the grave financial distress of PAL based on its ongoing
rehabilitation/receivership.[106] The CA likewise found that PAL had implemented a retrenchment program to
counter its tremendous business losses that the strikes of the pilot's union had aggravated.[107] Such recognitions
could not be justly ignored or denied, especially after PAL's financial and operational difficulties had attracted so
much public attention that even President Estrada had to intervene in order to save PAL as the country's flag
carrier.[108]
The Special Third Division also observed that PAL had submitted a "stand-alone" rehabilitation program that was
viewed as an acknowledgment that it could "undertake recovery on its own and that it possessed enough resources
to weather the financial storm." The observation was unfounded considering that PAL had been constrained to
submit the "stand-alone" rehabilitation plan on December 7, 1998 because of the lack of a strategic partner.[109]

We emphasize, too, that the presentation of the audited financial statements should not the sole means by which to
establish the employer's serious financial losses. The presentation of audited financial statements, although
convenient in proving the unilateral claim of financial losses, is not required for all cases of retrenchment. The
evidence required for each case of retrenchment really depends on the particular circumstances obtaining. The
Court has cogently opined in that regard:
That petitioners were not able to present financial statements for years prior to 2005 should not be automatically
taken against them. Petitioner BEMI was organized and registered as a corporation in 2004 and started business
operations in 2005 only. While financial statements for previous years may be material in establishing the financial
trend for an employer, these are not indispensable in all cases of retrenchment. The evidence required for each case
of retrenchment will still depend on its particular circumstances. In fact, in Revidad v. National Labor Relations
Commission, the Court declared that "proof of actual financial losses incurred by the company is not a condition
sine qua non for retrenchment," and retrenchment may be undertaken by the employer to prevent even future
losses:
In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of
some employees is authorized to be undertaken by the employer sometime before the anticipated losses are
actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to
stay his hand and keep all his employees until after losses shall have in fact materialized. If such an intent were
expressly written into the law, that law may well be vulnerable to constitutional attack as unduly taking property
from one man to be given to another.[110] (Bold underscoring supplied for emphasis)
In short, to require a distressed corporation placed under rehabilitation or receivership to still submit its audited
financial statements may become unnecessary or superfluous.

Under P.D. No. 902-A, the SEC was empowered during rehabilitation proceedings to thoroughly review the
corporate and financial documents submitted by PAL. Hence, by the time when the SEC ordered PAL's
rehabilitation, suspension of payments and receivership, the SEC had already ascertained PAL's serious financial
condition, and the clear and imminent danger of its losing its corporate assets. To require PAL in the proceedings
below to still prove its financial losses would only trivialize the SEC's order and proceedings. That would be
unfortunate because we should not ignore that the SEC was then the competent authority to determine whether or
not a corporation experienced serious financial losses. Hence, the SEC's order- presented as evidence in the
proceedings below - sufficiently established PAL's grave financial status.

Finally, PAL argues that the Special Third Division should not have deviated from the pronouncements made in
Garcia v. Philippine Airlines, Inc., Philippine Airlines, Inc. v. Kurangking, Philippine Airlines v. Court of
Appeals, Philippine Airlines v. Zamora, Philippine Airlines v. PALEA, and Philippine Airlines v. National Labor
Relations Commission, all of which judicially recognized PAL's dire financial condition.

The argument of PAL is valid and tenable.

Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement pending appeal because PAL had
been placed under corporate rehabilitation, explaining that unlike the ground of substantial losses contemplated in
a retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a competent court and
not formulated for the first time by the employer, viz.:
While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of
the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is
similarly in a judicially monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its
options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the
other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as
discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the
ground of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was
judicially pre-determined by a competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation.
Respondent was, during the period material to the case, effectively deprived of the alternative choices under
Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim
relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver.
Had there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending
appeal to optimize the utilization of resources. Then again, though the management may think this Wise, the
rehabilitation receiver may decide otherwise, not to mention the subsistence of the injunction on claims.[111]
In Philippine Airlines v. Kurangking, Philippine Airlines v. Court of Appeals, Philippine Airlines v. PALEA and
Philippine Airlines v. National Labor Relations Commission, the Court uniformly upheld the suspension of
monetary claims against PAL because of the SEC's order placing it under receivership. The Court emphasized the
need to suspend the payment of the claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring and rehabilitation. Philippine Airlines
v. Zamora reiterated this rule and deferred to the prior judicial notice taken by the Court in suspending the
monetary claims of illegally dismissed employees.[112]

Through these rulings, the Court consistently recognized PAL's financial troubles while undergoing rehabilitation
and suspension of payments. Considering that the ruling related to conditions and circumstances that had occurred
during the same period as those obtaining in G.R. No. 178083, the Court cannot take a different view.

It is also proper to indicate that the Court decided the other cases long before the promulgation of the assailed July
22, 2008 decision. Hence, the Special Third Division should not have regarded the financial losses as an issue that
still required determination. Instead, it should have just simply taken judicial notice of the serious financial losses
being suffered by PAL.[113] To still rule that PAL still did not prove such losses certainly conflicted with the
antecedent judicial pronouncements about PAL's dire financial state.

As such, we cannot fathom the insistence by the dissent that the Court had not taken judicial notice but merely
"recognized" that PAL was under corporate rehabilitation. Judicial notice is the cognizance of certain facts that
judges may properly take and act on without proof because they already know them. It is the manner of
recognizing and acknowledging facts that no longer need to be proved in court. In other words, when the Court
"recognizes" a fact, it inevitably takes judicial notice of it.

For sure, it would not have been the first time that the Court would have taken judicial notice of the findings of the
SEC and of antecedent jurisprudence recognizing the fact of rehabilitation by the employer. The Court did so in
the 2002 case of Clarion Printing House, Inc. v. National Labor Relations Commission,[114] to wit:
Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("REORGANIZATION OF THE SECURITIES
AND EXCHANGE COMMISSION WITH ADDITIONAL POWERS AND PLACING SAID AGENCY UNDER
THE ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT"), as amended, read:
SEC. 5. In addition to the regulatory and adjudicative functions of THE SECURITIES AND EXCHANGE
COMMISSION over corporations, partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases
involving:

xxx xxx xxx

(d)
Petitions of corporations, partnerships or associations declared in the state of suspension of payments in cases
where the corporation, partnership or association possesses sufficient property to cover all debts but foresees the
impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership,
association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver
or Management Committee created pursuant to this Decree.

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

xxx xxx xxx

(c)
To appoint one or more receivers of the property, real and personal, which is the subject of the action pending
before the Commission in accordance with the provisions of the Rules of Court in such other cases whenever
necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public
and creditors: Provided, however, That the Commission may in appropriate cases, appoint a rehabilitation receiver
of corporations, partnerships or other associations not supervised or regulated by other government agencies who
shall have, in addition to powers of the regular receiver under the provisions of the Rules of Court, such functions
and powers as are provided for in the succeeding paragraph (d) hereof: ...

(d)
To create and appoint a management committee, board or body upon petition or motu propio to undertake the
management of corporations, partnership or other associations not supervised or regulated by other government
agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets
or other properties or paralization of business operations of such corporations or entities which may be prejudicial
to the interest of minority stockholders, parties-litigants of the general public: ... (Emphasis and underscoring
supplied).
From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of a receiver or management
committee by the SEC presupposes a finding that, inter alia, a company possesses sufficient property to cover all
its debts but "foresees the impossibility of meeting them when they respectively fall due" and "there is imminent
danger of dissipation, loss, wastage or destruction of assets of other properties or paralization of business
operations."

That the SEC, mandated by law to have regulatory functions over corporations, partnerships or associations,
appointed an interim receiver for the EYCO Group of Companies on its petition in light of, as quoted above, the
therein enumerated "factors beyond the control and anticipation of the management" rendering it unable. to meet
its obligation as they fall due, and thus resulting to "complications and problems ... to arise that would impair and
affect [its] operations ..." shows that CLARION, together with the other member-companies of the EYCO Group
of Companies, was suffering business reverses justifying, among other things, the retrenchment of its employees.

This Court in fact takes judicial notice of the Decision of the Court of Appeals dated June 11, 2000 in CA-G.R. SP
No. 55208, "Nikon Industrial Corp., Nikolite Industrial Corp., et al. (including CLARION), otherwise known as
the EYCO Group of Companies v. Philippine National Bank, Solidbank Corporation, et al., collectively known
and referred as the 'Consortium of Creditor Banks,'" which was elevated to this Court via Petition for Certiorari
and docketed as G.R. No. 145977, but which petition this Court dismissed by Resolution dated May 3, 2005:
Considering the joint manifestation and motion to dismiss of petitioners and respondents dated February 24, 2003,
stating that the parties have reached a final and comprehensive settlement of all the claims and counterclaims
subject matter of the case and accordingly, agreed to the dismissal of the petition for certiorari, the Court Resolved
to DISMISS the petition for certiorari (Underscoring supplied).
The parties in G.R. No. 145977 having sought, and this Court having granted, the dismissal of the appeal of the
therein petitioners including CLARION, the CA decision which affirmed in toto the September 14, 1999 Order of
the SEC, the dispositive portion of which SEC Order reads:
WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order dated 18 December 1998
is set aside. The Petition to be Declared in State of Suspension of payments is hereby disapproved and the SAC
Plan terminated. Consequently, all committee, conservator/receivers created pursuant to said Order are dissolved
and discharged and all acts and orders issued therein are vacated.

The Commission, likewise, orders the liquidation and dissolution of the appellee corporations. The case is hereby
remanded to the hearing panel below for that purpose.

xxx xxx xxx (Emphasis and underscoring supplied).

has now become final and executory. Ergo, the SEC's disapproval of the EYCO Group of Companies' "Petition for
the Declaration of Suspension of Payment ..." and the order for the liquidation and dissolution of these companies
including CLARION, must be deemed to have been unassailed.

That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al. v. PNB et al., there should
be no doubt.

As provided in Section 1, Rule 129 of the Rules of Court:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states, their political history, forms of government and symbols
of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments of
the Philippines, the laws of nature, the measure of time, and the geographical divisions. (Emphasis and
underscoring supplied)
which Mr. Justice Edgardo L. Paras interpreted as follows:
A court will take judicial notice of its own acts and records in the same case, of facts established in prior
proceedings in the same case, of the authenticity of its own records of another case between the same parties, of
the files of related cases in the same court, and of public records on file in the same court. In addition judicial
notice will be taken of the record, pleadings or judgment of a case in another court between the same parties or
involving one of the same parties, as well as of the record of another case between different parties in the same
court. Judicial notice will also be taken of court personnel. (Emphasis and underscoring supplied)
In fine, CLARION's claim that at the time it terminated Miclat it was experiencing business reverses gains more
light from the SEC's disapproval of the EYCO Group of Companies' petition to be declared in state of suspension
of payment, filed before Miclat's termination, and of the SEC's consequent order for the group of companies'
dissolution and liquidation.[115]
At any rate, even assuming that serious business losses had not been proved by PAL, it would still be justified
under Article 298 of the Labor Code to retrench employees to prevent the occurrence of losses or its closing of the
business, provided that the projected losses were not merely de minimis, but substantial, serious, actual, and real,
or, if only expected, were reasonably imminent as perceived objectively and in good faith by the employer.[116] In
the latter case, proof of actual financial losses incurred by the employer would not be a condition sine qua non for
retrenchment,[117] viz.:
Third, contrary to petitioner's asseverations, proof of actual financial losses incurred by the company is not a
condition sine qua non for retrenchment. Retrenchment is one of the economic grounds to dismiss employees,
which is resorted to by an employer primarily to avoid or minimize business losses. The law recognize this under
Article 283 of the Labor Code xxx

xxxx

In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of
some employees is authorized to be undertaken by the employer sometime before the anticipated losses are,
actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to
stay his hand and keep all his employees until after losses shall have in fact materialized. If such an intent were
expressly written into the law, that law may well be vulnerable to constitutional attack as unduly taking property
from one man to be given to another.

At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is sufficient legal
warrant for the reduction of personnel. In the nature of things, the possibility of incurring the losses is constantly
present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the
factors which impact upon the profitability or viability of such operations may be substantially outside the control
of the employer.

On the bases of these consideration, it follows that the employer bears the burden to prove his allegation of
economic or business reverses with clear and satisfactory evidence, it being in the nature of an affirmative defense.
As earlier discussed, we are fully persuaded that the private respondent has been and is besieged by a continuing
downtrend in both its business operations and financial resources, thus amply justifying its resort to drastic cuts in
personnel and costs.[118]
B

PAL retrenched in good faith

The employer is burdened to observe good faith in implementing a retrenchment program. Good faith on its part
exists when the retrenchment is intended for the advancement of its interest and is not for the purpose of defeating
or circumventing the rights of the employee under special laws or under valid agreements.[119]

The July 22, 2008 decision branded the recall of the retrenched employees and the implementation of "Plan 22"
instead of "Plan 14" as badges of bad faith on the part of PAL. On the other hand, the October 2, 2009 resolution
condemned PAL for changing its theory by attributing the cause of the retrenchment to the ALPAP pilots' strike.

PAL refutes the adverse observations, and maintains that its position was clear and consistent - that the reduction
of its labor force was an act of survival and a less drastic measure as compared to total closure and liquidation that
would have otherwise resulted; that downsizing had been an option to address its financial losses since 1997;[120]
that the reduction of personnel was necessary as an integral part of the means to ensure the success of its corporate
rehabilitation plan to restructure its business;[121] and that the downsizing of its labor force was a sound business
decision undertaken after an assessment of its financial situation and the remedies available to it.[122]
A hard look at the records now impels the reconsideration of the July 22, 2008 decision and the resolution of
October 2, 2009.

PAL could not have been motivated by ill will or bad faith when it decided to terminate FASAP's affected
members. On the contrary, good faith could be justly inferred from PAL's conduct before, during and after the
implementation of the retrenchment plan.

Notable in this respect was PALs candor towards FASAP regarding its plan to implement the retrenchment
program. This impression is gathered from PAL's letter dated February 11, 1998 inviting FASAP to a meeting to
discuss the matter, thus:
Roberto D. Anduiza
President
Flight Attendants' and Stewards' Association of the Philippines (FASAP)
xxxx

Mr. Anduiza:

Due to critical business losses and in view of severe financial reverses, Philippine Airlines must undertake drastic
measures to strive at survival. In order to meet maturing obligations amidst the present regional crisis, the
Company will implement major cost-cutting measures in its fleet plan, operating budget, routes and frequencies.
These moves include the closure of stations, downsizing of operations and reducing the workforce through
layoff/retrenchment or retirement.

In this connection, the Company would like to meet with the Flight Attendants' and Stewards' Association of the
Philippines (FASAP) to discuss the implementation of the lay-off/retrenchment or retirement of FASAP-covered
employees. The meeting shall be at the Allied Bank Center (8th Floor-Board Room) on February 12, 1998 at 4:00
p.m.

This letter serves as notice in compliance with Article 283 of the Labor Code, as amended and DOLE Orders
Nos[.] 9 and 10, Series of 1997.

Very truly yours,

(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer[123]
The records also show that the parties met on several occasions[124] to explore cost-cutting measures, including
the implementation of the retrenchment program. PAL likewise manifested that the retrenchment plan was
temporarily shelved while it implemented other measures (like termination of probationary cabin attendant, and
work-rotations).[125] Obviously, the dissent missed this part as it stuck to the belief that PAL did not implement
other cost-cutting measures prior to retrenchment.[126]

Given PAL's dire financial predicament, it becomes understandable that PAL was constrained to finally implement
the retrenchment program when the ALPAP pilots strike crippled a major part of PAL's operations.[127]

In Rivera v. Espiritu,[128] we observed that said strike wrought "serious losses to the financially beleaguered flag
carrier;" that "PAL's financial situation went from bad to worse;" and that "[f]aced with bankruptcy, PAL adopted
a rehabilitation plan and downsized its labor force by more than one-third." Such observations sufficed to show
that retrenchment became a last resort, and was not the rash and impulsive decision that FASAP would make it out
to be now.

As between maintaining the number of its flight crew and PAL's survival, it was reasonable for PAL to choose the
latter alternative. This Court cannot legitimately force PAL as a distressed employer to maintain its manpower
despite its dire financial condition. To be sure, the right of PAL as the employer to reasonable returns on its
investments and to expansion and growth is also enshrined in the 1987 Constitution.[129] Thus, although labor is
entitled to the right to security of tenure, the State will not interfere with the employer's valid exercise of its
management prerogative.
Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation Receiver and Approval of a
Rehabilitation Plan with the SEC on June 19, 1998, before the retrenchment became effective.[130] PAL likewise
manifested that:
xxx The Rehabilitation Plan and Amended Rehabilitation Plan submitted by PAL in pursuance of its corporate
rehabilitation, and which obtained the joint approval of PAL's creditors and the SEC, had as a primary component,
the downsizing of PAL's labor force by at least 5,000, including the 1,400 flight attendants. As conceptualized by a
team of industry experts, the cutting down of operations and the consequent reduction of work force, along with
the restructuring of debts with significant "haircuts" and the capital infusion of Mr. Lucio Tan amounting to
US$200 million, were the key components of PAL's rehabilitation. The Interim Rehabilitation Receiver was
replaced by a Permanent Rehabilitation Receiver on June 7, 1999.[131] (Bold underscoring supplies tor emphasis)
Being under a rehabilitation program, PAL had no choice but to implement the measures contained in the program,
including that of reducing its manpower. Far from being an impulsive decision to defeat its employees' right to
security of tenure, retrenchment resulted from a meticulous plan primarily aimed to resuscitate PAL's operations.

Good faith could also be inferred from. PAL's compliance with the basic requirements under Article 298 of the
Labor Code prior to laying-off its affected employees. Notably, the notice of termination addressed to the
Department of Labor and Employment (DOLE) identified the reasons behind the massive termination, as well as
the measures PAL had undertaken to prevent the situation, to wit:
June 15, 1998

HON. MAXIMO B. LIM

THE REGIONAL DIRECTOR
Department of Labor and Employment
Regional Office No. NCR

Dear Sir:

This is to inform you that Philippine Air Lines, Inc. (PAL) will be implementing a retrenchment program one (1)
month from notice hereof in order to prevent bankruptcy.

PAL is forced to take this action because of continuous losses it has suffered over the years which losses were
aggravated by the PALEA strike in October 1996, peso depreciation, Asian currency crisis, causing a serious drop
in our yield and the collapse of passenger traffic in the region. Specifically, PAL suffered a net loss of P2.18
Billion during the fiscal year 1995-1996, P2.50 Billion during the fiscal year 1996-1997 and P8.08 Billion for the
period starting April 1, 1997 to March 31, 1998.

These uncontrolled heavy losses have left PAL with no recourse but to reduce its fleet and its flight frequencies
both in the domestic and international sectors to ensure its survival.

In an effort to avoid a reduction of personnel, PAL has resorted to other measures, such as freeze on all hiring, no
salary increase for managerial and confidential staff (even for promotions), reduction of salaries of senior
management personnel, freeze on staff movements, pre-termination of temporary staff contracts and negotiations
with foreign investors. But all these measures failed to avert the continued losses.

Finally, all the efforts of PAL to preserve the employment of its personnel were shattered by the illegal strike of its
pilots which has cause irreparable damage to the company's cash flow. Consequently, the company is now no
longer able to meet its maturing obligations and is not about to go into default in all its major loans. It is presently
under threat of receiving a barrage of suits from its creditors who will go after the assets of the corporation.

Under the circumstances, PAL is left with no recourse but to reduce its fleet and its flight frequencies both in the
domestic and international sectors to ensure its survival. Consequently, a reduction of personnel is inevitable.

All affected employees in the attached list will be given the corresponding benefits which they may be entitled to.

Very truly yours,

(Sgd)
JOSE ANTONIO GARCIA
President & Chief Operating Officer[132]
As regards the observation made in the decision of July 22, 2008 to the effect that the recall of the flight crew
members indicated bad faith, we hold to the contrary.

PAL explained how the recall process had materialized, as follows:

During this time, the Company was slowly but steadily recovering. Its finances were improving and additional
planes were flying. Because of the Company's steady recovery, necessity dictated more employees to man and
service the additional planes and flights. Thus, instead of taking in new hires, the Company first offered
employment to employees who were previously retrenched. A recall/rehire plan was initiated.

The recall/rehire plan was a success. A majority of retrenched employees were recalled/rehired and went back to
work including the members of petitioner union. In the process of recall/rehire, many employees who could not be
recalled for various reasons (such as, among others, being unfit for the job or the employee simply did not want to
work for the Company anymore) decided to accept separation benefits and executed, willingly and voluntarily,
valid quitclaims. Those who received separation packages included a good number of the members of the
petitioner union.[133]
Contrary to the statement in the dissent that the implementation of Plan 22 instead of Plan 14 indicated bad faith,
[134] PAL reasonably demonstrated that the recall was devoid of bad faith or of an attempt on its part to
circumvent its affected employees' right to security of tenure. Far from being tainted with bad faith, the recall
signified PAL's reluctance to part with the retrenched employees. Indeed, the prevailing unfavorable conditions
had only compelled it to implement the retrenchment.

The rehiring of previously retrenched employees should not invalidate a retrenchment program, the rehiring being
an exercise of the employer's right to continue its business. Thus, we pointed out in one case:
We likewise cannot sustain petitioners' argument that their dismissal was illegal on the basis that Lapanday did not
actually cease its operation, or that they have rehired some of the dismissed employees and even hired new set of
employees to replace the retrenched employees.

The law acknowledges the right of every business entity to reduce its workforce if such measure is made necessary
or compelled by economic factors that would otherwise endanger its stability or existence. In exercising its right to
retrench employees, the firm may choose to close all, or a part of, its business to avoid further losses or mitigate
expenses. In Caffco International Limited v. Office of the Minister-Ministry of Labor and Employment, the Court
has aptly observed that -
Business enterprises today are faced with the pressures of economic recession, stiff competition, and labor unrest.
Thus, businessmen are always pressured to adopt certain changes and programs in order to enhance their profits
and protect their investments. Such changes may take various forms. Management may even choose to close a
branch, a department, a plant, or a shop.
In the same manner, when Lapanday continued its business operation and eventually hired some of its retrenched
employees and new employees, it was merely exercising its right to continue its business. The fact that Lapanday
chose to continue its business does not automatically make the retrenchment illegal. We reiterate that in
retrenchment, the goal is to prevent impending losses or further business reversals - it therefore does not require
that there is an actual closure of the business. Thus, when the employer satisfactorily proved economic or business
losses with sufficient supporting evidence and have complied with the requirements mandated under the law to
justify retrenchment, as in this case, it cannot be said that the subsequent acts of the employer to rehire the
retrenched employees or to hire new employees constitute bad faith. It could have been different if from the
beginning the retrenchment was illegal and the employer subsequently hired new employees or rehired some of the
previously dismissed employees because that would have constituted bad faith. Consequently, when Lapanday
continued its operation, it was merely exercising its prerogative to streamline its operations, and to rehire or hire
only those who are qualified to replace the services rendered by the retrenched employees in order to effect more
economic and efficient methods of production and to forestall business losses. The rehiring or reemployment of
retrenched employees does not necessarily negate the presence or imminence of losses which prompted Lapanday
to retrench.

In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of labor, the
fundamental law itself guarantees, even during the process of tilting the scales of social justice towards workers
and employees, "the right of enterprises to reasonable returns of investment and to expansion and growth." To hold
otherwise would not only be oppressive and inhuman, but also counter-productive and ultimately subversive of the
nation's thrust towards a resurgence in our economy which would ultimately benefit the majority of our people.
Where appropriate and where conditions are in accord with law and jurisprudence, the Court has authorized valid
reductions in the workforce to forestall business losses, the hemorrhaging of capital, or even to recognize an
obvious reduction in the volume of business which has rendered certain employees redundant.[135]
Consequently, we cannot pass judgment on the motive behind PAL's initiative to implement "Plan 22" instead of
"Plan 14." The prerogative thereon belonged to the management alone due to its being in the best position to assess
its own financial situation and operate its own business. Even the Court has no power to interfere with such
exercise of the prerogative.

PAL used fair and reasonable criteria in selecting the employees to be retrenched pursuant to the CBA

The July 22, 2008 decision agreed with the holding by the CA that PAL was not obligated to consult with FASAP
on the standards to be used in evaluating the performance of its employees. Nonetheless, PAL was found to be
unfair and unreasonable in selecting the employees to be retrenched by doing away with the concept of seniority,
loyalty, and past efficiency by solely relying on the employees' 1997 performance rating; and that the retrenchment
of employees due to "other reasons," without any details or specifications, was not allowed and had no basis in fact
and in law.[136]

PAL contends that it used fair and reasonable criteria in accord with Sections 23, 30 and 112 of the 1995-2000
CBA;[137] that the NLRC's use of the phrase "other reasons" referred to the varied grounds (i.e. excess sick
leaves, previous service of suspension orders, passenger complains, tardiness, etc.) employed in conjunction with
seniority in selecting the employees to be terminated;[138] that the CBA did not require reference to performance
rating of the previous years, but to the use of an efficiency rating for a single year;[139] and that it adopted both
efficiency rating and inverse seniority as criteria in the selection pursuant to Section 112 of the CBA.[140]

PAL's contentions are meritorious.

In selecting the employees to be dismissed, the employer is required to adopt fair and reasonable criteria, taking
into consideration factors like: (a) preferred status; (b) efficiency; and (c) seniority, among others.[141] The
requirement of fair and reasonable criteria is imposed on the employer to preclude the occurrence of arbitrary
selection of employees to be retrenched. Absent any showing of bad faith, the choice of who should be retrenched
must be conceded to the employer for as long as a basis for the retrenchment exists.[142]

We have found arbitrariness in terminating the employee under the guise of a retrenchment program wherein the
employer discarded the criteria it adopted in terminating a particular employee;[143] when the termination
discriminated the employees on account of their union membership without regard to their years of service;[144]
the timing of the retrenchment was made a day before the employee may be regularized;[145] when the employer
disregarded altogether the factor of seniority and choosing to retain the newly hired employees;[146] that
termination only followed the previous retrenchment of two non-regular employees;[147] and when there is no
appraisal or criteria applied in the selection.[148]

On the other hand, we have considered as valid the retrenchment of the employee based on work efficiency,[149]
or poor performance;[150] or the margins of contribution of the consultants to the income of the company;[151] or
absenteeism, or record of disciplinary action, or efficiency and work attitude;[152] or when the employer exerted
efforts to solicit the employees' participation in reviewing the criteria to be used in selecting the workers to be laid
off.[153]

In fine, the Court will only strike down the retrenchment of an employee as capricious, whimsical, arbitrary, and
prejudicial in the absence of a clear-cut and uniform guideline followed by the employer in selecting him or her
from the work pool. Following this standard, PAL validly implemented its retrenchment program.

PAL resorted to both efficiency rating and inverse seniority in selecting the employees to be subject of
termination. As the NLRC keenly pointed out, the "ICCD Masterank 1997 Ratings - Seniority Listing" submitted
by PAL sufficiently established the criteria for the selection of the employees to be laid off. To insist on seniority
as the sole basis for the selection would be unwarranted, it appearing that the applicable CBA did not establish
such limitation. This counters the statement in the dissent that the retrenchment program was based on
unreasonable standards without regard to service, seniority, loyalty and performance.[154]

In this connection, we adopt the following cogent observations by the CA on the matter for being fully in accord
with law and jurisprudence:
FASAP insists that several CBA provisions have been violated by the retrenchment. They are the provisions on
seniority, performance appraisal, reduction in personnel and downgrading and permanent OCARs. Seniority and
performance stand out because these were the main considerations of PAL in selecting workers to be retrenched.
Under the CBA, seniority is defined "to mean a measure of a regular Cabin Attendant's claim in relation to other
regular Cabin Attendants holding similar positions, to preferential consideration whatever the Company exercises
its right to promote to a higher paying position of lay-off of any Cabin Attendant." Seniority, however, is not the
sole determinant of retention. This is clear under Article XIII on performance appraisal of the CBA provisions.

Under the CBA, several factors are likewise taken into consideration like performance and professionalism in
addition to the seniority factor. However, the criteria for performance and professionalism are not indicated in the
CBA but are to be formulated by PAL in consultation with FASAP. Where there is retrenchment, cabin attendants
who fail to attain at least 85% of the established criteria shall be demoted progressively. Domestic cabin
attendants, the occupants of lowest rung of the organizational hierarchy, are to be retrenched once they fail to meet
the required percentage.

We have painstakingly examined the records and We find no indication that these provisions have been grossly
disregarded as to taint the retrenchment with illegality. PAL relied on specific categories of criteria, such as merit
awards, physical appearance, attendance and checkrides, to guide its selection of employees to be removed. We do
not find anything legally objectionable in the adoption of the foregoing norms. On the contrary, these norms are
most relevant to the nature of cabin attendant's work.

However, the contention of FASAP that these criteria required its prior conformity before adoption is not
supported by Section 30, Article VIII of the CBA. Note should be taken that this provision only mandates PAL to
"meet and consult" the Association (FASAP) in the formulation of the Performance and Professionalism Appraisal
System. By the ordinary import of this provision, PAL is only required to confer with FASAP; it is not at all
required to forge an addendum to the CBA, which will concretize the appraisal system as basis for retrenchment or
retention.[155]
To require PAL to further limit its criteria would be inconsistent with jurisprudence and the principle of fairness.
Instead, we hold that for as long as PAL followed a rational criteria defined or set by the CBA and existing laws
and jurisprudence in determining who should be included in the retrenchment program, it sufficiently met the
standards of fairness and reason in its implementation of its retrenchment program.

The retrenched employees signed valid quitclaims

The July 22, 2008 decision struck down as illegal the quitclaims executed by the retrenched employees because of
the mistaken conclusion that the retrenchment had been unlawfully executed.

We reverse.

In EDI Staffbuilders International, Inc. v. National Labor Relations Commission,[156] we laid down the basic
contents of valid and effective quitclaims and waivers, to wit:
In order to prevent disputes on the validity and enforceability of quitclaims and waivers of employees under
Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;

2. The benefits of the employees if possible with the corresponding amounts, which the employees are giving up in
consideration of the fixed compromise amount;

3. A statement that the employer has dearly explained to the employee in English, Filipino, or in the dialect known
to the employees - that by signing the waiver or quitclaim, they are forfeiting or relinquishing their right to receive
the benefits which are due them under the law; and

4. A statement that the employees signed and executed the document voluntarily, and had fully understood the
contents of the document and that their consent was freely given without any threat, violence, duress, intimidation,
or undue influence exerted on their person.[157] (Bold supplied for emphasis)
The release and quitclaim signed by the affected employees substantially satisfied the aforestated requirements.
The consideration was clearly indicated in the document in the English language, including the benefits that the
employees would be relinquishing in exchange for the amounts to be received. There is no question that the
employees who had occupied the position of flight crew knew and understood the English language. Hence, they
fully comprehended the terms used in the release and quitclaim that they signed.

Indeed, not all quitclaims are per se invalid or against public policy. A quitclaim is invalid or contrary to public
policy only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person;
or (2) where the terms of settlement are unconscionable on their face.[158] Based on these standards, we uphold
the release and quitclaims signed by the retrenched employees herein.

WHEREFORE, the Court:

(a) GRANTS the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008 filed by the respondents Philippine Airlines, Inc. and Patria
Chiong;

(b) DENIES the Motion for Reconsideration (Re: The Honorable Court's Resolution dated March 13, 2012) filed
by the petitioner Flight Attendants and Stewards Association of the Philippines;

(c) SETS ASIDE the decision dated July 22, 2008 and resolution dated October 2, 2009; and

(d) AFFIRMS the decision of the Court of Appeals dated August 23, 2006.

No pronouncement on costs of suit.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 207252, January 24, 2018 ]
PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION (PGIEU), PETITIONER, CHEVRON
GEOTHERMAL PHILS. HOLDINGS, INC., RESPONDENT.

DECISION
REYES, JR., J:

This is a Petition for Review on Certiorari[1] pursuant to Rule 45 of the Rules of Court, as amended, seeking to
reverse and set aside the Decision[2] dated November 5, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No.
115796, dismissing the Petition for Review entitled "Philippine Geothermal, Inc. Employees Union (PGIEU) vs.
Chevron Geothermal Phils. Holdings, Inc.'' as well as the Resolution[3] dated May 17, 2013 denying Philippine
Geothermal, Inc. Employees Union's (petitioner) Motion[4] for Reconsideration dated November 27, 2012.

The Facts

Petitioner is a legitimate labor organization and the certified bargaining agent of the rank-and-file employees of
Chevron Geothermal Phils. Holdings, Inc. (respondent).[5]

On July 31, 2008, the petitioner and respondent formally executed a Collective Bargaining Agreement (CBA)
which was made effective for the period from November 1, 2007 until October 31, 2012. Under Article VII,
Section 1 thereof, there is a stipulation governing salary increases of the respondent's rank-and-file employees, as
follows:

Section 1. WAGE INCREASE

The COMPANY will grant the following:

- Effective Nov. 1, 2007, P260,000.00 - lump sum payment for the 1 st year of this agreement
(taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary in the amount of
P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary in the amount of
P1,500.00.[6]

In implementing the foregoing provision, the parties agreed on the following guidelines appended as Annex D of
said CBA, viz.:

Employment Status P260K P1500 P1500

(Nov. 1, (Nov. 1,
  Lump Sum
2008) 2009)
Regularized on or before April 30, 2008 / / /
Regularized between May 1, 2008 and
X / /
October 31, 2008
Regularized on or before April 30, 2009 X / /
Regularized between May 1, 2009 and
X X /
October 31, 2009
Regularized on or before April 30, 2010 X X /

On October 6, 2009, a letter dated September 20, 2009 was sent by the petitioner's President to respondent
expressing, on behalf of its members, the concern that the aforesaid CBA provision and implementing rules were
not being implemented properly pursuant to the guidelines and that, if not addressed, might result to a salary
distortion among union members.[7]

On even date, respondent responded by letter denying any occurrence of salary distortion among union members
and reiterating its remuneration philosophy of having "similar values for similar jobs", which means that
employees in similarly-valued jobs would have similar salary rates. It explained that to attain such objective, it
made annual reviews and necessary adjustments of the employees' salaries and hiring rates based on the computed
values for each job.[8]

Finding the explanation not satisfactory, petitioner, with respondent's approval, referred the subject dispute to the
Voluntary Arbitration of the National Conciliation and Mediation Board (NCMB). It averred that respondent
breached their CBA provision on worker's wage increase because it granted salary increase even to probationary
employees in contravention of the express mandate of that particular CBA article and implementing guidelines that
salary increases were to be given only to regular employees.[9]

To cite an example, petitioner alleged that respondent granted salary increases of One Thousand Five Hundred
Pesos (P1,500.00) each to then probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales
(Cordovales) at a time when they have not yet attained regular status. They (Lanao and Cordovales) were
regularized only on January 1, 2010 and April 16, 2010, respectively, yet they were given salary increase for
November 1, 2008. As a consequence of their accelerated increases, wages of said probationary workers equated
the wage rates of the regular employees, thereby obliterating the wage rates distinction based on merit, skills and
length of service. Therefore, the petitioner insisted that its members' salaries must necessarily be increased so as to
maintain the higher strata of their salaries from those of the probationary employees who were given the said
premature salary increases.[10]

On the other hand, respondent maintained that it did not commit any violation of that CBA provision and its
implementing guidelines; in fact, it complied therewith. It reasoned that the questioned increases given to Lanao
and Cordovales' salaries were granted, not during their probationary employment, but after they were already
regularized. It further asseverated that there was actually no salary distortion in this case since the disparity or
difference of salaries between Lanao and Cordovales with that of the other company employees were merely a
result of their being hired on different dates, regularization at different occasions, and differences in their hiring
rates at the time of their employment.[11]

After due proceedings, the Voluntary Arbitrator rendered a Decision [12] dated August 16, 2010 in favor of
respondent, ruling that petitioner failed to duly substantiate its allegations that the former prematurely gave salary
increases to its probationary employees and that there was a resultant distortion in the salary scale of its regular
employees.[13]

Thereafter, a Petition[14] for Review under Rule 65 was filed with the CA on September 22, 2010.

On November 5, 2012, the CA rendered its Decision. [15] It dismissed the petition for review and sustained the
Voluntary Arbitrator's decision. The pertinent and dispositive portion of the assailed decision reads as follows:

In fine, We hold that the Voluntary Arbitrator of NCMB did not commit grave abuse of discretion
in dismissing petitioner union's complaint against respondent company. Settled is the rule that
factual findings of labor officials who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only respect but even finality, and they are binding when
supported by substantial evidence. In this case, these findings are supported by competent and
convincing evidence.

WHEREFORE, premises considered, the instant petition is DISMISSED. The Decision dated 16
August 2010 of the Voluntary Arbitrator of the NCMB Regional Branch No. IV is SUSTAINED.

SO ORDERED.[16]

On November 28, 2012, petitioner filed its Motion[17] for Reconsideration. This was, however, denied by the CA in
its Resolution[18] dated May 17, 2013.

Hence, this petition.

The Issues

I.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT RESPONDENT DID

NOT VIOLATE THE CBA IN GRANTING WAGE INCREASE OF P1,500.00 TO LANAO AND
CORDOVALES AT A TIME WHEN THEY HAD NOT YET ATTAINED REGULAR STATUS
 II.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT THE GRANT OF

WAGE INCREASE TO LANAO AND CORDOVALES IS A VALID EXERCISE OF
MANAGEMENT PREROGATIVES BY RESPONDENT

III.

WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT TO LIKEWISE

INCREASE THE RATES OF OTHER REGULAR EMPLOYEES IN ORDER TO MAINTAIN
THE DIFFERENCE BETWEEN THEIR RATES AND THOSE OF THE EMPLOYEES WHO
WERE ALLEGEDLY GRANTED PREMATURE WAGE INCREASES

Ruling of the Court

The petition is devoid of merit.

Petitioner and respondent entered into an agreement whereby employees will be granted a wage increase
depending on the date of their regularization, viz.:

Employment Status P260K P1500 P1500

(Nov. 1, (Nov. 1,
  Lump Sum
2008) 2009)
Regularized on or before April 30, 2008 / / /
Regularized between May 1, 2008 and
X / /
October 31, 2008
Regularized on or before April 30, 2009 X / /
Regularized between May 1, 2009 and
X X /
October 31, 2009
Regularized on or before April 30, 2010 X X /

Petitioner claims that Lanao and Cordovales having been regularized only on January 1, 2010 and April 16, 2010,
respectively, are not covered by the P260,000.00 lump sum and the initial P1500.00 wage increase effective on
Nov. 1, 2008. It appears, however, that based on the actual pay slips of union members, Lanao and Cordovales
both received wage increase in the amount of P1500.00 effective Nov. 1, 2008 and that such increase was
immediately granted to them at the time of their hiring which resulted to the increase of their salaries to
P36,500.00 per month.

It is further stressed by petitioner that the increase granted by respondent to Lanao and Cordovales are violative of
the terms of the CBA, specifically Section 1, Article VII and Annex D, for the reason that these employees have
not yet attained "Regular" status at the time they were granted a wage increase and thus resulting to a salary/wage
distortion.

Respondent, for its part, claims that the alleged "increase" in the wages of these employees was not due to
application of the provisions of Article VII and Annex D of the CBA, rather it was brought about by the increase
in the hiring rates at the time these employees were hired. As a matter of fact, a careful scrutiny of the records
reveals that respondent have complied with the terms agreed upon in the CBA.

Notably, respondent's reply to the petitioner's letter accusing them of violation of the terms of the CBA and
holding them responsible for the alleged wage distortion, clarified the ambiguity with regard to the hiring
rates, viz.:

As for the perceived salary distortion among Union members resulting from the non-
implementation of the guidelines on Article VH-Salaries and Allowances, Section 1 - Wage
Increase, Annex D of the CBA 2007-2012, we would like to reiterate our discussion during the
recent NLMC meeting of September 16, on Chevron's remuneration philosophy of having "similar
value for similar jobs" which simply states that employees in similarly valued jobs will have similar
salary rates. Salaries and hiring rates are reviewed annually and adjusted as necessary based on the
 computed values of each job, an employee's tenure or seniority in his/her current position will not
influence the value of the job.[19] (Underlining Ours)

Clearly then, the increase in the salaries of Lanao and Cordovales was not pursuant to the wage increase agreed
upon in CBA 2007-2012 rather it was the result of the increase in hiring rates at the time they were hired.

To illustrate, in its Reply,[20] respondent discussed the difference in the hiring rates of employees Lanao and Robert
Gawat, viz.:

Mr. Robert Gawat was regularized on April 16, 2007 having been hired on October 16, 2007 while
Mr. Lanao as shown in the Company's position paper was regularized on January 1, 2010, having
been hired only on July 1, 2009. At the time of Mr. Gawat's hiring, the hiring rate for Pay
Grade 12 was P31,800.00. On April 16, 2007, Mr. Gawat was given a CBA salary increase under
the 2002-2007 CBA of P1,700.00 per month which increased his pay to P33,500.00 per month. He
received another CBA salary increase of P1,500.00 under the 2007-2012 CBA on November 1,
2008, thus increasing his pay to P35,000.00. On November 1, 2009, he received another salary
increase of P1,500.00 under the 2007-2012 CBA which further increased his pay to P36,500.00 per
month until the present.

On the other hand, when Mr. Lanao was hired on July 9, 2009, the hiring rate at the time for
employees falling under Pay Grade 12 was already P35,000.00, having been adjusted by the
company in accordance with market and industry practice. On January 1, 2010, Mr. Lanao was
regularized and as dictated by the CBA, he was given a CBA salary increase of P1,500.00 per
month effective January 1, 2010 which increased his monthly pay at the present to P36,500.00.
[21]
 (Emphasis and underlining Ours)

As shown above, the respondent never violated the CBA and in fact, complied with it to the letter. Clearly, the
petitioner only used the respondent's alleged violation of the CBA when its true gripe is related to the respondent's
prerogative of setting the hiring rate of the employees over which the petitioner neither has the personality nor the
privilege to meddle or interfere with.[22]

The second and third issue, being interrelated, shall be discussed jointly.

Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization Act, amending among others, Article
124 of the Labor Code) on June 9, 1989, the term "Wage Distortion" was explicitly defined as "a situation where
an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative
differences in wage or salary rate between and among employee groups an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of service or other logical bases
of differentiation."[23]

Contrary to petitioner's claim of alleged "wage distortion", Article 124 of the Labor Code of the Philippines only
cover wage adjustments and increases due to a prescribed law or wage order, viz.:

Article 124. Standards/Criteria for Minimum Wage Fixing.

xxxx

Where the application of any prescribed wage increase by virtue of a law or Wage Order issued
by any Regional Board results in distortions of the wage structure within an establishment, the
employer and union shall negotiate to correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure under their collective bargaining
agreement and, if it remains unresolved, through voluntary arbitration.[24] (Emphasis Ours)

Prubankers Association v. Prudential Bank and Trust Company[25] laid down the four elements of wage distortion,
to wit: (1) an existing hierarchy of positions with corresponding salary rates; (2) a significant change in the salary
rate of a lower pay class without a concomitant increase in the salary rate of a higher one; (3) the elimination of the
distinction between the two levels; and (4) the existence of the distortion in the same region of the country.

The apparent increase in Lanao and Cordovales' salaries as compared to the other company workers who also have
the same salary/pay grade with them should not be interpreted to mean that they were given a premature increase
for November 1, 2008, thus resulting to a wage distortion. The alleged increase in their salaries was not a result of
the erroneous application of Article VII and Annex D of the CBA, rather, it was because when they were hired by
respondent in 2009, when the hiring rates were relatively higher as compared to those of the previous years.
Verily, the setting and implementation of such various engagement rates were purely an exercise of the
respondent's business prerogative in order to attract or lure the best possible applicants in the market and which
We will not interfere with, absent any showing that it was exercised in bad faith.

Management prerogative gives an employer freedom to regulate according to their discretion and best judgment,
all aspects of employment including work assignment, working methods, the processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of
workers.[26] This right is tempered only by these limitations: that it must be exercised in good faith and with due
regard to the rights of the employees.[27]

Petitioner claims that the wages of other employees should also be increased in order to maintain the difference
between their salaries and those of employees granted a "premature" wage increase. Such a situation may be
remedied if it falls under the concept of a wage distortion as defined by Article 124 of the Labor Code of the
Philippines. However, as already discussed, there is no wage distortion in the case at bench. Not all increases in
salary which obliterate the salary differences of certain employees should be perceived as wage distortion.

In the case of Bankard Employees Union-Workers Alliance Trade Unions v. National Labor Relations
Commission,[28] the Court discussed the possible implication of an expanded interpretation of the concept of Wage
Distortion, to wit:

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary
and unilateral increases by the employer in fixing hiring rates which is inherently a business
judgment prerogative, then the hands of the employer would be completely tied even in cases where
an increase in wages of a particular group is justified due to a re-evaluation of the high productivity
of a particular group, or as in the present case, the need to increase the competitiveness of Bankard's
hiring rate. An employer would be discouraged from adjusting the salary rates of a particular group
of employees for fear that it would result to a demand by all employees for a similar increase,
especially if the financial conditions the business cannot address an across-the-board increase.[29]

The Court's ruling in the case of Bankard seek to address and resolve conflicting opinions regarding the true
concept of a wage distortion like the one presented in this case whereby a legitimate exercise by an employer of its
management prerogative is being taken against it in the guise of an allegation that it is circumventing labor laws.
An employer should not be held hostage by the whims and caprices of its employees especially when it has
faithfully complied with and executed the terms of the CBA.

It is the prerogative of management to regulate, according to its discretion and judgment all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the
judgment of the employer in the conduct of its business. Such management prerogative may be availed of without
fear of any liability so long as it is exercised in good faith for the advancement of the employer's interest and not
for the purpose of defeating or circumventing the rights of the employees under special laws or agreements and are
not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite.[30]

On a final note, the Court has ruled time and again that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by
the courts when supported by substantial evidence and affirmed by the CA, in the exercise of its expanded
jurisdiction to review findings of the National Labor Relations Commission.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated November 5, 2012 of the
Court of Appeals in CA-G.R. SP No. 115796 is hereby AFFIRMED.

SO ORDERED.
 FIRST DIVISION
[ G.R. No. 194765, April 23, 2018 ]
MARSMAN & COMPANY, INC., PETITIONER, V. RODIL C. STA. RITA, RESPONDENT.

DECISION
LEONARDO-DE CASTRO,[*] J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Marsman &
Company, Inc. (Marsman), now Metro Alliance Holdings & Equities Corporation, seeking the annulment and
reversal of the Decision [1] dated June 25, 2010 and the Resolution[2] dated December 9, 2010 of the Court of
Appeals in CA-G.R. SP No. 106516. The appellate court's issuances reversed the Decision [3] dated July 31, 2008 of
the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No.
032892-02) dismissing respondent Rodil C. Sta. Rita's (Sta. Rita's) complaint and the Resolution [4] denying his
motion for reconsideration. The Court of Appeals instead found Marsman guilty of illegal dismissal and ordered
the company to pay for backwages, separation pay, moral damages, exemplary damages and attorney's fees.
Marsman, a domestic corporation, was formerly engaged in the business of distribution and sale of pharmaceutical
and consumer products for different manufacturers within the country. [5] Marsman purchased Metro Drug
Distribution, Inc. (Metro Drug), now Consumer Products Distribution Services, Inc. (CPDSI), which later became
its business successor-in-interest. The business transition from Marsman to CPDSI generated confusion as to the
actual employer of Sta. Rita at the time of his dismissal.

Marsman temporarily hired Sta. Rita on November 16, 1993 as a warehouse helper with a contract that was set to
expire on April 16, 1994, and paid him a monthly wage of P2,577.00. After the contract expired, Marsman rehired
Sta. Rita as a warehouseman and placed him on probationary status on April 18, 1994 with a monthly salary of
P3,166.00.[6] Marsman then confirmed Sta. Rita's status as a regular employee on September 18, 1994 and adjusted
his monthly wage to P3,796.00. Later, Sta. Rita joined Marsman Employees Union (MEU), the recognized sole
and exclusive bargaining representative of Marsman's employees.[7]

Marsman administered Sta. Rita's warehouse assignments. Initially, Marsman assigned Sta. Rita to work in its
GMA warehouse. Marsman then transferred Sta. Rita to Warehouses C and E of Kraft General Foods, Inc. on
September 5, 1995. Thereafter, Marsman reassigned Sta. Rita to Marsman Consumer Product Division Warehouse
D in ACSIE, Parañaque.[8]

Sometime in July 1995, Marsman purchased Metro Drug, a company that was also engaged in the distribution and
sale of pharmaceutical and consumer products, from Metro Pacific, Inc. The similarity in Marsman's and Metro
Drug's business led to the integration of their employees which was formalized in a Memorandum of Agreement,
[9]
 dated June 1996, which provides:

MARSMAN & COMPANY, INC.

City of Makati

MEMORANDUM OF AGREEMENT

MARSMAN AND CO., INC. hereinafter referred to as the MANAGEMENT, represented by MR.
JOVEN D. REYES, Group President and Chief Executive Officer and the MARSMAN
EMPLOYEES UNION-PSMM/DFA as the Union, represented hereinafter by MR. BONIFACIO
M. PANALIGAN, PSMM President,

WITNESSETH, THAT:

WHEREAS, Marsman Employees Union-PSMM/DFA is the recognized sole and exclusive

bargaining representative of Marsman & Co., Inc. regular employees in the rank and file and non-
managerial category except those excluded in Article I, Section 2 of their existing CBA signed last
June 1995;

WHEREAS, Marsman & Co. Inc. bought Metro Drug Distribution, Inc. from Metro Pacific Inc. last
July, 1995;
 WHEREAS, the Management of Marsman & Co., Inc. decided to limit Marsman & Co.
Inc.'s, functions to those of a holding company and run Metro Drug Distribution, Inc. as the
main operating company;

WHEREAS, in view of this, Management decided to integrate the employees of Marsman &
Co. Inc. and Metro Drug Distribution, Inc. effective July 1, 1996 under the Metro Drug legal
entity;

THEREFORE, Management and Marsman Employees Union PSMM/DFA agree: .

1. That, the Union acknowledges Management's decision to transfer all employees of

Marsman, including members of MEU-PSMM/DFA, to Metro Drug Distribution, Inc.

2. That, the Management recognizes the Marsman Employees Union-PSMM/DFA as the exclusive
bargaining representative of all the rank and file employees transferred from Marsman & Co. Inc. to
Metro Drug Distribution, Inc. and the other employees who may join the Union later.

3. That, the name of Marsman Employees Union-PSMM/DFA is retained.

4. That, the tenure or service years of all employees transferred shall be recognized and carried over
and will be included in the computation/consideration of their retirement and other benefits.

5. That, the provisions of the existing Collective Bargaining Agreement signed last June 1995 and
the Memorandum of Agreement signed also last June 1995 will be respected, honored and continue
to be implemented until expiry or until superseded as per item 8 below.

6. That, there will be no diminution of present salaries and benefits being enjoyed even after the
transfer.

7. That, upon transfer of MCI employees to Metro Drug Distribution, Inc. all employees covered by
the CBA or otherwise shall enjoy the same terms and conditions of employment prior to transfer
and shall continue to enjoy the same including company practice until a new CBA is concluded.

8. That, all of the above rights and obligations of the parties pertaining to the recognition of the
union as exclusive bargaining representative, the effectivity, coverage and validity of the CBA and
all other issues relative to the representation of the former Marsman employees are subject to and
be superseded by the result of a Certification Election between Marsman Employees Union-
PSMM/DFA and Metro Drug Corp. Employees Association-FFW in 1996 or at a date to be agreed
upon by MEU and MDCEA as coordinated by the DOLE, and by any agreement that may be
entered into by management and the winner in said certification election.

9. That, upon transfer, the Management agrees to address all pending/unresolved grievances and
issues lodged by Marsman Employees Union-PSMM/DFA.

10. That, also upon transfer, the Management agrees to continue negotiation of Truckers and
Forwarders issue as stipulated in the MOA signed last June, 1995.

11. That, Management and Union may continue to negotiate/discuss other concerns/issues with
regard to the transfer and integration.

IN WITNESS WHEREOF, the parties have caused this document to be executed by their
authorized representatives this ______day of June, 1996 at Makati City. [Emphases supplied.]

MARSMAN & COMPANY, INC.

 
(signed)  
JOVEN D. REYES
 
President & Chief Exec. Officer
   
MARSMAN EMPLOYEES UNION-PSSM/DFA
(signed)    
BONIFACIO M. PANALIGAN
 
President  
   
Witnessed by:
(signed)
JOSE MILO M. GILLESANIA
LUISITO N. REYES
1st Vice-President
Vice-President
MEU-PSMM/DFA
Finance & Administration
   
Attested by:
(signed)
ABNER M. PADILLA
Conciliator-Mediator
NCMB, DOLE
Concomitant to the integration of employees is the transfer of all office, sales and warehouse personnel of
Marsman to Metro Drug and the latter's assumption of obligation with regard to the affected employees' labor
contracts and Collective Bargaining Agreement. The integration and transfer of employees ensued out of the
transitions of Marsman and CPDSI into, respectively, a holding company and an operating company. Thereafter,
on November 7, 1997, Metro Drug amended its Articles of Incorporation by changing its name to "Consumer
Products Distribution Services, Inc." (CPDSI) which was approved by the Securities and Exchange Commission.
[10]

In the meantime, on an unspecified date, CPDSI contracted its logistic services to EAC Distributors (EAC).
CPDSI and EAC agreed that CPDSI would provide warehousemen to EAC's tobacco business which operated in
EAC-Libis Warehouse. A letter issued by Marsman confirmed Sta. Rita's appointment as one of the
warehousemen for EAC-Libis Warehouse, effective October 13, 1997, which also stated that the assignment was a
"transfer that is part of our cross-training program."[11]

Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the lease contract between EAC and
Valiant Distribution (Valiant), owner of the EAC-Libis Warehouse. Hence, EAC's operations were affected when
Valiant decided to terminate their contract of lease on January 31, 2000. In response to the cessation of the
contract of lease, EAC transferred their stocks into their own warehouse and decided to operate the business by
themselves, thereby ending their logistic service agreement with CPDSI.[12]

This sequence of events left CPDSI with no other option but to terminate the employment of those assigned to
EAC-Libis Warehouse, including Sta. Rita. A letter [13] dated January 14, 2000, issued by Michael Leo T. Luna,
CPDSI's Vice-President and General Manager, notified Sta. Rita that his services would be terminated on February
28, 2000 due to redundancy. CPDSI rationalised that they could no longer accommodate Sta. Rita to another work
or position. CPDSI however guaranteed Sta. Rita's separation pay and other employment benefits. The letter is
reproduced in full as follows:

a MARSMAN company
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
January 14, 2000

MR. RODIL STA. RITA

Warehouse Supervisor
EAC Libis Operation
Libis, Quezon City

Dear Rodil,

As we have earlier informed you, EAC Distributors, Inc. has advised us that their Lessor, Valiant
Distribution has terminated their lease contract effective January 31, 2000.

Accordingly, we were informed by EAC Distributors, Inc., that they will no longer need our
services effective on the same date. As a result thereof, your position as warehouseman will become
redundant thereafter.
 We have exerted efforts to find other work for you to do or other positions where you could be
accommodated. Unfortunately, our efforts proved futile.

In view thereof, we regret to inform you that your services will be terminated effective upon the
close of business hours on the 28th of February, 2000.

You will be paid separation pay and other employment benefits in accordance with the company
policies and the law, the details of which shall be discussed with you by your immediate superior.

In order to cushion the impact of your separation from the service and to give you ample time to
look for other employment elsewhere, you need not report for work from the 18th of January up the
end of February, 2000, although you will remain in the payroll of the company and will be paid the
salary corresponding to this period.

We thank you for your contribution to this organization and we wish you well in your future
endeavors.

Sincerely,

(signed)
  MICHAEL LEO T. LUNA
Vice President & General
Manager[14]

CPDSI thereafter reported the matter of redundancy to the Department of Labor and Employment in a
letter[15] dated January 17, 2000, conveying therein Sta. Rita's impending termination. The letter stated:

The Regional Director

Department of Labor & Employment
National Capital Region
Palacio De Gobernador
Intramuros, Manila

Dear Sir:

In compliance with the provisions of Article 283 of the Labor Code, as amended, Consumer
Products Distribution Services, Inc. (CPDSI) "Company" hereby gives notice that our company is
implementing a comprehensive streamlining program affecting levels of employment with the
objective of further reducing operating expenses and to cope with the current economic difficulties.
The employment of the employees occupying such positions and whose names are enumerated in
the attachment list of (Annex "A") will be terminated.

In accordance with law, the above enumerated employees will be paid their separation pay in due
course. Individual notices of the termination of employment of said employees have already been
served upon them.

Very truly yours,

CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.

BY:
(signed)

MICHAEL LEO T. LUNA

Vice President and General Manager

xxxx

LIST OF TERMINATED WORKERS

Names of Workers
  Occupation/Skills Salary
Terminated
RION L. V. RUZGAL xxx WHSE SUPERVISOR P16,000.00
GLENN V. VISTO xxx WHSE SUPERVISOR P15,600.00
CONRADO C.
xxx SR. WHSEMAN P7,200.00[16]
TIUSINGCO, JR.
LOLITA D. JAMERO xxx WHSE SUPERVISOR P14,500.00
ARTURO G. CASTRO,
xxx WHSEMAN P7,616.00
JR.
RODIL C. STA. RITA xxx WHSEMAN P7,746.00
EMILIO MADRIAGA xxx WHSEMAN P7,616.00

Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital Region-Quezon City against Marsman on
January 25, 2000 for illegal dismissal with damages in the form of moral, exemplary, and actual damages and
attorney's fees. Sta. Rita alleged that his dismissal was without just or authorized cause and without compliance
with procedural due process. His affidavit-complaint reads:

RODIL C. STA RITA, of legal age, single, Filipino citizen, with residence and postal address at
1128 R. Papa Street, Bo. Obrero, Tondo, Manila being under oath hereby deposes and says:

1. He was employed with Marsman on November 16, 1993, with offices and address at Manalac
Avenue, Taguig, Metro Manila, as warehouseman with a basic salary P3,790.00 more (sic);
2. As a regular employee, his salary was increased by P1,600.00 in 1995; in 1996 was increased by
P1,300.00; in 1997 was increased by P1,050.00, making a total of P7,740.00 up to his separation
from employment on January 18, 2000 x x x;
3. He cannot fathom to know why he was terminated from employment, save the better (sic) of Mr.
Michael Leo T. Luna, Vice President and General Manager of Marsman Company (Consumer
Products Distribution Services, Inc.) on January 14, 2000;
4. His termination from employment is in diametric opposition to Art VI. Sec. 3(d) of the CBA and
to Art. 282 of the Labor Code, as amended, i.e., he was no[t] given the 30-day period prior to his
termination, making his dismissal as illegal per se;
5. In the absence of any derogatory record of Mr. Rodil Sta. Rita for six (6) years, he is entitled to
moral and exemplary damages, in addition to back wages and separation pay, short of
reinstatement and without loss of seniority rights.[17]
Marsman filed a Motion to Dismiss[18] on March 16, 2000 on the premise that the Labor Arbiter had no jurisdiction
over the complaint for illegal dismissal because Marsman is not Sta. Rita's employer. Marsman averred that the
Memorandum of Agreement effectively transferred Sta. Rita's employment from Marsman and Company, Inc. to
CPDSI. Said transfer was further verified by Sta. Rita's: 1) continued work in CPDSI's premises; 2) adherence to
CPDSI's rules and regulations; and 3) receipt of salaries from CPDSI. Moreover, Marsman asserted that CPDSI
terminated Sta. Rita.

Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his Decision [19] on April 10, 2002 finding Marsman
guilty of illegal dismissal, thus:

This Office finds in favor of the complainant.

Article 167 of the Labor Code defines employer, to wit:

"Employer means any person, natural or juridical, employing the services of the
employee."

Likewise, Article 212 of the Labor Code defines employer in this wise:

"Employer includes any person acting in the interest of an employer directly or

indirectly."

Consumer did not perform any act, thru its responsible officer, to show that it had employed the
complainant. Nevertheless, Marsman acted in the interest of Consumer because "sometime in 1996,
for purposes of efficiency and economy Marsman integrated its distribution business with the
business operations of Consumer Products Distribution Services, Inc. xxx" and "in line with the
integration of the distribution businesses of Marsman and CPDSI, the employment of all Marsman
office, sales, and warehouse personnel was transferred to CPDSI. x x x"
 Thusly, Marsman qualifies as the employer of the complainant under the aforequoted provisions of
the Labor Code.

The MOA was concluded between Marsman and. Co. Inc. and Marsman Employees Union-
PSMM/DFA. A perusal of its contents show that matters, concerning terms and conditions of
employment, were contracted and concluded.

On the contrary, the MOA is a piece of evidence that Marsman is the employer of complainant
because it is solely the employer who can negotiate and conclude the terms and conditions of
employment of the workers.

Ironically, the MOA does not establish the contention that Consumer is the employer of the
complainant.

Rule XVI of Department Order No. 9, Series of 1997, which took effect on June 21, 1997, requires
among others, the ratification by the majority of all workers in the Collective Bargaining Unit of the
Agreement. The non-compliance of the requirement, under said Department Order, renders the
MOA ineffective.

Further, it may be concluded that the Consumer is an agent of respondent Marsman, because the
former does "[t]he employment of all Marsman office sales, and warehouse personnel x x x."

Nevertheless, the employer of the complainant is Marsman and Company, Inc.

In illegal dismissal, the burden, to establish the just cause of termination, rest on the employer. The
records of this case [are] devoid of the existence of such cause. Indeed, the respondent Marsman
and Company, Inc. failed to show the cause of complainant's dismissal, warranting the twin
remedies of reinstatement and backwages. However, insofar as reinstatement is concerned, this
remedy appears to be impractical because, as gleaned from the position paper of [Sta. Rita], there is
uncertainty in the availability of assignment for the complainant. Instead, the payment of separation
pay equivalent to one half month for every year or a fraction of at least six (6) months be
considered as one year, would be equitable.

The rest of the claims are dismissed for lack of merit.

WHEREFORE, premises considered, the complainant is herein declared to have been illegally
dismissed. Marsman and Company, Inc. is directed to pay the complainant backwages and
separation pay on the total amount of P152,757.55.[20]

Marsman appealed the foregoing Decision arguing that the Labor Arbiter had no jurisdiction over the complaint
because an employer-employee relationship did not exist between the party-litigants at the time of Sta. Rita's
termination. Furthermore, Marsman stated that the ratification requirement under Rule XVI of Department Order
No. 9, Series of 1997[21] applied only to Collective Bargaining Agreements, and the Memorandum of Agreement
was certainly not a replacement for the Collective Bargaining Agreement which Marsman and MEU entered into
in the immediately succeeding year prior to the ratification of the Memorandum of Agreement. Marsman also
maintained that it had a personality that was separate and distinct from CPDSI thus it may not be made liable to
answer for acts or liabilities of CPDSI and vice-versa. Finally, Marsman claimed that Sta. Rita was validly
declared redundant when CPDSI's logistics agreement with EAC was not renewed.[22]

Sta. Rita filed his own appeal, contesting the failure of the Labor Arbiter to award him moral and exemplary
damages, and attorney's fees.

The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter Demaisip's Decision and found that there
was no employer-employee relationship between Marsman and Sta. Rita. The NLRC held:

Applying the four-fold test in determining the existence of employer-employee relationship fails to
convince Us that complainant is respondent Marsman's employee.

On selection and engagement, by complainant's transfer to CPDSI, he had become the employee of
CPDSI. It should be emphasized that respondent Marsman and CPDSI are corporate entities which
are separate and distinct from one another.
 On payment of wages, it was CPDSI which paid complainant's salaries and benefits. Complainant
never claimed that it was still respondent Marsman which paid his salaries.

On the power of dismissal, after EAC's lease contract expired deciding to transfer its stock to its
own warehouse and handle its warehousing operations, complainant was left without any work.
CPDSI decided to terminate his services by issuing him a termination notice on January 14, 2000.

On the employer's power to control the employee with respect to the means and methods by which
his work is to be accomplished, complainant was under the control and supervision of CPDSI
concomitant to the logistic services which respondent Marsman had integrated to that of CPDSI.
CPDSI saw to it that its obligation to provide logistic services to its client EAC is carried out with
complainant working as warehouseman in the warehouse rented by EAC. The power of control is
the most decisive factor in determining the existence of an employer-employee relationship. x x x.

Having determined that employer-employee relationship does not exist between complainant and
respondent Marsman, complainant has no cause of action for illegal dismissal against the latter.
There is no necessity to resolve the [other] issues.

WHEREFORE, premises considered, the Decision of the Labor Arbiter is VACATED and SET
ASIDE. A NEW decision is entered dismissing the complaint for lack of employer-employee
relationship.[23]

In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita's motion for reconsideration because his
motion "raised no new matters of substance which would warrant reconsideration of the Decision of [the]
Commission."[24]

Sta. Rita filed before the Court of Appeals a Petition for Certiorari[25] imputing grave abuse of discretion on the
part of the NLRC for 1) finding a lack of employer-employee relationship between the party-litigants; and 2) not
awarding backwages, separation pay, damages and attorney's fees.

The Court of Appeals promulgated its Decision on June 25, 2010, reversing the NLRC Decision. The Court of
Appeals held that Marsman was Sta. Rita's employer because Sta. Rita was allegedly not part of the integration of
employees between Marsman and CPDSI. The Court gave credence to Sta. Rita's contention that he purposely
refused to sign the Memorandum of Agreement because such indicated his willingness to be transferred to CPDSI.
In addition, the appellate court considered Sta. Rita's assignment to the EAC-Libis Warehouse as part of
Marsman's cross-training program, concluding that only Sta. Rita's work assignment was transferred and not his
employment.

The appellate court also found no merit in the NLRC's contention that CPDSI paid Sta. Rita's salaries and that it
exercised control over the means and methods by which Sta. Rita performed his tasks. On the contrary, the Court
of Appeals observed that Sta. Rita filed his applications for leave of absence with Marsman. Finally, the Court of
Appeals adjudged that CPDSI, on the assumption that it had the authority to dismiss Sta. Rita, did not comply with
the requirements for the valid implementation of the redundancy program.

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the instant petition for certiorari is GRANTED. The assailed Decision and

Resolution of the public respondent National Labor Relations Commission
are ANNULLED and SET ASIDE. Judgment is rendered declaring petitioner Rodil C. [Sta. Rita's]
dismissal from work as illegal and accordingly, private respondent Marsman and Company, Inc. is
ordered to pay said [respondent] the following:

1. backwages computed from 18 January 2000 up to the finality of this Decision;

2. separation pay in lieu of reinstatement computed at the rate of one (1) month pay for every year
of service from 16 November 1993 up to the finality of this Decision;
3. the amount of P15,000.00 as moral damages;
4. the amount of P15,000.00 as exemplary damages; and
5. the amount equivalent to 10% of his total monetary award, as and for attorney's fees.
Let this case be REMANDED to the Labor Arbiter for the purpose of computing, with reasonable
dispatch, petitioner's monetary awards as above discussed.[26]

Hence, Marsman lodged the petition before us raising the lone issue:
 WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED
IN DECIDING A QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH THE
LAW, APPLICABLE DECISIONS OF THIS HONORABLE COURT AND EVIDENCE ON
RECORD WHEN IT ANNULLED AND SET ASIDE THE NLRC'S DECISION AND
RESOLUTION EFFECTIVELY RULING THAT [STA. RITA] WAS ILLEGALLY DISMISSED
FROM SERVICE WHEN THE LATTER COULD NOT HAVE BEEN DISMISSED AT ALL ON
ACCOUNT OF THE ABSENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
SAID [STA. RITA] AND THE COMPANY[27]

Simply stated, the issue to be resolved is whether or not an employer-employee relationship existed between
Marsman and Sta. Rita at the time of Sta. Rita's dismissal.

This petition is impressed with merit.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of
fact. As a rule, this Court is not a trier of facts and this applies with greater force in labor cases. [28] This petition
however falls under the exception because of variance in the factual findings of the Labor Arbiter, the NLRC and
the Court of Appeals. Indeed, on occasion, the Court is constrained to wade into factual matters when there is
insufficient or insubstantial evidence on record to support those factual findings; or when too much is concluded,
inferred or deduced from the bare or incomplete facts appearing on record. [29] The Court in the case of South
Cotabato Communications Corporation v. Sto. Tomas[30] held that:

The findings of fact should, however, be supported by substantial evidence from which the said
tribunals can make their own independent evaluation of the facts. In labor cases, as in other
administrative and quasi-judicial proceedings, the quantum of proof necessary is substantial
evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion. Although no particular form of evidence is required to prove the existence of
an employer-employee relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must nonetheless rest on
substantial evidence. (Citations omitted)

Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and the burden of
proof is on the party making the allegation. [31] In an illegal dismissal case, the onus probandi rests on the employer
to prove that its dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be established.[32] In this instance, it was incumbent upon
Sta. Rita as the complainant to prove the employer-employee relationship by substantial evidence. Unfortunately,
Sta. Rita failed to discharge the burden to prove his allegations.

To reiterate the facts, undisputed and relevant to the disposition of this case, Marsman hired Sta. Rita as a
warehouseman when it was still engaged in the business of distribution and sale of pharmaceutical and consumer
products. Marsman paid Sta. Rita's wages and controlled his warehouse assignments, acts which can only be
attributed to a bona fide employer. Marsman thereafter purchased Metro Drug, now CPDSI, which at that time,
was engaged in a similar business. Marsman then entered into a Memorandum of Agreement with MEU, its
bargaining representative, integrating its employees with CPDSI and transferring its employees, their respective
employment contracts and the attendant employment obligation to CPDSI. The planned integration was then
carried out sometime in 1996, as admitted by Sta. Rita in his pleading.[33]

It is imperative to point out that the integration and transfer was a necessary consequence of the business transition
or corporate reorganization that Marsman and CPDSI had undertaken, which had the characteristics of a corporate
spin-off. To recall, a proviso in the Memorandum of Agreement limited Marsman's function into that of a holding
company and transformed CPDSI as its main operating company. In business parlance, a corporate spin-off occurs
when a department, division or portions of the corporate business enterprise is sold-off or assigned to a new
corporation that will arise by the process which may constitute it into a subsidiary of the original corporation. [34]

The spin-off and the attendant transfer of employees are legitimate business interests of Marsman. The transfer of
employees through the Memorandum of Agreement was proper and did not violate any existing law or
jurisprudence.

Jurisprudence has long recognized what are termed as "management prerogatives." In SCA Hygiene Products
Corporation Employees Association-FFW v. SCA Hygiene Products Corporation,[35] we held that:
 The hiring, firing, transfer, demotion, and promotion of employees have been traditionally
identified as a management prerogative subject to limitations found in the law, a collective
bargaining agreement, or in general principles of fair play and justice. This is a function associated
with the employer's inherent right to control and manage effectively its enterprise. Even as the law
is solicitous of the welfare of employees, it must also protect the right of an employer to exercise
what are clearly management prerogatives. The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied. x x x.

Tinio v. Court of Appeals[36] also acknowledged management's prerogative to transfer its employees within the
same business establishment, to wit:

This Court has consistently recognized and upheld the prerogative of management to transfer an
employee from one office to another within the business establishment, provided there is no
demotion in rank or a diminution of salary, benefits and other privileges. As a rule, the Court will
not interfere with an employer's prerogative to regulate all aspects of employment which include
among others, work assignment, working methods and place and manner of work. Labor laws
discourage interference with an employer's judgment in the conduct of his business.

xxxx

But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and
fair play. Having the right should not be confused with the manner in which the right is exercised.
Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker.
The employer must be able to show that the transfer is not unreasonable, inconvenient, or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges, and other benefits. x x x. (Citations omitted.)

Analogously, the Court has upheld the transfer/absorption of employees from one company to another, as
successor employer, as long as the transferor was not in bad faith [37] and the employees absorbed by a successor-
employer enjoy the continuity of their employment status and their rights and privileges with their former
employer.[38]

Sta. Rita's contention that the absence of his signature on the Memorandum of Agreement meant that his
employment remained with Marsman is merely an allegation that is neither proof nor evidence. It cannot prevail
over Marsman's evident intention to transfer its employees.

To assert that Marsman remained as Sta. Rita's employer even after the corporate spin-off disregards the separate
personality of Marsman and CPDSI. It is a fundamental principle of law that a corporation has a personality that is
separate and distinct from that composing it as well as from that of any other legal entity to which it may be
related.[39] Other than Sta. Rita's bare allegation that Michael Leo T. Luna was Marsman's and CPDSI's Vice-
President and General Manager, Sta. Rita failed to support his claim that both companies were managed and
operated by the same persons, or that Marsman still had complete control over CPDSI's operations. Moreover, the
existence of interlocking directors, corporate officers and shareholders without more, is not enough justification to
pierce the veil of corporate fiction in the absence of fraud or other public policy considerations.[40]

Verily, the doctrine of piercing the corporate veil also finds no application in this case because bad faith cannot be
imputed to Marsman.[41] On the contrary, the Memorandum of Agreement guaranteed the tenure of the employees,
the honoring of the Collective Bargaining Agreement signed in June 1995, the preservation of salaries and
benefits, and the enjoyment of the same terms and conditions of employment by the affected employees.

Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-employee
relationship. The elements of the four-fold test are: 1) the selection and engagement of the employees; 2) the
payment of wages; 3) the power of dismissal; and 4) the power to control the employee's conduct. [42] There is no
hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the
relationship may be admitted. Identification cards, cash vouchers, social security registration, appointment letters
or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee status.
[43]
The Memorandum of Agreement effectively transferred Marsman's employees to CPDSI. However, there was
nothing in the agreement to negate CPDSI's power to select its employees and to decide when to engage them.
This is in line with Article 1700 of the Civil Code which provides that:

Art. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.

A labor contract merely creates an action in personam and does not create any real right which should be respected
by third parties.[44] This conclusion draws its force from the right of an employer to select his/her employees and
equally, the right of the employee to refuse or voluntarily terminate his/her employment with his/her new
employer by resigning or retiring. That CPDSI took Sta. Rita into its employ and assigned him to one of its clients
signified the former's acquiescence to the transfer.

Marsman's letter[45] to Sta. Rita dated September 29, 1997 neither assumed nor disturbed CPDSI's power of
selection. The letter reads:

MARSMAN & COMPANY, INC.

TO: MR. RODIL STA. RITA

RE: TRANSFER OF ASSIGNMENT

This is to confirm in writing your appointment as warehouseman for EAC-Libis Warehouse and
Mercury Drug effective 13 October 1997. This transfer is part of our cross-training program.

Prior to the effectivity of your appointment, you may be instructed to proceed to EAC-Libis
Warehouse for work familiarization and other operational matters related to the job.

You will directly report to Mr. Eusebio Paisaje, warehouse supervisor.

Good luck.
(signed)
Irene C. Nagrampa

cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file

It would be amiss to read this letter independent of the Memorandum of Agreement because the Memorandum of
Agreement clearly reflected Marsman's intention to transfer all employees to CPDSI. When read in isolation, the
use of "cross-training program" may be subject to a different interpretation but reading it together with the MOA
indicates that the "cross training program" was in relation to the transition phase that Marsman and CPDSI were
then undergoing. It is clear under the terms of the Memorandum of Agreement that Marsman may continue to
negotiate and address issues with the Union even after the signing and execution of said agreement in the course of
fully implementing the transfer to, and the integration of operations with, CPDSI.

To prove the element on the payment of wages, Sta. Rita submitted forms for leave application, with either
Marsman's logo or CPDSI's logo. Significantly, the earlier leave forms bore Marsman's logo but the latest leave
application of Sta. Rita already had CPDSI's logo. In any event, the forms for leave application did not sufficiently
establish that Marsman paid Sta. Rita's wages. Sta. Rita could have presented pay slips, salary vouchers, payrolls,
certificates of withholding tax on compensation income or testimonies of his witnesses. [46] The submission of his
Social Security System (SSS) identification card (ID) only proved his membership in the social insurance program.
Sta. Rita should have instead presented his SSS records which could have reflected his contributions, and the name
and address of his employer.[47] Thus, Sta. Rita fell short in his claim that Marsman still had him in its payroll at
the time of his dismissal.

As to the power of dismissal, the letter dated January 14, 2000 clearly indicated that CPDSI, and not Marsman,
terminated Sta. Rita's services by reason of redundancy.
Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at the time of his
dismissal. The power of an employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. [48] Control in such relationships addresses the
details of day to day work like assigning the particular task that has to be done, monitoring the way tasks are done
and their results, and determining the time during which the employee must report for work or accomplish his/her
assigned task.[49] The Court likewise takes notice of the company IDs attached in Sta. Rita's pleading. The "old" ID
bore Marsman's logo while the "new" ID carried Metro Drug's logo. The Court has held that in a business
establishment, an identification card is usually provided not only as a security measure but mainly to identify the
holder thereof as a bona fide employee of the firm that issues it. [50] Thus the "new" ID confirmed that Sta. Rita was
an employee of Metro Drug, which, to reiterate, later changed its name to CPDSI.

Having established that an employer-employee relationship did not exist between Marsman and Sta. Rita at the
time of his dismissal, Sta. Rita's original complaint must be dismissed for want of jurisdiction on the part of the
Labor Arbiter to take cognizance of the case. For this reason, there is no need for the Court to pass upon the other
issues raised.

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals' assailed Decision dated
June 25, 2010 and Resolution dated December 9, 2010 in CA-G.R. SP No. 106516 are,
accordingly, REVERSED and SET ASIDE. The NLRC Decision dated July 31, 2008 in NLRC NCR Case No.
30-01-00362-00 (NLRC CA No. 032892-02) is REINSTATED.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 219324, August 08, 2018 ]
DEBRA ANN P. GAITE, PETITIONER, VS. FILIPINO SOCIETY OF COMPOSERS, AUTHORS AND
PUBLISHERS, INC., ARTURO LUI PIO, NOEL G. CABANGON, ALVIN F. DE VERA, LEOCADIO
ERNESTO A. SANCHEZ III, ADORACION SATURNO AND CEASAR* APOSTOL, RESPONDENTS.

DECISION
PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and
set aside the Decision[1] dated November 24, 2014 and the Resolution [2] dated July 1, 2015 of the Court of Appeals
(CA) in CA-G.R. SP No. 133559.

The antecedent facts are as follows:

On May 16, 2006, respondent Filipino Society of Composers, Authors, and Publishers,
Inc. (FILSCAP),  incorporated in 1965 as a non-stock, non-profit association of composers, lyricists, and music
publishers that collectively enforces the public performance rights granted by law to copyright owners of musical
works, employed petitioner Debra Ann P. Gaite as its General Manager. Its primary purpose includes: (i) the
acquisition of representation and performance rights on music compositions of its members and similar affiliate
societies; and (ii) the grant of licenses and collection of royalties for the representation and performance rights on
music compositions of its members and similar affiliate foreign societies. In consideration for its authorization of
the public performance of copyright works through the issuance of licenses, FILSCAP collects license fees which
it then distributes to its members and affiliate foreign societies.

In 2012, several issues pertaining to Gaite were brought to the attention of FILSCAP's Board of Trustees which
include the following: (1) the erroneous filing of a case against a records company without prior notice to the
Board, which eventually resulted in FILSCAP being ordered to pay P1,000,000.00 in damages; (2) her non-
disclosure of her receipt of an e-mail inviting one of the board members to a regional digital licensing conference
in Taipei; (3) her willful delay in taking action on the collection of proxy forms from members for the May 28,
2011 FILSCAP elections and, consequently, collection of an insufficient number of proxy forms for the said
election; (4) her non-disclosure of the complete list of members to a board member who wanted to help in securing
the proxy forms; and (5) the appropriation for her personal benefit of show tickets given to FILSCAP, which were
supposed to be used for monitoring purposes.[3]

Before conducting administrative disciplinary proceedings against Gaite, the Board sought the legal opinion of
FILSCAP's external counsel. Thereafter, learning of the issues between FILSCAP and Gaite, the International
Confederation of Societies of Authors and Composers (CISAC), the umbrella organization of copyright societies
around the world, advised FILSCAP to settle the matter amicably. Thus, FILSCAP discussed a graceful exit and
separation package with Gaite and scheduled the signing of a Release, Waiver, and Quitclaim on June 26, 2012
which provided that FILSCAP would release, waive and discharge Gaite from any and all actions, whether civil,
criminal or administrative, or from any and all claims of any kind or character arising out of or in connection with
her employment with FILSCAP in exchange for P1,440,386.01.

Days before the scheduled signing, however, FILSCAP discovered that for several fiscal years already,
specifically from 2009 to 2011, Gaite had been allowing funds from its Special Accounts to be used to cover the
company's Operating Expenses without the knowledge, consent, or authorization of the Board and in contravention
of FILSCAP's Distribution Rules. FILSCAP pointed out that it is a non-stock, non-profit organization established
to protect the interests of composers, lyricists, and music publishers and that from the royalties it receives, it
maintained a Special Accounts for undistributed collections. Under its Distribution Rules, these Special Accounts
were intended to be held for a certain period until such time that the conditions for their release to a particular
person or entity or to a general membership, as the case may be, have been met. In other words, these funds were
held in trust by FILSCAP for the benefit of the rightful owners. But as FILSCAP claimed, it discovered that said
Special Accounts were being transferred and credited to cover the shortage in the Operating Expenses resulting in
the dwindling of the same, depriving the rightful beneficiaries of the amount appropriately due them. Because of
this discovery, FILSCAP decided to defer the settlement with Gaite and in lieu of the Quitclaim-signing scheduled
on June 26, 2012, FILSCAP commenced a specific inquiry into the matter.[4]

During said investigation, FILSCAP confirmed Gaite's unauthorized misappropriation or reallocation, which she
committed together with the then Distribution Manager, Mr. Genor Kasiguran, amounting to P17,720,455.77. In
fact, she even admitted the same in her email to Board member, Mr. Gary Granada, on June 22, 2012, where she
said in part that:
Rox, Genor and I discussed it and made a decision which we thought was in the best interest of the
Society. I agree with you that it is mainly an accounting concern. But it was a collegial decision
based on reports made by accounting and distribution, distribution rules as approved by the Board,
and sound accounting principles (otherwise Rox would have said so). Whether or not the Board
was made fully aware of this (which I heard is now the main issue) does not make the decision
wrong.[5]

In view of said discovery, FILSCAP issued a Show Cause Notice to Gaite dated July 10, 2012 requiring her to
explain why no disciplinary sanctions should be imposed on her and likewise placed her under preventive
suspension with pay, pending the administrative investigation. In her reply, Gaite denied any misappropriation and
informed the Board that she had already filed a case for constructive dismissal against FILSCAP on June 28, 2012,
or two (2) days after the cancelled signing of the Quitclaim and even before the July 10, 2012 show-cause notice
was sent to her.

In her Position Paper, Gaite alleged that her termination was premeditated and that as early as 2010, she was
already confronted about certain matters such as her out-of-town trips, entitlement to complimentary oncert tickets,
and her remarks about having too many board meetings. She alleged that it is because FILSCAP and its counsel
doubted the validity of their proposed grounds for termination that they instead negotiated with her for a separation
package in exchange for her resignation. But belatedly, they reneged on their offer and simulated the charge of loss
of confidence to justify her termination. According to Gaite, she did not misappropriate any fund nor is there proof
that she utilized the same for her personal use. As regards the alleged reallocation from the Special Accounts to the
Operating Expenses, Gaite claimed that such was done in accordance with the company's Distribution Rules which
provide that the distributable revenue is calculated by subtracting from the company's gross revenue, among
others, all expenses arising from and incidental to the management and operation thereof. Also, she pointed out
that, besides, said reallocation redounded to the benefit of the company.[6]

On April 24, 2013, the Labor Arbiter (LA) rendered a Decision ordering FILSCAP to pay Gaite P1,440,386.10
representing the amount stated in the Quitclaim declaring that there was already a perfected and binding contract
between the parties when they negotiated and wrote the final draft of the Quitclaim.[7]

On October 29, 2013, the National Labor Relations Commission (NLRC) partially set aside the LA Decision and
declared that Gaite was constructively dismissed, ordering FILSCAP to pay her backwages, separation pay, moral
and exemplary damages and attorney' fees. According to the NLRC, the acts of FILSCAP prior to terminating
Gaite's services amounted to constructive dismissal. First, they sought the legal opinion of their counsel as to how
they could terminate her employment. Apparently unconvinced with the soundness of their grounds, they
negotiated with Gaite for a separation package. But they reneged on their promise and instead belatedly came up
with the charge of reallocation/misappropriation, which is a mere afterthought. To the NLRC, these acts
constituted discrimination, insensibility, and disdain towards Gaite amounting to constructive dismissal.[8]

In a Decision dated November 24, 2014, however, theCA reversed and set aside the NLRC Decision. It held that
contrary to the NLRC's findings, the acts of FILSCAP in seeking the opinion of its counsel, foregoing the signing
of the Quitclaim, and conducting an administrative hearing cannot be considered as acts of discrimination,
insensibility, and disdain for it was merely exercising prudence and due diligence in good faith to ensure that
Gaite's dismissal would be proper and based on valid grounds.[9] Besides, it was stressed that the said Quitclaim
was not perfected as the parties did not sign the same.

As for her actual dismissal, the CA ruled that Gaite was validly dismissed for serious misconduct and loss of trust
and confidence. This is because as provided by the company's Distribution Rule, the Board has sole authority to
allocate or appropriate FILSCAP's revenues consisting of royalties and license fees. Thus, her act of transferring
the staggering amount from the Special Accounts to augment the alleged Operating Expenses deficit without the
consent of the Board is serious in that not only did she violate the rules, she depleted the special funds which
FILSCAP merely held in trust for the rightful copyright owners, putting FILSCAP in a bad light. In fact, the
appellate court noted that to correct Gaite's anomaly, FILSCAP even had to take out a loan to cover the royalties
due for distribution but were unavailable because of her reallocation.

The CA also ruled that contrary to Gaite's claim, FILSCAP was able to sufficiently prove with convincing
evidence the fact of the reallocation. Besides, her claim that there is no reallocation is inconsistent with her
subsequent arguments that the reallocation was made pursuant to the Distribution Rules and that the same even
redounded to the benefit of the company. The fact remains that Gaite's culpable acts amounted to loss of trust and
confidence justifying her dismissal because as General Manager of FILSCAP, she held a fiduciary position
entrusted with the overall operation thereof.[10]

In its Resolution dated July 1, 2015, the CA further rejected Gaite's contention that the accounting report and email
correspondence are inadmissible as they were never authenticated, verified or sworn to. First of all, technical rules
of evidence are not binding in labor cases. Second of all, Gaite never questioned the authenticity/admissibility
thereof before the labor tribunals. Thus, any objection thereto must be deemed waived.[11]

Unfazed, Gaite filed the instant petition on September 7, 2015 invoking the following arguments:

I.
THE COURT OF APPEALS GRAVELY ERRED IN IGNORING THE FACTUAL
FINDINGS OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH
WERE CLEARLY SUBSTANTIATED BY EVIDENCE ON RECORD.

II.
THE CONCLUSIONS OF THE COURT OF APPEALS WERE GROUNDED ENTIRELY ON
SPECULATIONS, SURMISES, AND A MISAPPREHENSION OF FACTS.

III.
THE GROUND UPON WHICH PETITIONER WAS DISMISSED WAS BASELESS,
UNFOUNDED, AND CONTRIVED.[12]

In her petition, Gaite posits that the CA erred in reversing the ruling of the NLRC for the same was clearly
supported by substantial evidence, particularly, the legal opinion of FILSCAP's counsel, the minutes of the special
meeting of the Board, and the draft of the Quitclaim. These documents evince the premeditated scheme of
FILSCAP to oust Gaite from her employment. Clearly, the supposed "reallocation or misappropriation of funds"
purportedly committed by Gaite was a belated accusation to forestall the execution of the Quitclaim. Thus, the
findings of fact of the NLRC should be respected.[13]

Gaite also claims that the CA erred when it ruled that she was validly dismissed. First, the documents presented by
FILSCAP as evidence were neither authenticated, identified nor sworn to. As such, they have no probative value
and are merely hearsay and self-serving. Second, the June 22, 2012 email where Gaite supposedly admitted that
there was a "reallocation" of funds was conveniently taken out of context for the CA merely relied on its last
paragraph. She invites Us to consider the pertinent portions of the same below:

"Hi Gary. It seems that the brief I prepared was not read or forwarded. Baka that might explain
things better.

The ratios reported annually are correct, but based on totals. The distribution is done in pools, with
varying percentages of administration cost (specifically for mechanicals and foreign pools) – a
practice that has been in place since the beginning. That is causing the deficiencies.

The amounts were not "borrowed." The expense was already made the previous year. (i.e., last
year's opex) based on the approved budgets and all disbursements over 50,000 are cleared with the
Board. The budgets were not changed at all. But these were expenses already incurred for the
previous year's operating expense, and the amount should be deducted from the following year's
distribution as specified in our distribution rules. It is simply an issue of the amount not being fully
deducted from the following year's distributable amount.

xxx

Genor and I discussed this with Mars and then Rox because it is an accounting concern more than a
distribution concern. When the auditor (Bing) discussed the audit findings with us, one issue he
mentioned was the lack of reconciliation between the accounting and the distribution. I agreed and
said we will direct the two to make a reconciliation. Rox and I then explained the problem of
unrecovered costs to him and what we thought of doing to correct the previous years. He said it was
 "ok" naman especially since these funds can no longer be attributable to any specific recipient.

Rox, Genor and I discussed it and made a decision which we thought was in the best interest of the
Society. I agree with you that it is mainly an accounting concern. But it was a collegial decision
based on reports made by accounting and distribution, distribution rules as approved by the board,
and sound accounting principles (otherwise Rox would have said so). Whether or not the Board was
made fully aware of this (which I heard is the main issue) does not make the decision wrong."
(Underscoring supplied)[14]

Thus, Gaite claims that "the distribution is done in pools, with varying percentages of administration cost
(specifically for mechanicals and foreign pools) – a practice that has been in place since the beginning" and that
"the expense was already made the previous year. (i.e., last year's opex) based on the approved budgets and all
disbursements over 50,000 are cleared with the Board." Clearly, therefore, this allegation of reallocation is merely
an afterthought for had there been irregularities since 2009, the same should have already been discovered in the
course of the audit.

Third, to defend her case, Gaite explains that Section 3.1 of the Distribution Rules of the company provides that all
expenses arising from and incidental to the conduct, management and operation of the company, which includes
Operating Expenses, are first to be deducted from the company's gross revenue, to wit:

3. General Principles Governing Royalty Distribution

3.1 Distributable revenue is calculated by subtracting from the Society's gross revenue:
a) all expenses arising from and incidental to the conduct. management and operation of the
Society;
b) provision for reserves, if any; and
c) moneys applied by the Board for development and promotion of Filipino Music and culture."
(Underscoring supplied)[15]

Thus, Gaite concludes that the monies were used for operating expenses which were used for the
company. Fourth,  Gaite asseverates that the statement of the CA that FILSCAP was constrained to take out a loan
to "cover royalties due" is based on conjecture, speculation, and guesswork. This is because the purported bank
loan application submitted by FILSCAP does not indicate the purpose the same is to be used other than
"capital."[16] Finally, Gaite contends that the only offense she appears to be guilty of is that she withheld the
disbursement of funds from a Special Fund for the company's Operating Expenses without the knowledge, consent
or authorization of the Board. She is not, however, guilty of misappropriation since she did not utilize said funds
for her personal use. In fact, it was clearly shown that the disbursement of funds redounded to the benefit of the
company.[17]

The Court does not agree.

Ultimately, the bone of contention in the instant case is the legality of Gaite's dismissal.

Basic is the rule that an employer may validly terminate the services of an employee for any of the just causes
enumerated under Article 296 (formerly Article 282) of the Labor Code, namely:

(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 representatives; and
(e) Other causes analogous to the foregoing.

Here, the Notice of Termination shows that FILSCAP terminated Gaite's employment due to the fact that her
actuations constituted serious misconduct and caused loss of trust and confidence in her as General Manager of the
company.[18]
On the first ground for termination, case law characterizes "misconduct" as an improper or wrong conduct; it is the
transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. The misconduct, to be serious within the
meaning of the Labor Code, must be of such a grave and aggravated character and not merely trivial or
unimportant. Thus, for misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b)
it must relate to the performance of the employee's duties; and (c) it must show that the employee has become unfit
to continue working for the employer.[19]

In the instant case, the Court finds that Gaite's actuations constitutes serious misconduct. First, the seriousness of
the same cannot be denied. Not only is the amount involved herein a staggering amount of P17,720,455.77, the
alleged reallocation violated an express provision of the company's Distribution Rules and was accomplished
without the knowledge, consent, or authorization of the Board. Second, Gaite committed said transfer in the
performance of her duties as General Manager of FILSCAP who is responsible for the overall operations thereof,
including the regular review and updating of its distribution guidelines to facilitate royalty distribution to
FILSCAP members and foreign affiliates. Third, because of this grave infraction causing the depletion of the
company's Special Accounts held in trust for the rightful copyright owners, Gaite's ability to duly perform and
accomplish her duties and responsibilities as General Manager has been seriously put into question. It is clear,
therefore, that Gaite's acts amounted to serious misconduct warranting her dismissal.

On the second ground for termination, the Court has held that "loss of trust and confidence" will validate an
employee's dismissal when it is shown that: (a) the employee concerned holds a position of trust and confidence;
and (b) he performs an act that would justify such loss of trust and confidence. Moreover, certain guidelines must
be observed for the employer to cite loss of trust and confidence as a ground for termination. It is never intended to
provide the employer with a blank check for terminating its employees. Neither should it be loosely applied in
justifying the termination of an employee nor should it be used as a subterfuge for causes which are improper,
illegal, or unjustified.[20]

Here, the Court finds that FILSCAP validly terminated Gaite's employment on the ground of loss of trust and
confidence. First, there is no doubt that she held a position of trust and confidence. The law contemplates two (2)
classes of positions of trust. The first class consists of managerial employees. They are as those who are vested
with the power or prerogative to lay down management policies and to hire, transfer, suspend, layoff, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions. The second class
consists of cashiers, auditors, property custodians, etc. who, in the normal and routine exercise of their functions,
regularly handle significant amounts of money or property. [21] As General Manager of the company, Gaite clearly
falls under the first class of employee for as earlier pointed out, she was responsible for the overall operations
thereof, including the regular review and updating of its distribution guidelines to facilitate royalty distribution to
FILSCAP. members and foreign affiliates. Specifically, her duties include: (1) preparation of the annual and 3-5
year FILSCAP Programs and budgets, ensuring that the same are implemented effectively and judiciously; and (ii)
regular reviews and updating of FILSCAP's distribution guidelines to facilitate royalty distribution to FILSCAP
members and foreign affiliates.[22] Hence, the first requisite is present in this case.

Second, it is rather obvious to the Court that the act of transferring the aforementioned staggering amount from the
Special Accounts to cover the company's Operating Expenses, without the knowledge and consent of the Board of
Directors, and in direct contravention of FILSCAP's Distribution Rules is sufficient reason for the loss of trust and
confidence in Gaite. It bears stressing that as managerial employee, Gaite could be terminated on the ground of
loss of confidence by mere existence of a basis for believing that she had breached the trust of her employer,
which in this case is FILSCAP. Proof beyond reasonable doubt is not required. It would already be sufficient that
there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that
the concerned employee is responsible for the purported misconduct and the nature of his participation therein.
This distinguishes a managerial employee from a fiduciary rank-and-file where loss of trust and confidence, as
ground for valid dismissal, requires proof of involvement in the alleged events in question, and that mere
uncorroborated assertion and accusation by the employer will not be sufficient.[23]

In the present case, the Court agrees with the appellate court in ruling that FILSCAP has sufficiently proven
Gaite's unauthorized reallocation or transfer of funds from the company's Special Accounts to its Operating
Expenses. For one, the report of FILSCAP's Accounting Officer, Melinda Lenon, dated July 18, 2012 adequately
showed that the funds were taken from the distribution pool to cover the operating expenses deficit. [24] For another,
such report was, in fact, duly corroborated by Gaite's June 22, 2012 email to Board member, Mr. Gary Granada.
On this matter, Gaite contends that said June 22, 2012 email, where she allegedly admitted to the reallocation, was
taken out of context. The Court is not convinced. In the first place, nowhere in said e-mail did she expressly or
impliedly deny having reallocated funds from the Special Accounts to the Operating Expenses. In the second
place, nowhere in said email did she even address the issue of her unauthorized reallocation. At most, she merely
explained therein that "the operating expenses were already incurred based on approved budgets' and that 'the same
was not deducted from the following year's funds." But the email tells Us nothing about the source from which
these expenses were actually paid. Neither does it provide any explanation for FILSCAP's finding that these
operating costs were in fact paid using the funds from the Special Accounts. The fact that the issue here is mainly
an "accounting concern" has no bearing on the allegations proven in the present case.

Unfortunately for Gaite, moreover, her arguments in the instant petition are just as elusive. There, Gaite merely
declared that the CA conveniently took her email out of context and simply relied on its last paragraph but did not
particularly illustrate how this was done. Instead, she merely quoted the NLRC's ruling which found. that the
allegation of reallocation is an afterthought for had there been irregularities since 2009, the same should have
already been discovered in the course of the audit. But again, this finding does not explain how her admission in
her email was misinterpreted. The allegation that the reallocation issue is a mere afterthought does not instantly
render Gaite innocent of the same. Besides, even if We are to assume that the same was indeed taken out of
context, the fact remains that as pointed out by the CA, her claim that there was no reallocation is belied by her
subsequent arguments that the reallocation was made pursuant to the Distribution Rules and that the same even
redounded to the benefit of FILSCAP.

In her belated attempt to refute the charges against her, Gaite claims that the documents presented by FILSCAP as
evidence have no probative value for being neither authenticated, identified, nor sworn to. But the Court affirms
the ruling of the appellate court that technical rules of evidence are not binding in labor cases. In addition, any
objection to said evidence must be deemed waived for Gaite never questioned  the authenticity or admissibility
thereof before the labor tribunals.

Contrary to Gaite's expectations, moreover, it has not escaped the Court's attention that while she persistently
insists that her act of reallocating funds was sanctioned by the company's Distribution Rules, she unfortunately
failed to cite any relevant provision that supposedly authorizes her to do so. To support her claim, she cites Section
3.1 of the Distribution Rules. But all said provision states is that all expenses arising from and incidental to the
conduct, management and operation of the company, which includes the Operating Expenses, are first to be
deducted from the gross income. Nowhere in the rules cited by Gaite was it provided, either expressly or
impliedly, that she, as General Manager of FILSCAP, is authorized to transfer funds from the Special Accounts to
cover the Operating Expenses without the knowledge or consent of the Board. As the CA points out, it is true that
the Operating Expenses must first bdeducted from gross revenue to arrive at the distributable revenue. But the
Distribution Rules expressly provide that part of the distributable revenue, after operating and other expenses
have been deducted, are to be held in suspense under special accounts for certain works to be distributed later to
the rightful owners or to the general membership, as the case may be.[25] Thus, Gaite should not have used the
funds from the Special Accounts to cover Operating Expenses because in the first place, the Operating Expenses
should have already been deducted from the gross revenue before part of the distributable royalties may be set
aside under the Special Accounts. In fact, it bears stressing that Paragraph 1.2 of the Distribution Rules even
provides that the Board has the sole authority to allocate or appropriate FILSCAP's revenues consisting of
royalties and license fees.[26] It is therefore clear that not only did Gaite anchor her defense on an inapplicable and
irrelevant provision of the company's Distribution Rules, her commission of the subject reallocation goes against
the express prohibitions provided thereunder.

The Court finds it worthy to state further that Gaite seems to be missing the point in insisting that there is no
showing that an interested person had suffered any damage or injury as a result of the perceived 'reallocation.' That
she did not use the funds for her personal gain and that the transfer thereof redounded to the benefit of the
company is of no moment. To the Court, the mere fact that she authorized said transfer without the knowledge or
consent of the Board and in direct contravention of the company's Distribution Rules constitutes valid and legal
ground sufficient enough to warrant her dismissal. Otherwise stated, regardless of whether FILSCAP has
sufficiently proven actual damage to FILSCAP or that she personally benefited from her actuations, the mere
existence of a basis for believing that she breached FILSCAP's trust and confidence suffices as grounds for her
dismissal.

At this juncture, it must be noted that the Court, in Kasiguran v. FILSCAP, et al., had already issued a
Resolution[27] dated April 6, 2015, where it ruled upon the illegal dismissal suit filed against FILSCAP by Mr.
Genor Kasiguran, the Distribution Manager of FILSCAP with whom Gaite allegedly conspired in committing the
same unauthorized act of reallocation charged herein. There, the Court upheld the validity of Kasiguran's dismissal
on the grounds of serious misconduct and loss of trust and confidence, viz.:

In this case, the LA and the NLRC were uniform in their findings that the P17,720,455.77 subject
amount was transferred from Special Accounts to the Operating Expenses without the required
Board approval. The NLRC did not consider this as sufficient reason to justify Kasiguran's
dismissal because: (1) the respondents failed to prove that they were defrauded which to it was an
essential element of misappropriation; and (2) hence, while there was "transfer," the dismissal was
too harsh a penalty.

It should be noted, however, that the damage to the respondents or whether or not the
respondents were defrauded is not a necessary element and consideration in determining
whether sufficient basis exists to justify the employee's dismissal on grounds of serious
misconduct or loss of trust. To reiterate, the employer need only to entertain the moral
conviction or such reasonable grounds to believe, that the employee is responsible for the
misconduct and the nature of the latter's participation renders him unworthy of the trust and
confidence demanded by the position; that the act resulting in the loss of trust or the
misconduct is established by facts; and that the act or misconduct is willfully made, i.e., the
employee voluntarily and willfully committed the act, although he may not have intended the
wrongful consequence.[28]

Prescinding from the foregoing, it is evident from the facts of this case that Gaite was validly dismissed on the
grounds of serious misconduct and loss of trust and confidence for her unauthorized reallocation of funds from
FILSCAP's Special Accounts to cover the deficit in its Operating Expense without the required knowledge,
consent, or authorization of the company's Board of Directors. Time and again, the Court has emphasized that an
employer has the right to exercise its management prerogative in dealing with its company's affairs including its
right to dismiss its erring employees. We recognized the right of the employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods, processes to be followed,
regulation regarding transfer of employees, supervision of their work, lay-off and discipline, and dismissal and
recall of workers. In fact, it is a general principle of labor law to discourage interference with an employer's
judgment in the conduct of his business. Even as the law is solicitous of the welfare of the employees, it also
recognizes employer's exercise of management prerogatives. Thus, for as long as the company's exercise of
judgment is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of
employees under the laws or valid agreements, such exercise will be upheld.[29]

WHEREFORE, premises considered, the instant petition is DENIED. The assailed Decision dated November 24,
2014 and Resolution dated July 1, 2015 of the Court of Appeals are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 160506               June 6, 2011

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO,

ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO
GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR
IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO,
ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL
ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS
BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR,
EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE,
MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO MONTOS,
RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F.
TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN
BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO
DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ,
ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO
NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N.
GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M.
LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C.
PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY
O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S.
BALANGUE, Petitioners,
vs.
PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.

DECISION

DEL CASTILLO, J.:

Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes
an employer-employee relationship between the employer and the employees of the ‘labor-only’ contractor.

The instant petition for review assails the March 21, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP
No. 52082 and its October 20, 2003 Resolution 2 denying the motions for reconsideration separately filed by
petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998
Decision of the National Labor Relations Commission (NLRC), which in turn affirmed the November 29, 1996
Decision3 of the Labor Arbiter. All these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and
Promotions Services (SAPS) to be legitimate independent contractors and the employers of the petitioners.

Factual Antecedents

Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as
June 1991, to either May 5, 1992 or March 11, 1993, more specifically as follows:

Name Date Employed Date Dismissed

1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
8. Jose Fernando Gutierrez 1988 May 5, 1992
9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
11. Franz David 1989 March 11, 1993
12. Nestor Ignacio 1982 March 11, 1993
13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
15. Maximino Pascual 1990 May 5, 1992
16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
17. Rolando Romasanta 1983 March 11, 1993
18. [Roehl] Agoo 1988 March 11, 1993
19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
21. Arnel Endaya 1983 March 11, 1993
22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992
24. Ed[g]ardo Quiambao 1989 March 11, 1993
25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
28. Edwin Garcia 1987 May 5, 1992
29. Armando Villar 1990 May 5, 1992
30. Emil Tawat 1988 March 11, 1993
31. Mario P. Liongson 1991 May 5, 1992
32. Cresente J. Garcia 1984 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992
34. Melecio Casapao 1987 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992
36. Ferdinand Salvo 1985 May 5, 1992
37. Alstando Montos 1984 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992
39. Ramil Reyes 1984 March 11, 1993
40. Pedro G. Roy 1987
41. Leonardo [F]. Talledo 1985 March 11, 1993
42. Enrique [F]. Talledo 1988 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992
44. Ernesto Soyosa 1988 May 5, 1992
 45. Romeo Vasquez 1985 March 11, 1993
46. Joel Billones 1987 March 11, 1993
47. Allan Baltazar 1989 March 11, 1993
48. Noli Gabuyo 1991 March 11, 1993
49. Emmanuel E. Laban 1987 May 5, 1992
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
52. Tadeo Duran[o] 1988 May 5, 1992
53. Joseph Banico 1988 March 11, 1993
54. Albert Leynes 1990 May 5, 1992
55. Antonio Dacu[m]a 1990 May 5, 1992
56. Renato dela Cruz 1982
57. Romeo Viernes, Jr. 1986
58. El[ia]s Bas[c]o 1989
59. Wilfredo Torres 1986 May 5, 1992
60. Melchor Carda[ñ]o 1991 May 5, 1992
61. [Marino] [Maranion] 1989 May 5, 1992
62. John Sumergido 1987 May 5, 1992
63. Roberto Rosales May, 1987 May 5, 1992
64. Gerry [G]. Gatpo November, 1990 March 11, 1993
65. German N. Guevara May, 1990 March 11, 1993
66. Gilbert Y. Miranda June, 1991 March 11, 1993
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
68. Arnold D. [Laspoña] June 1991 March 11, 1993
69. Philip M. Loza March 5, 1992 March 11, 1993
70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993
71. Orlando P. Jimenez November 6, 1992 March 11, 1993
72. Fred P. Jimenez September, 1991 March 11, 1993
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993
74. Rolando J. de Andres June, 1991 March 11, 1993
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993
77. Rosedy O. Yordan June, 1991 May 5, 1992
78. Dennis Dacasin May. 1990 May 5, 1992
79. Alejandrino Abaton 1988 May 5, 1992
80. Orlando S. Balangue March, 1989 March 11, 19934

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less
five months at a time.5 They were assigned at different outlets, supermarkets and stores where they handled all the
products of P&G. They received their wages from Promm-Gem or SAPS.6
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual
absenteeism, dishonesty or changing day-off without prior notice.7

P&G is principally engaged in the manufacture and production of different consumer and health products, which it
sells on a wholesale basis to various supermarkets and distributors. 8 To enhance consumer awareness and
acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and
merchandising of its products.9

In December 1991, petitioners filed a complaint 10 against P&G for regularization, service incentive leave pay and
other benefits with damages. The complaint was later amended 11 to include the matter of their subsequent
dismissal.

Ruling of the Labor Arbiter

On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods
by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that
Promm-Gem and SAPS were legitimate independent job contractors. The dispositive portion of his Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases against
respondent Procter & Gamble (Phils.), Inc. for lack of merit.

SO ORDERED.12

Ruling of the NLRC

Appealing to the NLRC, petitioners disputed the Labor Arbiter’s findings. On July 27, 1998, the NLRC rendered a
Decision13 disposing as follows:

WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the decision appealed
from AFFIRMED.

SO ORDERED.14

Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998 Resolution.15

Ruling of the Court of Appeals

Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by
the CA which disposed as follows:

WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is AFFIRMED with
the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay
to petitioners.

SO ORDERED.16

Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.

Issues

Petitioners now come before us raising the following issues:

I.

WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE

ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN
RENDERING THE QUESTIONED JUDGMENT WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE
TO PROVE AND ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR
EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY THE FORMER.

II.

WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE

ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE
ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE
TO THE PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL
AS LITIGATION COSTS AND ATTORNEY’S FEES.17

Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners were illegally
dismissed; and (3) whether petitioners are entitled for payment of actual, moral and exemplary damages as well as
litigation costs and attorney’s fees.

Petitioners’ Arguments

Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G
and were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or
SAPS. They further claim that when the latter had its so-called re-alignment program, petitioners were instructed
to fill up application forms and report to the agencies which P&G created.18

Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter 19 to SAPS
dated February 24, 1993, informing the latter that their Merchandising Services Contract will no longer be
renewed.

Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to
their client. They claim that the contractors have neither substantial capital nor tools and equipment to undertake
independent labor contracting. Petitioners insist that since they had been engaged to perform activities which are
necessary or desirable in the usual business or trade of P&G, then they are its regular employees.20

Respondents’ Arguments

On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown
out as the Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC
and the Labor Arbiter are in agreement, are deemed binding and conclusive on the Supreme Court.

P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or
SAPS that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of
dismissal; and (4) had the power of control over their conduct of work.

P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly
outsourced. Thus, an employer can farm out any of its activities to an independent contractor, regardless of
whether such activity is peripheral or core in nature. It insists that the determination of whether to engage the
services of a job contractor or to engage in direct hiring is within the ambit of management prerogative.

At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of the Comment
of Promm-Gem on the petition.21 Also, although SAPS was impleaded as a party in the proceedings before the
Labor Arbiter and the NLRC, it was no longer impleaded as a party in the proceedings before the CA. 22 Hence, our
pronouncements with regard to SAPS are only for the purpose of determining the obligations of P&G, if any.

Our Ruling

The petition has merit.

As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained to wade into factual
matters when there is insufficient or insubstantial evidence on record to support those factual findings; or when too
much is concluded, inferred or deduced from the bare or incomplete facts appearing on record. 23 In the present
case, we find the need to review the records to ascertain the facts.

Labor-only contracting and job contracting

In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine
whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.

The pertinent Labor Code provision on the matter states:

ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect
the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by
him. (Emphasis and underscoring supplied.)

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No.
18-02,24 distinguishes between legitimate and labor-only contracting:

xxxx

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently
undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or
subcontractor to accomplish the job[,] work or service.

xxxx

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For
this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following
elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual
workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in
reaching that end.

x x x x (Underscoring supplied.)

Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs,
works or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such
activity is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to
an  independent contractor because the current labor rules expressly prohibit labor-only contracting.

To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or
places workers to perform a job, work or service for a principal25 and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of
the contractual employee. (Underscoring supplied)

In the instant case, the financial statements26 of Promm-Gem show that it

has authorized capital stock of ₱1 million and a paid-in capital, or capital available for operations, of ₱500,000.00
as of 1990.27 It also has long term assets worth ₱432,895.28 and current assets of ₱719,042.32. Promm-Gem has
also proven that it maintained its own warehouse and office space with a floor area of 870 square meters. 28 It also
had under its name three registered vehicles which were used for its promotional/merchandising
business.29 Promm-Gem also has other clients30 aside from P&G.31 Under the circumstances, we find that Promm-
Gem has substantial investment which relates to the work to be performed. These factors negate the existence of
the element specified in Section 5(i) of DOLE Department Order No. 18-02.

The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as
markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to
them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its
regular, not merely contractual or project, employees.32 This circumstance negates the existence of element (ii) as
stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This,
furthermore, negates – on the part of Promm-Gem – bad faith and intent to circumvent labor laws which factors
have often been tipping points that lead the Court to strike down the employment practice or agreement concerned
as contrary to public policy, morals, good customs or public order.33

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a
legitimate independent contractor.

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only ₱31,250.00.
There is no other evidence presented to show how much its working capital and assets are. Furthermore, there is
no showing of substantial investment in tools, equipment or other assets.

In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere
in the country, the paid-in capitalization of PMCI amounting to ₱75,000.00 cannot be considered as substantial
capital and, as such, PMCI cannot qualify as an independent contractor." 35 Applying the same rationale to the
present case, it is clear that SAPS – having a paid-in capital of only ₱31,250 - has no substantial capital. SAPS’
lack of substantial capital is underlined by the records36 which show that its payroll for its merchandisers alone for
one month would already total ₱44,561.00. It had 6-month contracts with P&G. 37 Yet SAPS failed to show that it
could complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient for one
month’s payroll. SAPS failed to show that its paid-in capital of ₱31,250.00 is sufficient for the period required for
it to generate its needed revenue to sustain its operations independently. Substantial capital refers to capitalization
used in the performance or completion of the job, work or service contracted out. In the present case, SAPS has
failed to show substantial capital.

Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an
activity that has already been considered by the Court as doubtlessly directly related to the manufacturing
business,38 which is the principal business of P&G. Considering that SAPS has no substantial capital or investment
and the workers it recruited are performing activities which are directly related to the principal business of P&G,
we find that the former is engaged in "labor-only contracting".

"Where ‘labor-only’ contracting exists, the Labor Code itself establishes an employer-employee relationship
between the employer and the employees of the ‘labor-only’ contractor." 39 The statute establishes this relationship
for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.40

Consequently, the following petitioners, having been recruited and supplied

by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees of P&G: Arthur Corpuz,
Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao
Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio
Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson
Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel
Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo,
Jr., Arnold D. Laspoña, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.
Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo
Viernes, Jr., Elias Basco and Dennis Dacasin.

The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered the
employees of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr.,
Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil Reyes,
Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro Pita,
Fernando Macabenta, Nestor Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio
Dacuma, Tadeo Durano, Raul Dulay, Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and
Joeb Aliviado.42

Termination of services

We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular employment, the
employer shall not terminate the services of an employee except for a just43 or authorized44 cause.

In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the cause of
dismissal as grave misconduct and breach of trust, as follows:

xxxx

This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc. has been
terminated. We find your expressed admission, that you considered yourself as an employee of Procter & Gamble
Phils., Inc…. and assailing the integrity of the Company as legitimate and independent promotion firm, is deemed
as an act of disloyalty prejudicial to the interests of our Company: serious misconduct and breach of trust reposed
upon you as employee of our Company which [co]nstitute just cause for the termination of your employment.

x x x x45

Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere
error of judgment. The misconduct to be serious must be of such grave and aggravated character and not merely
trivial and unimportant.46 To be a just cause for dismissal, such misconduct (a) must be serious; (b) must relate to
the performance of the employee’s duties; and (c) must show that the employee has become unfit to continue
working for the employer.47

In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has
violated some established rules or policies. It is equally important and required that the act or conduct must have
been performed with wrongful intent.48 In the instant case, petitioners-employees of Promm-Gem may have
committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so. As such, we find them guilty of only simple misconduct for
assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A misconduct which is not
serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an employee.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust
reposed in the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.49

Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee
concerned holds a position of responsibility or of trust and confidence. As such, he must be invested with
confidence on delicate matters, such as custody, handling or care and protection of the property and assets of the
employer. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and
must show that the employee is unfit to continue to work for the employer. 50 In the instant case, the petitioners-
employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and
confidence. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for
Promm-Gem.

All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.

While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of
petitioners-employees, i.e., giving two notices and in between such notices, an opportunity for the employees to
answer and rebut the charges against them, it failed to comply with the substantive aspect of due process as the
acts complained of neither constitute serious misconduct nor breach of trust. Hence, the dismissal is illegal.

With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The
records show that upon receipt by SAPS of P&G’s letter terminating their "Merchandising Services Contact"
effective March 11, 1993, they in turn verbally informed the concerned petitioners not to report for work anymore.
The concerned petitioners related their dismissal as follows:

xxxx

5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A. Ponce that
we should already stop working immediately because that was the order of Procter and Gamble. According to him
he could not do otherwise because Procter and Gamble was the one paying us. To prove that Procter and Gamble
was the one responsible in our dismissal, he showed to us the letter51 dated February 24, 1993, x x x

February 24, 1993

Sales and Promotions Services

Armon’s Bldg., 142 Kamias Road,
Quezon City

Attention: Mr. Saturnino A. Ponce

President & General Manager

Gentlemen:

Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be
renewing our Merchandising Services Contract with your agency.
 Please immediately undertake efforts to ensure that your services to the Company will terminate
effective close of business hours of 11 March 1993.

This is without prejudice to whatever obligations you may have to the company under the
abovementioned contract.

Very truly yours,

(Sgd.)
EMMANUEL M. NON
Sales Merchandising III

6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer allowed to work
and we were refused entrance by the security guards posted. According to the security guards, all merchandisers of
Procter and Gamble under S[APS] who filed a case in the Dept. of Labor are already dismissed as per letter of
Procter and Gamble dated February 25, 1993. x x x52

Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-Gem which
dismissed its employees for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its employees
upon the initiation of P&G. It is evident that SAPS does not carry on its own business because the termination of
its contract with P&G automatically meant for it also the termination of its employees’ services. It is obvious from
its act that SAPS had no other clients and had no intention of seeking other clients in order to further its
merchandising business. From all indications SAPS, existed to cater solely to the need of P&G for the supply of
employees in the latter’s merchandising concerns only. Under the circumstances prevailing in the instant case, we
cannot consider SAPS as an independent contractor.

Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the lawfulness of the
dismissal rests with the employer.53 In termination cases, the burden of proof rests upon the employer to show that
the dismissal is for just and valid cause.54 In the instant case, P&G failed to discharge the burden of proving the
legality and validity of the dismissals of those petitioners who are considered its employees. Hence, the dismissals
necessarily were not justified and are therefore illegal.

Damages

We now go to the issue of whether petitioners are entitled to damages. Moral

and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or
constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy.55

With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on
the part of the latter, we find no support for the award of damages.

As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The
sudden and peremptory barring of the concerned petitioners from work, and from admission to the work place,
after just a one-day verbal notice, and for no valid cause bellows oppression and utter disregard of the right to due
process of the concerned petitioners. Hence, an award of moral damages is called for.

Attorney’s fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith
and were compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts56 of P&G.

Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges, inclusive of allowances, and other benefits or
their monetary equivalent from the time the compensation was withheld up to the time of actual
reinstatement.57 Hence, all the petitioners, having been illegally dismissed are entitled to reinstatement without loss
of seniority rights and with full back wages and other benefits from the time of their illegal dismissal up to the
time of their actual reinstatement.1avvphi1

WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals in CA-
G.R. SP No. 52082 and the Resolution dated October 20, 2003 are REVERSED and SET ASIDE. Procter &
Gamble Phils., Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective employees immediately
without loss of seniority rights and with full backwages and other benefits from the time of their illegal dismissal
up to the time of their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of
those petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio,
Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David,
Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto
Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G.
Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German
Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoña, Philip M. Loza, Mario N. Coldayon,
Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr.,
Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao,
Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, ₱25,000.00 as moral
damages plus ten percent of the total sum as and for attorney’s fees.

Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of this
Decision, of petitioners’ backwages and other benefits; and ten percent of the total sum as and for attorney’s fees
as stated above; and for immediate execution.

SO ORDERED.
 THIRD DIVISION

APRIL 25, 2018

G.R. No. 226727

UNIVERSITY OF THE EAST and DR. ESTER GARCIA, Petitioners

vs
VERONICA M. MASANGKAY and GERTRUDO R. REGONDOLA, Respondents

DECISION

VELASCO, JR., J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and setting
aside of the February 19, 2016 Decision 1 and August 26, 2016 Resolution of the Court of Appeals (CA) in CA-
G.R. SP No. 132774, entitled "Veronica M Masangkay and Gertruda R. Regondola v. University of the East, Dr.
Ester Garcia and The National Labor Relations Commission."

Respondents Veronica M. Masangkay (Masangkay) and Gertrudo R. Regondola (Regondola) were regular faculty
members, Associate Professors, and Associate Deans of petitioner University of the East (UE) - Caloocan Campus,
prior to their dismissal on November 26, 2007.

While holding said positions at UE, respondents submitted three (3) manuals, namely: Mechanics, Statics, and
Dynamics, requesting said manuals' temporary adoption as instructional materials. Respondents represented
themselves to be the rightful authors thereof, together with their co-author, a certain Adelia F. Rocamora
(Rocamora). Accompanying said requests are certifications under oath, signed by respondents, declaring under
pain of perjury, and openly certifying that the manuals are entirely original and free from plagiarism. Said
certification reads:

We hereby certify that the contents of the manual MECHANICS FOR ECE AND COE by Gertruda
R. Regondola, et al. to be used in the subjects ECE 311N are entirely original and free from
plagiarism.

(SGD.)

Gertruda R.
Regondola.

(SGD.)
Veronica Masangkay2

After review, UE approved the requests for use of said manuals by students of the College of Engineering.

Thereafter, petitioners received two (2) complaint-letters via electronic mail (e-mail) from a certain Harry H.
Chenoweth and Lucy Singer Block. Chenoweth arid Block's father are authors, respectively, of three books,
namely: Applied Engineering Mechanics, Engineering Mechanics, 2nd Edition, 1954, and Engineering Mechanics:
Statics & Dynamics, 3rd Edition, 1975. They categorically denied giving respondents permission to copy,
reproduce, imitate, or alter said books, and asked for assistance from UE to stop the alleged unlawful acts and deal
with this academic dishonesty.
Prompted by the seriousness of the allegations, UE investigated the matter. After a thorough evaluation of the
alleged plagiarized portions, petitioner conducted an investigation in which respondents actively participated and
filed their Answer. Eventually, UE's Board of Trustees issued Resolution No. 2007-11-84 dismissing respondents.
Notices of Dismissal effective November 26, 2007 were sent to respondents and Rocamora via registered mail.

Unlike herein respondents, Rocamora sought reconsideration of the decision to the Board of Trustees.
Respondents, however, did not appeal the decision terminating them and instead opted to claim their benefits due
them, which consisted of leave credits, sick leave, holiday pay, bonuses, shares in tuition fee increase, COLA, and
RAT A. For her part, respondent Masangkay requested that a portion of her benefits be applied to her existing car
loan. For the amounts that they received, they signed vouchers and pay slips. These were duly acted upon by UE.

Rocamora's case

It appears that after the Board of Trustees denied reconsideration of Rocamora's dismissal, the latter filed a case
against UE for illegal dismissal. Eventually reaching this Court, the illegality of her dismissal was upheld by the
Court through a resolution in University of the East and Dr. Ester Garcia v. Adelia Rocamora, G.R. No. 199959,
February 6, 2012.

Meanwhile, almost three years after having been dismissed from service and after collecting their accrued benefits,
respondents then filed a complaint for illegal dismissal on July 20, 2010, docketed as NLRC NCR No. 07-09924-
10, entitled "Veronica M. Masangkay and Gertruda R. Re gondola v. University of the East (UE), President Ester
Garcia."

Ruling of the Labor Arbiter

In its February 28, 2011 ruling,3 the labor arbiter held that respondents were illegally dismissed and ordered their
reinstatement without loss of seniority rights and other benefits and full backwages inclusive of allowances until
actual reinstatement. UE was directed to pay a total of ₱4,623,873.34 representing both respondents' backwages,
allowances, 13th month pay, moral and exemplary damages. Thus:

WHEREFORE, premises considered, judgment is hereby rendered finding complainants to have

been ILLEGALLY DISMISSED. Respondents are ordered 10 immediately reinstate complainants
to their position without loss of seniority rights and other benefits and full backwages inclusive of
allowances until actual reinstatement. Respondent University of the East is directed 10 pay
complainants the following:

VERONICA M.    
MASANGKAY
1 BACKWAGES:    
.
11/1/07 - 2/28/11    
50,000 x 39.93 = ₱ 1,996,500.00  
13th MO. PAY:    
₱1,996,500/12 = ₱ 166,375.00  
ALLOWANCE: 41741    
₱3,000.00 X 39.93 = ₱ 119,790.00 ₱ 2,282, 665.
00
2 13th MO. PAY    
.
7/20/2007 - 10/31/2007    
₱50,000 x 3.40 / 12 =   ₱ 14, 166.67
3   ₱ 50,000.00
MORAL DAMAGES
.
4 EXEMPLARY   ₱ 25,000.00
. DAMAGE
   TOTAL: ₱
2,371,831.67
GERTRUDO R.    
REGONDOLA
5 BACKWAGES: November 1, 2007 -  
. February 28, 2011
50,000.00 x 39.93 = ₱1,996,500.00  
13th MO. PAY:    
₱1,996,500/12 = ₱166,375.00  
ALLOWANCE:    
₱3,000.00 X 39.93 =   ₱2,
162,875.00
6 13th MO. PAY    
.
July 20, 2007 - October    
31, 2007
₱50,000 x 3.40 I 12 =   ₱ 14, 166.67
7   ₱ 50,000.00
MORAL DAMAGES
.
8 EXEMPLARY   ₱ 25,000.00
. DAMAGE
10% Attorney's Fees 462,287.33
GRAND TOTAL: ₱4,623,873.34

SO ORDERED.4

NLRC Decision

The case reached the National Labor Relations Commission (NLRC), where the Commission reversed the labor
arbiter's ruling and disposed of the case in this wise:

WHEREFORE, the appeal of respondents is GRANTED and the labor arbiter's Decision is
REVERSED and SET ASIDE. The instant complaint is DISMISSED for lack of merit.

SO ORDERED.5

Their motion for reconsideration having been denied, 6 respondents elevated the case to the CA.

CA Ruling

The appellate court reinstated the labor arbiter's ruling that petitioners failed to prove that indeed a just cause for
respondents' dismissal exists. Too, it emphasized, among others, that the instant petition is bound by this Court's
Decision in the Rocamora case, calling for the application of the doctrine of stare decisis. The CA thus disposed
of the case in this manner:

IN VIEW OF ALL THESE, the petition is GRANTED. The assailed Decision dated June 29,
2012 and Resolution dated September 17, 2013 of public respondent National Labor Relations
Commission are SET ASIDE. The Decision dated February 28, 2011 of the Labor Arbiter
is REINSTATED.

SO ORDERED.
The CA denied reconsideration of the questioned Decision in the assailed Resolution of August 26, 2016,
prompting petitioners to file the instant petition, raising the following issues, to wit:

1) Whether or not respondents' misrepresentation, dishonesty, plagiarism and/or copyright infringement which is
considered academic dishonesty tantamount to serious misconduct is a just and valid cause for their dismissal.

2) Whether or not the CA erroneously applied the principle of stare decisis.

3) Whether or not respondents are entitled to reinstatement with full backwages, and other monetary awards
despite the fact that they were dismissed for valid cause under the Labor Code.

4) Whether or not the award of damages and attorney's fees have factual and legal basis.

Petitioners argue, among others, that the instant case cannot be bound by the Rocamora case via application of the
doctrine of stare decisis because of substantial differences in Rocamora's situation and in that of respondents, as
noted by the NLRC. Too, petitioners maintain that plagiarism, a form of academic dishonesty, is a serious
misconduct that justly warrants herein respondents' dismissal.

This Court's Ruling

We resolve to grant the petition.

The principle of stare decisis requires that once a case has been decided one way, the rule is settled that any other
case involving exactly the same point at issue should be decided in the same manner. 7 It simply means that for the
sake of certainty, a conclusion reached in one case should be applied to those that follow if the facts are
substantially the same, even though the parties may be different. It proceeds from the first principle of justice that,
absent any powerful countervailing considerations, like cases ought to be decided alike. Thus, where the same
questions relating to the same event have been put forward by the parties similarly situated as in a previous case
litigated and decided by a competent court, the rule of stare dee is is is a bar to any attempt to relitigate the same
issue. 8

Applying said principle, the CA held that Our ruling in University of the East v. Adelia Rocamora9 is a preceμent
to the case at bar, involving, as it does, herein respondents' co-author and tackling the same violation-the alleged
plagiarism of the very same materials subject of the instant case.

In this petition, UE, however, asserts that the case of respondents substantially varies from Rocamora so as not to
warrant the application of said rule.

Indeed, the CA erred when it relied on Our ruling in University of the East v. Adelia Rocamora  in resolving the
present dispute. Our decision in Rocamora, rendered via a Minute Resolution, is not a precedent to the case at bar
even though it tackles the same violation-the alleged plagiarism of the very same materials subject of the instant
case, which was initiated by respondents' co-author. This is so since respondents are simply not similarly situated
with Rocamora so as to warrant the application of the doctrine of stare decisis.

A legal precedent is a principle or rule established in a previous case that is either binding on or persuasive for a
court or other tribunal when deciding subsequent cases with similar issues or facts.

Here, We find that the Rocamora case is not on all fours with the present dispute, thereby removing it from the
application of the principle of stare decisis. First,  herein respondents categorically represented to UE under oath
that the Manuals were free from plagiarism-an act in which their co-author Rocamora did not
participate. Second, respondents benefited financially from the sale of the Manuals while Rocamora did
not. Third,  respondents acquiesced to UE's decision to terminate their services and even requested the release of
and thereafter claimed the benefits due them.

Aside from these, respondents executed a Certification categorically stating under oath and declaring under
pain of perjury that the manuals are entirely original and free from plagiarism. To reiterate:

We hereby certify that the contents of the manual MECHANICS FOR ECE AND COE by Gertrude
R. Regondola, et al. to be used in the subjects ECE 31 IN are entirely original and free from
plagiarism.
 (SGD.)
Gertruda R. Regondola

(SGD.)
Veronica Masangka10

As correctly noted by the NLRC in its September 17, 2013 Resolution, 11 Rocarwra made no such undertaking
with respect to the subject materials. This Certification is crucial in determining the guilt of herein respondents and
cannot simply be disregarded.

By expressly guaranteeing to UE that their Manuals were entirely original, coupled by their omission to attribute
the copied portions to the original authors thereof, as per the Memorandum submitted by Chancellor Celso D.
Benologa, it is apparent that respondents represented said copied portions as their own.

More importantly, We find that the CA erred in disregarding the evidence presented by petitioner as regards the
issue of plagiarism.

In the assailed ruling, the CA held that petitioner UE failed to prove that respondents were indeed guilty of the
charge of misconduct or dishonesty through plagiarism-a form of academic dishonesty. It found that the evidence
does not show that respondents were motivated with wrongful intent in publishing the manuals. 12 In ruling thus,
the appellate court heavily relied on the approval of the manual by the Textbook Evaluation and Publishing Office
(TEPO) and the Board of Trustees in exculpating respondents from liability.

The CA also found that their act of allegedly plagiarizing the books of Chenoweth and Singer was not duly proven
since the two (2) e-mails from Chenoweth and Block were not verified such that, therefore, such e-mails afford no
assurance of their authenticity and reliability. 13 The CA went on to state that "[h]aving issues on their authenticity
and reliability, the allegations in the e-mails are mere speculations that, therefore, such fact renders such emails
inadmissible in evidence against petitioners."14

The CA, in its Resolution, thereafter ruled that the evidence charging respondents with plagiarism was
inadmissible, viz:

Be that as it may, We reiterate that private respondents failed to sufficiently prove that petitioners
were guilty of plagiarism that would warrant the latter's dismissal from service. In order to prove
petitioners' act of plagiarizing the books of Chenoweth and Ferdinand Singer, private respondents
only presented the following: unauthenticated and unverified e-mails from Chenoweth and Block
and the Lecture Guides/Manuals. The e-mails from Chenoweth and Block, being unauthenticated,
are, therefore, inadmissible in evidence against petitioners. Private respondents cannot merely rely
on the Lecture Guides/Manuals in order to show that petitioners were guilty of plagiarism. The
reason is that such Lecture Guides/Manuals were duly scrutinized and evaluated by the TEPO,
through its Board of Textbooks Review, and were eventually approved by the UE Board of
Trustees. It would be absurd for private respondents to declare the Lecture Guides/Manuals as
plagiarized documents when in the first place, private respondents, through TEPO and the UE
Board of Trustees, had initially scrutinized and approved the same. 15

In labor cases, the deciding authority should use every reasonable means to ascertain speedily and objectively the
facts, without regard to technicalities of law and procedure. Technical rules of evidence are not strictly binding in
labor cases such as the instant one. 16 Thus, it was error on the part of the CA to disregard the evidence presented
by petitioners to establish the act of plagiarism committed by respondents.

It is worthy to note that the CA failed to examine the actual text written in the manual and compare the same with
the work claimed to have been plagiarized. However, after a thorough review of the records of the case, the Court
finds that respondents, indeed, plagiarized the works of Chenoweth and Singer. It is glaring from a comparison of
the subject text that respondents heavily lifted portions of the said books, as reported in the Memorandum
submitted by Chancellor Celso F. Bebologa, 17 thus:

FINDINGS:
 1. In his Memorandum dated March 15, 2007, Dean Constantino T. Yap verified Mr. Chenoweth's
claim that he is one of the authors of the textbook "Applied Engineering Mechanics". (EXHIBIT
"1")

2. At least three (3) books containing the names of Masangkay, Rocamora, Regondola, and
Tolentino were copied verbatim or with slight modifications from the following original
engineering books:

- Engineering Mechanics, Second Edition, by Ferdinand L. Singer

- Applied Engineering Mechanics, Metric Edition, by Alfred Jensen, Harry H. Chenoweth, adapted
by David N. Watkins

Another author, Hibbeler, is also mentioned as a source of the "reproduction" but the specific book
is not identified (EXHIBITS "2," "3" "4" & "5")

Tolentino's name appeared only in one of the three books copied from the original (EXHIBITS "6"
TO "6-B," "7" TO "7-B" & "8" TO "8- B").

3. No publisher is indicated in the "copied" volumes which are made of low quality paper.

OTHER INFORMATION

- "Reproduced" copies are sold to students. Copies bought by students are retrieved by professors at
the end of the school term. Records of students who failed to return the "reproduced" copies bought
by them are marked LFR and/or NC.

- Students interested to buy the "reproduced" book are referred to specific bookstores. A bookstore -
Special & Journal - with address at No. 76 Samson Road, Caloocan City is selling the "reproduced"
books.

- Some professors reportedly own or operate printing press facilities. Others are holding personal
review classes or having their own review centers.

- There are pending lapsed applications for removal of LFR at the Engineering
Department.1âwphi1 Professors alleged their class records

In a letter requiring respondents to provide the basis of their appeal of their dismissal, Dr. Ester A
Garcia quoted the findings of the Faculty Disciplinary Board:

SUMMARY OF FINDINGS

1. From the books of Singer, 558 sentences/figures were plagiarized and used in the manuals
of Respondents, either verbatim or with modification; while from the book of Jensen-
Chenoweth, 52 sentences and figures were likewise taken and used in Respondents' manuals.

2. Respondents did not mention, as required in Section 184 of the Intellectual Property Law, the
sources and the names of the authors of the textbooks from where they lifted passages, illustrations,
and tables used in their manuals.

3. In their request to TEPO for temporary adoption of the manuals, Respondents certified under
oath that the manuals are all original and free from plagiarism. Other investigation, however, shows
otherwise. (emphasis ours)

To this Court, the bulk of the copied text vis-a-vis the said Certification clearly shows wrongful intent on the part
of respondents. We cannot subscribe to the CA ruling that respondents were in good faith since, being the principal
authors thereof, they had full knowledge as to what they were including in their written work. In other words, they
knew which portions were truly original and which were not.
From the foregoing, the Court finds that there is sufficient basis for dismissing respondents from service,
considering the highest integrity and morality which the profession requires from its teachers. Respondents
plagiarized the works of Chenoweth and Singer by lifting large portions of the text of the works of said writers
without properly attributing the copied text, and, to make matters worse, they represented under oath that no
portion of the Manuals were plagiarized when, in truth and in fact, huge portions thereof were improperly lifted
from other materials.

Lastly, it is well to emphasize that Rocamora strongly opposed her dismissal from service as contained in her
December 3, 2007 Letter, 18 where she invoked denial of due process in her termination, denied having committed
plagiarism or benefiting from the printing of the materials in question, and '"sincerely hop[ing] that the [Board of
Trustees] xx x, will see the injustice [she] got which ought to be reversed and reconsidered."19

Such, however, is not so for herein respondents. It is well to emphasize that in her June 2, 2008
Letter,20 respondent Masangkay requested the recomputation of the amounts due in her favor after said
termination, as well as the application of said amounts to her car loan balance. She was even cooperative with the
procedure, asking the management to advise her should there be a need for her to prepare and accomplish her time
records for purposes of recomputing her salary.

As to Regondola, aside from the cash and check vouchers 21 that he signed after receiving the amounts due him
after said termination, it does not appear that he made any similar letter request or appeal, unlike Masangkay or
Rocamora, respectively.

Indeed, rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good
customs, or prejudicial to a third person with a right to be recognized by law. 22 Within the context of a termination
dispute, waivers are generally looked upon with disfavor and are commonly frowned upon as contrary to public
policy and ineffective to bar claims for the measure of a worker's legal rights. If (a) there is clear proof that the
waiver was wangled from an unsuspecting or gullible person; or (b) the terms of the settlement are
unconscionable, and on their face invalid, such quitclaims must be struck down as invalid or illegal.23

Thus, not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be
disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will
step in to annul the questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking. 24

In the case at bar, We find no reason to rule that respondents did not waive their right to contest UE's
decision.1âwphi1 Based on their actuations subsequent to their termination, it is clear that they were amenable to
UE's decision of terminating their services on the ground of academic dishonesty. Nowhere can we find any
indication of unwillingness or lack of cooperation on respondents' part with regard to the events that transpired so
as to convince Us that they were indeed constrained to forego their right to question the management's decision.
Neither do we find any sign of coercion nor intimidation, subtle or otherwise, which could have forced them to
simp1y accept said decision. In fact, based on their qualifications, this Court cannot say that respondents and UE
do not stand on equal footing so as to force respondents to simply yield to UE's decision. Furthermore, there is no
showing that respondents did not receive or received less than what is legally due them in said termination.

In sum, We are of the view that their acceptance of UE's decision is voluntary and with full understanding thereof,
tantamount to a waiver of their right to question the management's decision to terminate their services for
academic dishonesty. It is as though they have waived any and all claims against UE when they knowingly and
willingly acquiesced to their dismissal and opted to receive the benefits due them instead.

We also find that they genuinely accepted petitioner University's decision at that time and that their filing of the
complaint almost three (3) years later was a mere afterthought and, in their own words, inspired by their
colleague's victory.25

In the light of the foregoing, the Rocamora case cannot be used as a precedent to the case at bar. In view of the
substantial evidence presented by petitioner UE that respondents committed plagiarism, then the complaint for
illegal dismissal must, therefore, be dismissed for utter lack of basis.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated February 19, 2016 in
CA-G.R. SP No. 132774 and its August 26, 2016 Resolution are hereby REVERSED and SET ASIDE. The
complaint for illegal dismissal is hereby DISMISSED for lack of merit. SO ORDERED.
 THIRD DIVISION

JULY 23, 2018

G.R. No. 221813

MARICALUM MINING CORPORATION, Petitioner

vs.
ELY G. FLORENTINO, GLENN BUENVIAJE, RUDY J. GOMEZ, represented by his heir THELMA
GOMEZ, ALEJANDRO H. SITCHON, NENET ARITA, FERNANDO SIGUAN, DENNIS ABELIDA,
NOEL S. ACCOLADOR,WILFREDO TAGANILE, SR., MARTIR S. AGSOY, SR., MELCHOR APUCA
Y, DOMINGO LA VIDA, JESUS MOSQUEDA, RUELITO A. VILLARMIA, SOFRONIO M. A YON,
EFREN T. GENISE, ALQUIN A. FRANCO, PABLO L. ALEMAN, PEPITO G. HEPRIANA, ELIAS S.
TRESPECES, EDGAR SOBRINO, Respondents

x-----------------------x

G.R. No. 222723

ELY FLORENTINO, GLENN BUENVIAJE, RUDY J. GOMEZ, represented by his heir THELMA
GOMEZ, FERNANDO SIGUAN, DENNIS ABELIDA, NOEL S. ACCOLADOR,WILFREDO TAGANILE,
SR., MARTIR S. AGSOY, SR., MELCHOR APUCA Y, DOMINGO LA VIDA, JESUS MOSQUEDA,
RUELITO A. VILLARMIA, SOFRONIO M. A YON, EFREN T. GENISE, ALQUIN A. FRANCO, PABLO
L. ALEMAN, PEPITO G. HEPRIANA, ELIAS S. TRESPECES, EDGAR SOBRINO, ALEJANDRO H.
SITCHON, NENET ARITA, WELILMO T. NERI, ERLINDA FERNANDEZ, and EDGARDO
PENAFLORIDA, Petitioners
vs.
NATIONAL LABOR RELATIONS COMMISSION – 7th DIVISION, CEBU CITY, "G" HOLDINGS,
INC., and TEODORO G. BERNARDINO, ROLANDO DEGOJAS, MARICALUM MINING
CORPORATION. Respondents

DECISION

GESMUNDO, J.:

A subsidiary company's separate corporate personality may be disregarded only when the evidence shows that
such separate personality was being used by its parent or holding corporation to perpetrate a fraud or evade an
existing obligation. Concomitantly, employees of a corporation have no cause of action for labor-related claims
against another unaffiliated corporation, which does not exercise control over them.

The subjects of the instant consolidated cases are two (2) petitions for appeal by certiorari filed by the following
petitioners:

1) Maricalum Mining Corporation (Maricalum Mining) m G.R. No. 221813; and

2) Ely Florentino, Glenn Buenviaje, Rudy J. Gomez, 1 Fernando Siguan, Dennis Abelida, Noel S.
Acollador, Wilfredo C. Taganile, Sr., Martir S. Agsoy, Sr., Melchor B. Apucay, Domingo Lavida,
Jesus Mosqueda, Ruelito A. Villarmia, Sofronio M. Ayon, Efren T. Genise, Alquin A. Franco,
Pabio L. Aleman, Pepito G. Hepriana, Elias S. Trespeces, Edgar M. Sobrino, Alejandro H. Sitchon,
Nenet Arita, Dr. Welilmo T. Neri, Erlinda L. Fernandez, and Edgardo S.
Pefiaflorida (complainants) in G.R. No. 222723.
Both of these petitions are assailing the propriety of the October 29, 2014 Decision 2 of the Court of
Appeals (CA) in CA-G.R. SP No. 06835. The CA upheld the November 29, 2011 Decision 3 and January 31, 2012
Resolution4 of the National Labor Relations Commission (NLRC) in NLRC Case No. VAC-05-000412-11. In the
present petitions, complainants seek to reinstate the April 20, 2011 Decision 5 of the Labor Arbiter (LA) in
consolidated cases NLRC RAB VI CASE No. 09-10755-10, NLRC RAB VI CASE No. 12-10915-10, NLRC RAB
VI CASE No. 12-10916-10 and NLRC RAB VI CASE No. 12-10917-10, which granted their joint complaints for
monetary claims against G Holdings, Inc. (G Holdings); while Maricalum Mining seeks to have the
case remanded to the LA for proper computation of its total monetary liability to the complainants.

The Antecedents

The dispute traces its roots back to when the Philippine National Bank (PNB, a former government-owned-and-
controlled corporation) and the Development Bank of the Philippines (DBP) transferred its ownership of
Maricalum Mining to the National Government for disposition or privatization because it had become a non-
performing asset.6

On October 2, 1992, the National Government thru the Asset Privatization Trust (APT) executed a Purchase and
Sale Agreement (PSA) with G Holdings, a domestic corporation primarily engaged in the business of owning and
holding shares of stock of different companies. G Holding bought 90% of Maricalum Mining's shares and financial
claims in the form of company notes. In exchange, the PSA obliged G Holdings to pay APT the amount of
₱673,161,280.00, with a down payment of ₱98,704,000.00 and with the balance divided into four tranches payable
in installment over a period of ten years. 7 Concomitantly, G Holdings also assumed Maricalum Mining's liabilities
in the form of company notes. The said financial liabilities were converted into three (3) Promissory
Notes (PNs) totaling ₱550,000,000.00 (₱114,715,360.00, ₱186,550,560.00 and ₱248,734,080.00), which were
secured by mortgages over some of Maricalum Mining's properties. 8 These PNs obliged Maricalum Mining to pay
G Holdings the stipulated amount of ₱550,000,000.00.

Upon the signing of the PSA and paying the stipulated down payment, G Holdings immediately took physical
possession of Maricalum Mining's Sipalay Mining Complex, as well as its facilities, and took full control of the
latter's management and operations.9

On January 26, 1999, the Sipalay General Hospital, Inc. (Sipalay Hospital) was duly incorporated to provide
medical services and facilities to the general public. 10

Afterwards, some of Maricalum Mining's employees retired and formed several manpower cooperatives, 11 as
follow:

COOPERATIVE DATE OF REGISTRATION

San Jose Multi-Purpose
December 8, 1998
Cooperative (SJMPC)
Centennial Multi-Purpose
April 5, 1999
Cooperative (CeMPC)
Sipalay Integrated Multi-Purpose
April 5, 1999
Cooperative (SIMPC)
Allied Services Multi-Purpose
July 23, 1999
Cooperative (ASMPC)
Cansibit Multi-Purpose
September 16, 1999
Cooperative (CaMPC)

In 2000, each of the said cooperatives executed identical sets of Memorandum of Agreement 12 with Maricalum
Mining wherein they undertook, among others, to provide the latter with a steady supply of workers, machinery
and equipment for a monthly fee.

On June 1, 2001, Maricalum Mining's Vice President and Resident Manager Jesus H. Bermejo wrote a
Memorandum 13 to the cooperatives informing them that Maricalum Mining has decided to stop its mining and
milling operations effective July 1, 2001 in order to avert continuing losses brought about by the low metal prices
and high cost of production.

In July 2001, the properties of Maricalum Mining, which had been mortgaged to secure the PNs, were
extrajudicially foreclosed and eventually sold to G Holdings as the highest bidder on December 3, 2001. 14

On September 23, 2010, some of Maricalum Mining's workers, including complainants, and some of Sipalay
General Hospital's employees jointly filed a Complaint15 with the LA against G Holdings, its president, and
officer-in-charge, and the cooperatives and its officers for illegal dismissal, underpayment and nonpayment of
salaries, underpayment of overtime pay, underpayment of premium pay for holiday, nonpayment of separation
pay, underpayment of holiday pay, nonpayment of service incentive leave pay, nonpayment of vacation and sick
leave, nonpayment of 13th month pay, moral and exemplary damages, and attorneys fees.

On December 2, 2010, complainants and CeMPC Chairman Alejandro H. Sitchon surprisingly filed his complaint
for illegal dismissal and corresponding monetary claims with the LA against G Holdings, its officer-in-charge and
CeMPC. 16

Thereafter, the complaints were consolidated by the LA.

During the hearings, complainants presented the affidavits of Alejandro H. Sitchon and Dennis Abelida which
attested that, prior to the formation of the manpower cooperatives, their services were terminated by Maricalum
Mining as part of its retrenchment program. 17 They claimed that, in 1999, they were called by the top executives
of Maricalum Mining and G Holdings and informed that they will have to form a cooperative for the purpose of
providing manpower services in view of the retrenchment program. Thus, they were "rehired" only after their
respective manpower cooperative services were formed. Moreover, they also submitted the following documents:
(a) Cash Vouchers 18 representing payments to the manpower cooperatives; (b) a Payment Schedule 19 representing
G Holdings' payment of social security contributions in favor of some Sipalay Hospital employees (c) Termination
Letters 20 written by representatives of G Holdings, which were addressed to complainants including those
employed by Sipalay Hospital; and (d) Caretaker Schedules 21 prepared by G Holdings to prove the existence of
employment relations.

After the hearings were concluded, complainants presented their Position Paper 22 claiming that: they have not
received any increase in wages since they were allegedly rehired; except for Sipalay Hospital's employees, they
worked as an augmentation force to the security guards charged with securing Maricalum Mining's assets which
were acquired by G Holdings; Maricalum Mining's assets have been exposed to pilferage by some of its rank-and-
file employees whose claims for collective bargaining benefits were undergoing litigation; the Sipalay Hospital is
purportedly "among the assets" of Maricalum Mining acquired by G Holdings; the payrolls for their wages were
supposedly prepared by G Holdings' accounting department; since the second half of April 2007, they have not
been paid their salary; and some of their services were dismissed without any due process.

Based on these factual claims, complainants posited that: the manpower cooperatives were mere alter egos of G
Holdings organized to subvert the "tenurial rights" of the complainants; G Holdings implemented a retrenchment
scheme to dismiss the caretakers it hired before the foreclosure of Maricalum Mining's assets; and G Holdings was
their employer because it allegedly had the power to hire, pay wages, control working methods and dismiss them.

Correspondingly, G Holdings filed its Position Paper23 maintaining that: it was Maricalum Mining who entered
into an agreement with the manpower corporations for the employment of complainants' services for auxiliary or
seasonal mining activities; the manpower cooperatives were the ones who paid the wages, deducted social security
contributions, withheld taxes, provided medical benefits and had control over the working means and methods of
complainants; despite Maricalum Mining's decision to stop its mining and milling operations, complainants still
continued to render their services for the orderly winding down of the mines' operations; Maricalum Mining
should have been impleaded because it is supposed to be the indispensable party in the present suit; (e) Marical um
Mining, as well as the manpower cooperatives, each have distinct legal personalities and that their individual
corporate liabilities cannot be imposed upon each other; and there was no employer-employee relationship
between G Holdings and complainants.

Likewise, the manpower cooperatives jointly filed their Position Paper24 arguing that: complainants had exhibited a
favorable response when they were properly briefed of the nature and benefits of working under a cooperative
setup; complainants received their fair share of benefits; complainants were entitled to cast their respective votes in
deciding the affairs of their respective cooperatives; complainants, as member of the cooperatives, are also co-
owners of the said cooperative and they cannot bargain for higher labor benefits with other co-owners; and the LA
has no jurisdiction over the case because there is no employer-employee relationship between a cooperative and its
members.

The LA Ruling

In its decision dated April 28, 2011, the LA ruled in favor of complainants.1awp++i1 It held that G Holdings is
guilty of labor-only contracting with the manpower cooperatives thereby making all of them solidarily and directly
liable to complainants. The LA reasoned that: G Holdings connived with Marcalum Mining in orchestrating the
formation of manpower cooperatives to circumvent complainants' labor standards rights; it is highly unlikely that
complainants (except Sipalay Hospital's employees) would spontaneously form manpower cooperatives on their
own and in unison without the guidance of G Holdings and Maricalum Mining; and complainants effectively
became the employees of G Holdings because their work had changed from assisting in the mining operations to
safeguarding the properties in the Sipalay Mining Complex, which had already been acquired by G Holding. On
the other hand, the LA denied the claims of complainants Nenet Arita and Domingo Lavida for lack of factual
basis. The fallo of the LA decision reads:

WHEREFORE, premises considered, judgment is hereby rendered DIRECTING respondent "G"

HOLDINGS, INC. to pay complainants as follows:

    Unpaid Salaries/ 13th Month

Wages Pay
(1) Salvador Arceo ₱81,418.08 ₱6,784.84
(2) Sofronio Ayon 79,158.50 6,596.54
(3) Glenn Buenviaje 105,558.40 8,796.53
(4) Ely Florentino 102,325.28 8,527.11
(5) Rogelio Fulo 99,352.23 8,279.35
(6) Efren Genise 161,149.18 13,429.10
(7) Rudy Gomez 72,133.41 6,011.12
(8) Jessie Magallanes 239,251.94 19,937.66
Freddie
(9) 143,415.85 11,951.32
Masicampo
(10 Edgardo
146,483.60 12,206.97
) Penaflorida
(11
Noel Acollador 89,163.46 7,430.29
)
(12 Gorgonio
220,956.10 18,413.01
) Baladhay
(13
Jesus Mosqueda 48,303.22 4,025.27
)
(14
Alquin Franco 180,281.25 15,023.44
)
(15
Fabio Aleman 30,000.00 2,500.00
)
(16
Elias Trespeces 180,000.00 15,000.00
)
(17
Pepito Hedriana 18,000.00 1,500.00
)
(18
Dennis Abelida 149,941.00 12,945.08
)
 (19
Melchor Apucay 371,587.01 30,965.58
)
(20
Martin Agsoy 128,945.08 10,745.42
)
(21
Ruelito Villarmia 224,486.95 18,707.25
)
(22
Fernando Siguan 417,039.32 34,753.28
)
(23 Alejandro
380,423.16 31,701.93
) Sitchon
(24
Welilmo Neri 456,502.36 38,041.86
)
(25 Erlinda
125,553.88 10,462.82
) Fernandez
(26
Edgardo Sobrino 112,521.40 9,376.78
)
(27 Wildredo
52,386.82 4,365.57
) Taganile
(28 Bartholomew 68,000.00 5,666.67
) Jamboy
    ₱4,484,337.48 ₱373,694.79

and the amount of ₱485,803.23 as attorney's fees, or the total amount of FIVE MILLION THREE
HUNDRED FORTY-THREE THOUSAND EIGHT HUNDRED THIRTY-FIVE and 50/100
PESOS (₱5,343,835.50).

The other claims are DISMISSED for lack of merit.

Further, the complaints against respondents SIP ALA Y INTEGRATED MULTI-PURPOSE

COOPERATIVE, ALLIED SERVICES MULTI-COOPERATIVE, SAN JOSE MULTI-PURPOSE
COOPERATIVE, CANSIBIT MULTI-PURPOSE COOPERATIVE, and CENTENNIAL MULTI-
PURPOSE COOPERATIVE, being mere agents of respondent "G" HOLDINGS, INC., are hereby
DISMISSED.

SO ORDERED.25

The parties filed their respective appeals to the NLRC.

On July 18, 2011, Marical um Mining filed its Appeal-in-Intervention 26 seeking to: (a) reverse and set aside the
Labor Arbiter's Decision; (b) declare Mari cal um Mining as the true and proper party-in-interest; (c) remand the
case back to the Labor Arbiter for proper computation of the money claims of the complainants; and (d) give
Maricalum Mining the opportunity to settle with the complainants.

The NLRC Ruling

In its decision dated November 29, 2011, the NLRC modified the LA ruling. It held that Dr. Welilmo T. Neri,
Erlinda L. Fernandez and Edgar M. Sobrino are not entitled to the monetary awards because they were not able to
establish the fact of their employment relationship with G Holdings or Maricalum Mining because Sipalay
Hospital has a separate and distinct corporate personality. As to the remaining complainants, it found that no
evidence was adduced to prove that the salaries/wages and the 13th month pay had been paid.

However, the NLRC imposed the liability of paying the monetary awards imposed by the LA against Maricalum
Mining, instead of G Holdings, based on the following observations that: it was Maricalum Mining-not G
Holdings-who entered into service contracts by way of a Memorandum of Agreement with each of the manpower
cooperatives; complainants continued rendering their services at the insistence of Maricalum Mining through their
cooperatives; Maricalum Mining never relinquished possession over the Sipalay Mining Complex; Maricalum
Mining continuously availed of the services of complainants through their respective manpower cooperatives; in G
Holdings, Inc. v. National Mines and Allied Workers Union Local 103 (NAMAWU), et al. 27 (NAMA WU Case),
the Court already held that G Holdings and Maricalum Mining have separate and distinct corporate personalities.
The dispositive portion of the NLRC ruling states:

WHEREFORE, premises considered, the Decision rendered by the Labor Arbiter on 20 April 2011
is hereby MODIFIED, to wit:

1) the monetary award adjudged to complainants Jessie Magallanes, Rogelio E. Fulo, Salvador J.
Arceo, Freddie Masicampo, Welilmo Neri, Erlinda Fernandez and Edgar Sobrino are
CANCELLED;

2) the award of ten percent (10%) attorney's fees is ADJUSTED commensurate to the award of
unpaid salaries/wages and 13th month pay of the remaining complainants;

3) the directive for respondent "G" Holdings, Inc. to pay complainants the monetary awards
adjudged by the Labor Arbiter is CANCELLED;

4) it is intervenor that is, accordingly, directed to pay the remaining complainants their respective
monetary awards.1âwphi1

In all other respects the Decision STANDS.

SO ORDERED.28

Complainants and Maricalum Mining filed their respective motions for reconsideration before the NLRC. On
January 31, 2012, it issued a resolution modifying its previous decision. The dispositive portion of the NLRC
resolution state:

WHEREFORE, premises considered, intervenor's Motion for Reconsideration is only PARTIALLY

GRANTED. The Decision promulgated by the Commission on 29 November 2011 modifying the
Labor Arbiter's decision as stated therein, is further MODIFIED to the effect that the monetary
awards adjudged in favor of complainants Wilfredo Taganile and Bartholomew T. Jamboy are
CANCELLED.

SO ORDERED.29

Undaunted, the parties filed their respective petitions for certiorari before the CA.

The CA Ruling

In its decision dated October 29, 2014, the CA denied the petitions and affirmed the decision of the NLRC. It
ratiocinated that factual issues are not fit subjects for review via the extraordinary remedy of certiorari. The CA
emphasized that the NLRC's factual findings are conclusive and binding on the appellate courts when they are
supported by substantial evidence. Thus, it maintained that it cannot review and re-evaluate the evidence all over
again because there was no showing that the NLRC's findings of facts were reached arbitrarily. The decretal
portion of the CA decision states:

WHEREFORE, premises considered, the instant petition for certiorari is DENIED, and the assailed
Decision dated 29 December 2011 and two Resolutions both dated 31 January 2012 of the National
Labor Relations Commission are hereby AFFIRMED in all respects.

Costs against petitioners.

SO ORDERED.30

Hence, these consolidated petitions essentially raising the following issues:

 I

WHETHER THE COURT OF APPEALS ERRED IN REFUSING TO RE-EVALUATE THE

FACTS AND IN FINDING NO GRAVE ABUSE OF DISCRETION ON THE PART OF THE
NLRC;

II

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC'S FINDING OF

SUBSTANTIAL EVIDENCE IN GRANTING THE COMPLAINANTS' MONETARY AWARD
AS WELL AS ITS REFUSAL TO REMAND THE CASE BACK TO THE LABOR ARBITER
FOR RE-COMPUTATION OF SUCH AWARD;

III

WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THAT THE NLRC

ALLOWED MARICALUM MINING TO INTERVENE IN THE CASE ONLY ON APPEAL;

IV

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC'S RULING

WHICH ALLOWED THE PIERCING OF THE CORPORA TE VEIL AGAINST MARICALUM
MINING BUT NOT AGAINST SIPALAY HOSPITAL.

Complainants argue that the CA committed several reversible errors because: (a) it refused to re-evaluate the facts
of the case even if the factual findings of the NLRC and the LA were conflicting; (b) it failed to consider that G
Holdings had already acquired all of Maricalum Mining's assets and that Teodoro G. Bernardino (Bernardino) was
now the president and controlling stockholder of both corporations; (c) it failed to take into account that
Maricalum Mining was allowed to intervene only on appeal even though it was not a real party-in-interest; (d) it
failed to appreciate the LA' s findings that Maricalum Mining could not have hired complainants because G
Holdings had already acquired in an auction sale all the assets in the Sipalay Mining Complex; (e) it failed to
consider that all resident managers of the Sipalay Mining Complex were employed by G Holdings; (f) the
foreclosure of the assets in the Sipalay Mining Complex was intended to bring the said properties outside the reach
of complainants; (g) the Sipalay Hospital had been existing as a hospital for Maricalum Mining's employees long
before G Holdings arrived; (h) Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M. Sobrino and Wilfredo C.
Taganile, Sr. were all hired by Maricalum Mining but were dismissed by G Holdings; (i) Sipalay Hospital existed
without a board of directors and its employees were receiving orders from Maricalum Mining and, later on,
replaced by G Holdings' officer-in-charge; and (j) Maricalum Mining and G Holdings controlled the affairs of
Sipalay Hospital.

Maricalum Mining contends that the CA committed grave abuse of discretion because the monetary awards were
improperly computed. It claims that complainants had stopped rendering their services since September 23, 2010,
hence, their monetary claims covering the second half of April 2007 up to July 2007 have already prescribed as
provided pursuant to Article 291 of the Labor Code. Moreover, it also stressed that the NLRC should have
remanded the case to the LA for the determination of the manpower cooperatives' net surpluses and how these
amounts were distributed to their members to aid the proper determination of the total amount of the monetary
award. Finally, Maricalum Mining avers that the awards in favor of some of the complainants are "improbable"
and completely unfounded.

On the other hand, G Holdings argues that piercing the corporate veil of Maricalum Mining is not proper because:
(a) it did not acquire all of Maricalum Mining's assets; (b) it is primarily engaged in the business of owning and
holding shares of stocks of different companies-not participating in the operations of its subsidiaries; (c)
Maricalum Mining, the actual employers of complainants, had already manifested its willingness to settle the
correct money claims; (d) Bernardino is not a controlling stockholder of Maricalum Mining because the latter's
corporate records show that almost all of its shares of stock are owned by the APT; ( e) Joost Pekelharing-not
Bernardino-is G Holdings' president; (f) in the NAMA WU Case, it was already held that control over Maricalum
Mining was exercised by the APT and not G Holdings; (g) the NLRC did not commit any grave abuse of
discretion when it allowed Maricalum Mining to intervene after the LA's decision was promulgated; (h) the cash
vouchers, payment schedule, termination letters and caretaker schedules presented by complainants do not prove
the employment relationship with G Holdings because the signatories thereto were either from Maricalum Mining
or the manpower cooperatives; (i) this Court's pronouncements in the NAMA WU Case and in Republic v. G
Holdings, Inc. 31 prove that Maricalum Mining never relinquished possession of the Sipalay Mining Complex in
favor of G Holdings; and (j) Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M. Sobrino and Wilfredo C.
Taganile, Sr. were employees of the Sipalay Hospital, which is a separate business entity, and were not members
in any of the manpower cooperatives, which entered into a labor-only arrangement with Maricalum Mining.

The Court's Ruling

It is basic that only pure questions of law should be raised in petitions for review on certiorari under Rule 45 of
the Rules of Court.32 It will not entertain questions of fact as the factual findings of appellate courts are final,
binding or conclusive on the parties and upon this court when supported by substantial evidence. 33 In labor cases,
however, the Court has to examine the CA' s Decision from the prism of whether the latter had correctly
determined the presence or absence of grave abuse of discretion in the NLRC's Decision.34

In this case, the principle that this Court is not a trier of facts applies with greater force in labor cases. 35 Grave
abuse must have attended the evaluation of the facts and evidence presented by the parties. 36 This Court is keenly
aware that the CA undertook a Rule 65 review-not a review on appeal-of the NLRC decision challenged before
it. 37 It follows that this Court will not re-examine conflicting evidence, reevaluate the credibility of witnesses, or
substitute the findings of fact of the NLRC, an administrative body that has expertise in its specialized field.  38 It
may only examine the facts only for the purpose of resolving allegations and determining the existence of grave
abuse of discretion. 39 Accordingly, with these procedural guidelines, the Court will now proceed to determine
whether or not the CA had committed any reversible error in affirming the NLRC's Decision.

Propriety of the Monetary Awards

Ordinarily, when there is sufficient evidence before the Court to enable it to resolve fundamental issues, it will
dispense with the regular procedure of remanding the case to the lower court or appropriate tribunal in order to
avoid a further delay in the resolution of the case.40 A remand is only necessary when the proceedings below are
grossly inadequate to settle factual issues.41 This is in line with the Court's power to issue a process in order to
enforce its own decrees and thus avoid circuitous actions and vexatious litigation.42

In the case at bench, Maricalum Mining is seeking to have the case remanded because the LA allegedly
miscomputed the amount of the monetary awards. However, it failed to offer any reasonable argument or
explanation why the proceedings conducted before the NLRC or LA were "grossly inadequate to settle
factual issues," especially as regards the computation of monetary awards. Its bare allegations - that the monetary
awards were improperly computed because prescribed claims have been granted, that the net surpluses of the
manpower cooperative were not properly distributed, and that the awards in favor of some of the complainants
were improbable - do not warrant the invocation of this Court's power to have the case remanded back to the LA.
Bare and unsubstantiated allegations do not constitute substantial evidence and have no probative value.43

Besides, it is not imperative for the Court to remand the case to the LA for the determination of the amounts of net
surpluses that each of the manpower cooperatives had received from Maricalum Mining. The records show that
Maricalum Mining was guilty of entering into a labor-only contracting arrangement with the manpower
cooperatives, thus, all of them are solidarily liable to the complainants by virtue of Article 106 44 of the Labor
Code. In DOLE Philippines, Inc. v. Esteva, et al. 45 it was ruled that a cooperative, despite having a personality
separate from its members, 46 is engaged in a labor-only contracting arrangement based on the following
indicators:

1) The cooperative had a measly paid-up capital of ₱6,600.00 and had only managed to increase the
same by continually engaging in labor-only contracting with its client;

2) The cooperative did not carry out an independent business from its client and its own office and
equipment were mainly used for administrative purposes;

3) The cooperative's members had to undergo instructions and pass the training provided by the
client's personnel before they could start working alongside regular employees;

4) The cooperative was not engaged to perform a specific and special job or service; and
 5) The cooperative's members performed activities directly related and vital to the principal
business of its client.

Here, the virtually identical sets of memorandum of agreement with the manpower cooperatives state among
others that: (a) the services covered shall consist of operating loading, drilling and various auxiliary equipments;
and (b) the cooperative members shall abide by the norms and standards of the Maricalum Mining. These services
and guidelines are essential to the operations of Maricalum Mining. Thus, since the cooperative members perform
the work vital to the operation of the Sipalay Mining Complex, the they were being contracted in a labor-only
arrangement. Moreover, the burden of proving the supposed status of the contractor rests on the principal 47 and
Maricalum Mining, being the principal, also failed to present any evidence before the NLRC that each of the
manpower cooperatives had an independent viable business.

Propriety of Maricalum Mining's Intervention

Intervention is a remedy by which a third party, who is not originally imp leaded in a proceeding, becomes a
litigant for purposes of protecting his or her right or interest that may be affected by the proceedings. 48 The factors
that should be reckoned in determining whether or not to allow intervention are whether intervention will unduly
delay or prejudice the adjudication of the rights of the original parties and whether the intervenors rights may be
fully protected in a separate proceeding. 49 A motion to intervene may be entertained or allowed even if filed after
judgment was rendered by the trial court, especially in cases where the intervenors are indispensable
parties.50 Parties may be added by order of the court on motion of the party or on its own initiative at any stage of
the action and/or at such times as are just.51

In this case, it was never contested by complainants that it was Maricalum Mining-not G Holdings-who executed
several sets of memorandum of agreement with the manpower cooperatives. The contractual connection between
Maricalum Mining and the manpower cooperatives is crucial to the determination of labor-related liabilities
especially when it involves a labor-only contracting arrangement. Accordingly, Maricalum Mining will eventually
be held solidarily liable with the manpower cooperatives. In other words, it stands to be injured by the
incontrovertible fact that it entered into a labor-only arrangement with the manpower cooperatives. Thus,
Maricalum Mining is an indispensable party and worthy of being allowed to intervene in this case.52

In order to properly analyze G Holdings's role in the instant dispute, the Court must discuss its peculiar
relationship (or lack thereof) with Maricalum Mining and Sipalay Hospital.

G Holdings and Maricalum Mining

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: (a) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; (b) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or (c) alter ego
cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation. 53 This principle is basically applied only to
determine established liability. 54 However, piercing of the veil of corporate fiction is frowned upon and must be
done with caution. 55 This is because a corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity to which it may be related. 56

A parent57 or holding company58 is a corporation which owns or is organized to own a substantial portion of
another company's voting59 shares of stock enough to control 60 or influence the latter's management, policies or
affairs thru election of the latter's board of directors or otherwise. However, the term "holding company" is
customarily used interchangeably with the term "investment company" which, in turn, is defined by Section 4 (a)
of Republic Act (R.A.) No. 262961 as "any issuer (corporation) which is or holds itself out as being engaged
primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities."

In other words, a "holding company" is organized and is basically conducting its business by investing
substantially in the equity securities62 of another company for the purposes of controlling their policies (as opposed
to directly engaging in operating activities) and "holding" them in a conglomerate or umbrella structure along with
other subsidiaries. Significantly, the holding company itself-being a separate entity-does not own the assets of and
does not answer for the liabilities of the subsidiary 63 or affiliate. 64 The management of the subsidiary or affiliate
still rests in the hands of its own board of directors and corporate officers. It is in keeping with the basic rule a
corporation is a juridical entity which is vested with a legal personality separate and distinct from those acting for
and in its behalf and, in general, from the people comprising it. 65 The corporate form was created to allow
shareholders to invest without incurring personal liability for the acts of the corporation. 66

While the veil of corporate fiction may be pierced under certain instances, mere ownership of a subsidiary does not
justify the imposition of liability on the parent company. 67 It must further appear that to recognize a parent
and a subsidiary as separate entities would aid in the consummation of a wrong. 68 Thus, a holding
corporation has a separate corporate existence and is to be treated as a separate entity; unless the facts
show that such separate corporate existence is a mere sham, or has been used as an instrument for
concealing the truth.69

In the case at bench, complainants mainly harp their cause on the alter ego theory. Under this theory, piercing the
veil of corporate fiction may be allowed only if the following elements concur:

1) Control-not mere stock control, but complete domination-not only of finances, but of policy and
business practice in respect to the transaction attacked, must have been such that the corporate
entity as to this transaction had at the time no separate mind, will or existence of its own;

2) Such control must have been used by the defendant to commit a fraud or a wrong, to perpetuate
the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in
contravention of plaintiffs legal right; and

3) The said control and breach of duty must have proximately caused the injury or unjust loss
complained of.70

The elements of the alter ego theory were discussed in Philippine National Bank v. Hydro Resources Contractors
Corporation, 71 to wit:

The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be
completely under the control and domination of the parent. It examines the parent corporation's
relationship with the subsidiary. It inquires whether a subsidiary corporation is so organized and
controlled and its affairs are so conducted as to make it a mere instrumentality or agent of the parent
corporation such that its separate existence as a distinct corporate entity will be ignored. It seeks to
establish whether the subsidiary corporation has no autonomy and the parent corporation, though
acting through the subsidiary in form and appearance, "is operating the business directly for itself."

The second prong is the "fraud" test. This test requires that the parent corporation's conduct in
using the subsidiary corporation be unjust, fraudulent or wrongful. It examines the relationship of
the plaintiff to the corporation. It recognizes that piercing is appropriate only if the parent
corporation uses the subsidiary in a way that harms the plaintiff creditor. As such, it requires a
showing of "an element of injustice or fundamental unfairness."

The third prong is the "harm" test. This test requires the plaintiff to show that the defendant's
control, exerted in a fraudulent, illegal or otherwise unfair manner toward it, caused the harm
suffered. A causal connection between the fraudulent conduct committed through the
instrumentality of the subsidiary and the injury suffered or the damage incurred by the plaintiff
should be established. The plaintiff must prove that, unless the corporate veil is pierced, it will have
been treated unjustly by the defendant's exercise of control and improper use of the corporate form
and, thereby, suffer damages.

To summarize, piercing the corporate veil based on the alter ego theory requires the concurrence
of three elements: control of the corporation by the stockholder or parent corporation, fraud or
fundamental unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the
fraudulent or unfair act of the corporation. The absence of any of these elements prevents
piercing the corporate veil. (emphases and underscoring supplied)

Again, all these three elements must concur before the corporate veil may be pierced under the alter ego theory.
Keeping in mind the parameters, guidelines and indicators for proper piercing of the corporate veil, the Court now
proceeds to determine whether Maricalum Mining's corporate veil may be pierced in order to allow complainants
to enforce their monetary awards against G Holdings.
I. Control or Instrumentality Test

In Concept Builders, Inc. v. National Labor Relations Commission, et al., 72 the Court first laid down the first set
of probative factors of identity that will justify the application of the doctrine of piercing the corporate veil, viz:

1) Stock ownership by one or common ownership of both corporations.

2) Identity of directors and officers.

3) The manner of keeping corporate books and records.

4) Methods of conducting the business.

Later, in Philippine National Bank v. Ritratto Group Inc., et al.,73 the Court expanded the aforementioned
probative factors and enumerated a combination of any of the following common circumstances that may also
render a subsidiary an instrumentality, to wit:

1) The parent corporation owns all or most of the capital stock of the subsidiary;

2) The parent and subsidiary corporations have common directors or officers;

3) The parent corporation finances the subsidiary;

4) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its
incorporation;

5) The subsidiary has grossly inadequate capital;

6) The parent corporation pays the salaries and other expenses or losses of the subsidiary;

7) The subsidiary has substantially no business except with the parent corporation or no assets
except those conveyed to or by the parent corporation;

8) In the papers of the parent corporation or in the statements of its officers, the subsidiary is
described as a department or division of the parent corporation, or its business or financial
responsibility is referred to as the parent corporation's own;

9) The parent corporation uses the property of the subsidiary as its own;

10) The directors or executives of the subsidiary do not act independently in the interest of the
subsidiary but take their orders from the parent corporation; and

11) The formal legal requirements of the subsidiary are not observed.

In the instant case, there is no doubt that G Holdings-being the majority and controlling stockholder-had been
exercising significant control over Maricalum Mining. This is because this Court had already upheld the validity
and enforceability of the PSA between the APT and G Holdings. It was stipulated in the PSA that APT shall
transfer 90% of Mari cal um Mining's equity securities to G Holdings and it establishes the presence of absolute
control of a subsidiary's corporate affairs. Moreover, the Court evinces its observation that Maricalum Mining's
corporate name appearing on the heading of the cash vouchers issued in payment of the services rendered by the
manpower cooperatives is being superimposed with G Holding's corporate name. Due to this observation, it can be
reasonably inferred that G Holdings is paying for Mari cal um Mining's salary expenses. Hence, the presence of
both circumstances of dominant equity ownership and provision for salary expenses may adequately establish that
Maricalum Mining is an instrumentality of G Holdings.

However, mere presence of control and full ownership of a parent over a subsidiary is not enough to pierce the veil
of corporate fiction. It has been reiterated by this Court time and again that mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality.74
II. Fraud Test

The corporate veil may be lifted only if it has been used to shield fraud, defend crime, justify a wrong, defeat
public convenience, insulate bad faith or perpetuate injustice. 75 To aid in the determination of the presence or
absence of fraud, the following factors in the "Totality of Circumstances Test"76 may be considered, viz:

1) Commingling of funds and other assets of the corporation with those of the individual
shareholders;

2) Diversion of the corporation's funds or assets to non-corporate uses (to the personal uses of the
corporation's shareholders);

3) Failure to maintain the corporate formalities necessary for the issuance of or subscription to the
corporation's stock, such as formal approval of the stock issue by the board of directors;

4) An individual shareholder representing to persons outside the corporation that he or she is

personally liable for the debts or other obligations of the corporation;

5) Failure to maintain corporate minutes or adequate corporate records;

6) Identical equitable ownership in two entities;

7) Identity of the directors and officers of two entities who are responsible for supervision and
management (a partnership or sole proprietorship and a corporation owned and managed by the
same parties);

8) Failure to adequately capitalize a corporation for the reasonable risks of the corporate
undertaking;

9) Absence of separately held corporate assets;

10) Use of a corporation as a mere shell or conduit to operate a single venture or some particular
aspect of the business of an individual or another corporation;

11) Sole ownership of all the stock by one individual or members of a single family;

12) Use of the same office or business location by the corporation and its individual
shareholder(s);

13) Employment of the same employees or attorney by the corporation and its shareholder(s);

14) Concealment or misrepresentation of the identity of the ownership, management or financial

interests in the corporation, and concealment of personal business activities of the shareholders
(sole shareholders do not reveal the association with a corporation, which makes loans to them
without adequate security);

15) Disregard of legal formalities and failure to maintain proper arm's length relationships among
related entities;

16) Use of a corporate entity as a conduit to procure labor, services or merchandise for another
person or entity;

17) Diversion of corporate assets from the corporation by or to a stockholder or other person
or entity to the detriment of creditors, or the manipulation of assets and liabilities between
entities to concentrate the assets in one and the liabilities in another;

18) Contracting by the corporation with another person with the intent to avoid the risk of
nonperformance by use of the corporate entity; or the use of a corporation as a subterfuge for
illegal transactions; and
 19) The formation and use of the corporation to assume the existing liabilities of another person or
entity.

Aside from the aforementioned circumstances, it must be determined whether the transfer of assets from
Maricalum Mining to G Holdings is enough to invoke the equitable remedy of piercing the corporate veil. The
same issue was resolved in Y-1 Leisure Phils., Inc., et al. v. Yu77 where this Court applied the "Nell
Doctrine"78 regarding the transfer of all the assets of one corporation to another. It was discussed in that case
that as a general rule that where one corporation sells or otherwise transfers all of its assets to another corporation,
the latter is not liable for the debts and liabilities of the transferor, except:

1) Where the purchaser expressly or impliedly agrees to assume such debts;

2) Where the transaction amounts to a consolidation or merger of the corporations;

3) Where the purchasing corporation is merely a continuation of the selling corporation; and

4) Where the transaction is entered into fraudulently in order to escape liability for such
debts.

If any of the above-cited exceptions are present, then the transferee corporation shall assume the liabilities of the
transferor. 79

In this case, G Holdings cannot be held liable for the satisfaction of labor-related claims against Maricalum Mining
under the fraud test for the following reasons:

First, the transfer of some Maricalum Mining's assets in favor G Holdings was by virtue of the PSA as part of an
official measure to dispose of the government's non-performing assets-not to evade its monetary obligations to the
complainants. Even before complainants' monetary claims supposedly existed in 2007, some of Maricalum
Mining's assets had already been validly extrajudicially foreclosed and eventually sold to G Holdings in 2001.
Thus, G Holdings could not have devised a scheme to avoid a non-existent obligation. No fraud could be attributed
to G Holdings because the transfer of assets was pursuant to a previously perfected valid contract.

Settled is the rule that where one corporation sells or otherwise transfers all its assets to another corporation for
value, the latter is not, by that fact alone, liable for the debts and liabilities of the transferor. 80 In other words,
control or ownership of substantially all of a subsidiary's assets is not by itself an indication of a holding
company's fraudulent intent to alienate these assets in evading labor-related claims or liabilities. As discussed
earlier, the PSA was not designed to evade the monetary claims of the complainants. Although there was proof that
G Holdings has an office in Maricalum Mining's premises and that that some of their assets have been commingled
due to the PSA's unavoidable consequences, there was no fraudulent diversion of corporate assets to another
corporation for the sole purpose of evading complainants' claim.

Besides, it is evident that the alleged continuing depletion of Maricalum Mining's assets is due to its disgruntled
employees' own acts of pilferage, which was beyond the control of G Holdings. More so, complainants also failed
to present any clear and convincing evidence that G Holdings was grossly negligent and failed to exercise the
required degree of diligence in ensuring that Maricalum Mining's assets would be protected from
pilferage. 81 Hence, no fraud can be imputed against G Holdings considering that there is no evidence in the
records that establishes it systematically tried to alienate Maricalum Mining's assets to escape the liabilities to
complainants.

Second, it was not proven that all of Maricalum Mining's assets were transferred to G Holdings or were totally
depleted. Complainants never offered any evidence to establish that Maricalum Mining had absolutely no
substantial assets to cover for their monetary claims. Their allegation that their claims will be reduced to a mere
"paper victory" has not confirmed with concrete proof. At the very least, substantial evidence should be adduced
that the subsidiary company's "net realizable value" 82 of "current assets" 83 and "fair value" 84 of "non-current
assets" 85 are collectively insufficient to cover the whole amount of its liability subject in the instant litigation.

Third, G Holdings purchased Mari cal um Mining's shares from the APT not for the purpose of continuing the
latter's existence and operations but for the purpose of investing in the mining industry without having to directly
engage in the management and operation of mining. As discussed earlier, a holding company's primary business is
merely to invest in the equity of another corporation for the purpose of earning from the latter's endeavors. It
generally does not undertake to engage in the daily operating activities of its subsidiaries that, in turn, have their
own separate sets of directors and officers. Thus, there should be proof that a holding company had indeed
fraudulently used the separate corporate personality of its subsidiary to evade an obligation before it can be held
liable. Since G Holdings is a holding company, the corporate veil of its subsidiaries may only be pierced based on
fraud or gross negligence amounting to bad faith.

Lastly, no clear and convincing evidence was presented by the complainants to conclusively prove the presence of
fraud on the part of G Holdings. Although the quantum of evidence needed to establish a claim for illegal
dismissal in labor cases is substantial evidence,86 the quantum need to establish the presence of fraud is clear and
convincing evidence.87 Thus, to disregard the separate juridical personality of a corporation, the wrongdoing must
be established clearly and convincingly-it cannot be presumed.88

Here, the complainants did not satisfy the requisite quantum of evidence to prove fraud on the part of G Holdings.
They merely offered allegations and suppositions that, since Maricalum Mining's assets appear to be continuously
depleting and that the same corporation is a subsidiary, G Holdings could have been guilty of fraud. As
emphasized earlier, bare allegations do not prove anything. There must be proof that fraud-not the inevitable
effects of a previously executed and valid contract such as the PSA-was the cause of the latter's total asset
depletion. To be clear, the presence of control per se is not enough to justify the piercing of the corporate veil.

III. Harm or Casual Connection Test

In WPM International Trading, Inc., et al. v. Labayen,89 the Court laid down the criteria for the harm or casual
connection test, to wit:

In this connection, we stress that the control necessary to invoke the instrumentality or alter
ego rule is not majority or even complete stock control but such domination of finances, policies
and practices that the controlled corporation has, so to speak, no separate mind, will or existence of
its own, and is but a conduit for its principal. The control must be shown to have been exercised at
the time the acts complained of took place. Moreover, the control and breach of
duty must proximately cause the injury or unjust loss for which the complaint is made.
(emphases and underscoring supplied)

Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred. 90 More
comprehensively, the proximate legal cause is that "acting first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal
connection with its immediate predecessor, the final event in the chain immediately effecting the injury as a
natural and probable result of the cause which first acted, under such circumstances that the person responsible for
the first event should, as an ordinary prudent and intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might probably result therefrom." 91 Hence, for an act or
event to be considered as proximate legal cause, it should be shown that such act or event had indeed caused injury
to another.

In the case at bench, complainants have not yet even suffered any monetary injury. They have yet to enforce
their claims against Maricalum Mining. It is apparent that complainants are merely anxious that their monetary
awards will not be satisfied because the assets of Maricalum Mining were allegedly transferred surreptitiously to G
Holdings. However, as discussed earlier, since complainants failed to show that G Holdings's mere exercise of
control had a clear hand in the depletion of Maricalum Mining's assets, no proximate cause was successfully
established. The transfer of assets was pursuant to a valid and legal PSA between G Holdings and APT.

Accordingly, complainants failed to satisfy the second and third tests to justify the application of the alter ego
theory. This inevitably shows that the CA committed no reversible error in upholding the NLRC's Decision
declaring Maricalum Mining as the proper party liable to pay the monetary awards in favor of complainants.

G Holdings and Sipalay Hospital

Sipalay Hospital was incorporated by Romulo G. Zafra, Eleanore B. Gutierrez, Helen Grace B. Fernandez, Evelyn
B. Badajos and Helen Grace L. Arbolario. 92 However, there is absence of indication that G Holdings subsequently
acquired the controlling interests of Sipalay Hospital. There is also no evidence that G Holdings entered into a
contract with Sipalay Hospital to provide medical services for its officers and employees. This lack of
stockholding or contractual connection signifies that Sipalay Hospital is not affiliated 93 with G Holdings. Thus, due
to this absence of affiliation, the Court must apply the tests used to determine the existence of an employee-
employer relationship; rather than piercing the corporate veil.

Under the four-fold test, the employer-employee relationship is determined if the following are present: a) the
selection and engagement of the employee; b) the payment of wages; c) the power of dismissal; and d) the power
to control the employee's conduct, or the so-called "control test." 94 Here, the "control test" is the most important
and crucial among the four tests. 95 However, in cases where there is no written agreement to base the relationship
on and where the various tasks performed by the worker bring complexity to the relationship with the employer,
the better approach would therefore be to adopt a two-tiered test involving: a) the putative employer's power to
control the employee with respect to the means and methods by which the work is to be accomplished; and b) the
underlying economic realities of the activity or relationship.96

In applying the second tier, the determination of the relationship between employer and employee depends upon
the circumstances of the whole economic activity (economic reality or multi-factor test), such as: a) the extent to
which the services performed are an integral part of the employer's business; b) the extent of the worker's
investment in equipment and facilities; c) the nature and degree of control exercised by the employer; d) the
worker's opportunity for profit and loss; e) the amount of initiative, skill, judgment or foresight required for the
success of the claimed independent enterprise; f) the permanency and duration of the relationship between the
worker and the employer; and g) the degree of dependency of the worker upon the employer for his continued
employment in that line of business. 97 Under all of these tests, the burden to prove by substantial evidence all of
the elements or factors is incumbent on the employee for he or she is the one claiming the existence of an
employment relationship.98

In light of the present circumstances, the Court must apply the four-fold test for lack of relevant data in the case
records relating to the underlying economic realities of the activity or relationship of Sipalay Hospital's employees.

To prove the existence of their employment relationship with G Holdings, complainants Dr. Welilmo T. Neri,
Erlinda L. Fernandez, Edgar M. Sobrino and Wilfredo C. Taganile, Sr. presented the following documents:

1) Affidavit99 of Dr. Welilmo T. Neri attesting among others that he was the Medical Director of
Sipalay Hospital which is allegedly owned and operated by G Holdings/Maricalum Mining;

2) Several cash vouchers 100 issued by G Holdings!Maricalum Mining representing Dr. Welilmo T.

Neri's payment for services rendered to "various" personnel;

3) Schedules of social security premium payments101 in favor of Dr. Welilmo T. Neri, Edgar M.
Sobrino and Wilfredo C. Taganile, Sr. stamped paid by G Holdings;

4) Notice of termination102 dated July 3, 2010 issued by Rolando G. Degojas (OIC of G-Holdings

Inc.) issued to Dr. Welilmo T. Neri and some of his companions who are not complainants in this
case;

5) Notice of termination 103 addressed to Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M.

Sobrino and some of their co-employees who are not complainants in this case with
a collatilla stating that the services of Dr. Welilmo T. Neri and nurse Erlinda L. Fernandez will be
engaged on per call basis; and

6) A "Statement of Unpaid Salaries of Employees of G Holdings, Inc. Assigned to the Sipalay

General Hospital" 104 prepared by Dr. Welilmo T. Neri which included his own along with
complainants Erlinda L. Fernandez, Wilfredo C. Taganile, [Sr.] and Edgar M. [Sobrino].

A perusal of the aforementioned documents fails to show that the services of complainants Dr. Welilmo T. Neri,
Erlinda L. Fernandez, Edgar M. Sobrino and Wilfredo C. Taganile, Sr. were indeed selected and engaged by either
Maricalum Mining or G Holdings. This gap in evidence clearly shows that the first factor of the four-fold test,
or the selection and engagement of the employee, was not satisfied and not supported by substantial
evidence.

However, the same cannot be said as to the second and third factors of the four-fold test (the payment of wages
and the power of dismissal). Since substantial evidence is defined as that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion, 105 the cash vouchers, social security payments
and notices of termination are reasonable enough to draw an inference that G Holdings and Maricalum Mining
may have had a hand in the complainants' payment of salaries and dismissal.

Notwithstanding the absence of the first factor and the presence of the second and third factors of the four-fold
test, the Court still deems it best to examine the fourth factor-the presence of control-in order to determine the
employment connection of complainants Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M. Sobrino and
Wilfredo C. Taganile, Sr. with G Holdings.

Under the control test, an employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end achieved, but also the manner and means to be used in
reaching that end. 106 As applied in the healthcare industry, an employment relationship exists between a physician
and a hospital if the hospital controls both the means and the details of the process by which the physician is to
accomplish his task. 107 But where a person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee relationship exists. 108

A corporation may only exercise its powers within the definitions provided by law and its articles of
incorporation. 109 Accordingly, in order to determine the presence or absence of an employment relationship
between G Holdings and the employees of Sipalay Hospital by using the control test, the Court deems it essential
to examine the salient portion of Sipalay Hospital's Articles of Incorporation imparting its 'primary purpose,' 110 to
wit:

To own, manage, lease or operate hospitals or clinics offering and providing medical services and
facilities to the general public, provided that purely professional, medical or surgical services shall
be performed by duly qualified physicians or surgeons who may or may not be connected with the
corporation and who shall be freely and individually contracted by patients. (emphasis supplied)

It is immediately apparent that Sipalay Hospital, even if its facilities are located inside the Sipalay Mining
Complex, does not limit its medical services only to the employees and officers of Maricalum Mining and/or G
Holdings. Its act of holding out services to the public reinforces the fact of its independence from either Maricalum
Mining or G Holdings because it is free to deal with any client without any legal or contractual restriction.
Moreover, G Holdings is a holding company primarily engaged in investing substantially in the stocks of another
company-not in directing and managing the latter's daily business operations. Because of this corporate
attribute, the Court can reasonably draw an inference that G Holdings does not have a considerable ability
to control means and methods of work of Sipalay Hospital employees. Markedly, the records are simply bereft
of any evidence that G Holdings had, in fact, used its ownership to control the daily operations of Sipalay Hospital
as well as the working methods of the latter's employees. There is no evidence showing any subsequent transfer of
shares from the original incorporators of Sipalay Hospital to G Holdings. Worse, it appears that complainants Dr.
Welilmo T. Neri, Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M. Sobrino are trying to derive their
employment connection with G Holdings merely on an assumed premise that the latter owns the controlling stocks
of Maricalum Mining.

On this score, the CA committed no reversible error in allowing the NLRC to delete the monetary awards of Dr.
Welilmo T. Neri, Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M. Sobrino imposed by the Labor
Arbiter against G Holdings.

Conclusion

A holding company may be held liable for the acts of its subsidiary only when it is adequately proven that: a) there
was control over the subsidiary; (b) such control was used to protect a fraud (or gross negligence amounting to bad
faith) or evade an obligation; and c) fraud was the proximate cause of another's existing injury. Further, an
employee is duly-burdened to prove the crucial test or factor of control thru substantial evidence in order to
establish the existence of an employment relationship-especially as against an unaffiliated corporation alleged to
be exercising control.

In this case, complainants have not successfully proven that G Holdings fraudulently exercised its control over
Maricalum Mining to fraudulently evade any obligation. They also fell short of proving that G Holdings had
exercised operational control over the employees of Sipalay Hospital. Due to these findings, the Court sees no
reversible error on the part of the CA, which found no grave abuse of discretion and affirmed in toto the factual
findings and legal conclusions of the NLRC.

WHEREFORE, the Court AFFIRMS in toto the October 29, 2014 Decision of the Court of Appeals in CA-G.R.
SP No. 06835.

No pronouncement as to costs.

SO ORDERED.
 FIRST DIVISION

January 11, 2018

G.R. No. 214291

AMERICAN POWER CONVERSION CORPORATION; AMERICAN POWER CONVERSION

SINGAPORE PTE. LTD.; AMERICAN POWER CONVERSION (A.P.C.), B.V.; AMERICAN POWER
CONVERSION (PHILS.) B.V.; DAVID W. PLUMER, JR.; GEORGE KONG; and ALICIA
HENDY, Petitioner
vs.
JAYSON YU LIM, Respondent

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1seeks to set aside the April 23, 2014 Decision 2 of the Court of Appeals
(CA) in CA-G.R SP No. 110142 setting aside the June 17, 2008 Decision 3 and June 10, 2009 Resolution4 of the
National Labor Relations Commission (NLRC) in NLRC LAC No. 10-002807-07 and reinstating the July 27,
2007 Decision5 of the Labor Arbiter, as well as the CA's September 11, 2014 Resolution 6 denying petitioners'
Motion for Reconsideration.7

Factual Antecedents

On July 1, 1998, respondent Jason Yu Lim was hired to serve as the Country Manager of American Power
Conversion Philippine Sales Office, which was not registered with the Securities and Exchange Commission
(SEC) but whose function then was to act as a liaison office for American Power Conversion Corporation (APCC)
- an American corporation - and provide sales, marketing, and service support to the local distributor and
consumers of APCC in the Philippines. APCC is engaged in designing, developing, manufacturing and marketing
of power protection and management solutions for computer, communication, and electronic applications.

The only SEC-registered corporation then v.ras American Power Conversion (Phils.), Inc. (APCPI) with
manufacturing and production facilities in Cavite and Laguna.

Since American Power Conversion Philippine Sales Office was unregistered but doing business in the country,
respondent was included in the list of employees and payroll of APCPI. He was also instructed to create a petty
cash fund using his own personal bank account to answer for the day-to-day operations of American Power
Conversion Philippine Sales Office.

In 2002, American Power Conversion (Phils.) B. V. (APCP BV) was established in the country and it acquired
APCPI and continued the latter's business here.

In November, 2004, respondent was promoted as Regional Manager for APC North A.SEAN, a division of APC
ASEAN. As Regional Manager for APC North A.SEAN, he handled sales and marketing operations for Thailand,
the Philippines, Vietnam, Myanmar, Cambodia, Laos, and Guam, and reported directly to Larry Truong (Truong),
Country General Manager for the entire A.PC ASEAN and officer of APCC. Truong was not connected in any
way with APCP BV - which, per its SEC registration, is licensed to engage only in the manufacture of computer-
related products.8
In an electronic mail (e-mail) message,9 Truong announced respondent's appointment together with the
appointment of David Shao (Shao) as Regional Manager for South ASEAN; which covered Singapore, Malaysia,
Indonesia, and Brunei. Truong noted respondent's "steady and principled leadership" since he
"joined APC Philippines in 1998" that "doubled x x x revenue x x x despite the Fact that the country economy has
improved little since the Financial Crisis."10

In 2005, Truong was replaced by petitioner George Kong (Kong).

During their stint with Kong, respondent and Shao supposedly discovered irregularities committed by Kong, which
sometime in late August, 2005 they reported to. Leanne Cunnold (Cunnold), General Manager for APC-South and
Kong's immediate superior. Cum10Jd took up the matter with petitioner Alicia Hendy (Hendy), Human Resource
Director for APCP BV. Respondent and Shao also took the matter directly to David Plumer (Plumer), Vice
President for Asia Pacific of APC Japan,11 who advised them to discuss the matter directly with Kong.

Upon being apprised of the issues against him, Kong on September 8, 2005 sent three e-mail messages 12 to
respondent and the other six members of the sales and marketing team indicating his displeasure and that he took
the matter quite personally. In the last of his e-mail messages, he remarked - "'and finally, thank you for the 7
knives in my back."13

On September 30, 2005, Kong and Hendy met with Shao, where the latter was asked to resign; when he refused,
he was right then and there terminated from employment with immediate effect. 14 The Letter of
Termination15 handed to him did not specify any reason why he was being fired from work, and was written on the
official stationery of American Power Conversion Singapore Pte, Ltd. (APCS) and signed by its Human Resource
Manager, Samantha Phang (Phang).

Thereafter, Kong arrived in the country and met with respondent on October 17, 2005, where he informed the
latter of a supposed company restructuring which rendered his position as Regional Manager for North ASEAN
redundant. Respondent was furnished by the Human Resource Manager of APCP BV Maximo del Ponso, Jr. (del
Ponso) with a Termination Letter16 of even date, which stated among others that -

Dear Jason:

In response to the changing directions of the business, and pursuant to the need to align and
streamline the APAC Sales organization, we advise that management has decided to reconfigure
APAC Sales function and as a result of such, we declare the position of Regional Manager - North
ASEAN is [sic] redundant. Accordingly, we regard to inform you of your last working day with us
is effective close of business day 17 November, 2005. Until said date, you will no longer be
required to go to work other than the period required by management for the turn-over.

xxxx

On December 8, 2005, respondent's counsel proceeded to the Department of Labor and Employment (DOLE) to
verify if petitioners gave the requisite notice of termination due to redundancy. In a Certification, 17 the DOLE
through National Capital Region Assistant Regional Director Ma. Celeste M. Valderrama confirmed that there was
no record on file - from September l, 2005 up to November 30, 2005 - of a notice of termination filed by any of the
petitioners.

Respondent was paid severance pay, but in a written demand,18 he sought reinstatement, the payment of backwages
and allowances/benefits, and damages for his claimed malicious and illegal termination. In a written reply 19 by
APCC's counsel, petitioners refused to accede, thus:

Dear Atty. Marigomen

Mr. Jason Yu Lim

We write on behalf of our client American Power Conversion Corporation (' APCC') and respond to
your letter x x x.
 x x x Mr. Lim was lawfully terminated on the ground of redundancy. Moreover, APCC complied
with the procedure for tennination x x x and paid Mr. Lim his separation pay in accordance with
law.

xxxx

In view of the foregoing, APCC is unable to accede to your demands. (Emphasis supplied)

Likewise, in a December 9, 2005 letter20 to respondent, APCP BV through Hendy acknowledged to respondent
that should he be questioned about the use by APCC of his private bank account, petitioners will "offer the fullest
possible accounting of its [APCC] past actions."

Ruling of the Labor Arbiter

Respondent filed a labor case against the petitioners for illegal dismissal and recovery of money claims. In his
Position Paper21 and other pleadings, respondent claimed that he was illegally dismissed by petitioners using a
fabricated and contrived restructuring/reorganization/redundancy program; that in truth, his dismissal was
motivated by bad faith and malice out of Kong's desire to retaliate after he questioned Kong's irregularities; the
petitioners conspired and acted together to illegally remove respondent from his position through a fabricated
redundancy; that in effecting the purported redundancy program, petitioners did not comply with the requirements
laid down by the Labor Code, particularly the giving of notice to the DOLE, which thus renders the dismissal null
and void; and that by acting with malice and bad faith, petitioners are liable to respondent for moral and exemplary
damages and attorney's fees. Thus, respondent prayed for reinstatement with full backwages, allowances and other
benefits; or in the alternative, additional separation pay at the rate of three months salary for every year of service;
damages in the amount of US$1,500,000.00 for petitioners' malice, bad faith, and for subjecting respondent to the
threat of criminal and civil prosecution as a result of petitioners' illegal acts of evading taxes, non-registration with
the SEC, and for using respondent as their dummy; and attorney's fees and costs of suit.

In their joint Position Paper22 and other pleadings, petitioners claimed essentially that respondent should have
impleaded only APCP BV, as it is with the latter that respondent entered into an employment contract; that the
complaint against the other petitioners should thus be dismissed; that when Plumer was appointed Vice President
for APC Asia Pacific operations in August, 2005, a reorganization/restructuring of the APC Asia Pacific sales
organization was undertaken, in that its operations were divided into 1) Enterprise Sales - which shall be
responsible for selling directly to customers, and 2) Transactional Sales - which shall be tasked to handle
distributions, network, and channels accounts; that for this reason, there was a need to abolish the positions of
Regional Manager - North ASEAN and Regional Manager - South ASEAN because they were no longer aligned
with the new business model - and in their stead, the positions of Enterprise Sales Manager and Transactional
Business Manager were created; that these two new positions required a different set of functions including job
description, qualifications, and experience, which respondent did not possess; that in fact, two new employees with
the requisite qualifications have been appointed to these two new positions; that in effecting the redundancy
program, they complied with the requirements of law; that on October 6, 2005, APCP BV's del Ponso sent to
DOLE Region IV at Calamba, Laguna a written notice 23 of the redundancy program to be implemented, but it did
not contain the number and names of workers intended to be terminated from work, including that of respondent's;
that respondent's dismissal was thus for cause; that respondent is not entitled to his monetary claims on account of
his valid dismissal due to redundancy; that reinstatement is no longer feasible since his former position has been
abolished; that respondent is not entitled to the rest of his claims; and that the individual officers named in the
complaint cannot be held personally liable as they acted in their official capacity and without bad faith or malice.
Thus, they prayed for the dismissal of respondent's complaint .

Ruling of the Labor Arbiter

On July 27, 2007, the Labor Arbiter rendered her Decision in favor of respondent, stating thus:

From the conflicting statement of facts and evidence adduced by [the] parties in support of their
respective assertions, the issues for resolution by this Office are whether or not complainant was
illegally dismissed, and whether or not he is entitled to his monetary claims.

At the outset, it must be stressed that in cases of termination of an employee, it is the employer who
has the burden of proving that the termination x x x is for a valid or authorized cause x x x.
Further, a rule deeply entrenched in our jurisdiction is that 'in order to constitute a valid dismissal,
two requisites must concur: (a) the dismissal must be for any of the causes enumerated in Art. 282
of the Labor Code, and (b) the employee must be accorded due process, basic of which is the
opportunity to be heard and to defend himself x x x

As also provided under Art. 283 of the Labor Code, as amended, redundancy, among other
grounds, is an authorized cause for termination of an employment. x x x the Supreme Court held
that redundancy exists when the service capability of the work force is in excess of what is
reasonably needed to meet the demands of the enterprise. A redundant position is one rendered
superfluous by any number of factors, such as over hiring of workers, decreased volume of
business, dropping of a particular product line previously manufactured by the company, or phasing
out of a service activity previously undertaken by the business. x x x

x x x [T]he Supreme Court held that redundancy may be proven by a new staffing pattern,
feasibility studies/proposal on t11e viability of newly created positions, job description and
approval by the management of the restructuring.' In the instant case, we find respondents did not
present any of the foregoing evidence to establish the supposed restructuring and/or redundancy.
There was also no evidence showing the approval of the said restructuring and/or redundancy by
the directors and officers of respondent APC BV. What was submitted on record were the affidavits
and memoranda of thee managers of respondent company on the alleged plans for restructuring
which the Supreme Court held not sufficient to substantially prove the existence of a restructuring
or redundancy. Moreover, in the previous reorganization of APC ASEAN in January 2005, Country
Managers and Regional Managers, complainant actively participated in the formation of the new
structure for the APC ASEAN. The same tedious process of reorganization was however not
undertaken by respondents APCC in t11e supposed decision to abolish the position of t11e ASEAN
Regional Managers, thus rendering suspect the assertion of redundancy. Also significant to consider
is the point raised by complainant that up to present, respondent APCC has not yet annow1ced any
reconfiguration, reorganization, or restructuring in APC ASEAN despite the effected te1mination if
only to validate the alleged reorganization. The statement of Mr. Tzeng Kwan Chin, the APC
Country Sales Manager for Malaysia, corroborates this point of the complainant.

We also noted that after respondents terminated complainant and Mr. Shao as Regional Managers,
the company hired two (2) new employees to perform basically the same functions of complainant
and that of Mr. Shao, which is to market and promote APC products x x x, which factor also belies
the claim of redundancy. The hiring of two (2) new employees, albeit differently titled, merely
effected substitution of complainant and Mr. Shao. The same substitution suggest [sic] that vacated
posts of Regional Managers is [sic] necessary in the operations of respondent APCC which
necessitated the performance thereof by the newly hired employees. We are thus persuaded [that]
the obtaining circumstances does [sic] not help support respondent APCC's claim of redundancy.
With the abolition of the Regional Manager position, there should have been a merger of functions
and not the hiring of replacements.

It is not disputed that management is vested with the power and prerogative to decide whether to
undergo a reorganization to improve the business x x x. However, said power and prerogative is
[sic] not absolute. The Constitution and the Labor Code safeguards [sic] the right of the employees
to their job and their income. Hence, the guaranteed right to security of tenure of employees and
their protection against dismissal, except for a just or authorized cause.

In the absence of a clear showing of redundancy, we are inclined to give credence to the assertion
that respondents thru the initiative of respondent Kong was motivated to dismiss complainant from
the company because of the latter's report on the former's violations of the APCC's Code of Ethics.
Evidently, the termination of complainant was not due to redundancy but a retaliatory action in the
guise of redundancy for purposes of dismissing the complainant from the service. The said action is
clearly an exercise of management prerogative in bad faith. It may be true that investigation was
conducted on the reported breach of the Code of Ethics by respondent Kong, the lack of
transparency on the results thereof, however, prevents us from giving credence to said assertion.

Moreover, it is also noticeable that only complainant and Mr. Shao (who complained about
respondent Kong's unethical conduct) were removed on account of the supposed reorganization.
The five (5) other persons named in respondent Kong's angry e-mails were not dismissed in
connection with said reorganization since they did not join complainant and Mr. Shao in their report
on respondent Kong's unethical conduct, as against respondents' contention that no such retaliatory
action was undertaken by them as shown by the fact that five others also in the e-mails were not
included in the said reorganization.

It also did not escape our notice that Mr. Shao, who previously held the position of Regional
Manager for South Asean, was terminated 'without cause' rather than due to redundancy. We are not
persuaded by respondents' explanation that Singapore law allows dismissal without cause and hence
no longer deemed necessary to indicate the same reason of redundancy/reorganization for Mr.
Shao's termination. To the contrary, we are inclined to believe that having expressly stated that
termination was 'without cause,' it only infers that there was actually no valid reason for the latter's
termination. Granting arguendo the same is allowed under Singapore law, the said circumstances
nevertheless infer that termination of Mr. Shao, as well as complainant was not due to
reorganization. Furthermore, under Article 283 of the Labor Code, it is provided that in cases
oftennination for redundancy, the employer must serve a written notice to the workers and the
DOLE at least one (1) month before the intended date thereof.

In the instant case, respondents failed to comply with the requirement of written notice to the
DOLE as evidenced by the Certification from said Office that there is no record on its file from 01
September 2005 to 30 November 2005 reporting the termination of complainant for redundancy x x
x [F]ailure to comply with the mandatory procedural requirements taints the dismissal with
illegality. We also do not find the notice to DOLE adduced by respondents applicable to
complainant since the latter was not specifically named therein apart from the fact that said notice
as pointed out by complainant, appears to have been previously submitted to DOLE by
reorganization of the human resources department of APC BV Cavite and not that of the Regional
Managers of APCC.

Thus, on the basis of the foregoing findings and pursuant to Article 279 of the Labor Code, we find
complainant 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 less the amount already paid to him representing separation pay and other benefits
due to redundancy.

Further finding the claim of redundancy to have been merely a guise to terminate complainant,
abuse of management prerogative is established against respondent APCC which entitles
complainant to moral damages in the amount of ₱2,000,000.00. Also, the award is justified due to
respondent APCC's failure to register APC Philippines Sales in accordance with Philippine laws
including the respondents' use of the personal bank account of complainant exposing him to the
threat of criminal, civil, and/or administrative liabilities x x x To serve as a lesson to similarly
minded respondents x x x, we find the award of exemplary damages in the amount of
₱2,000,000.00 proper x x x.

It appearing further that respondent George Kong of APC Singapore Pte. Ltd., Alicia Hendy, and
David Plumer, who are both officials of respondent APCC to have participated, directly or
indirectly, in the contrived redundancy/reorganization that led to the dismissal of complainant, we
find said officers to be jointly and severally liable with respondents APCC to the adjudged
monetary award to the complainant.

WHEREFORE, foregoing premises considered, judgment is hereby rendered finding the

termination of complainant unlawful. Accordingly, respondents American Power Conversion
Corporation (APCC), American Power Conversion Singapore Pte. Ltd., American Power
Conversion (APC) B.V., Ame1ican Power Conversion (Phils.) Inc., George Kong, Alicia Hendy,
and David Plumer are held jointly and severally liable as follows:

1. To pay complainant full backwages, inclusive of allowances, and other benefits or their monetary
equivalent computed from the time compen5ation was unlawfully withheld up to the time of actual
reinstatement less the amount already received by him from the respondents as separation package,
to wit:
 MONTHLY RATE -------------------------------------- ₱ 191,666.67
1. ½ of 13th Month Pay of ₱175,694.44 - ₱14,641.20
2. Car Maintenance Allowance - 15,000.00
Communication Allowance - 5,000.00

Add 4. Medical Benefit (EENT & Dental[)] - 800.00

: 5. Fuel [Subsidies] - 4,000.00
6. Executive Parking Benefit - 3,500.00
7. Broadband Internet Charges - 3,000.00 ₱ 45,941.20
TOTAL MONTHLY COMPENSATION ₱ 237,607.87
BACKWAGES (Partial Only) November 17, 2005 -
₱ 4,752,157.31
July 17, 2007 or 20 months x ₱ 237,607.87
Less Amount already received ₱ 2,055,867.64
Net Backwages ₱ 2,696,289.67

2. To reimburse allowable expenses, to wit:

a. 50% car insurance for 2006 23,892.00

b. 50% car insurance, paid in March 2007 13,244.50
c. car registration for 2006 8,635.00
TOTAL ₱ 45,771.50

3. To reinstate complainant to his previous or similar position without loss of seniority rights.

4. To pay complainant moral damages in the amount of P2,000,000.00 and exemplary damages in
the amount of P2,000,000.00.

5. To pay complainant ten (10%) percent attorney's fees of the total judgment award on [sic] the
amount of ₱274,206.11.

All other claims are hereby ordered dismissed for lack of merit.

SO ORDERED.24 (Citations omitted)

Ruling of the National Labor Relations Commission

Petitioners appealed before the NLRC. On June 17, 2008, the NLRC issued its Decision containing the following
pronouncement:

After a careful review of the evidence submitted by the parties and the laws and the rules applicable
to the instant case, We decide to grant the Appeal and rule in favor of Respondents/ Appellants.

The Labor Arbiter failed to take into consideration that the restructuring implemented by APC was
organizational, meaning it affected not only APC (Philippines) B.V. but also APC ASEAN and
APC Asia Pacific. The Labor Arbiter failed to take into consideration the APC ASEAN
organizational chart presented by respondents, which showed that APC's ASEAN organization was
divided into Enterprise Sales and Transactional Sales (from the former grouping based on territorial
boundaries), consistent with the organizational changes in the APC Asia Pacific sales organization
(Respondents/Appellants' Position Paper, Annex "7''). Respondents/ Appellants also presented the
organizational chart of APC (Philippines) B.V. after August 2005, which showed that the ASEAN
restructuring resulted in direct reporting lines from the Philippines to the ASEAN Enterprise Sales
and ASEAN Transactional Business Managers (Respondents' Position Paper, Annex "11"). This
change in reporting lines rendered Complainant/Appellee's position as Regional Manager - North
ASEAN redundant.

Further, it appears from the records that the ASEAN restructuring was conceived as early as 1
August 2005 upon Respondent/ Appellant Plumer's appointment as VP for Asia Pacific. As soon as
Mr. Plumer assumed office, he proposed that the organizational structure of Asia Pacific be divided
on the basis of customer needs: (1) Enterprise Sales, covering direct selling to customers, and (2)
Transactional Sales, covering distributions, network, and channel accounts. This plan to reorganize
was thus conceived even before Complainant/Appellee reported, on 29 August 2005, individual
Respondent/Appellant Kong's "unexplained" use of company funds. This negates
Complainant/Appellee's theory that his dismissal was a purely retaliatory act orchestrated by
Respondent/ Appellant Kong. Considering the complexity of the Asia Pacific and ASEAN
reorganization, we are inclined to hold that it is only by pure happenstance that the restructuring
was implemented at a time when Complainant/Appellee's personal troubles with individual
respondent Kong began.

xxxx

In the instant case, Complainant/Appellee's dismissal may have been preceded by an unpleasant
exchange between him rn1d his superior respondent Kong, which Complainant/Appellee clainls is
the reason why he was illegally dismissed. As in the case of International Harvester
Macleod, however, Complainrn1t/Appellee's theory as to the cause of his separation merely
constitutes surmise and speculation. The fact that five other persons, against whom Kong's 'angry
emails' were also directed, were not dismissed from APC negates Complainant/ Appellee's theory
that he is being persecuted for 'whistleblowing.' That x x x Kong may have had a personal
misunderstanding with Complainant/ Appellee does not necessarily mean that it was the reason why
Complainant/APJ2_ellee's position was abolished. Personal matters between the company's
employees cannot, by themselves, invalidate an otherwise valid reorganization nor cause prejudice
to the company's bona fide business interests.

In any case, the findings of the Labor Arbiter on the supposed absence of evidence to justify a
declaration of redundancy in this case are contrary to the records. First, a brief reading of the Job
Description for the positions of Enterprise Sales Manager and Transactional Sales Manager x x x
negate[s] the Labor Arbiter's ruling that the two employees hired by the company are mere
replacements of Complainant/Appellee. These positions involved a different set of functions than
Complainant/ Appellee's position of Regional Manager - North ASEAN. Complainant/Appellee
also failed to deny that he did not possess the requisite qualifications, experience and contacts for
these two new positions. Hence, the hiring of individuals to occupy these two did not invalidate the
redundancy implemented by APC.

The insistence of the Labor Arbiter in the Decision on appeal upon a merger of functions rather
than the hiring of new persons is tantamount to a substitution of the Arbiter's judgment for the
Company's judgment as regards the characterization of the necessity of Complainant/ Appellee's
services. It would have been contrary to the very interests of APC if Complainant/ Appellee was
retained as ASEAN Enterprise Sales Manager or Transactional Business Manager, when he is
clearly unqualified for either position.

xxxx

Hence, the creation by the company of the new positions of Enterprise Sales Manager and
Transactional Business Manager, which rendered unnecessary Complainant/Appellee's position as
North ASEAN Regional Manager must be respected.

Second, we find that contrary to the findings of the Labor Arbiter, Complainant/ Appellee had
kiiowledge of the redundancy. In the e-mail dated 16 September 2005 to then Asia Pacific South
General Manager Cunnold x x x, and in Complainant/Appellee's discussion with Mr. Kong on or
about 18 October 2005 x x x, it is evident that Complainant/ Appellee knew for some time that
changes were underway in APC's organizational structure. APC was likewise transparent about the
organization to APC (Philippines) B.V.'s employees. In a meeting on 18 October 2005, individual
Respondent/ Appellant Kong briefed the Philippine employees about the abolition of the Regional
Manager - North ASEAN and the Regional Manager - South ASEAN positions and the dismissal of
Complainant/ Appellee on the ground of redundancy as a result of the reorganization x x x.

We rule that the circumstances cited by the Labor Arbiter in the appealed Decision do not, under
pertinent law and jurisprudence, negate the validity of the company's redundancy program. In
dismissals due to redundancy, the Labor Code merely requires written notice to the affected
employee and to the DOLE, and payment of separation pay thus:

xxxx

There is no law or jurisprudence that requires a showing of the 'approval of the restructuring or
redundancy by the directors and officers' of a company x x x. There is likewise no law requiring
that prior consultation be made with an enterprise's employees before any reorganization may be
effected x x x. There is, moreover, no law requiring the making of an announcement as regards the
reorganization of an enterprise x x x. The Labor Code again only categorically requires that notice
be given to the affected employee/s. It does not require the giving of notice to persons not otherwise
affected by the redundancy, such as, for instance, the company's other employees. As a rule, the
characterization of the services of an employee who was terminated for redundancy is an exercise
of the business judgment of the employer. The wisdom or soundness of such characterization or
decision is not subject to the discretionary review by the Labor Arbiter, the NLRC and the Courts
thereafter x x x. To require the employer to make prior consultation, with its employees, amounts to
subjecting the company's business decision to the discretionary review of its employees. This
dilutes the company's prerogative as an employer, to run its business as it sees fit.

Employers cannot be unduly burdened by extra-legal requirements imposed upon them by the
courts, such as those imposed in the Decision on Appeal, i.e. prior consultation with employees,
company-wide announcement, board resolution, etc. The basic requirements of due process
demand that employers be informed definitively of what the law requires. Otherwise,
employers will forever be at the mercy of quasi-judicial tribunals. The basic requirements of due
process demru1d that an employer's compliance with labor laws be not made dependent on a matter
as fluid as judicial legislation, as in the many requirements laid down by the Labor Arbiter in the
Assailed Decision.

Finally on this point, Complainant/Appellee's status as an executive officer must be considered in

evaluating the exercise of the company's prerogative to declare his position redundant. Under
pertinent jurisprudence, the Company retained a wider latitude of discretion in determining whether
Complainant/Appellee's employment should be sustained. InAlmodiel v. NLRC, x x x the Supreme
Court ruled:

'Considering further that petitioner herein held a position which was definitely managerial in
character, Raytheon had a broad latitude of discretion in abolishing his position. An employer has
a much wider discretion in terminating employment relationship of managerial personnel
compared to rank and file employees. The reason obviously is that officers in such key position
perform not only functions which by nature require the employer's full trust and confidence but also
functions that spell the success or failure of an enterprise. '

The Labor Code requires that employees separated on the ground of redundancy be given notice of
their separation at least thirty (30) days before the effective date thereof: A notice of the separation
must likewise be given to the DOLE, to give the latter the opportunity to determine whether
economic causes exist that justify the termination of the worker's employment, x x x.

In the instant case, we find that although Respondents/ Appellants gave the requisite 30-day notice
to Complainant/ Appellee x x x, Respondents/ Appellants failed to comply with the procedural
requirement of giving notice to the DOLE 30 days before the effective date of
Complainant/Appellee's separation. The notice referred to by Respondents/ Appellants x x x does
not specifically include Complainant/Appellee's name. It thus cannot be considered as sufficient
compliance with the notice requirement laid down by the Labor Code.

The prevailing rule is that a dismissal is not to be declared illegal simply because the employer
failed to comply with the requirements of procedural due process. x x x
 xxxx

Complainant/Appellee's claims for backwages and reinstatement must be denied in view of our
finding above that Complainant/ Appellee was dismissed for authorized cause. It is settled that
backwages and reinstatement are merely legal consequences of a finding that the employee was
indeed illegally dismissed x x x. These reliefs cannot be awarded to a separated employee absent a
finding of illegal dismissal.

xxxx

We find the Labor Arbiter's award of moral and exemplary damages, and attorney's fees in favor of
Complainant/ Appellee unwarranted. We find merit in Respondents/Appellees' argument that the
reasons cited by the Labor Arbiter in the Decision, which purport to justify an award of damages in
the instant case, are speculative. x x x

xxxx

The Labor Arbiter's award of Two Million Pesos x x x by way of moral damages and another Two
Million Pesos x x x by way of exemplary damages is too large an amount by any standard. x x x

xxxx

We finally find it irregular for the Labor Arbiter to award specific items and amounts in the
Decision, such as Complainant/Appellee's car maintenance allowance, communication allowance,
executive parking benefit, etc., when no mention of said items or their amounts was made by either
party in the records of the case. This is contrary to the constitutional proscription against decisions
rendered without bases in fact x x x

xxxx

There is no reason to hold individual Respondents/Appellant liable in the instant case considering
that whatever acts were committed by them were done in the performance of their official
functions, without malice or bad faith. x x x

Since Our jurisdiction is limited to those cases where an employment relationship exists between
the parties, Respondents/ Appellants APCC, APC Singapore Pte. Ltd., and APC (Phils.) Inc. cannot
be held liable under the complaint. These entities, although related to Complainant/Appellee's
employer APC (Philippines) B.V., maintain separate corporate personalities from the latter. They
cannot be considered Complainant/Appellee's employer on the basis of [sic] alone of their
affiliation with APC (Philippines) B.V. x x x:

xxxx

WHEREFORE, the Appeal is GRANTED and the Decision dated 27 July 2007 in NLRC NCR
Case No. 00-05-03722-06 is REVERSED and SET ASIDE. Respondents/Appellants are, however,
directed to pay Complainant/Appellee Php30,000.00 in nominal damages for failure to comply with
the notice requirement under the Labor Code.

SO ORDERED.25 (Emphasis in the original)

Respondent moved for reconsideration, but the NLRC stood its ground.

Ruling of the Court of Appeals

In a Petition for Certiorari26before the CA, respondent questioned the above NLRC dispositions and prayed for the
reinstatement of the Labor Arbiter's Decision.

On April 23, 2014, the CA rendered the assailed Decision granting the petition, decreeing thus:
The present controversy revolves on the issue of whether or not the dismissal of the petitioner on
the ground of redundancy is tenable.

The petitioner mainly contends that respondents dismally failed to prove that the dismissal was
valid; that contrary to the claims of respondents, there was no restructuring to effect a redundancy
of his position but it is just a make-believe redundancy to cover up for the illegality of his dismissal;
that his dismissal was a retaliat01y act to the complaint that he filed questioning the unethical
conduct of his former immediate superior, George Kong; that respondents failed to notify DOLE of
his termination as required under the Labor Code.

On the other hand, respondents claim that the dismissal of the petitioner due to redundancy is a
management prerogative which cannot be inte1fered with; that contrary to the claim of the
petitioner, the restructuring effected by the company is legitimate and in accordance with the needs
of the company; that notices as required by law have been strictly complied with.

xxxx

Settled is the fact that redundancy is an authorized cause for the termination of employment, as
provided by Article 283 of the Labor Code.

Redundancy exists when the service capability of the workforce is in excess of what is reasonably
needed to meet the demands of the business enterprise. A reasonably redundant position is one
rendered superfluous by any number of factors, such as overhiring of workers, decreased volume of
business, dropping of a particular product line previously manufactured by the company or phasing
out of service activity priorly undertaken by the business. Among the requisites of a valid
redundancy program arc: (1) the good faith of the employer in abolishing the redundant position;
and (2) fair and reasonable criteria in ascertaining what positions are to be declared redundant and
accordingly established.

Likewise, settled is the fact that the declaration of redundant positions is a management prerogative,
an exercise of business judgment by the employer.

It is however not enough for a company to merely declare that positions have become redundant. It
must produce adequate proof of such redundancy to justify the dismissal of the affected employees.
In Panlileo v. NLRC, the High Court said that the following evidence may be proffered to
substantiate redundancy: 'the new staffing pattern, feasibility studies/proposal, on the viability of
the newly created positions, job description and the approval by the management of the
restructuring.' In another case, it was held that the company sufficiently established the fact of
redundancy through 'affidavits executed by the officers of the respondent PLDT, explaining the
reasons and necessities for the implementation of the redundancy program.'

As found out by the Labor Arbiter which we look with favor: 'In the instant case, we find (that)
respondent did not present any of the foregoing evidence to establish the supposed restructuring
and/or redundancy. There was also no evidence showing the approval of the said restructuring
and/or redundancy by the directors and officers of respondent APC B. V What was submitted on
record were the affidavits and memoranda of the managers of respondent company on the alleged
plans for restructuring which the Supreme Court held not sufficient to substantially prove the
existence of a restructuring or redundancy. Moreover, in the previous reorganization of APC
ASEAN in January 2005, Country Managers and Regional Managers actively participated in the
formation of the new structure for the APC ASEAN. The same tedious process of reorganization
was however not undertaken by respondents APCC in the supposed decision to abolish the position
of the ASEAN Regional Managers, thus rendering suspect the assertion of redundancy. Also
significant to consider is the point raised by complainant that up to present, respondent APCC has
not announced any reconfiguration, reorganization, or restructuring in APC ASEAN despite the
effected termination if only to validate the alleged reorganization. '

A company's exercise of its management prerogatives is not absolute. It cannot exercise its
prerogative in a cruel, repressive, or despotic manner. x x x. Employment to the common man is his
very life and blood, which must be protected against concocted causes to legitimize an otherwise
irregular termination of employment.
In the present case, it appeared from the records that the redundancy program was not in existence.
Circumstances obtaining therein never [point] to the fact of a restructuring being carried out by the
company. The respondents dismally failed to convince this Court that the organizational chart and
self-serving affidavits presented are sufficient proof of the existence of redundancy.

It must be remembered that the employer bears the burden of proving the cause or causes for
termination. Its failure to do so would necessarily lead to a judgment of illegal dismissal.

The pieces of evidence presented did not justify the reorganization that led to redundant
positions as claimed by the respondent. Moreover, records also show that the written notice to the
Department of Labor and Employment (DOLE), as required by Article 283 of the Labor Code, was
not complied with.

The Labor Arbiter in her Decision said: ‘x x x respondent failed to comply with the requirement of
written notice to the DOLE as evidenced by the Certification from said office that there is no
record on its file from 01 September 2005 to 30 November 2005 reporting the termination of
complainant for redundancy. Failure to comply with the mandatory procedural requirements taints
the dismissal with illegality. We also do not find the notice to DOLE adduced by respondents
applicable to complainant since the latter was not specifically named therein apart from the fact
that said notice as pointed out by complainant, appears to have been previously submitted to DOLE
by reorganization of the human resources [sic] department of APC BV Cavite and not that of the
Regional Managers of APCC. '

Again, it bears stressing that substantial evidence is the [quantum] of evidence required to establish
a fact in cases before administrative and quasi-judicial bodies. Substantial evidence, as amply
explained in numerous cases, is that amount of 'relevant evidence which a reasonable mind might
accept as adequate to support a conclusion.'

We find this substantial evidence wanting in the present case.

Clearly the foregoing circumstances support the illegal dismissal of the complainant, as aptly ruled
by the Labor Arbiter.

In balancing the interest between labor and capital, the prudent recourse in termination cases is to
safeguard the prized security of tenure of employees and to require employers to present the best
evidence obtainable, especially so because in most cases, the documents or proof needed to resolve
the validity of the termination, are in the possession of employers. A contrary ruling would
encourage employers to utilize redundancy as a means of dis1nissing employees when no valid
grounds for termination are shown by simply invoking a feigned or unsubstantiated redundancy
program.

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. x x x. 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. x x x. 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.

On a final note, respondents have raised the issue of this Court's taking cognizance of this petition
for certiorari questioning therein the grounds posed for the filing of the petition.

We find this misplaced and without merit. The petition is mainly grounded on alleged grave abuse
of discretion an1ounting to lack or excess of jurisdiction allegedly committed by NLRC, although
some errors in judgment have surfaced as well.
 The extent of judicial review by certiorari of decisions or resolutions of the NLRC, as exercised
previously by the Supreme Court and now by the Court of Appeals, is described in Zarate, .Jr. v.
Olegario, thus –

'The rule is settled that the original and exclusive jurisdiction of this Court to review a decision of
respondent NLRC (or Executive Labor Arbiter as in this case) in a petition for certiorari under Rule
65 does not normally include an inquiry into the correctness of its evaluation of the evidence. Errors
of judgment, as distinguished from errors of jurisdiction, are not within the province of a special
civil action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of
discretion. It is thus incumbent upon petitioner to satisfactorily establish that respondent
Commission or executive labor arbiter acted capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy, in order that the extraordinary writ
of certiorari will lie. By grave abuse of discretion is meant such capricious and whimsical exercise
of judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically. For certiorari to lie, there must be capricious, arbitrary and
whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with
centuries of both civil law and common law traditions.'

Was NLRC guilty of such grave abuse of discretion?

We say yes.

The Court of Appeals, therefore, can grant the petition for certiorari if it finds that the NLRC in its
assailed decision or resolution, committed grave abuse of discretion by capriciously, whimsically,
or arbitrarily disregarding evidence which is material or decisive of the controversy.

And this is amplified in AMA case where the Supreme Court held that:

'x x x x

In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the
case and re-examine the questioned findings. As a corollary, this Court is clothed with ample
authority to review matters, even if they are not assigned as errors in their appeal, if it finds that
their consideration is necessary to arrive at a just decision of the case. The same principles are now
necessarily adhered to and are applied by the Court of Appeals in its expanded jurisdiction over
labor cases elevated through a petition for certiorari; thus, we see no error on its part when it made
anew a factual determination of the matters and on that basis reversed the ruling of the NLRC.'

Thus, pursuant to law and jurisprudence, Our taking cognizance of the present case is in order.

WHEREFORE, premises considered, the petition is GRANTED. Accordingly the assailed

Decision of the NLRC is REVERSED and SET ASIDE and the decision of the Labor Arbiter is
hereby REINSTATED with the MODIFICATION that if reinstatement is no longer possible,
petitioner should be paid full backwages reckoned from the date of his illegal dismissal up to the
time that this Decision becomes final and executory, separation pay equivalent to one month's
salary for every year of service less the amount already received by him from the respondent as
separation package and moral and exemplary damages in the amount of Phpl00,000.00 each.

Accordingly the case is remanded to the Labor Arbiter for the computation of the award.

SO ORDERED.27 (Emphasis in the original)

Petitioners filed a motion for reconsideration, but the CA denied the same via its September 11, 2014 Resolution.
Hence, the instant Petition.

In a January 11, 2016 Resolution,28 the Court resolved to give due course to the Petition.

Issues

Petitioners raise the following issues for resolution:

 I.

THE COURT OF APPEALS DECIDED IN A MANNER CONTRARY TO LAW AND LEGAL

PRECEDENTS WHEN IT EXERCISED ITS CERTIORARI POWER ABSENT ANY FINDING
THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRE110N AMOUNTING TO LACK
OR EXCESS OF JURISDICTION.

A. The Court of Appeals exercised its certiorari jurisdiction without a finding that the NLRC
committed grave abuse of discretion amounting to lack or excess of jurisdiction.

B. The Court of Appeals erred in granting respondent's CA Petition, even when respondent failed to
raise any ground which would justify the exercise of the Court of Appeals' certiorari jurisdiction.

C. In any event, the Court of Appeals should have dismissed the CA Petition outright for being a
mere rehash of respondent Lim's arguments before the NLRC.

II.

THE COURT OF APPEALS DECIDED IN A MANNER CONTRARY TO LEGAL PRECEDENT

WHEN IT REVISITED AND REVERSED

FACTUAL FINDINGS OF THE NLRC SOLELY ON THE GROUND THAT THERE

SUPPOSEDLY IS A DIVERGENCE OF VIEWS BETWEEN THE LABOR ARBITER AND THE
NLRC.

III.

IN ANY EVENT, THE NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION, AND THE COURT OF APPEALS'
FACTUAL FINDINGS WERE UNSUPPORTED BY EVIDENCE AND ITS CONCLUSIONS
CONTRARY TO LAW AND EXISTING JURISPRUDENCE.

A. The NLRC's finding that respondent Lim was validly dismissed due to
redundancy is substantially supported by evidence on record.

B. The NLRC's findings on the existence of redundancy are correct. The Court of
Appeals misapplied and/or misconstrued this Honorable Court's rulings in San
Miguel v. Del Rosario and Panlilio v. NLRC regarding the evidence that may prove
redundancy.

C. Petitioners have presented evidence sufficient to prove redundancy, even if

measured against the standards set by the Court of Appeals.

(i) New staffing pattern proved redundancy.

(ii) Restructuring/reorganization resulted from a series of proposals and prior

extensive feasibility studies.1âwphi1

(iii) Job descriptions provided adequate basis to conclude that the new positions
were different from the abolished ones.

(iv) Approval by the management of the restructuring/reorganization.

D. Petitioners complied with the requirement to notify the DOLE. In any event,
respondent Lim's dismissal due to redundancy cannot be rendered illegal even
assuming arguendo that Petitioners failed to strictly comply with such requirement.29

Petitioners' Arguments
In their Petition and Reply30 seeking reversal of the assailed CA dispositions and, in lieu thereof, the reinstatement
of the June 17, 2008 NLRC Decision, petitioners essentially argue that the CA erred in finding that the NLRC
committed grave abuse of discretion; that it failed to explain how the NLRC's findings could have amounted to
grave abuse of discretion so patent and gross as to amount to an evasion of positive duty or virtual refusal to
perform a duty enjoined by law; that respondent fulled to raise any ground which would justify the CA's exercise
of its certiorari jurisdiction; that the NLRC's finding that respondent was validly dismissed for redundancy is
substantially supported by the evidence adduced; that contrary to the CA's pronouncement, redundancy may be
proved by evidence other than a new staffing pattern, feasibility studies/proposals on the viability of newly created
positions, job descriptions, and approval of the redundancy scheme by management; that they presented sufficient
evidence to prove the necessity of dismissing respondent on account of redundancy, such as a new staffing
pattern/organizational chart, series of proposals/meetings/ extensive study, new job descriptions for the new
positions, and approval by management of the scheme; and that the requirements of Article 283 of the Labor
Code31 were substantially complied with, although failure to comply therewith does not render the dismissal illegal
or ineffectual.

Respondent's Arguments

In his Comment32 to the Petition, respondent insists that petitioners' redundancy scheme was a sham as it was
contrived with the sole aim to discharge him from employment; that petitioners did not comply with the notice
requirement under the Labor Code; that he remained an employee of APCC, and was only an APCP BV employee
on paper; that upon his termination, he was immediately replaced by another employee who held the same
position, although his title was changed; that the documentary evidence adduced by petitioners to prove their sham
redundancy scheme were fabricated; that in deciding the case the way it did, the NLRC committed grave abuse of
discretion; and that the CA was correct in granting his Petition for Certiorari. Thus, he prays for denial of the
instant Petition.

Our Ruling

The Court denies the Petition.

The CA committed no error in taking cognizance of respondent's Petition for Certiorari. As will be shown below,
the NLRC committed an error so patent and gross as to amount to an evasion of its positive duty to administer
justice in favor of the respondent in this case. Failing in its duty to properly appreciate the facts and evidence on
record, and apply the law and decide this otherwise simple case in favor of the party to whom justice should be
served, the NLRC arrived at a fundamentally unjust, unreasonable, and absurd pronouncement that is consequently
null and void and without force and effect. An appreciation of the copious evidence on record should lead one to a
single obvious inevitable legal conclusion, yet the NLRC, with its expertise and experience as a labor tribunal,
failed to arrive at such a resolution.

A void judgment or order has no legal and binding effect. It does not divest rights and no rights can
be obtained under it; all proceedings founded upon a void judgment are equally worthless.

Void judgments, because they are legally non-existent, are susceptible to collateral attacks. A
collateral attack is an attack, made as an incident in another action, whose purpose is to obtain a
different relief In other words, a party need not file an action to purposely attack a void judgment;
he may attack the void judgment as part of some other proceeding. A void judgment or order is a
lawless thing, which can be treated as an outlaw and slain at sight, or ignored wherever and
whenever it exhibits its head. Thus, it can never become final, and could be assailed at any time.33

When respondent was hired directly by APCC, an American entity that was not registered to conduct business
here, to sell its products and services here, he was tossed over to another APC corporation, APCPI (now APCP
BV), a Philippine-registered manufacturing corporation, where he was ostensibly included in the list of employees
and the payroll. In other words, APCC sanctioned the use of APCP BV as respondent's cover, from where he
conducted his sales operations for APCC. To further conceal and promote APCC's covert sales operations here,
respondent was required to create a petty cash fund using his own personal bank account to answer for the daily
expenses and operations of the American Power Conversion Philippine Sales Office. Thus, APCC conducted
business here as an unregistered and unregulated enterprise; consequently, it did not pay truces despite doing
business here and earning income as a result. APCP BV was not engaged in sales, as it is licensed to engage only
in the manufacture of computer-related products - yet, it holds respondent in its payroll. Meanwhile, respondent
took orders from and came under the supervision and control of APCS and Kong from Singapore. This
Management and manner of conducting business by petitioners is illegal. Being illegal, this should have been early
on remedied by petitioners, including Plumer, Kong, and Hendy, who are presumed to know, by the very nature of
their positions and business, how legitimate business is supposed to be conducted in this country, that is, by
registering the business to allow regulation and taxation by the authorities. Yet they did not, and instead continued
with this illegal arrangement to further their business here and avoid their legal obligations to the public and
government.

Everything seemed to go well for petitioners with their illegitimate business arrangement.1awp++i1 For his part,
respondent- who was at the losing end of the bargain given that it was his name and reputation on the line as he
was working for an unregistered, unregulated, and untaxed foreign enterprise and doing business with the public -
prodded APCC to formalize and declare its existence in order to free himself from the precarious position that
APCC has placed him in. Thus, respondent declared in his Position Paper that -

16. Despite Complainant's (respondent) continued requests and suggestions, APC Corporation's
international management failed and refused to fo1malize the registration of APC Philippines Sales
as distinct and separate from APCPI, and to discontinue the use of his personal bank account for the
petty cash requirements of APC Philippines Sales.34

When respondent joined APCC, he was merely in his early twenties, as admitted by Truong in his email message
announcing respondent's appointment as Regional Manager for APC North ASEAN. He cannot be faulted for
acceding to APCC's condition at the outset that he use his personal bank account for APCC's operations in the
meantime; during the incipient phase of his employment, he must have been operating wider the impression that
since APCC's sales and marketing operations were new in the country, it needed time to formalize its operations
and secure a license to do business here. And with this hope, he innocently went about doing his·· work. Indeed,
APCC had the sole responsibility of complying with domestic laws if it wanted to continue - as it did - doing
business here. It was not respondent's concern to perform administrative and compliance work that APCC, through
APCP BV, was more than capable of doing; his only job was to sell APCC's products and services. Given that
respondent made repeated requests for APCC to formalize and legalize its presence here, it could be that the latter
may have repeatedly assured or misrepresented to the former that it would do so - which kept respondent toward
the uncomplaining performance of his work. And when he was ostensibly absorbed into the APCP BV payroll,
respondent must have thought that APCC had remedied the situation. Which it did not. Meanwhile, respondent
continued as its employee, doing sales work for it. He remained an APCP BV employee on paper, and continued to
do business unregulated and untaxed, using his personal bank account to conceal APCC's income.

APC Japan and APCS Singapore, on the other hand, maintained supervision and control over respondent, through
Plumer and Kong, respectively. Still, respondent remained an employee of APCC, and not of APC Japan or APCS.

We therefore have this unique situation where respondent was hired directly by APCC of the U.S.A., but was
being paid his remuneration by a separate entity-APCP BV of the Philippines, and is supervised and controlled by
APCS from Singapore and APC Japan - all in furtherance of APCC's objective of doing business here unfettered
by government regulation.

To determine the existence of an employer-employee relationship, four elements generally need to

be considered, 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. These
elements or indicators comprise the so-called 'four-fold' test of employment relationship. x x x35

From the above, it would seem that all of the petitioners are for all practical purposes respondent's employers. He
was selected and engaged by APCC. His salaries and benefits were paid by APCP BV. And he is under the
supervision and control of APCS and APC Japan. But of course, there is no such thing in legitimate employment
arrangements. This bizarre labor relation was made possible and necessary only by the petitioners' common
objective: to enable APCC to skirt the law. For all legal purposes, APCC is respondent's employer. Therefore, this
Court declares the subject redundancy scheme a sham, the same being an integral part of petitioners' illegitimate
scheme to defraud the public - including respondent - and the State. It is null and void for being contrary to law
and public policy as it is in furtherance of an illegal scheme perpetrated by APCC with the aid of its co-
petitioners. Quae  ab initio non valent, ex post facto convalescere non possunt. Things that are invalid from the
beginning are not made valid by a subsequent act.

For levity's sake, let us set aside the foregoing for a while and indulge petitioners by precisely illustrating the
fallacy of their position. Thus, to demonstrate, while APCC was respondent's employer, the redundancy program
in issue that was used to justify respondent's dismissal from work was nonetheless implemented by Plumer and
Kong - who are employees of APC Japan and APCS, as well as by Hendy and del Ponso - employees of APCP
BV. As admitted by petitioners, Plumer and Kong conceived and implemented the redundancy program, and
Hendy and del Ponso prepared the documents which consummated respondent's supposed dismissal. As APCP BV
Human Resource Director and Manager, respectively, Hendy and del Ponso furnished the DOLE with documents
relative to the redundancy scheme, including a notice of termination/redundancy. Now, since APCC is
respondent's true employer, APC Japan, APCS, APCP BV, Plumer, Kong, Hendy, and del Ponso had no business
coming into the picture; they are not connected with APCC whatsoever. They had no authority to devise a
redundancy scheme and represent APCC in their dealings with the DOLE. Therefore, their supposed redundancy
scheme, as against respondent, is ineffective; they had no power to terminate the services of respondent, in the first
place; the prerogative belonged to APCC.

However, this does not prevent respondent from recovering from all the petitioners. Since they all benefited from
his services - APCC was able to grow its business and conceal its sales operations and, by its misrepresentations
and assurances that it would register its operations, it successfully convinced respondent to do its bidding; APCP
BV enjoyed the immense goodwill of APCC for aiding the latter in its elaborate cover-up and duping respondent,
government, and the public into believing that it was respondent's actual employer; and APCS utilized respondent
as its workhorse even as he drew his salaries from APCP BV - and knowingly aided and abetted each other in the
commission of wrong, they should all be held responsible, under the principle of quasi-contract, for respondent's
money claims, including damages and attorney's fees. For all purposes beneficial to respondent, all the petitioners
should be considered as his employers since they all benefited from his industry and used him in their elaborate
scheme and to further their aim - evading the regulatory processes of this country. And from a labor standpoint,
they are al1 guilty of violating the Labor Code as a result of their concerted acts of fraud and misrepresentation
upon the respondent, using him and placing him in a precarious position without risk to themselves, and thus
deliberately disregarding their fundamental obligation to afford protection to labor and insure the safety of their
employees. For this gross violation of the fundamental policy of the Labor Code, petitioners must be held liable to
pay backwages, damages, and atto1ney's fees.

It is true that the 'backwages' sought by an illegally dismissed employee may be considered, by
reason of its practical effect, as a 'money claim.' However, it is not the principal cause of action in
an illegal dismissal case but the unlawful deprivation of one's employment committed by the
employer in violation of the right of an employee. Backwages is merely one of the reliefs which an
illegally dismissed employee prays the labor arbiter and the NLRC to render in his favor as a
consequence of the unlawful act committed by the employer. The award thereof is not private
compensation or damages but is in furtherance and effectuation of the public objectives of the
Labor Code. Even though the practical effect is the enrichment of the individual, the award of
backwages is not in redress of a private right, but rather, is in the nature of a command upon the
employer to make public reparation for his violation of the Labor Code.36

Under Article 2142 of the Civil Code, "[c]ertain lawful, voluntary and unilateral acts give rise to the juridical
relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another."

There is unjust enrichment 'when a person unjustly retains a benefit to the loss of another, or when a
person retains money or property of another against the fundamental principles of justice, equity
and good conscience. The principle of unjust enrichment requires two conditions: (1) that a person
is benefited without a valid ba5is or justification, and (2) that such benefit is derived at the expense
of another.

The main objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration. x x x37

With the view taken of the case, it cannot be said that respondent may still be reinstated to his former position, on
account of strained relations. Besides, the Court shall endeavor to determine the respective accountabilities of
petitioners by way of taxes and other possible liabilities proceeding from the manner that they conducted business
all these years. Hendy' s admission in her December 9, 2005 letter to respondent about APCC's use of the latter's
private bank account with which to conduct its business and operations is certainly revealing, just as telling as the
evidence on record which suggests that APCC generated substantial revenue from its Philippine operations. For
this purpose, respondent's cooperation might be required by the authorities. As a potential witness to the activities
of petitioners, his security and safety may not be guaranteed if he continues to work for the petitioners - not to
mention that any investigation into the matter might be jeopardized by his continued association with petitioners.
Apparent from the Petition is petitioners' failure to question the monetary awards. Perhaps they found no need to
question the same, thinking that it is unnecessary to do so with their full concentration devoted to defending the
validity and propriety of their redundancy scheme - which they must sincerely believe will stand the test of
validity. Understandably, if the scheme were upheld, respondent's monetary claims would necessarily be struck
down. Nonetheless, the Court observes that the Labor Arbiter committed a patent error regarding one of the
awards contained in the dispositive portion of her Decision-which escaped the attention of the CA. This pertains to
the award of ₱45,771.50, covering vehicle insurance for the years 2006 and 2007, and vehicle registration for the
year 2006 - which should be deleted. It has no basis in fact and in law.

WHEREFORE, the Petition is DENIED. The April 23, 2014 Decision and September 11, 2014 Resolution of the
Court of Appeals in CA-G.R. SP No. 110142 are AFFIRMED WITH MODIFICATION, in that the decree to
reinstate respondent to his former position and the award of ₱45,771.50 covering vehicle insurance for the years
2006 and 2007 and vehicle registration for the year 2006 are DELETED.

Let the Office of the Commissioner of the Bureau of Internal Revenue be furnished a copy of this Decision for
appropriate action.
37
 Locsin II v. Mekeni Food Corporation, 722 Phil. 886, 901 (2013), citing Flores v. Spouses Lindo, Jr., 664 Phil.
210, 221 (2011).

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 229404, January 24, 2018 ]
MARILYN B. ASENTISTA, PETITIONER, VS. JUPP & COMPANY, INC., AND/OR MR. JOSEPH V.
ASCUTIA, RESPONDENTS.

DECISION
REYES, JR., J:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 filed by Marilyn B. Asentista (Asentista)
seeking to set aside the Decision[2] dated August 31, 2016 and Resolution [3] dated November 17, 2016 of the Court
of Appeals (CA), in CA-G.R. SP No. 06747-MIN, which set aside and nullified the Resolutions [4] dated November
28, 2014 and February 27, 2015 of the National Labor Relations Commission (NLRC), ordering respondents JUPP
& Company, Inc. (JUPP) and/or its President Joseph V. Ascutia (Ascutia) to pay Asentista her remaining unpaid
sales commissions in the amount of P210,077.95 plus ten percent (10%) total monetary award as attorney's fees.

Asentista was employed by JUPP as sales secretary on April 16, 2007. On March 14, 2008, she became a regular
employee of the company as a sales assistant and was later appointed in July 2010 as a sales agent of JUPP for its
Northern Mindanao area. As a sales agent, Asentista became entitled to a sales commission of two percent for
every attained monthly quota. However, despite reaching her monthly quota, JUPP failed to give Asentista her
earned sales commission despite repeated requests.[5]

Meanwhile in 2011, JUPP, through its Administrative and Finance Officer Malou Ramiro, issued a new Toyota
Avanza vehicle to Asentista in view of her sales performance in the Cagayan De Oro area. The ownership of the
car, however, remains with the company. Notwithstanding lack of agreement, JUPP deducted car plan
participation payment amounting to P113,000.00 and one year rental payment of P68,721.36 from her unpaid sales
commission.[6]

On February 4, 2013, Asentista tendered her resignation effective February 28, 2013 and returned the Avanza
vehicle to JUPP through Emmanuel P. Pabon.[7] Thereafter, she filed a claim for unpaid commission and refund for
car plan deduction based on the computation[8] sent by Ascutia, summarized as follows:
       
2010--------------------------- P 5,361.61
2011--------------------------- P 178,105.06
2012--------------------------- P 143,295.53
Total Amount: P 334,117.20
Less: P85,305.31 (Cash Advances - Asentista's total debts to JUPP)
-------------------------------------
Total Amount: P248,811.89
Less: P38,733.94 (deposited commission to Asentista's account)
-------------------------------------
Total Sales Commission due: P 210,077.99

As a result of the respondents' incessant refusal to pay, Asentista filed a complaint against JUPP and Ascutia
before the NLRC Regional Arbitration Branch No. 10, Cagayan de Oro City for non-payment for sales
commission.[9]

For their part, the respondents opposed the allegations of Aseptista, arguing the burden of proof to substantiate her
claim for unpaid commission and car participation refund rested upon her. Since the employment agreement
signed by Asentista did not include any remuneration for a sales commission and car participation plan, her claim
lacked any legal basis for entitlement Further, Asentista was only allowed to use the Toyota Avanza with car
participation during the amortization period for both her personal and official use due to the generosity of JUPP.[10]

On the other hand, JUPP admitted that despite lack of explicit provision in the employment agreement, Asentista
was given during her employment discretionary sales commission subject to the sole prerogative of the company.
JUPP likewise acknowledged sole discretion to allow Asentista to own the vehicle after the amortization period.[11]
In a Decision[12] dated November 28, 2013, Labor Arbiter (LA) Rammex C. Tiglao dismissed the complaint of
Asentista for lack of merit. In so ruling, the LA emphasized the non-entitlement of Asentista to claim for sales
commission or refund for amortization payment for the use of the company's car as shown by the employment
agreement between JUPP and the complainant. Furthermore, the LA opined on the improbability of omission of
the entitlement of unpaid commission in the resignation letter of the complainant, given her six years of
employment and educational attainment. Finally, the affidavit and supporting documents of Asentista were
disregarded for being self-serving, unreliable and unsubstantial evidence. Thus, it was ruled:

WHEREFORE the instant complaint is DISMISSED for lack of merit.

The respondents' counter-claims for exemplary damages and attorney's fees are dismissed for want
of jurisdiction and/or lack of merit.[13]

On appeal, the NLRC in a Resolution [14] dated November 28, 2014 reversed the decision of the LA and gave more
credence on Asentista's claim for unpaid commission based on Ascutia's electronic messages. Further, in the
absence of express stipulation, the respondents lacked authority to forfeit Asentista's sales commission and apply
the same as rentals for the personal use of the vehicle.[15] Accordingly, it was held that:

WHEREFORE, the appeal is GRANTED.

Respondents are hereby ORDERED to pay Complainant her remaining unpaid sales commissions
in the amount of P210,077.95 plus ten percent of the total monetary award as attorney's fees.

SO ORDERED.[16]

The motion for reconsideration filed by the respondents was denied for lack of merit in a Resolution [17] dated
February 27, 2015.

Aggrieved, the respondents filed a petition for certiorari under Rule 65 of the Rules of Court before the CA
alleging grave abuse of discretion on the part of NLRC for reversing the ruling of the LA and ordering them to pay
the complainant the unpaid sales commissions with additional 10% of the total monetary award as attorney's fees.
[18]

In a Decision[19] dated August 31, 2016, the CA ruled favorably on the petition and reinstated the decision of the
LA. CA agreed with the respondents that Asentista is not entitled to the grant of sales commission based on the
"Job Offer for Regular Status of Employment." Further, the CA rejected the email allegedly sent by Ascutia for
being "self-serving, unreliable and unsubstantial evidence."

"Nowhere could it be read in the contract that private respondent [Asentista] is entitled to the
claimed unpaid commission. The Court cannot give credence to the email allegedly sent by
petitioner Ascutia to private respondent detailing the computation of her claimed unpaid
commission. x x x."

Granting the petition, it was held that:

WHEREFORE, the petition is GRANTED. The Resolutions dated November 28, 2014 and

February 27, 2015 of the National Labor Relations Commission, Eight Division, Cagayan De Oro
City is hereby SET ASIDE and NULLIFIED, having been issued in grave abuse of discretion.
The Decision of the Labor Arbiter dated November 28, 2013 is hereby REINSTATED.

SO ORDERED.[20]

Hence, this petition.

Ruling of the Court

Before this Court, Asentista argues entitlement to sales commission and refund for car plan participation and
amortization payment. She avers that the respondents can no longer refute her allegations since they have already
admitted her entitlement to a discretionary commission and deduction in the amount of P113,000.00 and
P68,721.36 as payment for her car plan participation and amortization payment.

In their Comment, the respondents reiterate their opposition since the employment agreement did not include sales
commission as part of her salary and benefits. The respondents likewise refute the evidentiary value of the alleged
email messages of Ascutia for being unsubstantiated and unfounded.

The petition is granted.

The Court reverses the CA's ruling that the respondents have sufficiently established Asentista's non-entitlement in
view of the absence of any specific provision in her employment agreement including sales commission as part of
her remuneration.

At the outset, the respondents can no longer refute Asentista's entitlement to a discretionary commission since an
admission can already be deduced in their position paper.[21] Moreover, the silence of the employment  agreement
including sales commission as part of remuneration does not affect her entitlement. As provided by Section 97(f)
of the Labor Code, employee's wage has been defined as "remuneration of 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 and Employment, of board,
lodging, or other facilities customarily furnished by the employer to the employee."[22]

In Toyota Pasig, Inc. v. De Peralta[23] citing Iran v. NLRC,[24] the Court affirmed the inclusion of sales commission
as part of a salesman's remuneration for services rendered to the company. In explaining the wisdom behind the
inclusion, it was held that:

This definition explicitly includes commissions as part of wages. While commissions are, indeed,
incentives or forms of encouragement to inspire employees to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remunerations for services
rendered. In fact, commissions have been defined as the recompense, compensation or reward of an
agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as
a percentage on the amount of his transactions or on the profit to the principal. The nature of the
work of a salesman and the reason for such type of remuneration for services rendered demonstrate
clearly that commissions are part of a salesman's wage or salary.[25]

In the same way, the Court cannot subscribe to the assertion of the respondents that the burden of proof to prove
monetary claims rests on the employee.

It is a settled labor doctrine that in cases involving non-payment of monetary claims of employees, the employer
has the burden of proving that the employees did receive their wages and benefits and that the same were paid in
accordance with law.[26] As elucidated in De Guzman v. NLRC, et al.:[27]

It is settled that once the employee has set out with particularity in his complaint, position paper,
affidavits and other documents the labor standard benefits he is entitled to, and which he alleged
that the employer failed to pay him, it becomes the employer's burden to prove that it has paid these
money claims. One who pleads payment has the burden of proving it, and even where the
employees must allege non-payment, the general rule is that the burden rests on the defendant to
prove payment, rather than on the plaintiff to prove non-payment.[28]

The rule finds merit in view of the fact that the accessibility over the employment records, pertinent personnel
files, payrolls, remittances, and other similar documents which will show that overtime, differentials, service
incentive leave, and other claims have been paid to the employee is exclusively within the custody and absolute
control of the employer.[29] Otherwise, t7he feasibility of proving non-payment of monetary claims or benefits will
hardly result to fruition.

In this case, the Court agrees with Asentista that she has already set out the particularities of her unpaid monetary
claims against the respondents based on the electronic messages of Ascutia. The respondents should have
presented evidentiary proof based on the employment records and personnel files that Asentista was already paid
of her benefits, instead of attributing the burden of proof back to her.

As held in Toyota Pasig,[30] the employer's act of simply dismissing the employee's claim "for being purely self-
serving and unfounded without even presenting any tinge or proof showing that respondent (employee) was
already paid of such benefits or that she was entitled thereto" was rebutted by the Court. [31] Failure on the part of
the employer to discharge the burden tilts the balance in favor of the employee.

Similarly, the Court concurs with Asentista that in the absence of any express stipulation, the respondents cannot
deduct car participation and amortization payment from her unpaid sales commission.

The case of Locsin v. Mekeni[32] is instructive:

In the absence of specific terms and conditions governing a car plan agreement between the
employer and employee, the former may not retain the installment payments made by the latter on
the car plan and treat them as rents for the use of the service vehicle, in the event that the employee
ceases his employment and is unable to complete the installment payments on the vehicle. The
underlying reason is that the service vehicle was precisely used in the former's business; any
personal benefit obtained by the employee from its use is merely incidental.[33]

The Court agrees with the factual findings of NLRC that the respondents and Asentista did not agree on any car
participation plan. Since the inception of the complaint, Asentista has been adamant that she did not authorize the
respondents to deduct a car plan participation payment from her sales commission.[34]

In contrast, the Court disagrees with the justification advanced by the respondents as guided by the principle of
equity, since "it would be more equitable if Asentista shares such amount with the company as rentals for the
utilization of the company vehicle."[35] Even granting that Asentista was allowed to use the company car even for
personal and family use, the sole the amortization period remains with the respondents.[36]

Any benefit or privilege enjoyed by Asentista from using the service vehicle was merely incidental and
insignificant, because for the most part the vehicle was under the respondents' control and supervision. Given the
high monthly quota requirement imposed upon Asentista to generate sales for the company, the service vehicle
given to her was an absolute necessity. In truth, the respondents were the ones reaping the full benefits of the
vehicle assigned to Asentista in the performance of her function.[37]

Under the principle of unjust enrichment, no person may unjustly enrich oneself at the expense of another. [38] As
embodied in Article 22 of the New Civil Code, every person who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him.[39]

In this case, the respondents committed unjust enrichment against Asentista when it allowed her to use the
company vehicle to further the performance of her function as a sales agent then unilaterally, without any consent,
deduct car participation and amortization payment to Asentista's sales commission, to the latter's prejudice.

Applying the guiding principles explicated in Locsin:[40]

In the absence of specific terms and conditions governing the car plan arrangement between the
petitioner and Mekeni, a quasi-contractual relation was created between them. Consequently,
Mekeni may not enrich itself by charging petitioner for the use of its vehicle which is otherwise
absolutely necessary to the full and effective promotion of its business. It may not, under the claim
that petitioner's payments constitute rents for the use of the company vehicle, refuse to refund what
petitioner had paid, for the reasons that the car plan did not carry such a condition; the subject
vehicle is an old car that is substantially, if not fully, depreciated; the car plan arrangement
benefited Mekeni for the most part; and any personal benefit obtained by petitioner from using the
vehicle was merely incidental.[41]
Finally, following the legal precepts[42] laid down in Nacar v. Gallery Frames, et al.[43] and Rivero v. Spouses
Chua,[44] the total amount adjudged in this Decision in favour of Asentista shall further earn legal interest at the
rate of six percent (6%) per annum computed from its finality until full payment thereof, the interim period being
deemed to be a forbearance of credit.

WHEREFORE, after judicious review of the records, the Court resolves to GRANT the instant petition
and REVERSE AND SET ASIDE the Decision dated August 31, 2016 and Resolution dated November 17, 2016
of the Court of Appeals in CA-G.R. SP No. 06747-MIN. The Resolution dated November 28, 2014 of the National
Labor Relations Commission is hereby REINSTATED. Respondents JUPP & Company, Inc. and/or Joseph V.
Ascutia are hereby ORDERED to pay Marilyn B. Asentista the amount of P210,077.95 plus ten percent (10%) of
the total monetary award as attorney's fees and legal interest at the rate of six percent (6%) per annum computed
from its finality until full payment thereof.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 200571, February 19, 2018 ]
JOSEPHINE A. CASCO, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, SIXTH
DIVISION, CAPITOL MEDICAL CENTER AND/OR THELMA N. CLEMENTE, RESPONDENTS.

DECISION
BERSAMIN, J.:

This appeal seeks to set aside the decision promulgated on October 12, 2011[1]  whereby the Court of Appeals (CA)
dismissed the petition for certiorari  of the petitioner and thereby upheld the decision dated July 22, 2010 [2] of the
National Labor Relations Commission (NLRC) reversing and setting aside the ruling of the Labor Arbiter that had
declared her dismissal to be illegal.[3]
Antecedents

The CA recounted the antecedent facts in its assailed decision, viz.:

Private respondent Capitol Medical Center (hereafter CAPITOL) is a private hospital, with private
respondent Dr. Thelma N. Clemente as its President and Chief Executive Officer.

Petitioner Josephine Casco is the Nurse Supervisor of the Operating Room of CAPITOL. She
started working for CAPITOL as a Staff Nurse in the Recovery Room on 29 March 1984. She was
promoted as Head Nurse of the OB-Gyne Surgical Ward on 16 February 1989 and as Nurse
Supervisor of the Surgical Ward on 30 November 1991. Petitioner was finally promoted as Nurse
Supervisor of the Operating Room on 3 September 2002.

The job summary of a Nurse Supervisor of the Operating Room are as follows: a.) responsible for
the supervision and management of nurses and services at the Operating and Recovery Room; b.)
plan all nursing and exercise personnel management within the area, make decisions when
problems arise in the unit; c.) accountable for losses, equipment malfunction, breakage, patients and
personnel.

On 19 June 2006 and 3 July 2006, petitioner received from CAPITOL various equipment such as
vaporizers, patient monitors and Pulse Oximeters for the Operating Room.

On 25 January 2008, a representative of Abbot Laboratories conducted a calibration of the

Operating Room's vaporizers. In the course of the calibration, it was discovered that several
hospital equipments [sic] in the Operating Room were missing. Petitioner filed Incident Report
dated 31 January 2007 stating that several vaporizers were missing inside the Operating Complex,
including two (2) Mindray Monitors and two (2) Pulse Oximeter.

On 7 February 2008, CAPITOL issued a First Notice of Investigation  stating that a complaint for
gross negligence in connection with the loss of hospital equipments [sic] has been filed against the
petitioner and requiring her to submit a written explanation on the matter.

In her Explanation dated 11 February 2008, petitioner alleged the following:

xxx                  xxx

1.) I've been working for 23 years here at CMC and not one instance
that I have neglected my duties and responsibilities;

2.) I suggested verbally before the first incident that we have lost 17
sutures to put surveillance camera to all Operating Theaters, Central
Supply and all important areas in the Operating Room Complex but
they have placed two (2) surveillance camera[s] in the OR hallway
only;

3.) I started reviewing the surveillance camera but I doubt I could get
something out of it. I called up my colleagues in the ORNAP
 organization who are all connected in the hospitals in Metro Manila
to inquire whether they have the same machines as we do and asked
them to inform me if somebody inquires/sell about monitors and
vaporizers;

xxx                  xxx

5.) This incident of theft is beyond my control because everybody has access in (sic)
the machine room area and all OP theaters. And Besides we have seven (7) doors,
three (3) of which are the exit[s] inside the sterile area that could not be permanently
locked.

xxx                  xxx

On 18 December 2008, CAPITOL issued a Letter of Termination to petitioner which reads:

After a careful deliberation of the case filed against you and upon serious
consideration of the evidences (sic) presented, the investigation committee hereby
finds you of (sic) GROSS NEGLIGENCE resulting to loss of equipments [sic] at the
Operating Rooms specifically (2) units PM 600 Mindray (sic) monitors, (2) units
Pulse Oximeter; (3) Vaporizers and (1) Endoscopy Camera with a total value of P2.9
M. These equipments [sic] have been kept in your area of responsibility but you did
not initiate control measures to secure them and the machine room where they are
kept has been accessible to everybody until the time that the loss was discovered.
The lack of effort in securing the machine room speaks of your negligence, lapses
and lack of concern for the equipments [sic] entrusted to your custody. This has
caused the Management to lose its trust and confidence in you as Supervisor. The
sanction for this offense is DISMISSAL.

x x x x[4]

On February 2, 2009, the petitioner filed her complaint for illegal dismissal and damages against respondents
Capitol Medical Center and Thelma N. Clemente in the NLRC.[5]

Labor Arbiter's Ruling

Labor Arbiter (LA) Daniel J. Cajilig rendered a decision on October 14, 2009 disposing as follows:[6]

WHEREFORE, judgment is hereby rendered ordering the respondent entity to reinstate the
complainant to her former position without loss of seniority rights and other privileges and benefits
which is immediately executory within ten (10) calendar days from receipt hereof, and to submit a
report of compliance thereof pursuant to Paragraph 2, Section 14, Rule V of the 2005 Revised Rules
of Procedure of the NLRC.

Respondent entity is hereby likewise ordered to pay complainant the amount of P220,298.58,
representing her backwages as of the date of this decision.

Other claims are hereby denied for lack of merit.

SO ORDERED.[7]

LA Cajilig pointed out that the records did not show that the petitioner had been habitually neglectful of her duties;
that an isolated case of negligence did not justify her termination for gross and habitual negligence; and that
Section II, subsection H of the Manual of Employee Discipline providing for other forms of neglect of which she
was charged did not require the penalty of dismissal.

Respondent employers appealed to the NLRC.[8]

Decision of the NLRC

On July 22, 2010, the NLRC promulgated its decision reversing the LA's ruling, and dismissing the petitioner's
complaint for illegal dismissal.[9] The NLRC declared that she had committed a series of negligent acts by failing
to perform her duties and responsibilities as the Head Nurse that resulted to the loss of the hospital equipment; and
that she had been validly dismissed also on account of loss of trust and confidence because her position as the
Head Nurse qualified her as a supervisor or manager in whom the respondents had reposed their trust and
confidence.

The petitioner moved for reconsideration,[10] but the NLRC denied her motion on September 17, 2010.[11]

Hence, the petitioner assailed the NLRC's decision on certiorari,[12]  asserting that the NLRC thereby gravely
abused its discretion amounting to lack or excess of jurisdiction.

Decision of the CA

On October 12, 2011, the CA promulgated its decision upholding the decision of the NLRC, [13] and ruling that the
petitioner as Nurse Supervisor held a position of trust and confidence by virtue of her being entrusted with the
protection, handling and custody of hospital equipment and machines assigned at the Operating Room Complex;
and that she had consequently been validly dismissed on the ground of loss of trust and confidence following the
loss of the hospital equipment.

The CA concluded that the petitioner was grossly negligent because she only discovered the missing equipment
when the vaporizers were scheduled to be calibrated; that if she had been diligent, she would have regularly
conducted an inventory of the equipment; and that despite being aware that the operating room was easily
accessible to anybody, she did not take any appropriate measures to secure the equipment and machines to prevent
the loss.

The petitioner moved for reconsideration,[14]  but the CA denied the same on February 8, 2012.[15]

Issues

In her appeal, the petitioner seeks the reversal of the CA's adverse decision, submitting the following errors on the
part of the CA, to wit:

I
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN FINDING THAT PUBLIC RESPONDENT DID NOT GRAVELY
ABUSE ITS DISCRETION IN FINDING THAT PETITIONER WAS VALIDLY
DISMISSED  FROM  HER EMPLOYMENT BY PRIVATE RESPONDENTS
WHICH ARE  CONTRARY TO THE FACTS AND LAW

A
THE PUBLIC RESPONDENT DELIBERATELY
MISAPPRECIATED THE FACTS WHEN IT FOUND THAT
PETITIONER WAS SUPPOSEDLY VALIDLY DISMISSED
FROM HER EMPLOYMENT ON THE GROUND OF LOSS OF
TRUST AND CONFIDENCE DUE TO PURPORTED GROSS
NEGLIGENCE IN THE PERF[OR]MANCE OF DUTIES.

B
THE CARE AND CUSTODY OF THE LOST MACHINERIES/EQUIPMENT
WAS NOT THE CHIEF TASK OF PETITIONER

C
PETITIONER CONDUCTED REGULAR INVENTORIES OF THE
MACHINERIES AND EQUIPMENT WITHIN HER AREA, THE LATEST OF
WHICH WAS A FEW MONTHS BEFORE THE LOSS WAS DISCOVERED.[16]

The petitioner contends that the care and custody of the equipment and machinery devolved upon the Head Nurse
who was specifically tasked to secure and oversee their care and use;[17] that she regularly conducted an inventory
of the fixed assets and supplies of the operating room, the latest of which was done a few months prior to the loss
of the equipment;[18]  that she diligently performed her duties and even advocated the installation of surveillance
cameras;[19] that she had rendered loyal, dedicated and efficient service to the respondents' hospital for 25 years;
[20]
 that loss of trust and confidence required willfulness on her part but that was lacking; that she could only be
guilty of simple negligence, if at all; and that under Capitol Medical Center's Manual on Employee Regulations,
her offense was not punishable with dismissal.[21]

The respondents maintain, however, that the petitioner did not discharge her responsibility by regularly conducting
an inventory; that she did not institute control measures to secure the equipment under her custody; that she did not
actively pursue the lead as to the possible perpetrator; that the lost equipment was never released to the Head
Nurse; that her acts warranting her dismissal were voluntary, willful and blameworthy for having resulted in
financial loss to the employer; and that her length of service aggravated instead of mitigated her liability because
she had become grossly complacent and careless.[22]

Did the CA err in finding that the NLRC did not gravely abuse its discretion in declaring the petitioner's dismissal
as valid on the ground of loss of trust and confidence and gross negligence?

Ruling of the Court

The appeal is meritorious.

I
The Court may review factual issues in a labor case
when there are conflicting findings of fact

We restate the legal framework for reviewing the CA's decision in a labor case laid down in  Montoya v. Transmed
Manila Corporation,[23]  viz:

x x x In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast

with the review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45
limits us to the review of questions of law raised against the assailed CA decision. In ruling for
legal correctness, we have to view the CA decision in the same context that the petition
for certiorari  it ruled upon was presented to it; we have to examine the CA decision from the
prism of whether it correctly determined the presence or absence of grave abuse of discretion
in the NLRC decision before it, not on the basis of whether the NLRC decision on the merits
of the case was correct. In other words, we have to be keenly aware that the CA undertook a Rule
65 review, not a review on appeal, of the NLRC decision challenged before it. This is the approach
that should be basic in a Rule 45 review of a CA ruling in a labor case. In question form, the
question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of
discretion in ruling on the case?[24]

Consequently, only questions of law may now be entertained by the Court. But the Court, by way of exception,
may proceed on an inquiry into the factual issues in order to determine whether or not, as essentially ruled by the
CA, the NLRC committed grave abuse of discretion by grossly misreading the facts and misappreciating the
evidence.[25] As such, the Court may review the facts in labor cases where the findings of the CA and of the labor
tribunals are contradictory[26] which is the case herein.

II
Petitioner was not liable
for gross and habitual negligence

Neglect of duty, as a ground for dismissal, must be both gross and habitual. [27] Gross negligence implies a want or
absence of or a failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Habitual neglect implies repeated failure to
perform one's duties for a period of time, depending upon the circumstances.[28]

In termination cases, the burden of proving that the dismissal of the employees was for a valid and authorized
cause rests on the employer, who show by substantial evidence that the termination of the employment of the
employee was validly made; the failure to discharge this duty will mean that the dismissal was not justified and
was, therefore, illegal.[29]

Respondent employers did not discharge their burden.

Both the CA and the NLRC concluded that the petitioner had been remiss in her duty to secure the hospital
equipment and machineries under her custody. They based their conclusion on her Job Summary that included her
being accountable for losses and equipment malfunction, among others.

The conclusion of the CA and the NLRC was erroneous.

Before the petitioner could be held liable for gross and habitual negligence of duty, respondents must clearly show
that part of her duty as a Nurse Supervisor was to be the custodian of hospital equipment and machineries within
her area of responsibility. Yet, there was no evidence submitted that substantially proved that the respondents had
entrusted to her the custody of such property. Even the job description of a Nurse Supervisor [30] did not include that
of being the custodian of hospital equipment and machines, to wit:

Position Title: NURSE SUPERVISOR – OPERATING/RECOVERY ROOM

xxxx           xxxx           xxxx

Job Summary
Responsible in the supervision and management of nurses and services at the Operating and
Recovery Room. Plan all nursing activities and exercise personnel management within the area,
make decisions when problem arises in the unit. Accountable for losses, equipment malfunction,
breakage, patients and personnel.

xxxx     xxxx     xxxx

Details of Duties and Responsibilities

1. Supervision of Patient Care

xxxx     xxxx     xxxx

2. Personnel Management:

xxxx     xxxx     xxxx

3. Others:

3.1. Accepts schedule of operation and ensure easy flow of cases daily
3.2. Consistently monitor the use of supplies
3.3. Check proper endorsement of supplies, equipment, machines and report immediately the
malfunction of equipment and machines
3.4. Receives newly purchased instruments and equipment
3.5. Conducts inventory of fixed assets and supplies
3.6. Prepares annual budget, reports (monthly and annually)

Based on the petitioner's job description, she would be accountable for losses, equipment malfunction and
breakages. Her other duties included, among others, the consistent monitoring of the use of supplies; checking
proper endorsement of supplies, equipment and machines; reporting of any malfunction thereof; receiving newly
purchased instruments and equipment; and conducting inventory of fixed assets and supplies. Her job description
nowhere vested her with the task of taking care, handling and keeping of hospital property. Clearly, her job
description did not include her acting as the custodian of hospital property and equipment. Her being held
accountable for losses and equipment malfunction did not automatically make her the custodian thereof. For one,
there was no mention at all of what kind of loss she would be liable for. As for equipment malfunction, that
liability was clearly upon her because part of her specific responsibilities was that of promptly reporting such
malfunction; yet, that liability did not necessarily mean that she was the custodian of the equipment.

Even assuming that the petitioner was made the custodian of hospital property, she could not be found to have
been grossly and habitually negligent of her duty.

Negligence is "the failure to observe for the protection of the interests of another person that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury." [31] 
The test of negligence is: Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? The law considers what would
be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence, and determines liability
by that.[32]

The respondents failed to establish that the petitioner had wilfully and deliberately intended to be mindless of her
responsibilities, or that she had been reckless as to be blameworthy for her acts or omissions. She could not be
responsible for conducting the annual inventory if there was no standard laid down by the respondents as the
employers. Neither should the blame for failing to secure the equipment fall upon her if access to the operating
room was not under her control, but that of the management to which security of the premises from unauthorized
and undesirable personalities was of utmost importance. Likewise, the responsibility of taking the lead in
investigating the loss could not be expected from her considering that any actions against the supposed perpetrator
should be initiated by the respondents themselves. Under the circumstances, she could not be validly dismissed on
the ground of gross negligence.

II
The petitioner could not be dismissed
for loss of trust and confidence

Loss of trust and confidence as a valid ground for dismissal is premised on the fact that the employee holds a
position whose functions may only be performed by someone who enjoys the trust and confidence of the
management. Such employee bears a greater burden of trustworthiness than ordinary workers, and the betrayal of
the trust reposed is the essence of the loss of trust and confidence that becomes the basis for the employee's
dismissal.[33]

In Bristol Myers Squibb (Phils.), Inc. v. Baban,[34] the Court laid down the requisites for a valid dismissal on the
ground of loss of trust and confidence, to wit:

The first requisite for dismissal on the ground of loss of trust and confidence is that the employee
concerned must be one holding a position of trust and confidence. Verily, We must first determine
if respondent holds such a position.

There are two (2) classes of positions of trust. The first class consists of managerial employees.
They are defined as those vested with the powers or prerogatives to lay down management policies
and to hire, transfer suspend, lay-off, recall, discharge, assign or discipline employees or effectively
recommend such managerial actions. The second class consists of cashiers, auditors, property
custodians, etc. They are defined as those who in the normal and routine exercise of their functions,
regularly handle significant amounts of money or property.[35]

Managerial employees refer to those whose primary duty consists of the management of the establishment in
which they are employed, or of a department or a subdivision thereof, and to other officers or members of the
managerial staff.[36] A simple perusal of the job description of Nurse Supervisor indicated that the petitioner was a
managerial employee. Being tasked with the daily supervision of other nurses and with the operational
management of the operating room, she was clearly discharging a position of trust.

Did the respondents validly dismiss the petitioner as a managerial employee on the ground of loss of trust and
confidence?

We answer in the negative.

In terminating managerial employees based on loss of trust and confidence, proof beyond reasonable doubt is not
required, but the mere existence of a basis for believing that such employee has breached the trust of his employer
suffices.[37] In Lima Land v. Cuevas,[38] we distinguished between managerial employees and rank-and-file
personnel insofar as terminating them on the basis of loss of trust and confidence, thus:

As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for
termination of employment, is premised on the fact that an employee concerned holds a position
where greater trust is placed by management and from whom greater fidelity to duty is
correspondingly expected. This includes managerial personnel entrusted with confidence on
delicate matters, such as the custody, handling, or care and protection of the employer's property.
The betrayal of this trust is the essence of the offense for which an employee is penalized.
 It must be noted, however, that in a plethora of cases, this Court has distinguished the treatment of
managerial employees from that of rank-and-file personnel, insofar as the application of the
doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel,
loss of trust and confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and accusations by the
employer will not be sufficient. But as regards a managerial employee, the mere existence of a
basis for believing that such employee has breached the trust of his employer would suffice
for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt
is not required, it being sufficient that there is some basis for such loss of confidence, such as
when the employer has reasonable ground to believe that the employee concerned is
responsible for the purported misconduct, and the nature of his participation therein renders
him unworthy of the trust and confidence demanded of his position.

On the other hand, loss of trust and confidence as a ground of dismissal has never been
intended to afford an occasion for abuse because of its subjective nature. It should not be used
as a subterfuge for causes which are illegal, improper, and unjustified. It must be genuine, not
a mere after thought intended to justify an earlier action taken in bad faith. Let it not be
forgotten that what is at stake is the means of livelihood, the name, and the reputation of the
employee. To countenance an arbitrary exercise of that prerogative is to negate the employee's
constitutional right to security of tenure.[39]  (Boldscoring supplied for emphasis)

Herein, the respondents could not simply dismiss the petitioner on account of her position. Although a less
stringent degree of proof was required in termination cases involving managerial employees, the employers could
not invoke the ground of loss of trust and confidence arbitrarily. [40] There must still be some basis to justify that the
petitioner was somehow responsible for the loss of the equipment, and to show that her participation in the loss
rendered her unworthy of the trust and confidence demanded of her position as the Nurse Supervisor. As already
discussed, however, she could not be made accountable for the missing property for several reasons. Firstly, she
was not vested with the responsibility of safekeeping of the hospital equipment and machines. And, secondly, the
respondents did not adduce evidence showing that she had committed wilful and deliberate acts that led to the loss.
As such, her dismissal based on loss of trust and confidence should not be upheld.

The misdeed attributed to the employee must be a genuine and serious breach of established expectations required
by the exigencies of the position regardless of its designation, and not out of a mere distaste, apathy, or petty
misunderstanding. It cannot be overemphasized that the employee's reputation and good name are currency in their
chosen profession, and their livelihood, at the very least, is what is at stake. Employment and tenure cannot be
bargained away for the convenience of attaching blame and holding one accountable when no such accountability
exists.

In fine, the petitioner was illegally terminated from her employment. Under Article 294 [41] of the Labor Code, she
is entitled to reinstatement to her former position without loss of seniority rights; and to the payment of backwages
covering the period from the time of her illegal dismissal until her actual reinstatement.

ACCORDINGLY, the Court GRANTS the petition for review on certiorari; REVERSES the decision

promulgated on October 12, 2011 by the Court of Appeals; REINSTATES the decision of the Labor Arbiter dated
October 14, 2009; and ORDERS respondents Capitol Medical Center and Thelma N. Clemente to pay the costs of
suit.

SO ORDERED.
 SECOND DIVISION

February 7, 2018

G.R. No. 213128

LOURDES SCHOOL QUEZON CITY, INC., Petitioner

vs.
LUZ V. GARCIA, Respondent

DECISION

PERALTA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court (Rules) seeks to set aside the January 29,
2014 Decision1 and June 18, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 125316, which
reversed the February 29, 2012 Decision3 and April 18, 2012 Resolution4 of the National Labor Relations
Commission (NLRC) affirming with modification the August 25, 2011 Decision5 of the Labor Arbiter (LA).

Petitioner Lourdes School Quezon City, Inc. (LSQC) is a non-stock, non-profit educational institution offering
elementary and high school education. Prior to the termination of her service, respondent Luz V.
Garcia (Garcia) was its Chief Accountant and Head of the Accounting Office with a monthly salary of
₱56,912.10.

Sometime in September 2010, Fr. Cesar Acuin (Acuin), Rector of LSQC, issued a Memorandum creating two
committees to investigate on the possible irregularities in the purchase of notebooks and the sale of textbooks in
the school.6 The first committee composed of Antonio Romero, Jr., Lalaine Alejo, Editha Grandea, Leonardo
Dizu, and Jocelyn Andaya looked into the oversupply of notebooks, while the second committee composed of
Mary Jane Capistrano, Ma. Elviza Godinez, Edzel Gonzales, Ma. Socorro Pradillo, and Cecilia Toledo examined
on the missing proceeds of the booksale. Garcia, as one of the employees subject of the investigations, was
requested to submit a written report/statement on the matter.7

In a letter dated October 1, 2010, Fr. Antonio Ala (Ala), Treasurer of LSQC, instructed Garcia to turn-over all the
money and other financial resources of the school.8 Garcia immediately complied by giving back the passbooks,
certificates and receipts of placements and post-dated checks issued by parents for payment of tuition fees as well
as the passbook of Lourdes Church's placement in a bank.9

After the physical inventory of notebooks in the stockroom; request of pertinent documents, records and data;
invitation of resource persons (a lawyer and two certified public accountants); and interviews of school officials
and personnel, as well as concerned individuals, the first committee submitted its final report to Fr. Acuin on
October 22, 2010.10 The findings, with respect to Garcia, were as follows:

[Garcia] cannot deny her culpability in the oversupply of notebooks because:

1) Despite her denials that Sir Peter's immediate head is Father Treasurer and that in
all matters of purchase, Sir Peter deals directly with the Fr. Treasurer, the following
instances belie her claim:

a. the organizational chart (ANNEX "C") and her job description

(ANNEX "D") point to her as the immediate head of Sir Peter;
 b. in the Efficiency Rating (ANNEX "E") submitted to the Office of
the Registrar every end of the SY, [Garcia] rates Sir Peter - she gives
the 70% rating, while the Father Treasurer gives the remaining 30%.
This clearly indicates that only a small portion of Sir Peter's work is
rated by the Father Treasurer. Considering that the bulk of work of
Sir Peter is in procurement and purchasing and that [Garcia], controls
70% of the latter's efficiency rating, it becomes downright absurd for
[Garcia] to deny and disclaim any supervision to Sir Peter's work as
purchase officer. Simply put, Sir Peter has more to answer to [Garcia]
than to Father Treasurer.

2) Contrary to [Garcia's] claims that she does not dip her hands or she is hands-off in
purchasing, she is in fact privy to the transactions and workings of the purchasing
officer, as shown by the following:

a. Sir Peter admitted that there were occasions when he consulted

with [Garcia] regarding purchases esp. when he is confused and when
the Father Treasurer is not around.

b. In the Fund Requisition Form (ANNEX "F"), her signature

appeared as she noted the requisition.

c. There were also requisitions (ANNEX "G") wherein she placed the
source of fund for said purchases.

d. Ms. Penny claimed that to date, all requisitions pass through

[Garcia] for checking because if there are errors, [Garcia] will shout
at her staff.

e. [Garcia] told Ms. Bridget sometime in May that the former will just
inform her when the next set of notebooks will be delivered.

3) Granting arguendo that Sir Peter does not directly report to [Garcia] in matters of

purchasing, her position as Chief Accountant bestows upon her the duty to be
vigilant and keen in protecting the financial interests of the school and to aid the
management in its decision making. [Garcia] neglect, if not deliberately, betrays this
trust as can be gleaned from the following series of event:

a. Considering that she actually reviews and all requisitions, as

witnessed by Ms. Penny, she is in the position to know and grasp the
trend of the annual purchases of notebooks. She should have sensed
the erratic and unsystematic estimation made by Sir Peter of the
quantity of notebooks ordered annually. She, therefore, should have
called Sir Peter's attention and clarified at the first instance the basis
and formula used for those estimations.

b. [Garcia] admitted knowledge of the big quantity of notebooks from

last year's purchase. She, however, justified such to Fr. Tony by
allegedly telling the latter that those notebooks will be good for two
school years (SY2009-2011). If such were the case, it is baffling why
[Garcia] would still remind Fr. Tony the need to order for additional
notebooks for school year (SY2010-2011), knowing fully well that (i)
there is still adequate supply of notebooks for SY2010- 2011 and (ii)
that no inventory has yet been conducted at that time to check
whether there is still a need to order for more notebooks.

c. Part of the work of [Garcia] as contained in her job description

(ANNEX "D") is to ensure that management is aided in decision-
making by the preparation of statements and/or financial reports.
[Garcia] claimed that she reminded and cautioned Fr. Tony of the
 existing supplies of notebooks from the previous purchase by saying
"Father marami pa pong notebooks." This general comment,
however, did not fully and effectively appraised Fr. Tony of the
extent of the oversupply. This clearly shows [Garcia's] failure to aid
the Treasurer in sound decision making by failing to show Fr. Tony
the results of the inventory. She glaringly did not point out the
oversupply to Fr. Tony when Fr. Tony was asking about the new
orders from Bridge Media.

d. [Garcia] claimed to know of the big number of remaining

notebooks in the inventory that is why she suggested to Fr. Tony to
make the buying of notebooks compulsory. Fr.
Tony allegedly accepted her suggestion hence Fr. Tony allegedly told
her that he will talk to the GS principal to make the buying of
notebooks compulsory to all students. Sometime during enrolment,
[Garcia] learned that a number of parents purchased the notebooks of
their sons outside the school. This should have alarmed [Garcia],
knowing that Fr. Tony's alleged plan did not materialize. However,
[Garcia] kept quiet and did not make any effort to call the attention of
Fr. Tony or Mr. Bautista.

e. When her attention was called by Mr. Bautista sometime in August

2010 about her pronouncement that "hindi required sa grade school
ang notebook", she never mentioned to Mr. Bautista that she was to
by Fr. Tony of the latter's alleged intent to make the purchase of the
notebook from the school compulsory. Later, facing both Fr. Tony
and Mr. Bautista, she again did not say anything about being told by
Fr. Tony that it will be made compulsory. In summary, it appears
that the idea to make the purchase of notebooks from the school
compulsory was hatched by [Garcia] in order to maneuver the
disposal of the remaining supplies of notebooks and to further justify
the ordering of the notebooks from the supplier. Fr. Tony, trusting the
advise of [Garcia], thought that it will work out but the latter never
knew of the extent of oversupply.

4) As immediate head of the Accounting office and the most trusted person in the
Office, [Garcia] should have instituted an accounting system that is efficient and
systematic. But this, she failed to do as evidenced by the following:

a. Sir Peter claims to be the one assisting in the inventory of

notebooks as can be gleaned from his job descriptions for SY 2004-
2010 and not the one really doing the inventory. But when the other
accounting personnel were queried as to their function in the
inventory-taking, they all mentioned that they only assist Sir Peter in
the inventory-taking. Pouring over the job description in terms of
inventory-taking (ANNEX "E"), it would seem that only Sir Peter is
following his job descriptions and the others do not as regards
inventory-taking (ANNEX "H").

b. [Garcia] was not able to monitor and provide a check and balance
in the inventory-taking, which is a crucial part in the purchase of
notebooks for the next school year. According to Sir Peter, he had not
been doing monthly inventory since the canteen operations was
transferred to them. Had [Garcia] impressed upon Sir Peter said work
and demanded monthly reports, the oversupply of notebooks would
not have happened.

c. A cursory glance at the inventory results in January and April 2010

revealed some irregularities leading the committee to conclude that
no counter-checking is being done with the inventory.
 d. Sir Peter had been left unchecked and unguided in doing the
estimation of the notebooks to be purchased. [Garcia] could have
assisted Sir Peter in determining the quantity of notebooks to be
ordered.

e. Considering the amount of money/funds, which amounts to

millions of pesos, sourced out from the school's coffers for the
purchase of notebooks, it is highly irregular for the accounting to
simply approve the requisition form without any scrutiny. This is
problematic considering that the accounting office has access to the
physical inventory of the notebooks because it is being done by the
accounting staff.

f. [Garcia] is accountable for the absence of

monthly inventory which she did not meticulously require from Sir
Peter. Instead, what she did was to require the accounting staff to
submit a tentative inventory at the end of February. By the time the
inventory was finished, the notebooks had already been ordered by
Sir Peter rendering the results of the tentative inventory useless. She
should have monitored her accounting staff in charge of the
inventory. Had she done that, she would have discovered some
discrepancies in the reporting of inventory (ANNEX "I").11

The first committee recommended the termination of employment of Garcia for breach of trust and confidence
through gross and habitual neglect of duty. On the same ground, the second committee suggested her immediate
dismissal, reasoning that "[it] would be harmful and more damaging for LSQC to wait until further damage or
harm is done especially on the financial aspect of the school due to an imminent malpractice or possible
misrepresentation of school's finances."12 The endorsement was based on the following:

1. Gross inefficiency and incompetence in the performance of assigned duty.

As the chief accountant, [Garcia] is "responsible for the implementation of the Accounting system,
Policies and procedures and the related internal control system to protect the Institution's financial
activities."

It is, therefore expected, of her to ensure the proper accounting of collection from the booksale. She
is expected to supervise all the accounting staff, including the accounting responsibility of the
Supplies/Purchasing Staff related to the booksale.

[Garcia] claimed giving reminders/orientation on the responsibility and nature of the work of her
staff particularly on the booksale during the first five years as the chief accountant. However, since
the work of her staff (particularly the cashier and purchasing staff) became a regular routine in the
operation of the accounting office, she assumed that they already know the meaty-gritty (sic) of
their responsibility thus she did not see the need to conduct regular reminders and update/check on
the regular routines for the booksale.

[Garcia] cited Mrs. Pelayo as the cashier assigned to receive remittance from the booksale (money
with accompanying documents) and prepare the summary of booksale. She cited giving a sort of
orientation to Mrs. Pelayo particularly in accounting matters concerning the booksale every year
during the first five years. It was expected that upon the daily remittance of the payment from the
booksale, the used yellow receipt with the attached booklist will be kept in the accounting office.
All unused receipts are expected to be surrendered to the accounting after the booksale. However,
[Garcia] claimed having not checked whether the procedure on the safekeeping and retrieval of the
receipts was implemented.

[Garcia] cited Mr. Salas as the Purchasing staff responsible for the release of the requested number
of OR booklets for the booksale. She claimed instructing Mr. Salas during her first five years to log
the serial numbers of the booklets with the signature of the person who received the booklets. She
claimed further that Mr. Salas did as instructed but the log of booklets the committee required of
him to present was allegedly misplaced/lost due to the renovation of the accounting office last
summer. She cited that Mr. Salas had the log of booklets for this school year but the committee
informed her that the said log was asked from the library staff after the issue on the unremitted
money from the booksale was uncovered. The said log was a crumpled paper and did not bear the
signature of the library personnel who received the booklets.

It can be concluded that there is a failure to establish prescribed standards of work to her
subordinates (cashier and supplies staff). Furthermore, there is no systematic measure to account for
all the booklets released for the booksale as well as the retrieval of the unused booklets.

The accounting office verifies the statement of account from the publishing house for the claim of
payment of the books based on the booksale report submitted by the Librarians. The librarians'
booksale report reflected the actual number of books delivered, sold and returned and the
corresponding prices (Publishing and LSQC's price). The accounting office has no detailed
accounts of the books sold. The office did not use the triangulation of data (accounting, librarians
and publishing) to verify the veracity of the report submitted by the librarians against the remitted
money.

The absence of a scheme to validate the librarians' report with the remitted money from the
booksale gave an opportunity for the conduct of repeated fraudulent activity in the booksale.

[Garcia], being the Chief accountant, failed to develop, recommend and implement an adequate and
effective internal control system for the collection and accounting of the booksale.

2. Habitual neglect of duties prejudicial to the employer's interest

[Garcia] claimed to have regularly prepared the yearly booksale status report which she allegedly
submitted to the Father. Based on the report for school year 2007-2008, there was no remittance of
booksale for the PC Med books. As claimed by the librarians, the PC Med books were sold and
were part of the booksale. According to [Garcia], she made follow ups with the librarians regarding
the money from the sales of the PC Med. books but the school year ended having not received the
remittance. The following school year, 2008-2009, the report reflected no remittance again for the
PC Med books. A rough estimate of Php 300,000.00 per school year from the sales of the PC Med
books were not remitted to the Accounting office.

Such big amount is hard to go unnoticed by the accountant if indeed there was a yearly booksale
report prepared by the accountant and a detailed report of booksale by the cashier. If the effort to
make a follow up for the unremitted amount was in vain, it is a solid ground for the accountable
people not to be cleared in their clearance at the end of the school year. Unlike the other employees
with small accountability, those accountable people from the booksale with big accountability were
cleared by all the accounting people. Such negligence happened in consecutive years. There was a
failure to establish a system to safeguard the revenue of the school from the remittance of the PC
Med books.

In the booksale status report for school year 2009-2010, the school is guaranteed a sure income of
Php 1,922,682.32 from the commission for the books without yet the mark-up price. The report
reflected of a gross profit o'f only Phpl,301,955.92. There was a deficiency of Php620,726.40.
Because there was still an additional income from the mark-up price for the books, thus the school's
deficiency is more than what is missing.

In the tentative booksale status report for school year 2010-2011, the guaranteed income of the
school from the commission is Phpl,740,992.41. The gross profit was only Php 1,432,331.81. There
was a deficiency of Php308,660.60. However, based on the admission of Mrs. De Leon, she
recorded and computed their "daily share" from the booksale this school year and it amounted to
Php649,220. Upon checking the daily share, the committee computed that the total daily share was
actually Php683,830.00. The committee could safely assume that the school could have gained a
gross profit of Php2, 116, 161.81 from the booksale. The excess amount from the amount of
commission could be assumed as the total money from the mark-up price.
 The big deficiency in the gross profit for two years is again hard to go unnoticed by the accountant
if there was indeed a yearly report and if there was a sound accounting system for the booksale
remittance. The big deficiency in the booksale happened in consecutive years.

The above negligence of duty resulting to loss of income is prejudicial to the economic interest of
the school.

3. Divulging highly confidential information

The advice of [Garcia] to Mrs. De Leon to sign all pages of her narrative report, put the letter in a
sealed envelope and sign the flap of the envelope explicitly identifies the document as bearing
confidential information. It was clear to [Garcia] that the letter is intended to Father Tony Ala, thus
her advice again to forward the sealed letter through the secretary, Mrs. Bucalig.

[Garcia's] admission of providing Mr. Lanuzo the narrative statement of Mrs. De Leon was a clear
act of divulging confidential information.

Mr. Lanuzo disclaimed being a confidant to [Garcia] for him to be entrusted with the confidential
document. He further disclaimed that the apparent issue has nothing to do with the scope of his duty
and responsibility as the OIC security of the school. Furthermore, he takes orders from his
immediate heads regarding security matters/concerns and would act according to the protocol of
security. He acknowledged the absence of a security threat to the school based on his discernment
on the confidential document. Thus, Mr. Lanuzo considered the case not a security concern.

4. Tampering information

[Garcia] admitted having offered Mrs. De Leon help specifically in the narrative report as the latter
allegedly approached her for help. [Garcia] cited that her idea of helping Mrs. De Leon was to
verify the consistency of her story as told to her with the narrative report prepared. In the draft of
the narrative report, a certain portion was deleted as instructed by [Garcia] which the latter also
admitted. Though Mrs. De Leon consented with [Garcia's] instruction, such act is tantamount to
tampering. Mrs. De Leon's testimony should have been allowed to stand and be presented as it was
written based on her personal account of what she did and got into for it is only her who could truly
say the truth behind everything. The intrusion of [Garcia] in the narrative report of Mrs. De Leon is
unprecedented because she is a party involved in the same case. Least to say, a person possible of
accountability for the fraud that happened. If the concern is only about consistency in the versions
told and written as cited by [Garcia], it would be the job of the investigating body to verify.13

On January 11, 2011, Fr. Acuin furnished Garcia with a copy of the results conducted by the two committees and
directed her to submit a written explanation on why she should not be dismissed from service.14

In compliance, Garcia submitted her written explanation. As to the oversupply of notebooks, she countered that
she was the one who discovered the excessive supply of notebooks and had its delivery and payment stopped; and
it was but Fr. Ala and Angelito "Peter" Salas (Salas) who were responsible for the requisition, purchase and
payment of notebooks.15 Anent the irregularity in the sale of textbooks, she contended that: she was the one who
found out that there was under-remittance in book sale, which she promptly reported to Fr. Ala; the persons
involved with the Official Receipts (OR) admitted that they did not monitor the retrieval of the ORs; she is not
responsible for the book sale since her job did not involve the requisition, receiving, and sale of books; she had not
divulged any highly confidential information to anyone obtained in the course of her work; and she had not
tampered with information as whatever corrections made in the draft narrative report of Marifi De Leon (De
Leon), in the course of its finalization, is her privilege, including the right to be corrected. 16 On both cases, Garcia
emphasized that she was the one who gave way to the establishment of an accounting system, bank loan payment,
systematic payroll implementation, budgeting, accounting manual, and development of accounting personnel,
among others.

On February 21, 2011, Garcia was placed under a 30-day preventive suspension with pay. 17 She protested her
suspension, treating it as constructive dismissal, at the very least, and demanding her immediate reinstatement.18

Fr. Acuin then formed a fact-finding committee to receive evidence on the two administrative cases. Pursuant to
his March 3, 2011 letter, 19 the committee was chaired by Atty. Sabino Padilla, Jr. (member of LSQC Board of
Trustees), Maria Corazon Yap (RDO Head), and Marietta del Prado (chosen by the employees under investigation,
except Garcia who did not participate in the selection process). The initial and only hearing of the committee was
held on March 9, 2011.20 All respondents, excluding Garcia who did not file a motion or request for postponement,
personally appeared without a counsel.21

Beginning March 23, 2011, Garcia was again made to serve a 30-day preventive suspension with pay. 22 She
received Fr. Acuin's memorandum under protest.

On April 8, 2001, the fact-finding committee submitted its report to Fr. Acuin. 23 The relevant portion of which are
quoted below:

B.1 The misleading reports on the inventory of notebooks.

The Chairman invited the attention of the respondents to the findings and recommendations of the
investigating committee, copies of which had already been furnished to them when they were given
letters to submit written explanations as to why the recommended sanctions should not be imposed
on them, and asked if they wished to submit any evidence or additional explanation for the
consideration of the Committee.

Only Mr. Angelito Salas submitted additional documentary evidence, consisting of Exh. 1- Salas to
show that he was appointed cashier on May 20, 2010 to show that at the time he was charged, he
was already a cashier and not the property custodian, and Exhs. 2, 2-A to 2-1, which are the "Fund
Requisition Form" of the Treasurer's Office, to show that he only requests for funds for the
purchase of notebooks, but these requests have to be approved by Fr. Tony Ala, OFM Cap., the
school treasurer.

Mr. Salas reiterated that when he told Fr. Tony about the need to place orders for the purchase of
notebooks, he really did not know how many notebooks were still in stock or inventory, and that he
was not able to monitor the size of the inventory because of his additional workload in the canteen.
Neither did he really know the actual number of notebooks in stock when he and [Garcia] went
back to Fr. Tony and informed him that there was still a sizeable stock of notebooks and therefore
the ·purchase order given to the new supplier of notebooks should be drastically reduced.

This convincing or at least plausible explanation of Mr. Salas was shown to be untrue when Mr.
Jeffrey Bonalos told the committee, in front of Mr. Salas, that every month, he and Mr. Salas
conducted an actual count of the stock of notebooks and submitted a written report thereof to
[Garcia]. The committee asked the Accounting Office for copies of these reports. All these reports,
from May 31, 2009 to April 30, 2010 were "Taken by Angelito Salas and Jeffrey [Bonalos]" and
"Noted by Luz V. Garcia." Mr. [Bonalos] informed the committee, in front of Mr. Salas who kept
quiet, that Mr. Salas did the actual physical count of the notebooks every month, while he recorded
the count made by Mr. Salas, and that the signatures in the report were his and that of Mr. Salas and
[Garcia].

The testimony of Mr. Jeffrey Bonalos on the monthly inventory-taking and the monthly reports on
the inventory of notebooks shows beyond any reasonable doubt that at the time Mr. Salas and
[Garcia] were giving information to Fr. Tony as School Treasurer as to the amount of notebooks to
be ordered (a large amount when the order was to be placed by the usual supplier, and a very low
amount when the order was instead placed with another supplier who was quoting a lower price and
better quality notebook), they knew what was the correct amount to be ordered but withheld such
readily available information from Fr. Tony.

The other conclusion to be drawn from this regrettable disinformation practiced on the School
Treasurer is that Mr. Salas and [Garcia] were giving Fr. Tony false information, with the intention
of confining to Benopit Printing the lucrative business of supplying notebooks to the School. It was
obviously to the advantage and benefit of Mr. Salas and [Garcia] to have Benopit Printing retain the
business of supplying notebooks to the School.

B-2. Theft in the sale of textbooks.

 Mrs. Marifi de Leon, the School Librarian, has given a detailed report and confession on how she
and Mrs. Josephine Costales, the former School Librarian, defrauded the School by the hundreds of
thousands, through the simple use of two sets of official receipts: the current official receipts for
book sales to be turned over to the cashier and another set of official receipts, supplied by Mrs.
Costales, for book sales that they were to keep to themselves. Mrs. De Leon reiterated and affirmed
before the Committee the report and confession she had made, together with the transcription of the
text messages between her and Mrs. Costales.

Unfortunately, the theft or irregularity could not be limited to Mrs. De Leon and Mrs. Costales. The
Investigating Committee, after interviewing not only Mrs. De Leon and Mrs. Costales but also other
employees, including [Garcia]. Mr. Angelito Salas, Mrs. Penny Pelayo and Mr. Jeffrey Bonalos,
recommended that aside from Mrs. De Leon and Mrs. Costales, four other employees be subjected
to disciplinary action:

xx xx

2. The responsibility of [Garcia]

And what about [Garcia]? If [Garcia] as Chief Accountant had caused an inventory to be made of
the unused official receipts before turning them over to the care and custody of Mr. Salas, then it
would have been easy to hold Mr. Salas accountable for their loss while in his custody, and for their
subsequent illegal use by Mrs. De Leon and Mrs. Costales. But [Garcia] did not undertake this
simple and elementary precaution. Could this be the reason why she instructed Mrs. De Leon to say
that the booklets of unused official receipts which she used to hide what she was stealing was
"printed outside" by her and/or Mrs. Costales?

What is more significant is that [Garcia], as Chief Accountant, knew how much the School was
expected to earn from the sales of the textbooks. After enrollment, when the sale of textbooks had
come to an end, [Garcia] was in a 'position to determine, and in fact had a duty to determine, how
much the School had earned from the sale of textbooks. A simple comparison between reported
sales of textbooks against the amounts paid to the publishers for these textbooks (sales versus cost
of goods sold) should have alerted (and must have alerted her) (sic) that there was something very
fishy in the reporting of textbook sales. But she did not raise any alarm. Why?

The kindest conclusion is that she was grossly negligent in the performance of her duties as Chief
Accountant. The reasonable inference, however, is that she knew (and could not help but know) the
massive cheating and misappropriation of textbook sales, but she knowingly kept quiet. Why?24

The committee recommended the dismissal of Garcia ''for serious misconduct for knowingly misleading the
School Treasurer as to how many notebooks were to be purchased, with a view to favoring a supplier of
notebooks, and for knowingly allowing (at the very least) the massive theft in the sale of textbooks."25 Fr. Acuin
agreed with the findings, conclusions, and recommendations of the committee. In his letter dated April 14, 2011,
Garcia was terminated from employment.26 She received the same under protest on April 18, 2011. 27 Thereafter,
she filed a case for illegal dismissal and damages against LSQC, Fr. Acuin, Fr. Ala, and the three-member
committee.

According to petitioner, Garcia and Salas exactly knew how much the inventory of notebooks at any given time
and yet they repeatedly gave false information to Fr. Ala in order to manipulate its purchase in favor of a supplier.
As chief accountant, it was Garcia's duty to know and to be able to inform the school treasurer how many
notebooks were still in stock and whether it was time to place an order. She had the means to determine such. All
she had to do was to check the existing stock or inventory of notebooks in the school's bodega or ask for the
monthly report or inventory and give the exact information needed. But she did not. Garcia relied solely on Salas,
her subordinate, who was burdened with other duties related to the school canteen operation.

As to the irregularities in the book sale, petitioner asserted that Garcia obviously knew about the modus
operandi of De Leon and Costales. Costales got her supply of OR booklets from Salas, who was the custodian of
the unused ORs and was directly under Garcia. Salas, however, was placed. in charge thereof without first
conducting an inventory of the OR booklets placed under his custody. Consequently, there was no way of holding
him responsible in the same way that a cashier could not be held liable for any cash shortage if there was no actual
cash count made at the time the cash was placed under his charge. Considering that Garcia is an experienced
accountant, the logical conclusion is that she saw to it that there would be no way of determining where Costales
got the ORs for the theft committed. Moreover, as narrated by De Leon in her Incident Report 28 dated June 22,
2011, she was instructed by Garcia to tell school authorities that the reports on booksales in the previous years
were missing. and that the unauthorized ORs used for the textbook sales were printed outside. Finally, it took
Garcia more than a year to discover and be alarmed of the discrepancy between what the school was supposed to
earn and what it actually received from the booksale. She submitted the report to Fr. Ala only on October 7, 2010
after the theft had been committed during enrollment time in April, May, and June 2009 for school year (SY) 2009-
2010. By the end of June or by July 2009 at the latest, the Accounting Office already had the exact data on how
many textbooks were sold by the school and how much it earned from the sale, i.e., total billings by (and payment
to) the publishers plus discount agreed upon equals proceeds from the sale of textbooks. When she prepared the
financial statements for the SY 2009- 2010, which ended on March 31, 2010, there was no longer any excuse for
Garcia not to become aware of the massive theft committed.

After the parties filed their respective pleadings, the LA dismissed the complaint for lack of merit. It was opined
that Garcia's denial of the accusations against her was strongly demolished by the testimonies of Fr. Ala, Jeffrey
Bonalos, and De Leon, who all testified during the administrative investigation. The conclusion was that the
Accounting Office was truly negligent in the performance of its functions.

The NLRC sustained the LA ruling. It held:

The Labor Arbiter could not have erred in his finding that [Garcia] was negligent in her function as
Chief Accountant. While there is no credible evidence establishing that [Garcia] joined [Salas] in
specifically recommending the purchase of some 44,000 thin and thick notebooks which resulted in
oversupply, it is undisputed that [Garcia] joined [Salas] in telling Fr. Ala in February 2010 of the
need to purchase notebooks in anticipation of the forthcoming school year. The inventory reports
adduced in evidence (p.176 Rollo) which bear [Garcia's] signature however suggest that as of
January 31, 2010, [LSQC] still had in stock 7,336 thick notebooks and 19,055 thin notebooks.
[Garcia] could have prevented an oversupply of notebooks had she advised Fr. Ala of the stock on
hand.

What is more significant is that it is undisputed that [Garcia] turned over to her subordinate, [Salas],
the custody of unused receipts without an inventory of what were so turned over. [Garcia] notably
failed to ensure accountability over booklets of unused receipts. The laxity in accountability control
and monitoring on the part of [Garcia] had rendered the situation conducive to pilferage [of] unused
official receipts and to financial 'irregularities. As it turned out, [pilfered] official receipts were used
by [De Leon] and [Costales] in defrauding [LSQC] to the tune of ₱620,726.40 in proceeds from
sale of textbooks in May and June 2010 during enrollment period. To make matters worse, it took
more than one year for [Garcia] to discover the shortage in anticipated proceeds from sale of
textbooks. While [Garcia's] negligence may not be considered as habitual, the grossness of her
negligence is evident from the extent of the damage caused to [LSQC]. Under Article 382 of the
Labor Code, gross and habitual neglect of duties by an employee is considered as a just cause for
termination of employment. While the element of habituality must ordinarily be present to justify
dismissal, [it] is settled that the element of habituality may be disregarded where the actual loss
of (sic) suffered by the employer as a consequence of the employee's negligence is substantial in
amount.

Moreover, [Garcia] held the exalted position of Chief Accountant. Managerial and supervisory
employees are tasked to perform key and sensitive functions and are bound by more exacting work
ethics, and thus are subject by the trust and confidence rule. xx x. In the case of [Garcia] who is
considered as managerial or supervisory employee and held a position of trust and confidence her
dismissal does not require proof of actual involvement in the theft of proceeds from the sale of
textbooks. The mere existence of a basis for believing that a managerial employee has breached the
trust of his/her employer would suffice for his/her dismissal. xx x. The negligence of [Garcia]
which gave opportunity for fraud to be committed against [LSQC] had rendered her unworthy of
the trust and confidence demanded by her position. Succinctly put, respondents were justified in
terminating the employment of [Garcia].29

Garcia moved to reconsider the NLRC Decision, but it was denied.30

When the case was elevated to the CA, the petition was granted. For the appellate court, there is grave abuse of
discretion on the part of the NLRC as its findings of fact upon which its conclusion was based are not supported by
substantial evidence.

On the oversupply of notebooks, it does not appear from the records that Garcia recommended the purchase of
44,000 thin and thick notebooks which resulted in its oversupply. While she told Fr. Ala that it was time to order
notebooks as the enrollment was nearing, she did not suggest the number of notebooks to be ordered for the next
school year. Rather, it was Salas who furnished the figures. It was he alone who was responsible for misleading Fr.
Ala. Garcia could not have prevented an oversupply of notebooks because inventory preparation and reporting
were the tasks of Salas. The specific school policy, rules or regulations or manual stating that it was her duty to
advise Fr. Ala as to the correct number of books to be ordered was neither furnished nor presented. The mere fact
that Fr. Ala "trusted" her does not vest her the responsibility of doing a job that is not included in her job
description. Since the financial data and relevant reports in connection with the supply and procurement of
notebooks were readily available, Fr. Ala could have easily examined and referred to them before making a
decision.

As regards the alleged laxity of Garcia in accountability control and monitoring, which made way to the pilferage
of unused ORs and caused the irregularities in the book sale, the CA found no definitive proof that the receipts
used by De Leon and Costales were the unused ORs printed by LSQC but which had not been turned over. The
transfer of custody of the unused ORs printed by the school from Garcia to Salas and from Salas to the
perpetrators, as well as Garcia's willful participation or knowledge of the scheme of theft or that she benefited
from it, were not established. Her acts of bringing the matter to the attention of Fr. Ala and asking De Leon to
explain the discrepancy in the book sale and to find the missing funds hardly indicate gross negligence. While
there may be some lapses in judgment on the way she handled the status report on the book sale, it does not
amount to habitual neglect in the absence of other similar shortcomings. The lapse or inaction could only be
regarded as a single or isolated act of negligence that cannot be categorized as habitual.

With respect to Garcia's alleged breach of trust and confidence, the appellate court acknowledged that her position
involved a high degree of responsibility requiring trust and confidence, but it ruled that there was failure to
establish with certainty the facts upon which the loss of trust and confidence could be based. While the school lost
some funds, Garcia's responsibility therefor was not supported by substantial evidence. She did not commit any act
that was dishonest, deceitful or morally perverse. She did not use her authority to misappropriate the proceeds of
the sale of notebooks and derive benefits therefrom. She did not alter or tamper financial data. Her financial
analyses and evaluations were based on those supplied by her subordinates. Moreover, it made no sense for her to
engage in anomalous transactions after spending 25 years in service wherein she had not been charged by the
school with any infraction or complaint as regards the quality of her work.

The CA disposed as follows:

WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2012 and the
Resolution dated April 18, 2012 of the Fourth Division of the National Labor Relations
Commission are REVERSED and SET ASIDE and a new one entered declaring the dismissal of
Luz Garcia as illegal and consequently ordering Lourdes School, Inc./Lourdes School Quezon City
to pay her full backwages inclusive of allowances and other benefits or their monetary equivalent,
from the time of her dismissal up to the finality of the decision, and separation pay in lieu of
reinstatement equivalent to one month salary for every year of service, computed from the time of
her engagement up to the finality of this decision, as well as attorney's fees equivalent to Ten
Percent (10%) of the monetary award. The case is REMANDED to the labor arbiter for the purpose
of computing the monetary awards.

SO ORDERED.31

Petitioner's motion for reconsideration was denied;32 hence, this petition.

We deny.

The CA did not err in ruling that petitioner failed to comply with the requisites of valid dismissal based on loss of
trust and confidence.
 It must be noted that in termination cases, the burden of proof rests upon the employer to show that
the dismissal of the employee is for just cause and failure to do so would mean that the dismissal is
not justified. This is in consonance with the guarantee of security of tenure in the Constitution and
elaborated in the Labor Code. A dismissed employee is not required to prove his innocence of the
charges leveled against him by his employer. The determination of the existence and sufficiency of
a just cause must be exercised with fairness and in good faith and after observing due process.

As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for
termination of employment, is premised on the fact that an employee concerned holds a position
where greater trust is placed by management and from whom greater fidelity to duty is
correspondingly expected. This includes managerial personnel entrusted with confidence on
delicate matters, such as the custody, handling, or care and protection of the employer's property.
The betrayal of this trust is the essence of the offense for which an employee is penalized.

It must be noted, however, that in a plethora of cases, this Court has distinguished the treatment of
managerial employees from that of rank-and-file personnel, insofar as the application of the
doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel,
loss of trust and confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and accusations by the
employer will not be sufficient. But as regards a managerial employee, the mere existence of a basis
for believing that such employee has breached the trust of his employer would suffice for his
dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not
required, it being sufficient that there is some basis for such loss of confidence, such as when the,
employer has reasonable ground to believe that the employee concerned is responsible for the
purported misconduct, and the nature of his participation therein renders him unworthy of the trust
and confidence demanded of his position.

On the other hand, loss of trust and confidence as a ground of dismissal has never been intended to
afford an occasion for abuse because of its subjective nature. It should not be used as a subterfuge
for causes which are illegal, improper, and unjustified. It must be genuine, not a mere afterthought
intended to justify an earlier action taken in bad faith. Let it not be forgotten that what is at stake is
the means of livelihood, the name, and the reputation of the employee. To countenance an arbitrary
exercise of that prerogative is to negate the employees constitutional right to security of tenure.

Stated differently, the loss of trust and confidence must be based not on ordinary breach by the
employee of the trust reposed in him by the employer, but, in the language of Article 282 (c) of the
Labor Code, on willful breach. A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently. It must rest on substantial grounds and not on the employers
arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the
mercy of the employer. It should be genuine and not simulated; nor should it appear as a mere
afterthought to justify earlier action taken in bad faith or a subterfuge for causes which are
improper, illegal or unjustified. There must, therefore, be an actual breach of duty committed by the
employee which must be established by substantial evidence. Moreover, the burden of proof
required in labor cases must be amply discharged.33

In this case, the evidence submitted, both testimonial and documentary, fail to convince Us that Garcia had malice
aforethought at the time the alleged oversupply of notebooks and theft in the textbook sale were being committed.

On the excessive order of notebooks, there is no substantial evidence on record of the exact figures that Garcia
incorrectly furnished to Fr. Ala; the frequency of giving the wrong information; how the numbers provided were
disproportionate relative to the actual need of the students taking into account the existing school inventory; how
and why a specific supplier was favored while the others were rejected; the difference in the prices they offered;
and the benefit that Garcia received from the oversupply. Petitioner always connects her name with that of Salas
and attribute the latter's act as hers as well. However, no evidence was shown that there was collusion between
them. In fact, Salas never alleged that Garcia connived with him when he gave the inaccurate data to Fr. Ala.

Also, based on De Leon's written confession dated October 13, 2010,34 while she admitted the theft she and
Costales perpetrated on the proceeds of textbook sales, she did not implicate Garcia in whatever way. Like Salas,
she did not allege that Garcia participated with them or allowed them to commit the same despite her prior
knowledge. Truth be told, De Leon even revealed that she was confronted by Garcia when the latter discovered the
discrepancy (between the net amount of the booksale and the amount of what the school was supposed to earn as
commission) and that she was asked to immediately find supporting documents to justify the missing amount.
Since conspiracy was not clearly established, the ineluctable conclusion is that Garcia was dismissed on the bases
of petitioner's mere suspicions, surmises, and speculations.

The Court agrees with petitioner that Garcia was somehow remiss in her duties as Chief Accountant of LSQC.
Admittedly, she should have been more circumspect in closely supervising Salas, particularly in monitoring and
counter-checking his job with respect to the inventory-taking of notebooks and the safekeeping of unused school-
issued OR booklets. Nevertheless, for lack of malicious intent or fraud, her negligence or carelessness is not a
justifiable ground to impose the ultimate penalty of dismissal from employment. Loss of trust and confidence
stems from a breach of trust founded on a dishonest, deceitful or fraudulent act. 35 In the absence of substantial
evidence to prove otherwise, We are constrained to find that Garcia did not commit the accusations against her.
Neither did she knowingly use her authority to misappropriate school fund or property nor did she abuse the trust
reposed in her by petitioner with respect to her responsibility to implement school policies on accounting matters.
The most that can be attributed to Garcia is that she was simply remiss in the performance of her duties. As this
does not automatically demonstrate moral perverseness, it does not constitute dishonest or deceitful conduct that
would justify loss of trust and confidence.

Further, We do not agree with petitioner that Garcia was grossly and habitually negligent in the performance of her
duties.1âшphi1 She has not committed prior infractions in her more than two decades of service with LSQC. There
is no allegation or proof that she had been previously subjected to disciplinary proceedings for violation of
established school rules and regulations or found guilty of any misconduct. Her negligence cannot also be
characterized as gross in character. "Gross negligence implies a want or absence of or failure to exercise slight care
or diligence or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them."36 The evidence does not show that Garcia had any reason to distrust Salas, De Leon or
Costales. As they have not been involved in any misdeed in the past, she had reasonably assumed that they would
conduct themselves well within the regular performance of their respective duties. Until the investigation was
initiated, there was not the slightest reason to suspect that they would commit any irregularity or illegal act. At
most, Garcia's misplaced trust constitutes error of judgment but not gross negligence. While petitioner is not
mistaken to argue that, although not habitual, gross neglect of duty is sufficient cause to dismiss an
employee,37 such is definitely not the case here.

It also bears to point out that the severance from employment of Garcia invites suspicion of ill motive on the part
of petitioner. Notably, De Leon was not dismissed from service despite her admission of guilt; rather, she was
recommended to be retained in a position that does not involve the handling of money. 38 Also, Salas was totally
exonerated from any involvement in the theft on textbook sales.39 Unfortunately, the same understanding and
compassion was not extended to Garcia, who, despite her more than 20 years of loyal and untarnished service, was
terminated.

A lesser penalty should have been imposed by petitioner to Garcia, considering that she has no history of previous
infractions. It bears stressing that while an employer enjoys a wide latitude of discretion in the promulgation of
policies, rules, and regulations on work-related activities of the employees, those directives, however, must always
be fair and reasonable, and the corresponding penalties, when prescribed, must always be commensurate to the
offense involved and to the degree of the infraction.40

As a final note, the Court is wont to reiterate that while an employer has its own interest to protect,
and pursuant thereto, it may terminate a managerial employee for a just cause, such prerogative to
dismiss or lay off an employee must be exercised without abuse of discretion. Its implementation
should be tempered with compassion and understanding. The employer should bear in mind that, in
the execution of the said prerogative, what is at stake is not only the employees position, but his
very livelihood, his very breadbasket. Indeed, the consistent rule is that if doubts exist between the
evidence presented by the employer and the employee, the scales of justice must be tilted in favor
of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal
was for justifiable cause. Thus, when the breach of trust or loss of confidence alleged is not borne
by clearly established facts, as in this case, such dismissal on the cited grounds cannot be allowed.41

WHEREFORE, the petition for review on certiorari is DENIED. The January 29, 2014 Decision and June 18,
2014 Resolution of the Court of Appeals in CA-G.R. SP No. 125316, which reversed and set aside the February
29, 2012 Decision and April 18, 2012 Resolution of the National Labor Relations Commission, affirming with
modification the August 25, 2011 Decision of the Labor Arbiter, are AFFIRMED.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 210961, January 24, 2018 ]
LEO V. MAGO AND LEILANIE E. COLOBONG, PETITIONERS, V. SUN POWER MANUFACTURING
LIMITED, RESPONDENT.

DECISION
REYES, JR., J:

This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, seeking the review of the
Decision[2] dated October 8, 2013 and Resolution[3] dated January 13, 2014 of the Court of Appeals (CA) in CA-
G.R. SP No. 131059. In these assailed issuances, the CA reversed the decision [4] of the National Labor Relations
Commission (NLRC) declaring Leo V. Mago (Leo) and Leilanie E. Colobong (Leilanie) (petitioners) as
employees of Sunpower Philippines Manufacturing Limited (Sunpower) and consequently, holding that Jobcrest
Manufacturing, Incorporated (Jobcrest) was a labor-only contractor. The NLRC in turn reversed the ruling [5] of the
labor arbiter (LA) dismissing the petitioners' complaint for illegal dismissal.
Factual Antecedents

The petitioners are former employees of Jobcrest, a corporation duly organized under existing laws of the
Philippines, engaged in the business of contracting management consultancy and services. [6] Jobcrest was licensed
by the Department of Labor and Employment (DOLE) through Certificate of Registration No. NCR-MUNTA-
64209-0910-087-R.[7] During the time material to this case, the petitioners' co-habited together.[8]

On October 10, 2008, Jobcrest and Sunpower entered into a Service Contract Agreement, in which Jobcrest
undertook to provide business process services for Sunpower, a corporation principally engaged in the business of
manufacturing automotive computer and other electronic parts.[9] Jobcrest then trained its employees, including the
petitioners, for purposes of their engagement in Sunpower.[10] After the satisfactory completion of this training, the
petitioners were assigned to Sunpower's plant in Laguna Technopark. Leo was tasked as a Production Operator in
the Coinstacking Station on July 25, 2009,[11] while Leilanie was assigned as a Production Operator, tasked with
final visual inspection in the Packaging Station on June 27, 2009.[12] Jobcrest's On-site Supervisor, Allan
Dimayuga (Allan), supervised the petitioners during their assignment with Sunpower.[13]

It was alleged that sometime in October 2011, Sunpower conducted an operational alignment, which affected some
of the services supplied by Jobcrest. Sunpower decided to terminate the Coinstacking/Material Handling segment
and the Visual Inspection segment.[14] Meanwhile, Leo and Leilanie were respectively on paternity and maternity
leave because Leilanie was due to give birth to their common child.[15]

When Leo reported for work to formally file his paternity leave, Allan purportedly informed Leo that his
employment was terminated due to his absences. Leo, however, further alleged that he was asked to report to
Jobcrest on December 14, 2011 for his assignment to Sunpower. [16] In their defense, both Jobcrest and Allan
denied terminating Leo's employment from Jobcrest.[17]

Leo complied with the directive to go to Jobcrest's office on December 14, 2011. While he was there, Jobcrest's
Human Resource Manager, Noel J. Pagtalunan (Noel), served Leo with a "Notice of Admin Charge/Explanation
Slip."[18] The notice stated that Leo violated the Jobcrest policy against falsification or tampering because he failed
to disclose his relationship with Leilanie. Leo denied the charges and explained that he already filed a complaint
for illegal dismissal with the NLRC.[19]

Leilanie, on the other hand, alleged that when she reported for work at Jobcrest on November 29, 2011, she was
informed by one of the Jobcrest personnel that she will be transferred to another client company. She was likewise
provided a referral slip for a medical examination, pursuant to her new assignment.[20]

Instead of complying with Jobcrest's directives, Leo and Leilanie filed a complaint for illegal dismissal and
regularization on December 15, 2011, with the NLRC Regional Arbitration Branch No. IV. Leo alleged that he
was dismissed on October 30, 2011, while Leilanie alleged that she was dismissed from employment on December
4, 2011.[21] Despite the filing of the complaint, Leilanie returned to Jobcrest on December 16, 2011, where she was
served with a similar "Notice of Admin Charge/Explanation Slip," requiring her to explain why she failed to
disclose her co-habitation status with Leo.[22]
During the mandatory conference, Jobcrest clarified that the petitioners were not dismissed from employment and
offered to accept them when they report back to work. The petitioners refused and insisted that they were regular
employees of Sunpower, not Jobcrest.[23]

There being no amicable settlement of the matter among the parties, they proceeded to file their respective position
papers.[24]

Ruling of the LA

In a Decision[25] dated July 3, 2012, the LA held that Jobcrest is a legitimate independent contractor and the
petitioners' statutory employer:

WHEREFORE, premises considered, the complaint for illegal dismissal against [Sunpower] and
Dwight Deato is DISMISSED for lack of employer-employee relationship. [Jobcrest] is declared as
the statutory employer and is ordered to reinstate complainants sans backwages to substantially
equivalent positions within ten (10) days from receipt hereof.

SO ORDERED.[26]

The LA found the capital of Jobcrest substantial enough to comply with the requirements for an independent
contractor, and that Jobcrest exercised control over the petitioners' work. [27] The LA likewise rejected the
petitioners' claim that they were illegally dismissed, ruling that the petitioners failed to establish the fact of
dismissal itself.[28]

Jobcrest partially appealed the LA's Decision dated July 3, 2012. Among its arguments is the assertion that the
petitioners refused to be reinstated. Hence, they were considered constructively resigned from their employment
with Jobcrest, especially because they obtained a job somewhere else. As an alternative relief, Jobcrest prayed that
it be directed to pay the petitioners' separation pay instead of reinstating them to their former positions.[29]

The petitioners, on the other hand, attributed serious error on the LA for ruling against their complaint.[30]

Ruling of the NLRC

The NLRC reversed the LA's findings in its Decision [31] dated April 24, 2013 and ruled favorably for the
petitioners, viz.:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a NEW ONE ENTERED
declaring that [the petitioners] are regular employees of respondent [Sunpower], respondent
[Jobcrest] being a mere labor-only contractor that [petitioners] were illegally dismissed; hence,
respondent [Sunpower] is hereby ordered to reinstate them to their former position with full
backwages, from the time they were refused to work on October 31, 2011 until reinstated, within
ten (10) days from notice plus 10% of the total monetary awards as and for attorney's fees.

SO ORDERED.[32]

According to the NLRC, the contract between Jobcrest and Sunpower was for the sole supply of manpower. The
tools and equipment for the performance of the work were for the account of Sunpower, which supposedly
contradicted the claim that Jobcrest has the required capital for a legitimate contractor. [33] The NLRC also
disagreed that Jobcrest exercised control over the petitioners and likewise gave more credence to the petitioners'
sworn statements, which narrate that Sunpower employees allegedly supervised their work. [34] Lastly, on the basis
of the "Notice of Administrative Charge/Explanation Slip" furnished to the petitioners, the NLRC reversed the
LA's ruling and held that the petitioners were illegally dismissed from employment.[35]

Sunpower moved for the reconsideration of the NLRC's Decision dated April 24, 2013. [36] Unconvinced, the
NLRC denied this motion in its Resolution[37] dated May 28, 2013 as follows:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.

No further motion of this nature shall be entertained.

SO ORDERED.[38]
As a result of the NLRC's ruling, Sunpower filed a petition for certiorari with the CA, with a prayer for the
issuance of an injunctive writ.[39] Sunpower attributed grave abuse of discretion, amounting to lack or excess of
jurisdiction, on the NLRC for holding that the petitioners were regular employees of Sunpower despite evidence to
the contrary.[40] Sunpower also disagreed that Jobcrest is a labor-only contractor, and further submitted that the
NLRC misinterpreted its Service Contract Agreement with Jobcrest.[41]

Ruling of the CA

In a Decision[42] dated October 8, 2013, the CA granted Sunpower's petition for certiorari and enjoined the
implementation of the assailed NLRC ruling:

WHEREFORE, premises considered, the Petition is GRANTED. The Decision dated 24 April 2013
and Resolution dated 28 May 2013 of the [NLRC] (Second Division) in NLRC-LAC No. 09-
002582-12; NLRC RAB-IV-12-01978-11-B are NULLIFIED. All the respondents and/or persons
acting for and on their behalf are ENJOINED from enforcing or implementing the same. The
Decision dated 03 July 2012 of LA Renell Joseph R. Dela Cruz is hereby REINSTATED. No
pronouncement as to costs.

SO ORDERED.[43]

The CA ruled that Sunpower was able to overcome the presumption that Jobcrest was a labor-only contractor,
especially considering that the DOLE Certificate of Registration issued in favor of Jobcrest carries the
presumption of regularity. In contrast with the NLRC ruling, the CA found that the Service Contract Agreement
between Sunpower and Jobcrest specifically stated the job or task contracted out by stating that it was for the
performance of various business process services.[44] The CA also held that Jobcrest has substantial capital and as
such, it was no longer necessary to prove that it has investment in the form of tools, equipment, machinery, and
work premises.[45]

Also, the CA found that there is an employer-employee relationship between Jobcrest and the petitioners under the
four-fold test. The CA appreciated the affidavits of Jobcrest employees, as well as the sworn statements of
Sunpower employees who the petitioners claim to supervise their work. In these statements, the Sunpower
employees categorically denied under oath that they supervised the manner of the petitioners' work. Taken together
with other pieces of evidence, the CA ruled that there was no employer-employee relationship between Sunpower
and the petitioners. Finally, the CA held that any form of supervision, which Sunpower exercised over the results
of the petitioners' work, was necessary and allowable under the circumstances.[46]

Consequently, the CA rejected the claim that the petitioners were illegally dismissed from employment, especially
in light of Jobcrest's earlier offer to accept the petitioners' return to work.[47]

Following their receipt of the CA's Decision dated October 8, 2013, the petitioners filed their Motions for
Reconsideration and to Investigate the Reviewer Who Recommended the Palpably Erroneous Decision. [48] The CA
firmly denied these motions in its Resolution [49] dated January 13, 2014 for failure to raise any substantial
argument that would warrant the reconsideration of its decision:

WHEREFORE, premises considered, the Motions for Reconsideration and to Investigate the
Reviewer Who Recommended the Palpably Erroneous Decision are DENIED for sheer lack of
merit.

SO ORDERED.[50]

The petitioners are now before this Court, seeking to reverse and set aside the CA's issuances, and to reinstate the
NLRC's decision.[51] The petitioners insist that Jobcrest is a labor-only contractor, and that the DOLE Certificate of
Registration is not conclusive of Jobcrest's legitimate status as a contractor. [52] They further argue that, aside from
lacking substantial capital, Jobcrest only supplied manpower to Sunpower.[53] These services, the petitioners allege,
are directly related and necessary to Sunpower's business.[54]

Furthermore, the petitioners submit that it was Sunpower that controlled their work. They refute the evidentiary
weight and value of the sworn statements of Jobcrest and Sunpower employees. [55] The petitioners assert that the
NLRC was correct in ruling that Sunpower was their statutory employer, and in ordering their reinstatement with
payment of full backwages and attorney's fees.[56] The petitioners thus pray that this Court reverse and set aside the
Decision dated October 8, 2013 and Resolution dated January 13, 2014 of the CA.[57]
 Ruling of the Court

The Court resolves to deny the petition.

Jobcrest is a legitimate and independent contractor.

Article 106 of the Labor Code defines labor-only contracting as a situation "where the person supplying workers
to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer."[58]

DOLE Department Order (DO) No. 18-02, the regulation in force at the time of the petitioners' assignment to
Sunpower, reiterated the language of the Labor Code:

Section 5. Prohibition against labor-only contracting. x x x [L]abor-only contracting shall refer to

an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are present:

The contractor or subcontractor does not have substantial capital or investment which relates to the job, work
i) or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or

the contractor does not exercise the right to control over the performance of the work of the contractual
ii)
employee.
Thus, in order to become a legitimate contractor, the contractor must have substantial capital or investment, and
must carry a distinct and independent business free from the control of the principal. In addition, the Court requires
the agreement between the principal and the contractor or subcontractor to assure the contractual employees'
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization,
security of tenure, and social welfare benefits.[59]

Furthermore, the Court considers job contracting or subcontracting as permissible when the principal agrees to
farm out the performance of a specific job, work or service to the contractor, for a definite or predetermined period
of time, regardless of whether such job, work, or service is to be performed or completed within or outside the
premises of the principal.[60] Ordinarily, a contractor is presumed to be a labor-only contractor, unless the
contractor is able to discharge the burden of overcoming this presumption. In cases when it's the principal claiming
the legitimacy of the contractor, then the burden is borne by the principal.[61]

Preliminarily, the Court finds that there is no such burden resting on either Sunpower or Jobcrest in this case. It is
true that Sunpower maintained its position that Jobcrest is a legitimate and independent contractor. [62] But since the
petitioners do not dispute that Jobcrest was a duly-registered contractor under Section 11 of DOLE DO No. 18-02,
[63]
 there is no operative presumption that Jobcrest is a labor-only contractor.[64]

Conversely, the fact of registration with DOLE does not necessarily create a presumption that Jobcrest is a
legitimate and independent contractor. The Court emphasizes, however, that the DOLE Certificate of
Registration issued in favor of Jobcrest is presumed to have been issued in the regular performance of
official duty.[65] In other words, the DOLE officer who issued the certificate in favor of Jobcrest is presumed,
unless proven otherwise, to have evaluated the application for registration in accordance with the applicable rules
and regulations.[66] The petitioners must overcome the presumption of regularity accorded to the official act of
DOLE, which is no less than the agency primarily tasked with the regulation of job contracting.[67]

For the reasons discussed below, the Court is constrained to give more weight to the substantiated allegations of
Sunpower, as opposed to the unfounded self-serving accusations of the petitioners.

Jobcrest has substantial capital.

The law and the relevant regulatory rules require the contractor to have substantial capital or investment, in order
to be considered a legitimate and independent contractor. Substantial capital or investment was defined in DOLE
DO No. 18-02 as "capital stocks and subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out." DOLE initially did not provide a specific
amount as to what constitutes substantial capital. It later on specified in its subsequent issuance, DOLE DO No.
18-A, series of 2011, that substantial capital refers to paid-up capital stocks/shares of at least Php 3,000,000.00 in
the case of corporations.[68] Despite prescribing a threshold amount under DO No. 18-A, certificates of registration
issued under DO No. 18-02, such as that of Jobcrest, remained valid until its expiration.[69]

The records show that as early as the proceedings before the LA, Jobcrest established that it had an authorized
capital stock of Php 8,000,000.00, Php 2,000,000.00 of which was subscribed, and a paid-up capital stock of Php
500,000.00, in full compliance with Section 13 of the Corporation Code. [70] For the year ended December 31,
2011, the paid-up capital of Jobcrest increased to Php 8,000,000.00, [71] notably more than the required
capital under DOLE DO No. 18-A.[72]

The balance sheet submitted by Jobcrest for the year ending on December 31, 2010 also reveals that its total assets
for the year 2009 amounted to Php 11,280,597.94, and Php 16,825,271.30 for the year 2010, which were
comprised of office furniture, fixtures and equipment, land, building, and motor vehicles, among others.
[73]
 As of December 31, 2012, the total assets for the years 2011 and 2012 also increased to Php 35,631,498.58 and
Php 42,603,167.16, respectively.[74]

Evidently, Jobcrest had substantial capital to perform the business process services it provided Sunpower. It has its
own office, to which the petitioners admittedly reported to, possessed numerous assets for the conduct of its
business, and even continuously earned profit as a result. [75] The Court can therefore reasonably conclude from
Jobcrest's financial statements that it carried its own business independent from and distinctly outside the control
of its principals.

The petitioners argue that the amount of substantial capital is irrelevant because Sunpower provided the tools and
owned the work premises. These supposedly negate the claim that Jobcrest has substantial capital. [76] The Court
does not agree with the petitioners.

DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor Code itself, all use the conjunctive
term "or" in prescribing that the contractor should have substantial capital or investment. Having established that
Jobcrest had substantial capital, it is unnecessary for this Court to determine whether it had sufficient investment in
the form of tools, equipment, machinery and work premises.

In Neri v. NLRC,[77] the Court rejected the same argument put forward by the petitioners, arid ruled that proof of
either substantial capital or investment is sufficient for purposes of determining whether the first element of labor-
only contracting is absent:

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has
substantial capital. While there may be no evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others, it is enough that it has substantial capital, as
was established before the Labor Arbiter as well as the NLRC. In other words, the law does not
require both substantial capital and investment in the form of tools, equipment, machineries, etc.
This is clear from the use of the conjunction "or". If the intention was to require the contractor
to prove that he has both capital and the requisite investment, then the conjunction "and"
should have been used. But, having established that it has substantial capital, it was no longer
necessary for BCC to further adduce evidence to prove that it does not fall within the purview of
"labor-only" contracting. There is even no need for it to refute petitioners' contention that the
activities they perform are directly related to the principal business of respondent bank.
[78]
 (Emphasis Ours)

The agreement between Jobcrest and Sunpower also complied with the statutory requirement of ensuring the
observance of the contractual employees' rights under the law. Specifically, paragraph 7 of the Service Contract
Agreement obligates Jobcrest to observe all laws, rules and regulations pertaining to the employment of its
employees.[79]

Suncrest does not control the manner by which the

petitioners accomplished their work.
In most cases, despite proof of substantial capital, the Court declared a contractor as a labor-only contractor
whenever it is established that the principal—not the alleged legitimate contractor—actually controls the manner
of the employees' work.[80] The element of control was defined under DOLE DO No. 18-02 as:

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.[81]
In other words, the contractor should undertake the performance of the services under its contract according to its
own manner and method, free from the control and supervision of the principal. [82] Otherwise, the contractor is
deemed an illegitimate or labor-only contractor.

The control over the employees' performance of the work is, as the Court ruled in some cases, usually manifested
through the power to hire, fire, and pay the contractor's employees, [83] the power to discipline the employees and
impose the corresponding penalty,[84] and more importantly, the actual supervision of the employees' performance.
[85]
 On this point, the petitioners claim that Sunpower employees supervised their work while in the premises of
Sunpower's own plant. They also disclaim the affidavits of Sunpower employees, which denied exercising any
form of supervision over the petitioners,[86] by alleging that these are self-serving assertions. The petitioners also
refute the veracity of the sworn statements of Jobcrest's employees.[87]

Upon review of the records, the Court finds that the evidence clearly points to Jobcrest as the entity that exercised
control over the petitioners' work with Sunpower. Upon the petitioners' assignment to Sunpower, Jobcrest
conducted a training and certification program, during which time, the petitioners reported directly to the
designated Jobcrest trainer.[88] The affidavit of Jobcrest's Operations Manager, Kathy T. Morales (Kathy), states
that operational control over Jobcrest employees was exercised to make sure that they conform to the quantity and
time specifications of the service agreements with Jobcrest's clients. She narrated that manager and shift
supervisors were assigned to the premises of Sunpower, with the task to oversee the accomplishment of the target
volume of work. She also mentioned that there is administrative control over Jobcrest employees because they
monitor the employees' attendance and punctuality, and the employees' observance of other rules and regulations.
[89]

The affidavit of Kathy was markedly corroborated by the sworn statement of Jobcrest's On-site Supervisor, Allan,
in which he affirmed that he directly supervised the petitioners while they were stationed in Sunpower. He also
confirmed that during this period, he issued several memoranda to the petitioners for violating rules and
regulations, and provided their hourly output performance assessment, which "determine[s] their fitness to
continue their employment with Jobcrest."[90]

The petitioners' very own sworn statements further establish this point. In his statement, Leo averred that
when he reported for work to file his application for paternity leave, he reported to Allan, Jobcrest's supervisor,
who then approved his leave application. He likewise narrated that it was Jobcrest's Human Resource Manager,
Noel, who informed Leo about the disciplinary charge against him for allegedly violating the Jobcrest Code of
Conduct.[91]

The same conclusion holds for Leilanie. In her statement, Leilanie narrated that she reported for work to the
Jobcrest office on November 29, 2011 after giving birth to her second child. She also alleged in her affidavit that
similar to Leo, it was Noel who informed her of the disciplinary action against her, through the service of a copy
of the "Notice of Admin Charge/Explanation Slip."[92]

Notably, other documentary evidence plainly show that Leo's paternity leave application was indeed filed with
Jobcrest,[93] and the respective notices of disciplinary action against the petitioners were prepared and signed by the
Jobcrest Human Resource Manager.[94] These are clear indications that Jobcrest exercised control over the
petitioners' work.

The fact that the petitioners were working within the premises of Sunpower, by itself, does not negate Jobcrest's
control over the means, method, and result of the petitioners' work. [95] Job contracting is permissible "whether such
job, work, or service is to be performed or completed within or outside the premises of the principal" [96] for as long
as the elements of a labor-only contractor are not present. Since Jobcrest was a provider of business process
services, its employees would necessarily work within the premises of its client companies in order for Jobcrest to
perform its contractual undertaking. Mere physical presence in Sunpower's plant does not necessarily mean that
Sunpower controlled the means and method of the petitioners' work. The petitioners, despite working in
Sunpower's plant for most of the time, admit that whenever they file their leave application, or whenever required
by their supervisors in Jobcrest, they report to the Jobcrest office. Designated on-site supervisors from Jobcrest
were the ones who oversaw the performance of the employees' work within the premises of Sunpower.

Besides, while the Court repeatedly recognizes that there are employers who abuse the system of
subcontracting, we also acknowledge that contracts for services does not necessarily provide "untrammeled
freedom" to the contractor in undertaking the engagement. [97] What is important, as incontrovertibly
established in this case, is that the principal's right to control is limited to the results of the work of the contractor's
employees.
The petitioners were regular employees of Jobcrest.

The four-fold test is the established standard for determining the existence of an employer-employee relationship:
[98]
 (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the power of control over the employee's conduct. Of the four elements, the power of control is the most
important.[99] Having found that Jobcrest exercised control over the petitioners' work, the Court is constrained to
determine whether the petitioners were regular employees of Jobcrest by virtue of the three other elements of the
four-fold test.

The petitioners themselves admit that they were hired by Jobcrest.[100] In their subsequent engagement to
Sunpower, it was Jobcrest that selected and trained the petitioners. [101] Despite their assignment to Sunpower,
Jobcrest paid the petitioners' wages, including their contributions to the Social Security System (SSS), Philippine
Health Insurance Corporation (Philhealth), and Home Development Mutual Fund (HDMF, also known as Pag-
IBIG).[102] The power to discipline the petitioners was also retained by Jobcrest, as evidenced by the "Notice of
Admin Charge/Explanation Slip" furnished the petitioners through Jobcrest's Human Resource department. [103]

The Court further notes that on December 27, 2010 and January 25, 2011, Leilanie and Leo were respectively
confirmed as regular employees of Jobcrest.[104] Jobcrest did not even deny that the petitioners were their regular
employees. Consequently, the petitioners cannot be terminated from employment without just or authorized cause.
[105]

A review of the petitioners' repeated submissions reveals that while they claim to have been illegally dismissed
from employment,[106] Jobcrest actually intended to assign Leo again to Sunpower, and provide Leilanie with
another engagement with a different client company. The petitioners all admitted to these facts in their sworn
statement, heavily quoted in their position paper filed with the LA:[107]

Noong December 14, 2011, ako [Leo Mago] ay tinawagan sa aking cellular phone ng nagpakilalang Julie
41. at taga HR ng JOBCREST at ang sabi sa akin ay magreport umano ako sa opisina upang ipadala sa
SUNPOWER;

xxxx

Noong November 29, 2011, ako [Leilani Colobong] ay nagreport sa JOBCREST at aking nakausap ang
isa sa staff ng JOBCREST na hindi ko alam ang pangalan at ang sabi niya sa akin ay ililipat umano
44.
ako sa kompanyang FIRST SUMIDEN dahil hindi na umano ako pwedeng m[a]gtrabaho sa SUNPOWER
na hindi niya sinabi kung anu ang dahilan;

Noong December 1, 2011, ako ay bumalik sa JOBCREST at ako ay binigyan nila ng referral para
magpamedical para sa aking bagong requirements diumano sa aking bagong trabaho sa FIRST SUMIDEN
45. dahil hindi na talaga umano ako tatanggapin sa SUNPOWER sa aking pagbabalik trabaho ng December 4,
2011 na hindi naman niya sinabi kung anu ang dahilan; Kalakip nito ang nas[a]bing referral slip bilang
Exhibit "S"[108] (Emphasis Ours)
It was also uncontroverted that Jobcrest offered to accept the petitioners' return to work, but they refused this offer
during the mandatory conference.[109] Clearly, the petitioners were not illegally dismissed, much less terminated
from their employment. There is nothing on record that established the dismissal of the petitioners in the first
place.

In MZR Industries, et al. v. Colambot,[110] the employee claimed to have been illegally dismissed through a verbal
directive. The employer denied this and alleged waiting for the employee to report for work, only to later find out
that a complaint for illegal dismissal was filed against them. The Court recognized that while the employer is
generally required to establish the legality of the employee's termination, the employee should first establish the
fact of dismissal from service. Failing such, as in this case, the Court cannot rule that the employee was illegally
dismissed.

The "Notice of Admin Charge/Explanation Slip" is also insufficient proof of the petitioners' termination from
employment. The notice merely required the petitioners to explain whether they violated Jobcrest's Code of
Conduct. No penalty was imposed on the petitioners yet when they were furnished with a copy of the notices.
[111]
 In fact, Jobcrest was unable to take the appropriate action on the charge, considering that the petitioners
immediately filed their complaint for illegal dismissal with the NLRC the following day, or on December 15,
2011.[112]
All things considered, Sunpower is not the statutory employer of the petitioners. The circumstances obtaining in
this case, as supported by the evidence on record, establish that Jobcrest was a legitimate and independent
contractor. There is no reason for this Court to depart from the CA's findings.

WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit. The Court of
Appeals' Decision dated October 8, 2013 and Resolution dated January 13, 2014 in CA-G.R. SP No. 131059
are AFFIRMED, which nullified the National Labor Relations Commission's Decision dated April 24, 2013 and
Resolution dated May 28, 2013, and reinstated the Labor Arbiter's Decision dated July 3, 2012. No costs.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 206529, April 23, 2018 ]
RENANTE B. REMOTICADO, PETITIONER, VS. TYPICAL CONSTRUCTION TRADING CORP. AND
ROMMEL M. ALIGNAY, RESPONDENTS.

DECISION
LEONEN, J.:

There can be no case for illegal termination of employment when there was no termination by the employer.
While, in illegal termination cases, the burden is upon the employer to show just cause for termination of
employment, such a burden arises only if the complaining employee has shown, by substantial evidence, the fact
of termination by the employer.

This resolves a Petition for Review on Certiorari [1] under Rule 45 of the 1997 Rules of Civil Procedure praying that
the assailed November 29, 2012 Decision[2] and March 26, 2013 Resolution [3] of the Court of Appeals in CA G.R.
SP No. 124993 be reversed and set aside.

The assailed Court of Appeals November 29, 2012 Decision found no grave abuse of discretion on the part of
National Labor Relations Commission in rendering its January 11, 2012 Decision, [4] which affirmed Labor Arbiter
Renell Joseph R. Dela Cruz's (Labor Arbiter Dela Cruz) October 11, 2011 Decision. [5] Labor Arbiter Del a Cruz's
Decision dismissed petitioner Renante B. Remoticado's (Remoticado) Complaint for illegal dismissal after a
finding that he voluntarily resigned. The assailed Court of Appeals March 26, 2013 Resolution denied his Motion
for Reconsideration.

Remoticado's services were engaged by Typical Construction Trading Corporation (Typical Construction) as a
helper/laborer in its construction projects, the most recent being identified as the Jedic Project at First Industrial
Park in Batangas.[6]

In separate sworn statements, Pedro Nielo (Nielo), Typical Construction's Field Human Resources Officer, and
two (2) of Remoticado's co-workers, Salmero Pedros and Jovito Credo, [7] recalled that on December 6, 2010,
Remoticado was absent without an official leave. He remained absent until December 20, 2010 when, upon
showing up, he informed Nielo that he was resigning. Prodded by Nielo for his reason, Remoticado noted that they
were "personal reasons considering that he got sick." [8] Nielo advised Remoticado to return the following day as he
still had to report Remoticado's resignation to Typical Construction's main office, and as his final pay had yet to be
computed.[9]

Remoticado returned the following day and was handed P5,082.53 as his final pay. He protested, saying that he
was entitled to "separation pay computed at two (2) months for his services for two (2) years." [10] In response,
Nielo explained that Remoticado could not be entitled to separation pay considering that he voluntarily resigned.
Nielo added that if Remoticado was not satisfied with P5,082.53, he was free to continue working for Typical
Construction. However, Remoticado was resolute and proceeded to sign and affix his thumb marks on a Kasulatan
ng Pagbawi ng Karapatan at Kawalan ng Paghahabol, a waiver and quitclaim.[11]

On January 10, 2011,[12] Remoticado filed a Complaint for illegal dismissal against Typical Construction and its
owner and operator, Rommel M. Alignay (Alignay). [13] He claimed that on December 23, 2010, he was told to stop
reporting for work due to a "debt at the canteen"[14] and thereafter was prevented from entering Typical
Construction's premises.[15]

In a Decision[16] dated October 11, 2011, Labor Arbiter Dela Cruz dismissed Remoticado's Complaint for lack of
merit. He explained that Remoticado's employment could not have been illegally terminated as he voluntarily
resigned.[17]

In its January 11, 2012 Decision,[18] the National Labor Relations Commission denied Remoticado's appeal.

In its assailed November 29, 2012 Decision,[19] the Court of Appeals found no grave abuse of discretion on the part
of the National Labor Relations Commission. In its assailed March 26, 2013 Resolution, [20] the Court of Appeals
denied Remoticado's Motion for Reconsideration.

Undeterred by the consistent rulings of the Court of Appeals, the National Labor Relations Commission, and
Labor Arbiter Dela Cruz, Remoticado filed the present Petition.[21]

For resolution is the issue of whether petitioner Renante B. Remoticado voluntarily resigned or his employment
was illegally terminated in the manner, on the date, and for the reason he averred in his complaint.

The Petition lacks merit.

I

Determining which between two (2) alternative versions of events actually transpired and ascertaining the specifics
of how, when, and why one of them occurred involve factual issues resting on the evidence presented by the
parties.

It is basic that factual issues are improper in Rule 45 petitions. Under Rule 45 of the 1997 Rules of Civil
Procedure,[22] only questions of law may be raised in a petition for review on certiorari. The rule, however, admits
of exceptions. In Pascual v. Burgos:[23]
The Rules of Court require that only questions of law should be raised in petitions tiled under Rule
45. This court is not a trier of facts. It will not entertain questions of fact as the factual findings of
the appellate courts are "final, binding[,] or conclusive on the parties and upon this [c]ourt" when
supported by substantial evidence. Factual findings of the appellate courts will not be reviewed nor
disturbed on appeal to this court.

However, these rules do admit exceptions. Over time, the exceptions to these rules have expanded.
At present, there are 10 recognized exceptions that were first listed in Medina v. Mayor Asistio, Jr.:
(1) When the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; (2) When the inference made is manifestly mistaken, absurd or
impossible; (3) Where there is a grave abuse of discretion; (4) When the judgment is
based on a misapprehension of facts; (5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellant and appellee; (7)
The findings of the Court of Appeals are contrary to those of the trial court; (8)
When the findings of fact are conclusions without citation of specific evidence on
which they are based; (9) When the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondents; and (10) The
finding of fact of the Court of Appeals is premised on the supposed absence of
evidence and is contradicted by the evidence on record.
These exceptions similarly apply in petitions for review filed before this court involving civil, labor,
tax, or criminal cases.[24] (Citations omitted)
No exception avails in this case.

Quite glaring is the sheer consistency of the factual findings of the Court of Appeals, the National Labor Relations
Commission, and Labor Arbiter Dela Cruz.

Not only are these findings uniform, but they are also sustained by evidence. The Court of Appeals correctly ruled
that there is no showing of grave abuse of discretion on the part of the National Labor Relations Commission.

II

It is petitioner's claim that the Court of Appeals, the National Labor Relations Commission, and Labor Arbiter
Dela Cruz are all in error for failing to see that Typical Construction failed to discharge its supposed burden of
proving the validity of his dismissal. He asserts that such failure leaves no other conclusion than that his
employment was illegally terminated.[25]

It is petitioner who is in error.

It is true that in illegal termination cases, the burden is upon the employer to prove that termination of employment
was for a just cause. Logic dictates, however, that the complaining employee must first establish by substantial
evidence the fact of termination by the employer.[26] If there is no proof of termination by the employer, there is no
point in even considering the cause for it. There can be no illegal termination when there was no termination:
 Before the employer must bear the burden of proving that the dismissal was legal, the employee
must first establish by substantial evidence the fact of his dismissal from service. If there is no
dismissal, then there can be no question as to the legality or illegality thereof.[27]
Petitioner here insists on his version of events, that is, that on December 23, 2010, he was told to stop reporting for
work on account of his supposed indebtedness at the canteen. This bare insistence, however, is all that petitioner
has. He failed to present convincing evidence. Even his basic narrative is bereft of supporting details that could be
taken as badges of veracity. As the Court of Appeals underscored, "[P]etitioner only made a general statement that
he was illegally dismissed . . . He did not state how he was terminated [or] mentioned who prevented him from
reporting for work."[28]

III

In contrast with petitioner's bare allegation are undisputed facts and pieces of evidence adduced by respondents,
which cast serious doubt on the veracity of petitioner's recollection of events.

It is not disputed that the establishment identified as Bax Canteen, to which petitioner owed P2,115.00, is not
owned by, or otherwise connected with any of the respondents, or with any of Typical Construction's owners,
directors, or officers. There was also no showing that any of the two (2) respondents, or anyone connected with
Typical Construction, was prejudiced or even just inconvenienced by petitioner's indebtedness. It appears that Bax
Canteen was merely in the proximity of the site of Typical Construction's Jedic Project. Petitioner failed to show
why Typical Construction would go out of its way to concern itself with the affairs of another company. What
stands, therefore, is the sheer improbability that Typical Construction would take petitioner's indebtedness as an
infraction, let alone as a ground for terminating his employment.[29]

The waiver and quitclaim bearing petitioner's signature and thumbmarks was d9Jed December 21, 2010,
[30]
 predating petitioner's alleged illegal termination by two (2) days. If indeed petitioner was told to stop reporting
for work on December 23, 2010, it does not make sense for Typical Construction to have petitioner execute a
waiver and quitclaim two (2) full days ahead of the termination of his employment. It would have been a ludicrous
move for an employer that is purportedly out to outwit someone into unemployment.

The waiver and quitclaim could very well have been antedated. But it is not for this Court to sustain a mere
conjecture. It was for petitioner to allege and prove any possibility of antedating. He did not do so. In any case,
even if this Court were to indulge a speculation, there does not appear to be any cogent reason for antedating. To
the contrary, antedating the waiver and quitclaim was an unnecessary complication considering that any simulation
of resignation would have already been served by petitioner's mere affixing of his signature. Antedating would just
have been an inexplicably asinine move on the part of respondents.

What is most crucial is that petitioner has never disavowed the waiver and quitclaim.[31] It does not appear also that
petitioner has accounted for why this document exists, such as by alleging that he was coerced into executing it.

Jurisprudence frowns upon waivers and quitclaims forced upon employees. Waivers and quitclaims are, however,
not invalid in themselves. When shown to be freely executed, they validly discharge an employer from liability to
an employee. "[A] legitimate waiver representing a voluntary settlement of a laborer's claims should be respected
by the courts as the law between the parties."[32] In Goodrich Manufacturing Corporation v. Ativo:[33]
It is true that the law looks with disfavor on quitclaims and releases by employees who have been
inveigled or pressured into signing them by unscrupulous employers seeking to evade their legal
responsibilities and frustrate just claims of employees. In certain cases, however, the Court has
given effect to quitclaims executed by employees if the employer is able to prove the following
requisites, to wit: (1) the employee executes a deed of quitclaim voluntarily; (2) there is no fraud or
deceit on the part of any of the parties; (3) the consideration of the quitclaim is credible and
reasonable; and (4) the contract is not contrary to law, public order, public policy, morals or good
customs, or prejudicial to a third person with a right recognized by law.

Our pronouncement in Periquet v. National Labor Relations Commission on this matter cannot be
more explicit:
Not all waivers and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it is binding on
the parties and may not later be disowned simply because of a change of mind. It is
only where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are unconscionable on its face, that the
 law will step in to annul the questionable transaction. But where it is shown that the
person making the waiver did so voluntarily, with full understanding of what he was
doing, and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. [34] (Citations
omitted)
Petitioner's barren tale of his employer's order for him to stop reporting for work is hardly the requisite "clear
proof that the waiver was wangled from an unsuspecting or gullible person."[35] Indeed, courts and tribunals should
not be so gullible as to lend validity to every waiver and quitclaim confronting them. However, neither should they
be so foolhardy as to believe a complaining employee's narrative at the mere sight or mention of a waiver or
quitclaim.

IV

Petitioner here would have this Court rule in his favor when he does absolutely nothing more than entreat the
doctrine on an employer's burden to prove just cases for terminating employment. It is as though this invocation
was a magic spell that would win the day for him regardless of whether or not he is able to discharge his
primordial burden of proving the occurrence of termination. This Court cannot fall for this. The task of
adjudication demands more than convenient conclusions obtained through handy invocations. Rather, it requires a
meticulous appraisal of evidence and legal bases.

Petitioner is utterly wanting, both in evidence and legal bases. This Court cannot be so witless as to rule in his
favor. With an utter dearth of proof in petitioner's favor, the consistent findings of the Court of Appeals, the
National Labor Relations Commission, and the Labor Arbiter must be sustained.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed November 29, 2012 Decision and
March 26, 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 124993 are AFFIRMED.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 225803, July 02, 2018 ]
SHERYLL R. CABAÑAS, PETITIONER, VS. ABELARDO G. LUZANO LAW OFFICE/ABELARDO G.
LUZANO, RESPONDENTS.

DECISION
PERALTA, J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated April 21, 2016, annulling
and setting aside the Decision[2] dated June 30, 2014 of the National Labor Relations Commission (NLRC), Sixth
Division and dismissing herein petitioner Sheryll R. Cabañas' complaint for illegal dismissal and money claims.

The facts are as follows:

On October 1, 2013, petitioner Sheryll Cabañas filed before the NLRC a Complaint for illegal dismissal and
money claims against herein respondent Abelardo G. Luzano Law Office and its manager, Mary Ann Z. Detera.
Respondent Law Office is a service provider for the Bank of the Philippine Islands, Banco de Oro, Rizal
Commercial Banking Corporation and Unionbank of the Philippines in the collection of delinquent credit cards
and personal loan accounts.

In her Position Paper,[3] complainant-herein petitioner Cabañas stated that she was employed as an Administrative
Secretary for respondent Abelardo G. Luzano Law Office from June 27, 2012 to September 18, 2013. She was
tasked to act as receptionist/lawyer's staff, monitor petty cash disbursements and office employees, make demand
letters and do other clerical tasks. Her performance was satisfactory as she was employed as a regular employee on
[January 30, 2013] per her employment contract.[4]

In June 2013, Cabañas received a final warning in a Memorandum [5] dated June 18, 2013. The memorandum
notified her that her performance as Administrative Secretary failed to meet the performance requirements of the
position due to the following: (1) erroneous entry of data for the liquidation of petty cash; (2) erroneous
computation of accounts for mailing; (3) erroneous breakdown of expenses for cash payments; (4) instructions
from colleagues are not being strictly followed; and (5) not strict in releasing gas allowance for skiptracers.
Cabañas was warned that a similar violation in the future would mean termination of her employment.

At this point, Cabañas said that the office manager, Mary Ann Detera, began meddling with her office equipment.
Detera would also lose her requests relating to the demand letters that she (Cabañas) prepares. She was even asked
to cover-up irregularities.

Cabañas stated that as she was in charge of the petty cash disbursements, which was used to defray the transport
expenses of skiptracers or messengers, she would ask for receipts for the disbursements of Jomari Delos Santos, a
messenger assigned to Detera. Detera wanted her to cover-up any irregularity which may have been committed by
her messenger and not report the same to Mrs. Ivy Theresa Buenaventura, the General Manager, who was also the
daughter of Atty. Abelardo G. Luzano (Atty. Luzano). Cabañas refused to do Detera's wishes. Thus, Detera's angry
actuation began toward Cabañas.

Cabañas alleged that Detera would fail to report Mr. Delos Santos' absences, which placed Cabañas in a delicate
situation as Mrs. Buenaventura would ask her regarding Mr. Delos Santos' absences. Mr. Delos Santos would also
ask Cabañas for transportation expenses, but he would take three to four days to liquidate the said expenses. Detera
would also belatedly submit receipts for liquidating the petty cash disbursements. It was Cabañas who bore the ire
of her superiors for the delay. Cabañas said that she endured this ordeal as she wanted to remain employed.

On September 1, 2013, Cabañas stated that she was summoned to the office of Atty. Luzano. Atty. Luzano and his
daughter and General Manager, Mrs. Buenaventura, asked her to resign and execute a resignation letter, but she
did not do so.

On September 18, 2013, while Cabañas was on vacation leave, her officemate Josephine Santos told her that
Detera went through her (Cabañas') box containing letters she had prepared.

On September 19, 2013, Cabañas received another Memorandum of even date with the subject: "Notice of
Termination," alleging her commission of the following infractions: (1) erroneous computation of accounts for
mailing; (2) erroneous encoding of petty cash liquidation report; (3) erroneous breakdown of expenses for cash
payments; (4) instructions from superiors and collectors are not being strictly followed; (5) careless releasing of
gas allowance for skiptracers; (6) erroneous filing of court orders to the wrong case folders; (7) erroneous
photocopying of a different legal document; (8) reproduction of excessive copies of documents for case filing; (9)
wastage of company resources such as paper and ink due to failure to request for mailing expenses for demand
letters printed in August 2013; and (10) erroneous listing for mailing of a new batch of accounts, which were not
included in the actual count of the printed demand letters on September 18, 2013.

Cabañas was given up to the close of office hours of the next day, Friday, September 20, 2013, to submit her
explanation why her employment will not be terminated due to gross incompetence and negligence.

According to Cabañas, she verbally explained her side to Atty. Luzano and informed him that Detera was going
through her work. Atty. Luzano advised her to prepare an incident report.

At 6:00 p.m. of the same day, September 19, 2013, Cabañas stated that she was summoned by Atty. Luzano. He
asked her to execute a resignation letter, but Cabañas refused to do so.

The next day, September 20, 2013, Cabañas submitted her explanation letter to the charges against her contained
in the Memorandum dated September 19, 2013. She spoke with Atty. Luzano and inquired why she was no longer
given any work and she was not informed that she already had a replacement. Atty. Luzano informed her that the
same date was her last day of work and that her salary would just be deposited in her account. However, on
September, 30, 2013, no salary was deposited in her ATM account.

On October 1, 2013, Cabañas filed a complaint for illegal dismissal and the payment of her monetary claims
against respondents.

During the mediation conferences, respondents offered a settlement, but this did not push through. Hence, both
parties were required to submit their respective Position Paper and Reply.

Cabañas contended that it was undeniable that she was an employee of respondent Law Office. On September 19,
2013, a memorandum was issued asking her to explain her side, but when she submitted her explanation the
following day, September 20, 2013, she was there and then dismissed, which was tantamount to illegal dismissal.
Moreover, her salary was not given on September 30, 2013 as promised. She prayed that a judgment be rendered
that she was illegally dismissed and entitled to the following money claims: nonpayment of service incentive
leave, 13th month pay, backwages and separation pay.

On the other hand, respondents contended in their Position Paper [6] that Cabañas was not terminated from her
employment, but she abandoned her work.

Respondents stated that in the early part of 2013, Cabañas' job performance deteriorated; thus, she was repeatedly
admonished to be careful and avoid repetition of her errors in the liquidation of petty cash, computation of
accounts for mailing, and in the breakdown of cash payments. She was admonished for repeatedly failing to follow
the instructions of her superiors, doing things incorrectly, and being very lax and incorrectly releasing amounts for
gas allowances of the company's motorized skiptracers as well as the unintelligible filing of papers and folders of
accounts assigned to her.

Cabañas' job performance did not improve despite repeated warnings; thus, Cabañas was given a final warning in a
Memorandum[7] dated June 18, 2013 that a similar violation in the future would mean termination of her
employment. Since the final warning did not work, a Memorandum[8] dated September 19, 2013 was issued,
requiring Cabañas to explain why her employment will not be terminated due to gross incompetence and
negligence.

On September 20, 2013, a Friday, Cabañas submitted her written explanation on the charges contained in the
Memorandum dated September 19, 2013. The following Monday, September 23, 2013, she stopped reporting for
work. Since she abandoned her work and went on absence without leave, respondents' decision whether to
terminate her or not became moot and academic.

Respondents prayed for the dismissal of the complaint.

Cabañas filed her Reply,[9] maintaining that she did not abandon her work. She averred that other than the fact that
she was asked to execute a resignation letter, which she refused to do, she was also asked on September 20, 2013
to turn over all the files assigned to her to respondents' Head Administrative Assistant Antoinette Castro. She
asserted that she was not absent without leave (AWOL), because respondents terminated her employment; hence,
she is entitled to her monetary claims.

In their Reply[10] to complainant-herein petitioner Cabañas' Position Paper, respondents reiterated that they did not
force complainant to resign, and that complainant was not dismissed, but she abandoned her work.

In a Decision[11] dated March 27, 2014, Labor Arbiter Marcial Galahad T. Makasiar held that Cabañas was illegally
dismissed and ordered respondents to pay her backwages, separation pay, service incentive leave pay and
13th month pay.

The Labor Arbiter held that in termination cases, the employer has the onus probandi to prove, by substantial
evidence, that the dismissal of an employee is due to a just cause. Failure to discharge this burden would be
tantamount to an unjustified and illegal dismissal. He cited Kams International, Inc., et al. v. NLRC, et al.,
[12]
 which held that abandonment of work does not per se sever the employer-employee relationship. It is merely a
form of neglect of duty, which is in turn a just cause for termination of employment. [13] The operative act that will
ultimately put an end to this relationship is the dismissal of the employee after complying with the procedure
prescribed by law.[14] In this case, Cabañas was served a memorandum-notice regarding her performance.
However, in regard to the ground of abandonment, neither notice to explain nor notice of termination was issued.
Moreover, Cabañas' commencement of an action for illegal dismissal was proof of her desire to return to work,
negating abandonment of her work.

The dispositive portion of the Decision of the Labor Arbiter reads:

The dispositive portion of the Decision of the Labor Arbiter reads:

xxxx
FALLO

ACCORDINGLY, the termination of complainant's employment is declared illegal.

Respondent Atty. Abelardo G. Luzano is ordered to pay complainant:
1. SEPARATION PAY of PhP23,712.00
2. BACKWAGES of PhP169,540.80;
3. SERVICE INCENTIVE LEAVE PAY of PhP2,798.70;
4. 13th MONTH PAY of PhP14,553.24;

The foregoing awards shall be subject to 5% withholding tax upon payment/execution only where
the same is applicable.

Respondents's claim of damages is DENIED for lack of merit.

SO ORDERED.[15]

Respondents appealed the Decision of the Labor Arbiter to the NLRC.

In a Decision[16] dated June 30, 2014, the NLRC affirmed the Decision of the Labor Arbiter and dismissed the
appeal.

The NLRC considered the Memorandum dated September 19, 2013, with the subject: "Notice of Termination," as
a termination letter. It held that Cabañas was terminated on the basis of her poor and unsatisfactory performance
particularly in her quality of work and job knowledge. However, the NLRC found that the acts alleged in the
memorandum to have been committed by Cabañas have not been proven nor substantiated by respondents for
these reasons: (1) respondents have not shown any company policy which provides that the commission of any of
the alleged acts shall be dealt with the penalty of dismissal from employment to bolster their claim against
Cabañas; and (2) other than respondents' self-serving statements that Cabañas showed gross incompetence and
negligence in the performance of her tasks, no convincing proof was offered to substantiate Cabañas' alleged
negligence or incompetence.
The NLRC noted that Cabañas was employed by respondents since June  27, 2012 until her dismissal on
September 19, 2013, or more than a year and three (3) months. Had Cabañas exhibited gross incompetence and
negligence in her work, respondents should not have extended her employment upon completion of her
probationary contract of employment.

Moreover, the NLRC stated that while respondents argued that in the early part of 2013, they repeatedly
admonished and verbally warned Cabañas of her poor performance, there was no single evidence presented to
show the particular errors allegedly committed by her.

Further, the NLRC did not agree with respondents' contention that Cabañas was not dismissed from employment,
but she voluntarily severed her employment through abandonment. It held, thus:

Abandonment is a form of neglect of duty, one of the just causes for an employer to terminate an
employee. It is a hornbook precept that in illegal dismissal cases, the employer bears the burden of
proof. For a valid termination of employment on the ground of abandonment, the employer must
prove, by substantial evidence, the concurrence of the employee's failure to report for work for no
valid reason and his categorical intention to discontinue employment. In the present case, there is
no substantial evidence that will prove complainant's categorical intention to discontinue
employment. The story of abandonment is simply doubtful as complainant even refused to execute
a resignation letter when she was asked to resign by respondents. In the case of Garcia v.
NLRC, the Supreme Court emphasized that there must be concurrence of the intention to abandon
and some overt acts from which an employee may be deduced as having no more intention to work.
Moreover, as correctly observed by the Labor Arbiter, neither notice to explain nor notice of
termination was issued to complainant on the ground of abandonment.

There being no just cause for the termination of complainant's employment, the compelling
conclusion is that she was illegally dismissed from employment. x x x.[17]

The dispositive portion of the Decision of the NLRC reads:

WHEREFORE, the appeal filed by the respondents is hereby DISMISSED for lack of merit.
Accordingly, the Decision dated March 27, 2014 is AFFIRMED.[18]

Respondents' motion for reconsideration was denied for lack of merit by the NLRC in a Resolution [19] dated July
31, 2014.

On October 3, 2014, respondents filed a petition for certiorari with the Court of Appeals, questioning whether the
NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in finding that petitioner
Cabañas was illegally dismissed and, therefore, entitled to her monetary claims.

On April 21, 2016, the Court of Appeals rendered a Decision in favor of herein respondents, the dispositive
portion of which reads:

WHEREFORE, in view of the foregoing premises, the instant petition is hereby GRANTED. The
assailed Decision dated June 30, 2014 of the National Labor Relations Commission, Sixth Division,
in NLRC LAC No. 04-001071-14 is ANNULLED and SET ASIDE.

Private respondents Sheryll Cabañas' complaint for illegal dismissal and money claims is hereby
DISMISSED for lack of merit.[20]

The Court of Appeals held that Cabañas was not illegally dismissed, but she abandoned her job. The appellate
court stated that to constitute abandonment, two elements must be present: (1) the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and (2) there must have been a clear
intention on the part of the employee to sever the employer-employee relationship manifested by some overt act.
[21]
 It found the presence of the elements of abandonment in this case.

The Court of Appeals stated that although the subject of the Memorandum dated September 19, 2013 was "Notice
of Termination," the memorandum merely asked Cabañas to explain why she should not be dismissed from
employment. The next day, September 20, 2013, Cabañas submitted a handwritten letter in response to the
memorandum and she also made a handwritten document wherein she turned over the office files in her custody in
favor of Antoinette Castro. Thereafter, she failed to report for work as evidenced by her payslip for the month of
September. Based on the foregoing, the Court of Appeals concluded that Cabañas failed to report for work without
valid or justifiable reason. It stressed that respondents did not ask Cabañas to leave or prevent her from working in
the law firm. Although Cabañas alleged that Atty. Luzano and Mrs. Buenaventura asked her to resign, such
allegation ran counter to her statement in her handwritten letter dated September 20, 2013, wherein she thanked
the former for treating her well. If indeed she was asked to resign, she should have stated the same in her letter or
at the very least, she should not have thanked them.

Anent the second element of abandonment, the Court of Appeals held that Cabañas showed her clear intent to
sever the employer-employee relationship when she voluntarily and personally turned over the files in her custody
in favor of Antoinette Castro, which is an overt act manifesting her intent to leave her post in the law firm.

The Court of Appeals cited the case of Jo v. National Labor Relations Commission[22] to support its ruling that
although Cabañas instituted an illegal dismissal case immediately after her alleged termination, she, nonetheless,
belies her claim of illegal dismissal when she prayed for separation pay, not reinstatement.

Hence, this petition for review on certiorari raising these issues:

I.
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
[Cabañas] ABANDONED HER EMPLOYMENT.

II.
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT [Cabañas]
WAS NOT ILLEGALLY DISMISSED.[23]

Petitioner maintains that she did not abandon her work as ruled by the Court of Appeals, but she was illegally
dismissed from employment.

She reiterated that when she went to work on September 20, 2013, she was surprised to learn that she had already
been replaced. She was no longer given any work and ordered to turn over all the files assigned to her. The said
files were received by Antoinette Castro as shown in the turnover that she executed. She inquired from respondent
Atty. Luzano the reason therefor, and she was told that it was her last day of work and her unpaid salary would be
deposited in her account.

Moreover, petitioner averred that her actuations before she allegedly abandoned her job negate any intention to
sever her employment with respondents. On two separate occasions, respondent Atty. Luzano urged her to resign,
but she refused to give in to his prodding. She would not have likewise gone to great lengths to prepare and submit
her written explanation to the Memorandum dated September 19, 2013 had she intended to relinquish her
employment. She wanted to continue to be in their employ, considering that it was her means of providing for
herself and her family.

Further, petitioner stated that thanking the respondents for treating her well does not necessarily counter
respondents' act of asking her to resign. She was merely being thankful for being treated well during her employ.
She pointed out that respondents neither exerted any effort to question her alleged failure to report for work since
September 23, 2013 nor required her to return to work, which could have enabled them to ascertain whether she
had intention to resume her employment.

Petitioner maintains that the respondents terminated her employment without just or valid cause and without
observing the requirements of due process in violation of her right to security of tenure guaranteed by the
Constitution and the Labor Code. Hence, she is entitled to reinstatement and backwages, and her other money
claims. However, since reinstatement is no longer feasible due to strained relations considering her unjust
termination from employment, she prayed for the payment of separation pay in lieu thereof and her other money
claims. She likewise prayed for the payment of attorney's fees as she was compelled to litigate. Although she is
represented by the Public Attorney's Office (PAO), this should not deter the award of attorney's fees, which is
sanctioned by Section 6 of Republic Act (R.A.) No. 9406.[24]

The Ruling of the Court

The petition is meritorious.

As a rule, the Court does not review questions of fact, but only questions of law in an appeal by certiorari  under
Rule 45 of the Rules of Court.[25] The rule, however, is not absolute as the Court may review the facts in labor
cases where the findings of the Court of Appeals and of the labor tribunals are contradictory.[26]

In this case, the factual findings of the Labor Arbiter and the NLRC differ from those of the Court of Appeals.
Hence, the Court shall review and evaluate the evidence on record.

The main issue is whether or not the Court of Appeals correctly held that petitioner was not illegally dismissed, but
petitioner abandoned her job.

In illegal dismissal cases, the general rule is that the employer has the burden of proving that the dismissal was
legal. To discharge this burden, the employee must first prove, by substantial evidence, that he/she had been
dismissed from employment.[27]

Petitioner contends that she was terminated by respondents since she was not only asked to resign by respondent
Atty. Luzano, which she refused to do, but on September 20, 2013, she was asked to turn over all the files assigned
to her, and when she asked Atty. Luzano why she was not given any work, she was told that it was her last day of
work and that her unpaid salary would just be deposited in her ATM account.

The records show the document[28] dated September 20, 2013 evidencing petitioner's turnover of all the files
assigned to her to respondents' Head Administrative Assistant Antoinette L. Castro, who acknowledged receipt of
the turnover by affixing her signature on the document. In employment parlance, the turnover of work by an
employee signifies severance of employment.[29] In addition, petitioner narrated that when she asked respondent
Atty. Luzano, the owner of respondent Law Office, why she was not given any work, Atty. Luzano told her that it
was her last day of work and that her unpaid salary would just be deposited in her ATM, which is an overt act of
dismissal by petitioner's employer who had the authority to dismiss petitioner. [30] In effect, petitioner was
terminated on that day, September 20, 2013, a Friday. This would explain why petitioner no longer reported to
work the next working day, September 23, 2013, a Monday, and she filed a complaint for illegal dismissal on
October 1, 2013.

As petitioner Cabañas has proven that she was dismissed, the burden to prove that such dismissal was not done
illegally is now shifted to her employer, respondents herein. It is incumbent upon the employer to show by
substantial evidence that the dismissal of the employee was validly made and failure to discharge that duty would
mean that the dismissal is not justified and therefore illegal.[31]

Respondents contended that petitioner was not dismissed from work, but she stopped reporting for work the
following Monday, September 23, 2013, after submitting her written explanation to the charges against her on
September 20, 2013; hence, petitioner abandoned her work.

For abandonment of work to fall under Article 282 (b) of the Labor Code as gross and habitual neglect of duties,
which is a just cause for termination of employment, there must be concurrence of two elements. [32] First, there
should be a failure of the employee to report for work without a valid or justifiable reason; and, second, there
should be a showing that the employee intended to sever the employer-employee relationship, the second element
being the more determinative factor as manifested by overt acts.[33]

The Court of Appeals held that petitioner abandoned her work and the intent to do so was manifested by
petitioner's overt act of voluntarily turning over the files in her custody to Antoinette L. Castro, respondents' Head
Administrative Assistant.

Thus, petitioner's act of turning over all the files assigned to her to respondents' Head Administrative Assistant is
contended to be an overt act of dismissal by petitioner, while it is held to be an overt act of abandonment by the
Court of Appeals.

The Court has carefully reviewed the records and we have discussed earlier that petitioner's turnover of all the files
in her custody was an overt act of dismissal. Thus, the Court does not agree with the ruling of the Court of Appeals
that petitioner abandoned her job and the intent to do so was manifested by her overt act of voluntarily turning
over the files in her custody to Antoinette L. Castro for these reasons:

First, the records show that it was petitioner who first stated in her Reply[34] to respondents' Position Paper that she
was illegally terminated because on September 20, 2013, when she submitted her letter of explanation to the
charges against her, she was asked to turn over all the files assigned to her to respondents' Head Administrative
Assistant Antoinette L. Castro.[35] In her Position Paper,[36] petitioner also stated that when she submitted her
explanation letter on September 20, 2013, she inquired from Atty. Luzano why she was no longer given any work
nor was she informed that she already had a replacement, and Atty. Luzano informed her that it was her last day of
work and her salary would just be deposited in her ATM account.[37]

Second, respondents did not mention the fact that it was the petitioner who voluntarily turned over the files
assigned to her in their Position Paper, or in their Reply to Complainant's Position Paper, or in their appeal [38] from
the Labor Arbiter's Decision before the NLRC, but only mentioned it for the first time in their Reply
Memorandum[39] to Complainant's Comment/Opposition before the NLRC. Such an important fact constituting the
overt act of abandonment as defense could not have been taken for granted to not be alleged at the first instance by
respondents in their Position Paper if it were true that it was petitioner who voluntarily turned over all the files
assigned to her to respondents' representative. Hence, the belated allegation before the NLRC was merely an
afterthought on the part of respondents.

Third, if petitioner wanted to abandon her job, she could just have left without turning over all the files assigned to
her.

Fourth, the filing of an illegal dismissal case is inconsistent with abandonment of work.

Moreover, the termination of an employee must be effected in accordance with law. Therefore, the employer must
furnish the worker or employee sought to be dismissed with two (2) written notices, i.e., (a) notice which apprises
the employee of the particular acts or omissions for which his/her dismissal is sought; and (b) subsequent notice
which informs the employee of the employer's decision to dismiss him/her. [40] In this case, as observed by the
Labor Arbiter and the NLRC, respondents did not issue a notice to apprise/explain and a notice of termination on
the ground of abandonment; hence, respondents failed to comply with procedural due process.

Further, the Court of Appeals ruled that petitioner's prayer for separation pay, not reinstatement, belies her claim
of illegal dismissal on the basis of Jo v. National Labor Relations Commission.[41]

The Court finds that the facts and the finding of the Court in Jo v. National Labor Relations Commission is
different from this case; hence, the said ruling therein does not apply in this case.

The Court of Appeals summarized Jo v. National Labor Relations Commission, thus:

x x x [P]rivate respondent Mejila was hired as a barber and caretaker of a barbershop. When the
barbershop was sold to petitioners Jo, Mejila retained his job as a barber-caretaker. He, however,
had an altercation with his co-barber which prompted him to institute a labor case against the latter
and petitioners. Pending the resolution thereof, petitioners assured him that he was not being driven
out as barber-caretake[r]. Hence, Mejila continued reporting for work at the barbershop. But, on
January 2, 1993, he turned over the duplicate keys of the shop to the cashier and took away all his
belongings therefrom. On January 8, 1993, he began working as a regular barber at the newly-
opened Goldilocks Barbershop also in Iligan City. Four (4) days after, Mejila instituted a complaint
for illegal dismissal against petitioners Jo. x x x.[42]

In Jo v. National Labor Relations Commission, the Court found that therein private respondent Mejila's intention
to sever his ties with his employers or petitioners therein were manifested by the following circumstances: (1)
private respondent bragged to his co-workers his plan to quit his job at Cesar's Palace Barbershop and Massage
Clinic as borne out by the affidavit executed by his former co-workers; (2) he surrendered the shop's keys and took
away all his things from the shop; (3) he did not report anymore to the shop without giving any valid and
justifiable reason for his absence; (4) he immediately sought a regular employment in another barbershop, despite
previous assurance that he could remain in petitioners' employ; and (5) he filed a complaint for illegal dismissal
without praying for reinstatement.[43]

We find that the ruling in Jo v. National Labor Relations Commission that the employee's prayer for separation
pay, not reinstatement, belied his claim of illegal dismissal was made in consideration of all the circumstances that
showed the employee's intention to sever his ties with his employers, including the employee's contemporaneous
conduct, and not only because of his prayer for separation pay. Hence, it does not apply in this case.

An employee's prayer for separation pay is an indication of the strained relations between the parties. 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. [44] The doctrine of strained relations should
not be used recklessly or applied loosely nor be based on impression alone. [45] Thus, it is the task of labor tribunals
and the appellate courts to resolve whether the employee be reinstated or granted separation pay.

In this case, the Labor Arbiter noted that complainant-herein petitioner Cabañas prayed for separation pay in her
Complaint, and the Labor Arbiter was convinced that it is more fitting to grant separation pay to complainant in
lieu of reinstatement.[46] The NLRC affirmed the decision of the Labor Arbiter. The Court accords respect to the
decision of the labor tribunals considering the facts of this case.

Further, petitioner, whose legal counsel is a Public Attorney of the PAO, prayed for the award of attorney's fees in
her Position Paper and now seeks the award of attorney's fees as she was compelled to litigate in order to seek
redress. She contends that R.A. No. 9406 allows the PAO to receive attorney's fees, thus:

SEC. 6. New sections are hereby inserted in Chapter 5, Title III, Book IV of Executive Order No
292 to read as follows:

xxxx

"SEC. 16-D. Exemption from Fees and Costs of the Suit. - The clients of the PAO shall be exempt
from payment of docket and other fees incidental to instituting an action in court and other quasi-
judicial bodies, as an original proceeding or on appeal.

The costs of the suit, attorney's fees and contingent fees imposed upon the adversary of the
PAO clients after a successful litigation shall be deposited in the National Treasury as trust
fund and shall be disbursed for special allowances of authorized officials and lawyers of the
PAO."[47]

Indeed, petitioner is entitled to the award of attorney's fees equivalent to ten percent (10%) of the total monetary
award.[48] R.A. No. 9406 sanctions the receipt by the PAO of attorney's fees, and provides that such fees shall
constitute a trust fund to be used for the special allowances of their officials and lawyers. [49] The matter of
entitlement to attorney's fees by a claimant who was represented by the PAO has already been settled in Our Haus
Realty Development Corporation v. Parian.[50] The Court ruled therein that the employees are entitled to attorney's
fees, notwithstanding their availment of free legal services offered by the PAO and the amount of attorney's fees
shall be awarded to the PAO as a token recompense to them for their provision of free legal services to litigants
who have no means of hiring a private lawyer.[51]

In fine, petitioner Cabañas was dismissed by respondents without just cause and without procedural due process.

WHEREFORE, the petition for review on certiorari is GRANTED. The assailed Decision dated April 21, 2016
and Resolution dated June 30, 2016 of the Court of Appeals in CA-G.R. SP No. 137447 are
hereby REVERSED and SET ASIDE, and the Decision dated June 30, 2014 and Resolution dated July 31, 2014
of the National Labor Relations Commission, Sixth Division in NLRC LAC No. 04-001071-14 are
hereby REINSTATED and UPHELD but MODIFIED to the effect that, in addition to the award of separation
pay of P23,712.00; backwages of P169,540.80; service incentive leave pay of P2,798.70 and 13 th month pay of
P14,553.24, petitioner Sheryll R. Cabañas is also entitled to the award of attorney's fees equivalent to ten percent
(10%) of the total monetary award.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 222219, October 03, 2018 ]
REYNALDO S. GERALDO, PETITIONER, VS. THE BILL SENDER CORPORATION/MS. LOURDES NER
CANDO, RESPONDENTS.

DECISION
PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and
set aside the Decision[1] dated August 7, 2014 and the Resolution [2] dated September 28, 2015 of the Court of
Appeals (CA) in CA-G.R. SP No. 131235.

The antecedent facts are as follows:

On June 20, 1997, respondent The Bill Sender Corporation, engaged in the business of delivering bills and other
mail matters for and in behalf of their customers, employed petitioner Reynaldo S. Geraldo as a
delivery/messenger man to deliver the bills of its client, the Philippine Long Distance Telephone Company
(PLDT). He was paid on a "per-piece basis," the amount of his salary depending on the number of bills he
delivered. On February 6, 2012, Geraldo filed a complaint for illegal dismissal alleging that on August 7, 2011, the
company's operations manager, Mr. Nicolas Constantino, suddenly informed him that his employment was being
terminated because he failed to deliver certain bills. He explained that he was not the messenger assigned to
deliver the said bills but the manager refused to reconsider and proceeded with his termination. Thus, he claims
that his dismissal was illegal for being done without the required due process under the law and that the company
and its president, respondent Lourdes Ner Cando, be held liable for his monetary claims.[3]

For its part, the company countered that Geraldo was not a full time employee but only a piece-rate worker as he
reported to work only as he pleased and that it was a usual practice for messengers to transfer from one company
to another to similarly deliver bills and mail matters. As such, he would only be given bills to deliver if he reports
to work, otherwise, the bills would be assigned to other messengers. Moreover, contrary to Geraldo's claims, the
company asserts that he was not illegally dismissed for he was the one who abandoned his job when he no longer
reported for work. Thus, the burden was on him to substantiate his claims for illegal dismissal.[4]

On November 29, 2012, the Labor Arbiter (LA) held that contrary to the company's assertion, the burden of
proving that the dismissal of an employee is for just cause rests on the employer, without distinction whether the
employer admits or does not admit the dismissal, pursuant to Article 277(b) of the Labor Code. It also ruled that
Geraldo is considered as a regular employee of the company because he was doing work that is usually necessary
and desirable to the trade or business thereof. Moreover, even if the performance of his job is not continuous or is
merely intermittent, since he has been performing the same for more than a year, the law deems the repeated and
continuing need thereof as sufficient evidence of the necessity, if not indispensability, of his work to the
company's business. In addition, the LA found that the company failed to substantiate its contention that Geraldo
was employed with another company and that he abandoned his job. But even if it was true that he abandoned his
job, it was incumbent on the company to send him a notice ordering him to report to work and to explain his
absences as mandated by Sections 2 and 5, Book V, Rule XIV of the Labor Code. Finding that Geraldo was
illegally dismissed, the LA ordered the company to pay him separation pay, service incentive leave pay, and
attorney's fees in the aggregate amount of P352,214.13.[5]

In a Decision[6] dated May 9, 2013, the National Labor Relations Commission (NLRC) affirmed the LA ruling with
clarification that the computation of backwages must be from the time of his dismissal up to the finality of the
NLRC Decision. According to the NLRC, the company failed to discharge the burden of proving a deliberate and
unjustified refusal of Geraldo to resume his employment without any intention of returning as well as to observe
the twin-notice requirement to insure that due process has been accorded to him. Moreover, said commission also
rejected the company's claim that Geraldo abandoned his job since he filed his complaint only after seven (7)
months from the alleged dismissal for the lapse of time between the dismissal of an employee for abandonment
and the filing of the complaint is not a material indicium of abandonment.[7]

On August 7, 2014, however, the CA set aside the NLRC Decision. According to the appellate court, since
Geraldo was paid on a per piece basis, he was hired on a per-result basis, and as such, he was not an employee of
the company. The absence of an employer-employee relationship was further highlighted by the fact that
messengers would habitually transfer from one messengerial company to another depending on the availability of
mail matters. Thus, since Geraldo was not an employee of the company, there was no basis in awarding separation
pay, backwages, 13th month pay, service incentive leave pay, and attorney's fees.[8] Thereafter, in a Resolution
dated September 28, 2015, the CA further denied Geraldo's Motion for Reconsideration.

Aggrieved, Geraldo filed the instant petition on November 26, 2015 invoking the following arguments:
I.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

WHEN IT DISMISSED THE COMPLAINT ON THE GROUND THAT
PETITIONER BEING A PIECE-RATE EMPLOYEE IS NOT AN EMPLOYEE OF
RESPONDENT AND NOT ENTITLED TO SECURITY OF TENURE ON THE
BASIS OF THE ALLEGATIONS THAT PETITIONER WAS PAID ON A PER
PIECE BASIS.

II.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT

DISMISSED THE COMPLAINT AND SET ASIDE THE MONETARY AWARD FOR
BACKWAGES, SEPARATION PAY, SERVICE INCENTIVE LEAVE, 13TH MONTH PAY AND
ATTORNEY'S FEES WITHOUTH BASES IN FACT AND IN LAW.

IIII.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT

RULED THAT THE OFFICERS OF RESPONDENT CORPORATION ARE NOT LIABLE FOR
THE MONETARY CLAIMS OF PETITIONER.

In his petition, Geraldo posits that the existence of an employer-employee relationship cannot be denied and as a
regular employee, he is entitled to a security of tenure. According to him, his being a piece-rate employee is just a
manner of payment of his compensation and not the basis of his regularity of work. The regular nature of his work,
moreover, is shown by the fact that the same is usually necessary and desirable to the nature of the company's
business, which is the delivery of bills and other mail matters for and in behalf of its customers. Geraldo further
claims that since he was illegally dismissed, for his employment was terminated without due process of law, he is
entitled to his monetary claims as correctly awarded by the LA, and that Cando, as President of the company,
should be held solidarily liable therefor. The mere fact that he was illegally dismissed, underpaid and deprived of
his 13th month pay and service incentive leave pay constitutes bad faith on Cando's part as president of said
company. As such, she cannot escape personal liability.[9]

The petition is partially meritorious.

The issue of whether Geraldo was, indeed, illegally dismissed depends upon the nature of his relationship with the
company. Article 280 of the Labor Code describes a regular employee as one who is either (1) engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with respect to the
activity in which he is employed.

In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,[10] we held that the
test to determine whether employment is regular or not is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. If the employee has been
performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not
indispensability, of that activity to the business.

In the instant case, it is undisputed that the company was engaged in the business of delivering bills and other mail
matters for and in behalf of their customers, and that Geraldo was engaged as a delivery/messenger man tasked to
deliver bills of the company's clients. Clearly, the company cannot deny the fact that Geraldo was performing
activities necessary or desirable in its usual business or trade for without his services, its fundamental purpose of
delivering bills cannot be accomplished. On this basis alone, the law deems Geraldo as a regular employee of the
company. But even considering that he is not a full time employee as the company insists, the law still deems his
employment as regular due to the fact that he had been performing the activities for more than one year. In fact,
counting the number of years from the time he was engaged by the company on June 20, 1997 up to the time his
services were terminated on August 7, 2011 reveals that he has been delivering mail matters for the company for
more than fourteen (14) years. Without question, this amount of time that is well beyond a decade sufficiently
discharges the requirement of the law. While length of time may not be the controlling test to determine if an
employee is indeed a regular employee, it is vital in establishing if he was hired to perform tasks which are
necessary and indispensable to the usual business or trade of the employer.[11]

The Court, moreover, cannot subscribe to the company's contention that Geraldo is not a regular employee but
merely a piece-rate worker since his salary depends on the number of bills he is able to deliver. In Hacienda
Leddy/Ricardo Gamboa, Jr. v. Villegas,[12] We held that the payment on a piece-rate basis does not negate regular
employment. The term "wage" is broadly defined in Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or commission
basis. Payment by the piece is just a method of compensation and does not define the essence of the relations.
Thus, the fact that Geraldo is paid on the basis of his productivity does not render his employment as contractual.
It must be remembered that notwithstanding any agreements to the contrary, what determines whether a certain
employment is regular is not the will and word of the employer, to which the desperate worker often accedes,
much less the procedure of hiring the employee or the manner of paying his salary. It is the nature of the activities
performed in relation to the particular business or trades considering all circumstances, and in some cases the
length of time of its performance and its continued existence.[13]

Having established that Geraldo was a regular employee of the company, it becomes incumbent upon the latter to
show that he was dismissed in accordance with the requirements of the law for the rule is long and well settled
that, in illegal dismissal cases like the one at bench, the burden of proof is upon the employer to prove that the
employee's termination from service is for a just and valid cause. [14] Here, the company claims that Geraldo was
not illegally dismissed for he was the one who abandoned his job when he no longer reported for work. The Court,
however, finds that apart from this self-serving allegation, the company failed to adduce proof of overt acts on the
part of Geraldo showing his intention to abandon his work. Time and again, the Court has held that to justify a
finding of abandonment of work, there must be proof of a deliberate and unjustified refusal on the part of an
employee to resume his employment. The burden of proof is on the employer to show an unequivocal intent on the
part of the employee to discontinue employment. Mere absence is not sufficient. It must be accompanied by
manifest acts unerringly pointing to the fact that the employee simply does not want to work anymore. Hence, it
bears emphasis that the fact that Geraldo filed the instant illegal dismissal complaint negates any intention on his
part to sever his employment with the company. The records reveal that he even sought permission to return to
work but was rejected by the company. Contrary to the company's assertion, moreover, the mere lapse of seven (7)
months from Geraldo's alleged dismissal to the filing of his complaint is not a material indication of abandonment,
considering that the complaint was filed within a reasonable period during the three (3)-year period provided under
Article 291 of the Labor Code.[15]

Apart from the absence of just and valid cause in the termination of Geraldo's employment, the Court rules that his
dismissal was also done without the observance of due process required by law. It has long been settled in labor
law that in terminating the services of an employee, the employer must first furnish the employee with two (2)
written notices: (a) notice which apprises the employee of the particular acts or omissions for which his/her
dismissal is sought; and (b) subsequent notice which informs the employee of the employer's decision to dismiss
him/her.[16] The company in the present case, however, failed to show its compliance with the twin notice rule. In
fact, in its Comment, it even expressly admitted its failure to serve Geraldo with any written notice, merely
insisting that its oral notice should be considered substantial compliance with the law.

In view of the foregoing premises, therefore, the Court is convinced that Geraldo, a regular employee entitled to
security of tenure, was illegally dismissed from his employment due to the failure of the company to comply with
the substantial and procedural requirements of the law. Thus, We sustain the award of the LA and the NLRC of
separation pay, in lieu of reinstatement, attorney's fees, as well as Geraldo's monetary claims of 13th month pay and
service incentive leave pay in view of the failure of the company to adduce evidence to show that Geraldo has
been paid said benefits.

It must be noted, however, that respondent Cando cannot be held personally and solidarity liable with the company
for the monetary claims of Geraldo. As a general rule, a corporate officer cannot be held liable for acts done in his
official capacity because a corporation, by legal fiction, has a personality separate and distinct from its officers,
stockholders, and members. To pierce this fictional veil, it must be shown that the corporate personality was used
to perpetuate fraud or an illegal act, or to evade an existing obligation, or to confuse a legitimate issue. In illegal
dismissal cases, corporate officers may be held solidarily liable with the corporation if the termination was done
with malice or bad faith. [17] To hold a director or officer personally liable for corporate obligations, two requisites
must concur, to wit: (1) the complaint must allege that the director or officer assented to the patently unlawful acts
of the corporation, or that the director or officer was guilty of gross negligence or bad faith; and (2) there must be
proof that the director or officer acted in bad faith. [18] In the instant case, however, there is no showing that Cando,
as President of the company, was guilty of malice or bad faith in terminating the employment of Geraldo. Thus,
she should not be held personally liable for his monetary claims.

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The assailed Decision
dated August 7, 2014 and Resolution dated September 28, 2015 of the Court of Appeals in CA-G.R. SP No.
131235 are REVERSED and SET ASIDE. The Decision dated May 9, 2013 of the National Labor Relations
Commission is REINSTATED with the MODIFICATION that Lourdes Ner Cando is absolved of any personal
liability as regards the money claims awarded to petitioner.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 225862, December 05, 2018 ]
OLIVER V. VERGARA, PETITIONER, VS. CDM SECURITY AGENCY, INC. AND VILMA PABLO,
RESPONDENTS.

RESOLUTION
A. REYES, JR., J.:

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

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

On March 8, 2013, CDM's Operations Officer caused the personal service of a Memorandum of Disciplinary
Action (Memorandum)[4] upon Vergara, relieving him of his post at the bank and advising him to report to CDM's
office. Vergara allegedly refused to receive the Memorandum.[5]

On March 13, 2013, Vergara filed a Complaint [6] for illegal dismissal, non-remittance of Social Security System
(SSS) contributions and loan payments, and money claims for labor standards benefits against CDM and its
corporate officer Vilma Pablo (collectively, respondents). According to Vergara, when he went to CDM's office on
March 8, 2013, he was asked to make a written explanation and to disclose therein the gun-pointing incident.
Vergara submitted his explanation but refused to admit to aiming a shotgun at Fernandez, because no such incident
occurred. He alleged that because of such refusal, CDM's operations manager verbally terminated him from work.
[7]

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

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

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

RULING OF THE LA

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

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

Further, both the respondents are jointly and severally liable to pay [the] complainant the following:
1. HIS BACKWAGES from March 8, 2013 up to the promulgation of this decision (September 8,
2014), in the amount of ONE HUNDRED SEVENTY FOUR THOUSAND TWO HUNDRED
TWENTY PESOS ([P]174,220.00)
2. 10% ATTORNEY'S FEES in the amount of SEVENTEEN THOUSAND FOUR HUNDRED
TWENTY TWO PESOS ([P]17,422.00); AND
3. All other monetary claims, as well as his claims for damages are hereby dismissed with prejudice
for lack of merit.
SO ORDERED.[16]
RULING OF THE NLRC

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

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

RULING OF THE CA

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

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

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

The CA denied Vergara's motion for reconsideration through the Resolution[23] dated July 7, 2016.
ISSUES:
1. WHETHER THE [CA] GRAVELY ERRED IN AFFIRMING THAT VERGARA WAS NOT
ILLEGALLY DISMISSED FROM EMPLOYMENT
2. WHETHER THE [CA] GRAVELY ERRED WHEN IT UPHELD THE VALIDITY OF THE
QUITCLAIM/ WAIVER[24]
RULING OF THE COURT

The appeal lacks merit.

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

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

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

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

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

SO ORDERED.