2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

VOL. 472, OCTOBER 12, 2005 453

Philippine Long Distance Telephone Company, Inc. vs. Paguio

*
G.R. No. 152689. October 12, 2005.

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC.,

ENRIQUE D. PEREZ, RICARDO R. ZARATE, ISABELO A.
FERIDO, JR. and RODOLFO R. SANTOS, petitioners, vs.
ALFREDO S. PAGUIO, respondent.
*
G.R. No. 154072. October 12, 2005.

ALFREDO S. PAGUIO, petitioner, vs. PHILIPPINE LONG

DISTANCE TELEPHONE COMPANY, INC., ENRIQUE D.
PEREZ, RICARDO R. ZARATE, ISABELO A. FERIDO, JR. and
RODOLFO R. SANTOS, respondents.

Civil Procedure; Actions; It is familiar and fundamental doctrine that

it is not the title of the action but the allegations in the pleading that
determines the nature of the action.—We note from the records that there
has been no change of cause of action from “illegal demotion” to “illegal
transfer.” Illegal demotion is a type of illegal transfer. Moreover, it is
familiar and fundamental doctrine that it is not the title of the action but the
allegations in the pleading that determines the nature of the action.
Labor Law; Labor Relations; Employer Prerogative; It is the
employer’s prerogative, based on its assessment and perception of its
employees’ qualifications, aptitudes, and competence, to deploy its
employees in the various areas of its business operations in order to
ascertain where they will function with maximum benefit to the company.—
Jurisprudence abounds that, except as limited by special laws, an employer
is free to regulate, according to his own discretion and judgment, all aspects
of employment, including the transfer of employees. It is the employer’s
prerogative, based on its assessment and perception of its employees’
qualifications, aptitudes, and competence, to deploy its employees in the
various areas of its business operations in order to ascertain where they will
function with maximum benefit to the company. An employee’s right to
security of tenure does not give him such a vested right in his position as
would

_______________

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 1/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

* FIRST DIVISION.

454

454 SUPREME COURT REPORTS ANNOTATED

Philippine Long Distance Telephone Company, Inc. vs. Paguio

deprive the company of its prerogative to change his assignment or transfer

him where he will be most useful.
Same; Same; Same; While it may be conceded that management is in
the best position to know its operational needs, the exercise of management
prerogative cannot be utilized to circumvent the law and public policy on
labor and social justice.—As correctly pointed out by the Court of Appeals,
there are limits to the management prerogative. While it may be conceded
that management is in the best position to know its operational needs, the
exercise of management prerogative cannot be utilized to circumvent the
law and public policy on labor and social justice. That prerogative accorded
management should not defeat the very purpose for which our labor laws
exist: to balance the conflicting interests of labor and management. By its
very nature, management prerogative must be exercised always with the
principles of fair play and justice. In particular, 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. The employer bears the burden of
proving that the transfer of the employee has complied with the foregoing
test.
Civil Law; Damages; Moral Damages; Moral damages are
recoverable upon sufficient proof of moral suffering, mental anguish, fright
or serious anxiety.—Moral damages are recoverable upon sufficient proof of
moral suffering, mental anguish, fright or serious anxiety. The claimant
should satisfactorily show the existence of the factual basis of damages. In
the present case, though Paguio’s transfer was found unlawful by the
appellate court, our review of the records would show that there is no
factual basis for such an award.
Same; Same; Exemplary Damages; Attorney’s Fees; No exemplary
damages can be awarded in the absence of moral or actual damages—and
where the awards for moral and exemplary damages are eliminated, so must
the award for attorney’s fees.—No exemplary damages can be awarded in
the absence of moral or actual damages. And where the awards for moral
and exemplary damages are eliminated, so must the award for attorney’s
fees.

455

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 2/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

VOL. 472, OCTOBER 12, 2005 455

Philippine Long Distance Telephone Company, Inc. vs. Paguio

PETITION for review on certiorari of a decision of the Court of

Appeals and MOTION FOR RECONSIDERATION of a decision of
the Supreme Court.

The facts are stated in the opinion of the Court.

     Domingo C. Rodriguez for A. Paguio.
     Valdez, Anigan and Associates for Alfredo Paguio.
     Dela Rosa, Tejero, Nograles for PLDT, et al.

QUISUMBING, J.:

This petition for review on certiorari docketed as G.R. No. 152689,

1
assails the Decision dated March 7, 2002 of the Court of Appeals in
CA-G.R. SP No. 61528. It is consolidated with the Motions for
2
Reconsideration of this Court’s Decision dated December 3, 2002
in G.R. No. 154072.
The antecedent facts of the case are as follows:
Petitioner Philippine Long Distance Telephone Company, Inc.
(PLDT) has 27 Exchanges in its Greater Metro Manila (GMM)
Network. Alfredo S. Paguio was the Head of the Garnet Exchange.
In 1994, PLDT assessed the performance of the 27 Exchanges
comprising the GMM Network. Upon receipt of the ratings, Paguio
sent Rodolfo Santos, his immediate supervisor and the Assistant
Vice-President of the GMM East Center, a letter criticizing the
PLDT criteria for performance rating as unfair because they
depended on manpower. He also suggested that the criteria failed to
recognize that exchanges with new plants could easily meet the
objectives of GMM compared to those with old plants. Despite
Paguio’s criticism, Garnet Exchange, the oldest plant in GMM,
obtained the top

_______________

1 Rollo (G.R. No. 152689), pp. 72-87. Penned by Associate Justice Marina L.
Buzon, with Associate Justices Cancio C. Garcia (now a Member of this Court), and
Alicia L. Santos concurring.
2 Rollo (G.R. No. 154072), pp. 288-301.

456

456 SUPREME COURT REPORTS ANNOTATED

Philippine Long Distance Telephone Company, Inc. vs. Paguio

rating in the GMM. Nevertheless, Paguio reiterated his letter to

Santos and objected to the performance rating as it was based only
www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 3/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

on the attainment of objectives, without considering other relevant

factors.
In June 1996, PLDT rebalanced the manpower of the East Center.
Paguio wrote Santos and requested reconsideration of the manpower
rebalancing, claiming it was unfair to Garnet Exchange because as
the oldest exchange in the East Center, it was disallowed to use
contractors for new installations and was not made beneficiary of the
cut-over bonus. After Santos denied his request, Paguio elevated the
matter to respondent Isabelo Ferido, Jr., the First Vice-President-
GMM Network Services.
On January 17, 1997, Paguio was reassigned as Head for Special
Assignment at the Office of the GMM East Center and asked to turn
over his functions as Garnet Exchange Head to Tessie Go. Believing
that his transfer was a disciplinary action, Paguio requested Ferido
for a formal hearing of the charges against him and asked that his
reassignment be deferred. He also filed a complaint against Santos
for grave abuse of authority and manipulation of the East Center
performance. As no action was taken by Ferido, Paguio elevated the
matter to Enrique D. Perez, the Senior Executive Vice-President and
Chief Operating Officer of PLDT, who advised him to await the
resolution of his complaint.
Consequently, Ferido sent Paguio an inter-office memo stating
that he found Paguio’s reassignment in order as it was based on the
finding that Paguio was not a team player and cannot accept
decisions of management, which is short of insubordination. Ferido
advised Paguio to transfer to any group in the company that may
avail of his services. Likewise, Perez, thru an inter-office memo,
informed Paguio that his transfer was not in the nature of a
disciplinary action that required investigation and that he agreed
with the reasons of the transfer.

457

VOL. 472, OCTOBER 12, 2005 457

Philippine Long Distance Telephone Company, Inc. vs. Paguio

Aggrieved, Paguio filed, before the Regional Arbitration Branch of

the National Labor Relations Commission (NLRC), a complaint for
illegal dismissal with prayer for reinstatement and damages. He later
amended his complaint to illegal demotion with prayer for reversion
to old position, damages and attorney’s fees. On November 27,
1998, the Labor Arbiter upheld the validity of Paguio’s transfer and
3
dismissed the complaint.
Paguio appealed to the NLRC, which reversed the Labor
Arbiter’s decision. The NLRC found the transfer unlawful, firstly,
because Paguio’s comments were done in good faith to help his team
see their strong and weak points. According to the NLRC, this
showed that he strove to improve his team and was, indeed, a team
www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 4/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

player. The NLRC noted that the company’s manual emphasized the
importance of communication and what Paguio did was merely to
ventilate his opinions and observations. Secondly, Paguio’s transfer
4
involved a diminution of his salary, benefits and other privileges.
PLDT moved for reconsideration but the same was denied by the
5
NLRC. Consequently, PLDT filed a petition for certiorari with the
Court of Appeals. The appellate court affirmed the decision of the
NLRC but deleted the monetary award representing the 16%
6
monthly salary increase.
PLDT appealed directly to this Court. Its petition was docketed
as G.R. No. 152689.
On the other hand, Paguio sought
7
for partial reconsideration.
Upon the appellate court’s denial of his motion for reconsideration,
Paguio elevated the case to this Court where it was docketed as G.R.
No. 154072. On December 3, 2002, the Court rendered judgment in
G.R. No. 154072 and held that

_______________

3 Id., at pp. 103-116.

4 Id., at pp. 147-148.
5 Id., at pp. 151-153.
6 Id., at p. 59.
7 Id., at pp. 60-61.

458

458 SUPREME COURT REPORTS ANNOTATED

Philippine Long Distance Telephone Company, Inc. vs. Paguio

Paguio was not entitled to the monetary award representing the 16%
monthly salary increase. However, the Court awarded him moral and
8
exemplary damages and attorney’s fees.
Both Paguio and PLDT sought reconsideration. On February 26,
2003, the Court ordered the consolidation of G.R. No. 152689 and
9
the motions for reconsideration in G.R. No. 154072.
In G.R. No. 152689, PLDT imputes the following errors to the
appellate court:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

ERROR IN AFFIRMING THE NLRC’S DECISION AND RESOLUTION
BY RULING THAT THE TRANSFER OR RE-ASSIGNMENT OF
PRIVATE RESPONDENT PAGUIO WAS UNLAWFUL AND ILLEGAL.
THE HONORABLE COURT OF APPEALS’ FINDING ON
UNLAWFULNESS OF PAGUIO’S TRANSFER OR REASSIGNMENT
CONSTITUTES A DRASTIC DEPARTURE OF THE INSTANCES
CONSIDERED TO CONSTITUTE AN ILLEGAL TRANSFER AS

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 5/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

RULED IN SETTLED JURISPRUDENCE INVOLVING SIMILAR

CASES.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
CONSIDERING PETITIONERS’ ACT OF CHANGING THE PRIVATE
RESPONDENT’S ASSIGNMENT ON LEGITIMATE GROUNDS AS
TANTAMOUNT TO AN ILLEGAL TRANSFER.
THE HONORABLE COURT OF APPEALS CONTRADICTED THE
SETTLED JURISPRUDENCE ON THE MATTER WHEN IT ORDERED
10
THE REINSTATEMENT OF PAGUIO.

In brief, the petitioner asks this Court to resolve now the legality of
Paguio’s transfer.
PLDT contends that the appellate court erred in lending more
weight to the factual findings of the NLRC over those of

_______________

8 Id., at pp. 288-301.

9 Id., at p. 447.
10 Rollo (G.R. No. 152689), pp. 44, 53, 59, 62.

459

VOL. 472, OCTOBER 12, 2005 459

Philippine Long Distance Telephone Company, Inc. vs. Paguio

the Labor Arbiter without stating its basis. Moreover, PLDT alleges
that the NLRC ruling would allow a change of cause of action since
the complaint alleged “illegal demotion” while the decision involved
“illegal transfer.” PLDT asserts that the reassignment of Paguio was
not a demotion because it was merely a transfer to a position of
equivalent rank and salary. According to PLDT, transfer, as a rule is
allowed by law unless it is vitiated by improper motive or is used as
a disguise to remove or punish the employee. It maintains that the
appellate court failed to ascribe any illicit or improper motive behind
the transfer of Paguio. Lastly, PLDT claims that the reinstatement of
Paguio is no longer possible as his relationship with the company is
already strained and that his position no longer exists due to a
company-wide reorganization.
Paguio argues that his transfer was a demotion since he was
assigned to a functionless position with neither office nor staff and
deprived of the opportunity to be promoted as he would have no
performance to speak of in his new post.
Prefatorily, we note from the records that there has been no
change of cause of action from “illegal demotion” to “illegal
transfer.” Illegal demotion is a type of illegal transfer. Moreover, it is
familiar and fundamental doctrine that it is not the title of the action

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 6/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

but the allegations in the pleading that determines the nature of the
11
action.
Now, on the crux of the matter, jurisprudence abounds that,
except as limited by special laws, an employer is free to regulate,
according to his own discretion and judgment, all aspects of
12
employment, including the transfer of employees. It is the
employer’s prerogative, based on its assessment and perception of
its employees’ qualifications, aptitudes, and competence, to deploy
its employees in the various areas of its

_______________

11 See Almuete v. Andres, G.R. No. 122276, 20 November 2001, 369 SCRA 619,
627.
12 Habana v. National Labor Relations Commission, G.R. No. 121486, 16
November 1998, 298 SCRA 537, 557.

460

460 SUPREME COURT REPORTS ANNOTATED

Philippine Long Distance Telephone Company, Inc. vs. Paguio

business operations in order to ascertain where they will function

with maximum benefit to the company. An employee’s right to
security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change
13
his assignment or transfer him where he will be most useful.
Nonetheless, as correctly pointed out by the Court of Appeals,
there are limits to the management prerogative. While it may be
conceded that management is in the best position to know its
operational needs, the exercise of management prerogative cannot be
utilized to circumvent the law and public policy on labor and social
justice. That prerogative accorded management should not defeat the
very purpose for which our labor laws exist: to balance the
conflicting interests of labor and management. By its very nature,
management prerogative must be exercised always with the
14
principles of fair play and justice. In particular, 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
15
or a diminution of his salaries, privileges and other benefits. The
employer bears the burden of proving that the transfer of the
16
employee has complied with the foregoing test.
In the present case, we see no credible reason for Paguio’s
transfer except his criticisms of the company’s performance
evaluation methods. Based on the undisputed facts, Garnet
Exchange was doing well and excelled in the performance rating. In
the same way, Paguio’s performance was consis-

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 7/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

_______________

13 Isabelo v. National Labor Relations Commission (Fifth Division), G.R. Nos.

113366-68, 24 July 1997, 276 SCRA 141, 146.
14 Philippine Airlines, Inc. v. Pascua, G.R. No. 143258, 15 August 2003, 409
SCRA 195, 203.
15 Mendoza v. Rural Bank of Lucban, G.R. No. 155421, 7 July 2004, 433 SCRA
756, 766; Blue Dairy Corporation v. National Labor Relations Commission, G.R. No.
129843, 14 September 1999, 314 SCRA 401, 408.
16 Mendoza v. Rural Bank of Lucban, Id., at p. 767.

461

VOL. 472, OCTOBER 12, 2005 461

Philippine Long Distance Telephone Company, Inc. vs. Paguio

tently rated as outstanding. There was also no proof that Paguio

refused to comply with any management policy. Patently, his
transfer could not be due to poor performance. Neither was it
because he was needed in the new post for the new assignment was
functionless and it was nothing but a title. Paguio’s transfer could
only be caused by the management’s negative reception of his
comments. It is prejudicial to Paguio because it left him out for a
possible promotion as he was assigned to a functionless position
with neither office nor staff.
In the motion for reconsideration in G.R. No. 154072, Paguio
maintains that it is speculation on the part of the Court to rule that he
would not maintain his outstanding performance. Thus, he prays for
a monthly salary increase.
In its motion for reconsideration, PLDT points out that one
reason for the award of damages and attorney’s fees was the Court’s
mistaken belief that the company failed to appeal the Court of
Appeals’ decision. However, PLDT contends that there was a
pending appeal of the Court of Appeals’ finding of illegal transfer,
particularly G.R. No. 152689.
We reiterate our decision in G.R. No. 154072 that awarding a
monthly salary increase would be merely based on speculation. A
salary increase is conditioned on both the outstanding performance
of the employee and high returns for the company. It is not a
demandable right but a benefit given by management, subject to the
attainment of specific goals. Paguio’s future performance could not
be guaranteed to be excellent, with high returns to the company,
simply because in the past he did excel. That is the basic reason for a
periodic performance rating.
Now, moral damages are recoverable upon sufficient proof of
moral suffering, mental anguish, fright or serious anxiety. The
claimant should satisfactorily show the existence of the

462
www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 8/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

462 SUPREME COURT REPORTS ANNOTATED

Philippine Long Distance Telephone Company, Inc. vs. Paguio

17
factual basis of damages. In the present case, though Paguio’s
transfer was found unlawful by the appellate court, our review of the
records would show that there is no factual basis for such an award.
No exemplary damages can be awarded in the absence of moral
or actual damages. And where the awards for moral and exemplary
18
damages are eliminated, so must the award for attorney’s fees.
WHEREFORE, the petition in G.R. No. 152689 is DENIED. The
Decision dated March 7, 2002 of the Court of Appeals in CA-G.R.
SP No. 61528 is AFFIRMED. The motion for reconsideration by
Alfredo Paguio of the Decision dated December 3, 2002 in G.R. No.
154072 is DENIED. The motion for reconsideration of Philippine
Long Distance Telephone Company, Inc. is GRANTED IN PART by
deleting the award in the Decision dated December 3, 2002, for
moral and exemplary damages and attorney’s fees.
No pronouncement as to costs.
SO ORDERED.

     Davide, Jr. (C.J., Chairman), Ynares-Santiago, Carpio and

Azcuna, JJ., concur.

Petition denied, judgment affirmed. Motion for reconsideration

denied.

Note.—It is the employer’s prerogative to prescribe reasonable

rules and regulations necessary or proper for the conduct of its
business or concern. (Gustilo vs. Wyeth Philippines, Inc., 440 SCRA
67 [2004])

——o0o——

_______________

17 See Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 127473, 8 December
2003, 417 SCRA 196, 212.
18 Cathay Pacific Airways, Ltd. v. Sps. Vazquez, G.R. No. 150843, 14 March 2003,
447 Phil. 306, 324; 399 SCRA 207, 223.

463

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 9/10
2/11/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 472

© Copyright 2021 Central Book Supply, Inc. All rights reserved.

www.central.com.ph/sfsreader/session/00000177919e1b1914dbb228003600fb002c009e/t/?o=False 10/10