GENERAL PRINCIPLES

 Batong Buhay Gold Mines, Inc. vs De la Serna G.R. No. 86963, August 6, 1999, 312
SCRA 22
 Rivera vs. Genesis Transport Service Inc. G.R. No. 215568, Aug3, 2015, 764 SCRA 653
 Buena Obra vs. Social Security System G.R. No.147745 April 9, 2003, 401 SCRA 206
 Charlie Hubilla et al. vs. HSY Marketing Ltd. G.R. No. 207354, January 10, 2018
 Callanta vs. Carnation Philippines NLRC G.R. No. L-70615 October 28, 1986
 Calalang vs. A.D. Williams et al, G.R. No. 47800, December 2, 1940
 Visayan Electric Company Employees Union-ALU-TUCP and Casmero Mahilum vs.
Visayan Electric Company Inc. G.R. 205575 July 22, 2015, 763 SCRA 566
 Unilever Philippines Inc. vs. Maria Ruby Rivera, G.R. No. 201701, June 3, 2013, 697
SCRA 136
 Reynaldo Hayan Moya vs. First Solid Rubber Industries Inc. G.R. No. 184011,
September 18, 2013, 706 SCRA 58
 Philippine Air Lines vs. Catindoy G.R. No. 125792, November 9, 1998
 Barayoga vs. Asset Privatization Trust G.R. No. 160073 Oct 24, 2005 473 SCRA 690
 Rolando De Roca vs. Eduardo Dabuyan G.R. No. 215281 March 5, 2018
 SME Bank Inc. vs. De Guzman, G.R. No. 184517 October 8, 2013m 707 SCRA 35
 Cosmic Lumber vs. Court of Appeals G.R. No. 114311 November 29, 1996
 Sunace International vs. NLRC G.R. No. 161757 January 25, 2006
 Noblejas vs Italian Academy Phils Inc. G.R. No. 207888, June 9, 2014, 725 SCRA 570
 Basay vs. Hacienda Consolation G.R. No. 175532, April 19, 2010 618 SCRA 422

MANAGEMENT PREROGATIVE
 Imasen Philippine Manufacturing Corporation vs. Ramonchito Alcon and Joann Papa,
G.R. No. 194884 October 22, 2014, 739 SCRA 186
 Marsman vs. Rodil Sta Maria G.R. No. 194765 April 23, 2018
 Peckson vs. Robinsons’ Supermarket Corporation G.R. No. 198534 July 3, 2013, 700
SCRA 668, Bear Wear Garments vs. De Lemos 687 SCRA 355
 Pfizer Inc. vs. Geraldin Velasco G.R. No. 177467, March 9, 2011
 Mojar vs. Agro Commercial Security Service Agency Inc. G.R. No. 187188 June 27,
2012
 Manila Jockey Club Employees Labor Union vs. Manila Jockey Club Inc. G.R. No.
167760, March 07, 2007
 San Miguel Corporation vs. Layoc Jr G.R. No. 149640 October 19, 2007 537 SCRA 77
 Sime Darby Pilipinas Inc. vs NLRC G.R. No. 119205 April 15, 1998
 Coca Cola Bottlers vs. Iloilo Cocal Cola Plant Employees Labor Union G.R. No. 195297
December 5, 2018
 Eastern Telecommunication Philippines Inc. vs. Eastern Telecom Employees Union G.R.
185665 February 8, 2012 655 scra 516
G.R. No. 86963           August 6, 1999

BATONG BUHAY GOLD MINES, INC., petitioner,

vs.
HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO
MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER COMPLAINANTS* IN CASE
NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER HOLDINGS PTY.
LTD., respondents.

RESOLUTION

PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a Prayer for
Preliminary Injunction and or Restraining Order brought by Batong Buhay Gold Mines, Inc. (BBGMI
for brevity) to annul three orders issued by respondent Undersecretary Dionisio dela Serna of the
Department of Labor and Employment, dated September 16, 1988, December 14, 1988 and
February 13, 1989, respectively.

The Order of September 16, 1988 stated the facts as follows:

. . . on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O.

Reyes and 1,247 others filed a complaint against Batong Buhay Gold Mines, Inc. for: (1)
Non-payment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984,
inclusive, under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for
the period 16 June 1984 to 5 October 1986, inclusive under Wage Order No. 5; (3) Non-
payment of their salaries for the period 16 March 1986 to the present; (4) Non-payment of
their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick
leave, and the compensatory leaves of mine site employees; and (6) Non-payment of the
salaries of employees who were placed on forced leaves since November, 1985 to the
present, if this is not feasible, the affected employees be awarded corresponding separation
pay.

On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.

On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.

On 27 February 1987, the complainants filed a Motion for the issuance of an inspection
authority.

xxx     xxx     xxx

On 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the
following recommendations:

WHEREFORE, premises considered this case is hereby submitted with the

recommendation that an Order of Compliance be issued directing respondent Batong
Buhay Gold Mines Inc. to pay complainants' Elsie Rosalina Ty, et al. FOUR MILLION
EIGHT HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-SIX
PESOS AND FORTY CENTAVOS (P4,818,746.40) by way of unpaid salaries of
workers from March 16, 1987 to present, unpaid and ECOLA differentials under
Wage Order Nos. 2 and 5 unpaid 13th months pay for 1985 and 1986, and unpaid
(sic) vacation/sick/compensatory leave benefits.

On 31 July 1987, the Regional Director1 adopted the recommendation of the LSWOs and
issued an order directing the respondent to pay the complainants the sum of P4,818,746.40
representing their unpaid 13th month pay for 1985 and 1986, wage and ECOLA differentials
under wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to present and
vacation/sick leave benefits for 1984, 1985 and 1986.
 On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of
execution and appointment of special sheriff.

xxx     xxx     xxx

On 21 August 1987, the Regional Director issued an Order directing the respondent to put
up a cash or surety bond otherwise a writ of execution will be issued.

xxx     xxx     xxx

When the respondent failed to post a cash/surety bond, and upon motion for the issuance of
a writ of execution by the complainants, the Regional Director, on 14 September 1987 issued
a writ of execution appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing
him to do the following:

You are to collect the above-stated amount from the respondent and deposit the
same with Cashier of this Office for appropriate disposition to herein complainants
under the supervision of the office of the Director. Otherwise, you are to execute this
writ by attaching the goods and chattels of the respondent not exempt from execution
or in case of insufficiency thereof against the real or immovable property of the
respondent.

The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and
seized three (3) units of Peterbuilt trucks and then sold the same by public auction. Various
materials and motor vehicles were also seized on different dates and sold at public auction
by said sheriff.

xxx     xxx     xxx

On 11 December 1987, the respondent finally posted a supersedeas bond which prompted
this Office to issue an Order dated 26 January 1988, restraining the complainants and sheriff
Ramos from enforcing the writ of execution. . . .2

BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent
Undersecretary Dionisio de la Serna, contending that the Regional Director had no jurisdiction over
the case.

On September 16, 1988, the public respondent issued the first challenged Order upholding the
jurisdiction of the Regional Director and annulling all the auction sales conducted by Special Sheriff
John Ramos. The decretal portion of the said Order ruled:

WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital
Region, is hereby AFFIRMED. Accordingly, the writ of execution dated 14 September 1987
issued in connection thereto is hereby declared VALID.

However, the public auction sales conducted by special sheriff John Ramos pursuant to the
writ of execution dated 14 September 1987 on 24 September 2, 20, 23 and 29 October 1987
are all hereby declared NULL AND VOID. Furthermore, the personal properties sold and the
proceeds thereof which have been turned over to the complainants thru their legal counsel
are hereby ordered returned to the custody of the respondent and the buyers respectively.

SO ORDERED.3

On October 13, 1988, a Motion for Reconsideration of the aforesaid order was presented by the
complainants in Case No. NCR-LSED-CI-2047-87 but the same was denied.

On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting attention to a
Deed of Sale executed in its favor by Fidel Bermudez, the highest bidder in the auction sale
conducted on October 29, 1987.
On December 2, 1988, another Motion for Intervention was filed, this time by Salter Holdings Pty.,
Ltd., claiming that MFT Corporation assigned its rights over the subject properties in favor of movant
as evidenced by a Sales Agreement between MFT Corp. and Salter Holdings Pty., Ltd.

The two Motions for intervention were granted in the second questioned order dated December 14,
1988, directing the exclusion from annulment of the properties sold at the October 29, 1987 auction
sale and claimed by the intervenors, including one cluster of junk mining machineries, equipment
and supplies, and disposing thus:

WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors
MFT and Salter are hereby granted. Correspondingly, this Office's Order dated 16
September 1988 is hereby modified to exclude from annulment "the one lot of junk mining
machineries, equipment and supplies as-is-where-is" sold by Sheriff John C. Ramos in the
auction sale of 29 October 1987. 1âwphi1.nêt

xxx     xxx     xxx

Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and the respondent
employees but to no avail. The same were likewise denied in the third assailed Order dated
February 13, 1989.

Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to lack or excess
of jurisdiction to the public respondent in issuing the three Orders under attack.

The questioned Orders aforementioned have given rise to the issues: (1) whether the Regional
Director has jurisdiction over the complaint filed by the employees of BBGMI; and (2) whether or not
the auction sales conducted by the said Special Sheriff are valid.

Anent the first issue, an affirmative ruling is indicated. The Regional Director has jurisdiction over the
BBGMI employees who are the complainants in Case Number NCR-LSED-CI-2047-87.

The subject labor standards case of the petition arose from the visitorial and enforcement powers by
the Regional Director of Department of Labor and Employment (DOLE). Labor standards refers to
the minimum requirements prescribed by existing laws, rules and regulations relating to wages,
hours of work, cost of living allowance and other monetary and welfare benefits, including
occupational, safety and health standards.4 Labor standards cases are governed by Article 128(b) of
the Labor Code.

The pivot of inquiry here is whether the Regional Director has jurisdiction over subject labor
standards case.

As can be gleaned from the records on hand, subject labor standards case was filed on February 5,
1987 at which time Article 128 (b) read as follows 5:

Art. 128 (b) Visitorial and enforcement powers —

(b) The Minister of Labor or his duly authorized representative shall have the power
to order and administer, after due notice and hearing, compliance with the labor
standards provisions of this Code based on the findings of labor regulation officers or
industrial safety engineers made in the course of inspection, and to issue writs of
execution to the appropriate authority for the enforcement of their order, except in
cases where the employer contests the findings of the labor regulations officers and
raises issues which cannot be resolved without considering evidentiary matters that
are not verifiable in the ordinary course of inspection.

Petitioner theorizes that the Regional Director is without jurisdiction over subject case, placing
reliance on the ruling in Zambales Base Inc. vs. Minister of Labor6 and Oreshoot Mining Company
vs. Arellano.7

Respondent Undersecretary Dionisio C. Dela Serna, on the other hand, upheld the jurisdiction of
Regional Director Luna C. Piezas by relying on E.O. 111, to quote:
 Considering therefore that there still exists an employer-employee relationship between the
parties; that the case involves violations of the labor standard provisions of the labor code;
that the issues therein could be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection; and, if only to give meaning and not render
nugatory and meaningless the visitorial and enforcement powers of the Secretary of Labor
and Employment as provided by Article 128(b) of the Labor Code, as amended by Section 2
of Executive Order No. 111 which states:

The provisions of article 217 of this code to the contrary notwithstanding and in cases
where the relationship of employer-employee still exists, the Minister of Labor and
Employment or his duly authorized representative shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards
provision of this Code based on the findings of the findings of labor regulation officers
or industrial safety engineers made in the course of inspection, and to issue writs of
execution to the appropriate authority for the enforcement of their order, except in
cases where the employer contests the findings of the labor regulations officers and
raises issues which cannot be resolved without considering evidentiary matters that
are not verifiable in the ordinary course of inspection.

We agree with the complainants that the regional office a quo has jurisdiction to hear and
decide the instant labor standard case.

x x x           x x x           x x x8

The Court agrees with the public respondent. In the case of Maternity Children's Hospital
vs. Secretary of Labor (174 SCRA 632), the Court in upholding the jurisdiction of the Regional
Director over the complaint on underpayment of wages and ECOLAs filed on May 23, 1986, by the
employees of Maternity Children's Hospital, held:

This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as
amended by E.O. 111.

xxx     xxx     xxx

Prior to the promulgation of E.O. 111 on December 24, 1986, the Regional Director's
authority over money claims was unclear. The complaint in the present case was filed on
May 23, 1986 when E.O. 111 was not yet in effect. . . .

We believe, however, that even in the absence of E.O. 111, Regional Directors already had
enforcement powers over money claims, effective under P.D. 850, issued on December 16,
1975, which transferred labor standards cases from the arbitration system to the
enforcement system.

In the aforecited case, the Court in reinforcing its conclusion that Regional Director has jurisdiction
over labor standards cases, treated E.O. 111 as a curative statute, ruling as follows:

E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation
of the Secretary of Labor's decision upholding private respondents' salary differentials and
ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers
of the Regional Director (Article 128(b)) by said E.O. 111 reflects the intention enunciated in
Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolve uncontested
money claims in cases where an employer-employee relationship still exists. This intention
must be given weight and entitled to great respect. As held in Progressive Worker's
Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:

. . . The interpretation by officers of laws which are entrusted to their administration is

entitled to great respect. We see no reason to detract from this rudimentary rule in
administrative law, particularly when later events have proved said interpretation to
be in accord with the legislative intent. . .

The proceedings before the Regional Director must, perforce be upheld on the basis of
Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order
"to be considered in the nature of a curative statute with retrospective application."
 (Progressive Workers' Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A.
Martinez, et al. G.R. No. I-47629, may 28, 1979, 90 SCRA 331).

With regard to the petitioner's reliance on the cases of Zambales Base, Inc. vs. Minister of

Labor (supra) and Oreshoot Mining Company vs. Arellano, (supra), this is misplaced. In the case of
Zambales Base, Inc., the court has already ruled that:

. . ., in view of the promulgation of Executive Order No. 111, Zambales Base Metals

vs. Minister of Labor is no longer good law. (Emphasis supplied) Executive Order No. 111 is
in the character of a curative law, that is to say, it was intended to remedy a defect that, in
the opinion of the Legislature (the incumbent Chief Executive in this case, in the exercise of
her lawmaking powers under the Freedom Constitution) had attached to the provision under
the amendment.

x x x           x x x           x x x9

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of illegally
dismissed employees. As the employer-employee relationship has already ceased and
reinstatement is sought, jurisdiction necessarily falls under the Labor Arbiter. Petitioner should not
have used this to support its theory as this petition involves labor standards cases and not monetary
claims of illegally dismissed employees.

The Court would have ruled differently had the petitioner shown that subject labor standards case is
within the purview of the exception clause in Article 128 (b) of the Labor Code. Said provision
requires the concurrence of the following elements in order to divest the Regional Director or his
representatives of jurisdiction, to wit: (a) that the petitioner (employer) contests the findings of the
labor regulations officer and raises issues thereon; (b) that in order to resolve such issues, there is a
need to examine evidentiary matters; and (c) that such matters are not verifiable in the normal
course of inspection.10

Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds. In
fact, in its Motion for Reconsideration of the Order of the Regional Director dated August 20, 1987,
the grounds which petitioner raised were the following:

1. This Honorable Office has no jurisdiction to hear this case and its Order of 31 October
1987 is therefore null and void;

2. Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent,
the complaint should have been directed also against the Asset Privatization Trust.

In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent Omnibus
Motion to declare void the Writ of Execution for lack of jurisdiction and the Oppositions it filed on the
Motions for Intervention questioning the legal personality of the intervenors, questions as to the
amounts complained of by the employees or absence of violation of labor standards laws were never
raised. Raising lack of jurisdiction in a Motion to Dismiss is not the contest contemplated by the
exception clause under Article 128(b) of the Labor Code which would take the case out of the
jurisdiction of the Regional Director and bring it before the Labor Arbiter.

The only instance when there was a semblance of raising the aforestated grounds, was when they
filed an Appeal Memorandum dated January 14, 1988, before the respondent undersecretary. In the
said Appeal Memorandum, petitioner comes up with the defense that the Regional Director was
without jurisdiction, as employer-employee relationship was absent, since petitioner had ceased
doing business since 1985.

Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection
Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other related
documents. The officers of the petitioner alleged that the company is presently under receivership of
the Development Bank of the Philippines.11 In lieu of this, the Regional Director had ordered that a
summary investigation be conducted.12 Despite proper notices, the petitioner refused to appear
before the Regional Director. To give it another chance, an order to file its position paper was issued
to substantiate its defenses. Notwithstanding all these opportunities to be heard, petitioner chose not
to avail of such.
As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266 SCRA 111):

. . . Under Art. 128(a) of the Labor Code, the Secretary of Labor of his duly authorized
representatives, such as the Regional Directors, has visitorial powers which authorize him to
inspect the records and premises of an employer at any time of the day or night whenever
work is being undertaken therein, to question any employee and investigate any fact,
condition or matter, and to determine violations of labor laws, wage orders or rules and
regulations. If the employer refuses to attend the inspection or conference or to submit any
record, such as payrolls and daily time records, he will be deemed to have waived his right to
present evidence. (emphasis supplied)

Petitioner's refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the
premises of their head office in Makati and the failure to file their position paper is equivalent to a
waiver of its right to contest the claims of the employees. This Court had occasion to hold there is no
violation of due process where the Regional Director merely required the submission of position
papers and resolved the case summarily thereafter. 13 Furthermore, the issuance of the compliance
order was well within the jurisdiction of the Regional Director, as Section 14 of the Rules on the
Disposition of Labor Standards Cases provides:

Sec. 14. Failure to Appear — Where the employer or the complainant fails or refuses to
appear during the investigation, despite proper notice, for two (2) consecutive hearings
without justifiable reasons, the hearing officer may recommend to the Regional Director the
issuance of a compliance order based on the evidence at hand or an order of dismissal of
the complaint as the case may be. (Emphasis supplied)

It bears stressing that this petition involves a labor standards case and it is in keeping with the law
that "the worker need not litigate to get what legally belongs to him, for the whole enforcement
machinery of the Department of Labor exists to insure its expeditious delivery to him free of
charge."14

Thus, their claim of closure for business, among other things, are factual issues which cannot be
brought here for the first time. As petitioner refused to participate in the proceedings below where it
could have ventilated the appropriate defenses, to do so in this petition is unavailing. The reason for
this is that factual issues are not proper subjects of a special civil action for certiorari to the Supreme
Court.15

It is therefore abundantly clear that at the time of the filing of the claims of petitioner's employees,
the Regional Director was already exercising visitorial and enforcement powers.

Regional Director's visitorial and enforcement powers under Art. 128 (b) has undergone series of
amendments which the Court feels to be worth mentioning.

Confusion was engendered by the promulgation of the decision in the case of Servando's
Inc. vs. Secretary of Labor and Employment and the Regional Director, Region VI, Department of
Labor and Employment.16 In the said case, the Regional Director took cognizance of the labor
standards cases of the employees of Servando's Inc., but this Court held that:

In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus Engineering

Corp. vs. Sec. Of labor applying E.O. 111 the Court recognized the concurrent jurisdiction of
the Secretary of labor (or Regional Directors) and the labor Arbiters to pass on employees
money claims, including those cases which the labor Arbiters had previously exercised
jurisdiction. However, in a subsequent modificatory resolution in the Briad Agro Case, dated
9 November 1989, the Court modified its original decision in view of the enactment of RA
6715, and upheld the power of the Regional Directors to adjudicate money claims subject to
the conditions set forth in Section 2 of said law (RA 6715).

The power then of the Regional Director (under the present state of law) to adjudicate
employees money claims is subject to the concurrence of all the requisites provided under
Sec. 2 of RA 6715, to wit:

(a) the claim is represented by an employer or person employed in domestic or

household service, or househelper;
 (b) the claim arises from employer-employee relationship;

(c) the claimant does not seek reinstatement; and

(d) the aggregate money claim of each employee or househelper does not exceed
P5,000.

x x x           x x x           x x x17

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA 6715 as to
include labor standards cases under Article 128 (b) and no longer limited to ordinary monetary
claims under Article 129.

In fact, in the Motion for Reconsideration 18 presented by the private respondents in the Servando
case, the court applied more squarely the P5,000 limit to the visitorial and enforcement power of the
Regional Director, to wit:

To construe the visitorial power of the Secretary of Labor to order and enforce compliance
with labor laws as including the power to hear and decide cases involving employee's claims
for wages, arising from employer-employee relations, even if the amount of said claims
exceed P5,000 for each employee, would, in our considered opinion, emasculate and render
meaningless, if not useless, the provisions of Art. 217 (a) and (6) and Article 129 of the Labor
Code which, as above-pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear
and decide such employees' claims, regardless of amount, can be heard and determined by
the Secretary of Labor his visitorial power. This does not, however, appear to be the
legislative intent.

But prevailing law and jurisprudence rendered the Servando ruling inapplicable. In the recent case
of Francisco Guico, Jr. versus The Honorable Secretary of Labor & Employment Leonardo
A. Quisumbing, GR # 131750, promulgated on November 16, 1998, this Court upheld the jurisdiction
of the Regional Director notwithstanding the fact that the amounts awarded exceeded P5,000.

Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor Secretary
and his representatives reads:

Art. 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary
of Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code and
other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly
authorized representative shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the
labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.

x x x           x x x           x x x(emphasis supplied)

The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the
Regional Director has jurisdiction over the present labor standards case.

Well-settled is the rule that jurisdiction over the subject matter is determined by the law in force when
the action was commenced, unless a subsequent statute provides for its retroactive application, as
when it is a curative legislation. 19

Curative statutes are intended to supply defects, abridge superfluities in existing laws and curb
certain evils. They are intended to enable persons to carry into effect that which they have designed
and intended, but has failed of expected legal consequence by reason of some statutory disability or
irregularity in their own action. They make valid that which, before the enactment of the statute, was
invalid.20

In arriving at this conclusion, the case of Briad Agro Development vs. De La Cerna21 comes to the
fore. In the said case, RA 6115 was held to be a curative statute. There, the Court ruled that RA
6715 is deemed a curative statute and should be applied to pending cases. The rationale of the
ruling of the Court was that prior to RA 6715, Article 217 as amended by E.O. 111, created a
scenario where the Labor Arbiter and the Regional Director of DOLE had overlapping jurisdiction
over money claims. Such a situation was viewed as a defect in the law so that when RA 6715 was
passed, it was treated or interpreted by the Court as a rectification of the infirmity of the law, and
therefore curative in nature, with retroactive application.

Parenthetically, the same rationale applies in treating RA 7730 as a curative statute. Explicit in its
title22 is the legislative intent to rectify the error brought about by this Court's ruling that RA 6715
covers even labor standards cases where the amounts to be awarded by the Regional Director
exceed P5,000 as provided for under RA 6715. Congressional records relative to Republic Act 7730
reveal that, "this bill seeks to do away with the jurisdictional limitations imposed thru said ruling
(referring to Servando) and to finally settle any lingering doubts on the visitorial and enforcement
powers of the Secretary of Labor and Employment." 23

All the foregoing studiedly considered, the ineluctable conclusion is that the application of RA 7730
to the case under consideration is proper.

Thus, it is decisively clear that the public respondent did not act with grave abuse of discretion in
issuing the Order dated September 16, 1988.

The second issue for resolution is the validity of the auction sales conducted by Special Sheriff
Ramos. It bears stressing that the writ of execution issued by the Regional Director led to the several
auction sales conducted on September 24, 1987, October 2, 1987, October 23, 1987, October 29,
1987 and October 30, 1987.

In the first Order of public respondent, the five (5) auction sales were declared null and void. As the
public respondent put it, "the scandalously low price for which the personal properties of the
respondent were sold leads us to no other recourse but to invalidate the auction sales conducted by
the special sheriff."24

In the September 16, 1988 Order25 of public respondent, the personal properties and corresponding
prices for which they were sold were as follows:

Personal properties sold on September 24, 1987:

1. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis No.
139155-P not running condition.

2. One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis No.
6A410235, truck with Engine No. (Truck 4) not running condition.

3. One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis No.
139163-P Truck No. 4 not running condition.

Proceeds of Sale P178,000.00

Personal Properties Sold on October 2, 1987

1. One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis No.
1391539-P.

2. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis No.
139149.

3. One (1) unit payloader (caterpillar with Engine No. (not visible) 966.

4. One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and one
(1) Lot of scarp irons impounded inside the Batong Buhay Compound, Calanan,
Kalinga Apayao.

5. One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.
 Proceeds of Sale P228,750.00

Personal Properties Sold on October 23, 1987:

1. One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No.
81400500227 Plate No. BAT 353, burned, damage not running condition, type of
body jeep motor not visible.

2. Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and Chassis
Nos. not visible.

3. One (1) Unit Layland, burned, damaged and Motor No. not visible.

4. Two (units) air compressor, burned, damaged and one (1) generator.

5. One (1) Unit Loader Michigan 50, damaged and burned, and

6. One (1) rock crasher, damaged, burned, scrap iron junk.

Proceeds of Sale P98,000.00

Properties sold on October 29, 1987

1. One (1) lot of scrap construction materials.

2. One (1) lot of scrap mining machineries equipments and supplies.

3. One (1) lot of junk machineries, equipments and supplies.

Proceeds of Sale P1,699,999.99

Personal Properties Sold on October 20, 1987*

1. One (1) lot of scrap construction materials.

2. One (1) lot of scrap mining machineries, equipments and supplies.

Proceeds of Sale P2,185,000.00

Total Proceeds Sale P4,389,749.99

to satisfy the judgment award in the amount of P4,818,746.00.

As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial agencies are not
to be disturbed absent any showing of grave abuse of discretion tainting the same. But in the case
under scrutiny, there was grave abuse of discretion when the public respondent, without any
evidentiary support, adjudged such prices as "scandalously low". He merely relied on the self-
serving assertion by the petitioner that the value of the auctioned properties was more than the price
bid. Obviously, this ratiocination did not suffice to set aside the auction sales.

The presumption of regularity in the performance of official function is applicable here. Conformably,
any party alleging irregularity vitiating auction sales must come forward with clear and convincing
proof.

Furthermore, it is a well-settled principle that:

Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale
where the sale is regular, proper and legal in other respects, the parties stand on an equal
footing, there are no confidential relation between them, there is no element of fraud,
unfairness, or oppression, and there is no misconduct, accident, mistake or surprise
connected with, and tending to cause, the inadequacy.26
Consequently, in declaring the nullity of the subject auction sales on the ground of inadequacy of
price, the public respondent acted with grave abuse of discretion amounting to lack or excess of
jurisdiction.

But, this is not to declare the questioned auction sales as valid. The same are null and void since on
the properties of petitioner involved was constituted a mortgage between petitioner and the
Development Bank of the Philippines, as shown by the:

(a) Deed of Mortgage dated December 28, 1973;

(b) Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;

(c) Amendment to Joint Mortgage dated October 18, 1976.

(d) Confirmation of Mortgage dated March 27, 1979; and

(e) Additional Joint First Mortgage dated March 31, 1981. 27

The aforementioned documents were executed between the petitioner and Development Bank of the
Philippines (DBP) even prior to the filing of the complaint of petitioner's employees. The properties
having been mortgaged to DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3
December 1986, otherwise known as the "The 1986 Revised Charter of the Development Bank of
the Philippines," which exempts the properties of petitioner mortgaged to DBP from attachment or
execution sales. Section 14 of E.O. 81, reads:

Sec. 14. Exemption from Attachment. The provisions of any law to the contrary
notwithstanding, securities on loans and/or other accommodations granted by the Bank or its
predecessor-in-interest shall not be subject to attachment, execution or any other court
process, nor shall they be included in the property of insolvent persons or institutions, unless
all debts and obligations of the Bank or its predecessor-in-interest, penalties, collection of
expenses, and other charges, subject to the provisions of paragraphs (e) of Sec. 9 of this
Charter.

In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of the Asset
Privatization Trust, to the Office of the Clerk of Court of the Supreme Court, certified that the
petitioner is covered by Proclamation No. 50 issued on December 8, 1986 by President Corazon C.
Aquino.

Quoted hereunder are the pertinent portions of the said letter: 28

RE: BBGMI vs. Hon. dela Serna, GR No. 86963

Supreme Court Certiorari

SIR:

xxx     xxx     xxx

. . . all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI) have been
transferred and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation No. 50
dated December 8, 1986 of her Excellency, President Corazon C. Aquino. All the said assets of
BBGMI are covered by real and chattel mortgages executed in favor of the Philippine National Bank
("PNB"), the Development Bank of the Philippines ("DBP") and the National Investment and
Development Corporation ("NIDC").

xxx     xxx     xxx

Sec. 14, Executive Order No. 81:

xxx     xxx     xxx
Pursuant to the above-quoted provision of law, you are hereby warned that all the assets (real and
personal/chattel) of BBGMI are exempted from writs of execution, attachment, or any other lien or
court processes. The Government, through APT, shall initiate any administrative measures and
remedies against you for any violation of the vested rights of PNB, DBP and APT.

xxx     xxx     xxx

(sgd).

JOSE C. SISON

The exemption referred to in the aforecited letter is one of the circumstances contemplated by Rule
39 of the Revised Rules of Court, to wit:

Sec. 13. Property exempt from execution. — Except as otherwise expressly provided by law,
the following properties, and no other, shall be exempt from execution:

xxx     xxx     xxx

(m) Properties specially exempted by law.

xxx     xxx     xxx

Private respondents contend that even if subject properties were mortgaged to DBP (now under
Asset Privatization Trust), Article 11029 of the Labor Code, as amended by RA 6715, applies just the
same. According to them, the said provision of law grants preference to money claims of workers
over and above all credits of the petitioner. This contention is untenable. In the case of DBP
vs. NLRC,30 the Supreme Court held that the workers preference regarding wages and other
monetary claims under Article 110 of the Labor Code, as amended, contemplates bankruptcy or
liquidation proceedings of the employer's business. What is more, it does not disregard the
preferential lien of mortgagees considered as preferred credits under the provisions of the New Civil
Code on the classification, concurrence and preference of credits.

We now come to the issue with respect to the second Order, dated December 14, 1988, which
declared as valid the auction sale conducted on October 29, 1987 by Special Sheriff John Ramos.
Public respondent had no authority to validate the said auction sale on the ground that the
intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as purchasers for value, acquired legal
title over subject properties.

It is well to remember that the said properties were transferred to the intervenors, when Fidel
Bermudez, the highest bidder at the auction sale, sold the properties to MFT Corporation which, in
turn, sold the same properties to Salter Holdings Pty., Ltd. Public respondent opined that the
contract of sale between the intervenors and the highest bidder should be respected as these sales
took place during the interregnum after the auction sale was conducted on October 29, 1987 and
before the issuance of the first disputed Order declaring all the auction sales null and void.

On this issue, the Court rules otherwise.

As regards personal properties, the general rule is that title, like a stream, cannot rise higher than its
source.31 Consequently, a seller without title cannot transfer a title better than what he holds. MFT
Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest
bidder of a void auction sale over properties exempt from execution. Such being the case, the
subsequent sale made by him (Fidel Bermudez) is incapable of vesting title or ownership in the
vendee.

The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid, was
issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December 14, 1988 of
Undersecretary Dionisio dela Serna is concerned, which Order is SET ASIDE. The Order of
September 16, 1988, upholding the jurisdiction of the Regional Director, is AFFIRMED. No
pronouncement as to costs. 1âwphi1.nêt
SO ORDERED.

G.R. No. 215568

RICHARD N. RIVERA, Petitioner
vs.
GENESIS TRANSPORT SERVICE, INC. AND RIZA A. MOISES, Respondents

DECISION

LEONEN, J.:

This resolves a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure
praying that the July 8, 2014 Decision  and the November 20, 2014 Resolution  of the Court of
1 2

Appeals Fifth Division in CA-G.R. SP No. 130801 be reversed and set aside, and that new judgment
be entered finding petitioner Richard N. Rivera to have been illegally dismissed and awarding to him
his monetary claims.

The assailed July 8, 2014 Decision of the Court of Appeals dismissed the Petition
for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure filed by Richard N. Rivera (Rivera)
and affirmed the February 28, 2013  and April 30, 2013  Resolutions of the National Labor Relations
3 4

Commission Second Division. These Resolutions sustained the ruling of Labor Arbiter Gaudencio P.
Demaisip, Jr. who, in his June 26, 2012 Decision,  dismissed Rivera's Complaint  for illegal
5 6

dismissal.

The assailed November 20, 2014 Resolution of the Court of Appeals denied Rivera's Motion for
Reconsideration.

Rivera was employed by respondent Genesis Transport Service, Inc. (Genesis) beginning June
2002 as a bus conductor, assigned to the CubaoBaler, Aurora route. As part of the requisites for his
employment, he was required to post a cash bond of ₱6,000.00. Respondent Riza A. Moises is
Genesis' President and General Manager. 7

In his Position Paper before the Labor Arbiter, Rivera acknowledged that he was dismissed by
Genesis on account of a discrepancy in the amount he declared on bus ticket receipts. He alleged
that on June 10, 2010, he received a Memorandum  giving him twenty-four (24) hours to explain why
8

he should not be sanctioned for reporting and remitting the amount of ₱198.00 instead of the
admittedly correct amount of ₱394.00 worth of bus ticket receipts. He responded that it was an
honest mistake, which he was unable to correct "because the bus encountered mechanical
problems." 9

The discrepancy between the reported and remitted amount as against the correct amount was
detailed in the "Irregularity Report" prepared by Genesis' Inspector, Amel Villaseran (Villaseran). 10

According to Villaseran, on May 25, 2010, he conducted a "man to man" inspection on the tickets
held by the passengers on board Bus No. 8286 who had transferred from Bus No. 1820 in San
Fernando, Pampanga. (Bus No. 1820 broke down.) In the course of his inspection, he noticed that
Ticket No. 723374 VA had a written corrected amount of P394.00. However, the amount marked by
perforations made on the ticket, which was the amount originally indicated by the bus conductor,
was only P198.00. Upon inquiring with the passenger holding the ticket, Villaseran found out that the
passenger paid ₱500.00 to Rivera, who gave her change in the amount of ₱106.00. 11

Subsequently, Villaseran conducted verification works with the Ticket Section of Genesis' Cubao
Main Office. Per his inquiries, the duplicate ticket surrendered by Rivera to Genesis indicated only
the unconnected amount of ₱198.00. It was also found that Rivera remitted only P198.00. 12

On July 20, 2010, Genesis served on Rivera a written notice  informing him that a hearing of his
13

case was set on July 23, 2010. Despite his explanations, Rivera's services were terminated through
a written notice dated July 30, 2010.  Contending that this termination was arbitrary and not based
14
on just causes for terminating employment, he filed the Complaint  for illegal dismissal, which is
15

subject of this Petition. 16

For their defense, Genesis and Riza A. Moises claimed that Rivera's misdeclaration of the amount in
the bus ticket receipts and failure to remit the correct amount clearly violated Genesis' policies and
amounted to serious misconduct, fraud, and willful breach of trust; thereby justifying his dismissal. 17

In a Decision  dated June 26, 2012, Labor Arbiter Gaudencio P. Demaisip gave credence to
18

respondents' appreciation of the gravity of Rivera's acts of misdeclaring the amount of bus ticket
receipts and failing to remit the correct amount. Thus, he dismissed Rivera's Complaint.

In a Resolution  dated February 28, 2013, the National Labor Relations Commission Second
19

Division affirmed the Decision of Labor Arbiter Demaisip. In a Resolution  dated April 30, 2013, the
20

National Labor Relations Commission denied Rivera's Motion for Reconsideration.

Thereafter, Rivera filed a Rule 65 Petition before the Court of Appeals. In the assailed July 8, 2014
Decision,  the Court of Appeals Fifth Division sustained the rulings of Labor Arbiter Demaisip and
21

the National Labor Relations Commission. In the assailed November 20, 2014 Resolution,  the Court 22

of Appeals denied Rivera's Motion for Reconsideration.

Hence, this Petition was filed.

For resolution is the issue of whether petitioner Richard N. Rivera's employment was terminated for
just cause by respondent Genesis Transport, Inc.

As Riza A. Moises, Genesis' President and General Manager, has been impleaded, this court must
also rule on her personal liability, should the termination of petitioner's employment be found invalid.

Our laws on labor, foremost of which is the Labor Code, are pieces of social legislation. They have
been adopted pursuant to the constitutional recognition of "labor as a primary social economic
force"  and to the constitutional mandates for the state to "protect the rights of workers and promote
23

their welfare"  and for Congress to "give highest priority to the enactment of measures that protect
24

and enhance the right of all the people to human dignity, [and] reduce social, economic, and political
inequalities." 25

They are means for effecting social justice, i.e., the "humanization of laws and the equalization of
social and economic forces by the State so that justice in the rational and objectively secular
conception may at least be approximated." 26

Article XIII, Section 3 of the 1987 Constitution guarantees the right of workers to security of
tenure.  "One's employment, profession, trade or calling is a 'property right,'"  of which a worker may
1âшphi1
27

be deprived only upon compliance with due process requirements:

It is the policy of the state to assure the right of workers to "security of tenure" (Article XIII, Sec. 3 of
the New Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social
justice. When a person has no property, his job may possibly be his only possession or means of
livelihood. Therefore, he should be protected against any arbitrary deprivation of his job. Article 280
of the Labor Code has construed security of tenure as meaning that "the employer shall not
terminate the services of an employee except for a just cause or when authorized by" the code.
Dismissal is not justified for being arbitrary where the workers were denied due process and a clear
denial of due process, or constitutional right must be safeguarded against at all times. 28

(Citations omitted)

Conformably, liberal construction of Labor Code provisions in favor of workers is stipulated by Article
4 of the Labor Code:

Art. 4. Construction in favor of labor. All doubts in the implementation and interpretation of the
provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of
labor.
This case is quintessentially paradigmatic of the need for the law to be applied in order to ensure
social justice. The resolution of this case should be guided by the constitutional command for courts
to take a preferential view in favor of labor in ambitious cases.

This case revolves around an alleged discrepancy between the amounts indicated on a single ticket.
For the paltry sum of P196.00 that petitioner failed to remit in his sole documented instance of
apparent misconduct, petitioner's employment was terminated. He was deprived of his means of
subsistence.

II

Misconduct and breach of trust are just causes for terminating employment only when attended by
such gravity as would leave the employer no other viable recourse but to cut off an employee's
livelihood.

The Labor Code recognizes serious misconduct, willful breach of trust or loss of confidence, and
other analogous causes as just causes for termination of employment:

Article 282. Termination by employer. An employer may terminate an employment for any of the
following just causes:

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

(b) Gross and habitual neglect by the employee of his duties;

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

(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

Serious misconduct as a just cause for termination was discussed in Yabut v. Manila Electric Co.: 29

Misconduct is defined as 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." For serious misconduct to justify dismissal, the following requisites must be present:
(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.   (Emphasis
30

supplied, citation omitted)

Thus, it is not enough for an employee to be found to have engaged in improper or wrongful
conduct. To justify termination of employment, misconduct must be so severe as to make it evident
that no other penalty but the termination of the employee's livelihood is viable.

In Philippine Plaza Holdings v. Episcope,  we discussed the requisites for valid dismissal on account
31

of willful breach of trust:

Among the just causes for termination is the employer's loss of trust and confidence in its employee.
Article 296 (c) (formerly Article 282 [c]) of the Labor Code provides that an employer may terminate
the services of an employee for fraud or willful breach of the trust reposed in him. But in order for the
said cause to be properly invoked, certain requirements must be complied with[,] namely[:] (1) the
employee concerned must be holding a position of trust and confidence and (2) there must be an act
that would justify the loss of trust and confidence.32

Relating to the first requisite, Philippine Plaza Holdings clarified that two (2) classes of employees
are considered to hold positions of trust:

It is noteworthy to mention that there are two classes of positions of trust: on the one hand, there are
managerial employees whose primary duty consists of the management of the establishment in
which they are employed or of a department or a subdivision thereof, and to other officers or
members of the managerial staff; on the other hand, there are fiduciary rank-and-file employees,
such as cashiers, auditors, property custodians, or those who, in the normal exercise of their
functions, regularly handle significant amounts of money or property. These employees, though
rank-and-file, are routinely charged with the care and custody of the employer's money or property,
and are thus classified as occupying positions of trust and confidence.  (Emphasis supplied)
33

The position an employee holds is not the sole criterion. More important than this formalistic
requirement is that loss of trust and confidence must be justified. As with misconduct as basis for
terminating employment, breach of trust demands that a degree of severity attend the employee's
breach of trust. In China City Restaurant Corporation v. National Labor Relations Commission,  this 34

court emphasized the need for caution:

For loss of trust and confidence to be a valid ground for the dismissal of employees, it must be
substantial and not arbitrary, whimsical, capricious or concocted.

Irregularities or malpractices should not be allowed to escape the scrutiny of this Court. Solicitude for
the protection of the rights of the working class [is] of prime importance. Although this is not [al
license to disregard the rights of management, still the Court must be wary of the ploys of
management to get rid of employees it considers as undesirable.  (Emphasis supplied)
35

III

The social justice suppositions underlying labor laws require that the statutory grounds justifying
termination of employment should not be read to justify the view that bus conductors should, in all
cases, be free from any kind of error. Not every improper act should be taken to justify the
termination of employment.

Concededly, bus conductors handle money. To this extent, their work may be analogous to that of
tellers, cashiers, and other similarly situated rank-and-file employees who occupy positions of trust
and confidence. However, even granting that the first requisite for termination of employment on
account of willful breach of trust has been satisfied, we find it improper to sustain the validity of the
termination of petitioner's employment.

We take judicial notice of bus conductors' everyday work. Bus conductors receive, exchange, and
keep money paid by passengers by way of transportation fare. They keep track of payments and
make computations down to the last centavo, literally on their feet while a bus is in transit.

Regardless of whether a bus is driving through awkward spaces—through steep inclines, rugged
roads, or sharp turns—or of whether a bus is packed with standing passengers, the lonesome task
of keeping track of the passengers' payments falls upon a bus conductor.

Thus, while they do handle money, their circumstances are not at all the same as those of regular
cashiers. They have to think quickly, literally on their feet. Regular cashiers, on the other hand, have
the time and comfort to deliberately and carefully examine the transactions of their employer.

However, handling passengers' fare payments is not their sole function. Bus conductors assist
drivers as they maneuver buses through tight spaces while they are in transit, depart, or park. They
often act as dispatchers in bus stops and other such places, assist passengers as they embark and
alight, and sometimes even help passengers load and unload goods and cargo. They manage the
available space in a bus and ensure that no space is wasted as the bus accommodates more
passengers. Along with drivers, bus conductors commit to memory the destination of each
passenger so that they can anticipate their stops.

There are several ways to manifest the severity that suffices to qualify petitioner's alleged
misconduct or breach of trust as so grave that terminating his employment is warranted. It may be
through the nature of the act itself: spanning an entire spectrum between, on one end, an overlooked
error, made entirely in good faith; and, on another end, outright larceny. It may be through the sheer
amount mishandled. It may be through frequency of acts. It may be through other attendant
circumstances, such as attempts to destroy or conceal records and other evidence, or evidence of a
motive to undermine the business of an employer.

We fail to appreciate any of these in this case.

To reiterate, what is involved is a paltry amount of ₱196.00. All that has been proven is the existence
of a discrepancy. No proof has been adduced of ill-motive or even of gross negligence. From all
indications, petitioner stood charged with a lone, isolated instance of apparent wrongdoing.

The records are bereft of evidence showing a pattern of discrepancies chargeable against petitioner.
Seen in the context of his many years of service to his employer and in the absence of clear proof
showing otherwise, the presumption should be that he has performed his functions faithfully and
regularly. It can be assumed that he has issued the correct tickets and given accurate amounts of
change to the hundreds or even thousands of passengers that he encountered throughout his
tenure. It is more reasonable to assume that—except for a single error costing a loss of only
₱196.00—the company would have earned the correct expected margins per passenger, per trip,
and per bus that it allowed to travel.

Absent any other supporting evidence, the error in a single ticket issued by petitioner can hardly be
used to justify the inference that he has committed serious misconduct or has acted in a manner that
runs afoul of his employer's trust. More so, petitioner cannot be taken to have engaged in a series of
acts evincing a pattern or a design to defraud his employer. Terminating his employment on these
unfounded reasons is manifestly unjust.

To infer from a single error that petitioner committed serious misconduct or besmirched his
employer's trust is grave abuse of discretion. It is an inference that is arbitrary and capricious. It is
contrary to the high regard for labor and social justice enshrined in our Constitution and our labor
laws.

The Court of Appeals committed an error of law correctible by a petition for review under Rule 45. It
erred when it held that the National Labor Relations did not commit grave abuse of discretion when
the latter did not engage in the requisite scrutiny to review the inference and its bases.

IV

As his employment was illegally and unjustly terminated, petitioner is entitled to full backwages and
benefits from the time of his termination until the finality of this Decision. He is likewise entitled to
separation pay in the amount of one (1) month's salary for every year of service until the finality of
this Decision, with a fraction of a year of at least six (6) months being counted as one (1) whole year.

As he was compelled to litigate in order to seek relief for the illegal and unjust termination of his
employment, petitioner is likewise entitled to attorney's fees in the amount of 10% of the total
monetary award. 36

"Moral damages are awarded in termination cases where the employee's dismissal was attended by
bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it was done in
a manner contrary to morals, good customs or public policy."  Also, to provide an "example or
37

correction for the public good,"  exemplary damages may be awarded.

38

However, we find no need to award these damages in favor of petitioner. While the termination of his
employment was invalid, we nevertheless do not find respondent Genesis to have acted with such a
degree of malice as to act out of a design to oppress petitioner. It remains that a discrepancy and
shortage chargeable to petitioner was uncovered, although this discrepancy and shortage does not
justify a penalty as grave as termination of employment.

Respondent Riza A. Moises may not be held personally liable for the illegal termination of petitioner's
employment.

As we explained in Saudi Arabian Airlines v. Rebesencio: 39

A corporation has a personality separate and distinct from those of the persons composing it. Thus,
as a rule, corporate directors and officers are not liable for the illegal termination of a corporation's
employees. It is only when they acted in bad faith or with malice that they become solidarity liable
with the corporation.
In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical, this
court clarified that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty
through some motive or interest or ill will; it partakes of the nature of fraud."40

Petitioner has not produced proof to show that respondent Riza A. Moises acted in bad faith or with
malice as regards the termination of his employment. Thus, she did not incur any personal liability.

WHEREFORE, the Petition for Review on Certiorari is PARTIALLY GRANTED. The assailed

Decision dated July 8, 2014 and the assailed Resolution dated November 20, 2014 of the Court of
Appeals Fifth Division in CA-G.R. SP No. 130801, which dismissed the Petition for Certiorari filed by
petitioner Richard N. Rivera and affirmed the February 28, 2013 and April 30, 2013 Resolutions of
the National Labor Relations Commission Second Division, as well as the June 26, 2012 Decision of
Labor Arbiter Gaudencio P. Demaisip, Jr., are REVERSED and SET ASIDE. Accordingly,
respondent Genesis Transport Service, Inc. is ordered to pay petitioner:

(1) Full backwages and other benefits computed from July 30, 2010, when petitioner's employment
was illegally terminated, until the finality of this Decision;

(2) Separation pay computed from June 2002, when petitioner commenced employment, until the
finality of this Decision, at the rate of one (1) month's salary for every year of service, with a fraction
of a year of at least six ( 6) months being counted as one (1) whole year; and

(3) Attorney's fees equivalent to ten percent (10%) of the total award.

The case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to
petitioner, which respondents should pay without delay.

The case is DISMISSED with respect to respondent Riza A. Moises.

SO ORDERED.
G.R. No. 147745            April 9, 2003

MARIA BUENA OBRA, petitioner,

vs.
SOCIAL SECURITY SYSTEM (Jollar Industrial Sales and Services Inc.), respondents.

PUNO, J.:

On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 60704 dated September 27,
2000 sustaining the Decision2 of the Employees' Compensation Commission dated April 13, 2000,
as well as its subsequent Resolution3 dated March 6, 2001 denying petitioner's Motion for
Reconsideration.

The facts of the case are as follows:

Juanito Buena Obra, husband of petitioner, worked as a driver for twenty-four (24) years and five (5)
months. His first and second employers were logging companies. Thereafter, he was employed at
Jollar Industrial Sales and Services Inc. as a dump truck driver from January 1980 to June 1988. He
was assigned to the following projects:4

1. January 1980 to December 1981 – F.F. Cruz Project, Nabua, Camarines Sur –
hauling/delivery of filling materials from quarry to job site

2. January 1982 to December 1983 – F.F. Cruz, 300 MW Coal Fire Thermal Plant, Calaca,
Bacungan and Makban Geothermal Plant, Los Baños, Laguna – hauling/delivery of filling
materials from quarry to job site

3. January 1984 to December 1985 – Dizon Copper Silver Mines, Pili, San Marcelino,
Zambales – hauling/delivery filling materials from quarry to job site

4. January 1986 to June 1988 – Metro Manila Hauling Project

On 27 June 1988, Juanito suffered a heart attack while driving a dump truck inside the work
compound, and died shortly thereafter. In the Report of Death 5 submitted by his employer to the
Social Security System (SSS), Juanito expired at the Worker's Quarters at 10:30 a.m., of Myocardial
Infarction.

Petitioner Maria M. Buenaobra immediately filed her claim for death benefits under the SSS law. She
started receiving her pension in November 1988. Petitioner was, however, unaware of the other
compensation benefits due her under Presidential Decree No. 626, as amended, or the Law on
Employees' Compensation. In September 1998, or more than ten (10) years after the death of her
husband, that she learned of the benefits under P.D. No. 626 through the television program of then
broadcaster Ted Failon who informed that one may claim for Employees Compensation Commission
(ECC) benefits if the spouse died while working for the company. Petitioner prepared the documents
to support her claim for ECC benefits. On 23 April 1999, she filed with the SSS her claim for funeral
benefits under P.D. No. 626, as amended, which was docketed as SSS # 04-0089326-0. 6

On 28 July 1999, the SSS denied the claim of petitioner for funeral benefits ruling that the cause of
death of Juanito was not work-connected, absent a causal relationship between the illness and the
job. Caridad R. Borja, Assistant Vice-President National Capital Region (AVP – NCR) Central of the
SSS Member Assistance Center in Quezon City wrote:
 "Please be informed that funeral claim under the Employees Compensation is hereby
denied. Per medical evaluation, cause of death of subject member's (sic) cannot be
considered work connected since there is no causal relationship between the illness and the
job."

On 8 October 1999, petitioner wrote to Atty. Teofilo E. Hebron, Executive Director of the ECC,
appealing the denial of her claim. On 11 November 1999, Atty. Hebron ordered Dr. Simeon Z.
Gonzales, Assistant Vice-President (AVP) of the Medical Services Group of the SSS to review the
claim of petitioner.

On 23 November 1999, the Medical Services Group through Dr. Perla A. Taday, AVP for Medical
Operations, concluded its re-evaluation and affirmed the denial of petitioner's claim. It reiterated that
"there is no causal relationship between the cause of death/illness and member's job as dump truck
driver."7 Pursuant to Section 5, Rule XVIII of the Implementing Rules of PD 626, the records of the
deceased Juanito were elevated to the Commission.

On 13 April 2000, the Commission rendered a decision, dismissing the appeal. 8 It ruled that
petitioner failed to show by substantial evidence that her husband's cause of death was due to, or
the risk of contracting his ailment was increased by his occupation and working conditions, as per
Section 1(b), Rule III of P.D. No. 626, as amended. In addition, the Commission declared that
petitioner's claim has prescribed, citing ECC Resolution No. 93-08-0068.

Petitioner appealed to the Court of Appeals. She alleged that her cause of action had not prescribed
because the filing of her claim for SSS benefits shortly after Juanito's death suspended the running
of the prescriptive period for filing EC claims, as per Item No. III of ECC Resolution No. 90-03-0022
dated 23 March 1990. The appellate court dismissed the petition. It ruled that petitioner's filing of her
claim for SSS benefits shortly after Juanito's death did not suspend the running of the prescriptive
period for filing EC claims. It interpreted the aforementioned ECC Resolutions to mean that a
claimant must indicate the kind of claim filed before the running of the prescriptive period for filing
EC claims may be interrupted. In the case at bar, petitioner indeed filed a claim with SSS. In fact,
she has been receiving her pension since November 1988. However, she failed to specify whether
the basis of her claim was any contingency which may be held compensable under the EC
Program.9

In addition, the Court of Appeals cited P.D. No. 626 which states that a contingency may be held
compensable if listed in Annex "A" of the Rules Implementing Employees' Compensation as an
occupational disease, and satisfying all conditions set forth therein; or if not listed as an occupational
disease, or listed but has not satisfied the conditions set forth therein, it must be proven by
substantial evidence that the risk of contracting the disease which caused the death of the member,
was increased by the member's working conditions. 10

The appellate court likewise held that the three-year prescriptive period does not apply in the instant
case. Instead, it applied Art. 1142(2) of the Civil Code which reads:

"Art. 1144. The following actions must be brought within ten (10) years from the time the right
of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment. [Emphasis supplied.]"

The appellate court then held that the petitioner's cause of action has prescribed. Petitioner's
husband died on 27 June 1988. She filed her claim for funeral benefits under P.D. No. 626 or the
Law on Employees' Compensation only on 23 April 1999, or more than ten (10) years from his
death.

Lastly, the appellate court ruled that even assuming petitioner's cause of action has not prescribed,
her claim for Employees' Compensation benefits cannot prosper because of her failure to prove by
substantial evidence that her husband's working conditions increased the risk of contracting the
myocardial infarction that caused his death.
Petitioner's Motion for Reconsideration dated 27 September 2000 was denied by the appellate court
in a Resolution promulgated on 6 March 2001.

Hence, this petition. The following issues are raised: 11

(1) WHETHER, INDEED, THE CLAIM OF PETITIONER, HAD PRESCRIBED.

(2) WHETHER OR NOT THE ILLNESS OF PETITIONER'S HUSBAND, MYOCARDIAL

INFARCTION, IS WORK-RELATED.

On the first issue, we rule that the claim of petitioner for funeral benefits under P.D. No. 626, as
amended, has not yet prescribed.

The issue of prescription in the case at bar is governed by P.D. No. 626, or the Law on Employees'
Compensation. Art. 201 of P.D. No. 626 and Sec. 6, Rule VII of the 1987 Amended Rules on
Employees' Compensation both read as follows:

"No claim for compensation shall be given due course unless said claim is filed with the
System within three years from the time the cause of action accrued."

This is the general rule. The exceptions are found in Board Resolution 93-08-0068 and ECC Rules
of Procedure for the Filing and Disposition of Employees' Compensation Claims. Board Resolution
93-08-0068 issued on 5 August 1993, states:

"A claim for employee's compensation must be filed with System (SSS/GSIS) within three (3)
years from the time the cause of action accrued, provided however, that any claim filed
within the System for any contingency that may be held compensable under the Employee's
Compensation Program (ECP) shall be considered as the EC claim itself. The three-year
prescriptive period shall be reckoned from the onset of disability, or date of death. In case of
presumptive death, the three (3) years limitation shall be counted from the date the missing
person was officially declared to be presumptively dead." (emphasis supplied)

In addition, Section 4(b), Rule 3 of the ECC Rules of Procedure for the Filing and Disposition of
Employees' Compensation Claims, reads:

"RULE 3. FILING OF CLAIM

Section 4. When to file.

(a) Benefit claims shall be filed with the GSIS or the SSS within three (3) years from the date
of the occurrence of the contingency (sickness, injury, disability or death).

(b) Claims filed beyond the 3-year prescriptive period may still be given due course, provided
that:

1. A claim was filed for Medicare, retirement with disability, burial, death claims, or
life (disability) insurance, with the GSIS within three (3) years from the occurrence of
the contingency.

2. In the case of the private sector employees, a claim for Medicare, sickness, burial,
disability or death was filed within three (3) years from the occurrence of the
contingency.

3. In any of the foregoing cases, the employees' compensation claim shall be filed
with the GSIS or the SSS within a reasonable time as provided by law. [Emphasis
supplied.]"

We agree with the petitioner that her claim for death benefits under the SSS law should be
considered as the Employees' Compensation claim itself. This is but logical and reasonable because
the claim for death benefits which petitioner filed with the SSS is of the same nature as her claim
before the ECC. Furthermore, the SSS is the same agency with which Employees' Compensation
claims are filed. As correctly contended by the petitioner, when she filed her claim for death benefits
with the SSS under the SSS law, she had already notified the SSS of her employees' compensation
claim, because the SSS is the very same agency where claims for payment of
sickness/disability/death benefits under P.D. No. 626 are filed.

Section 4(b)(2), Rule 3 of the ECC Rules of Procedure for the Filing and Disposition of the
Employees' Compensation Claims, quoted above, also provides for the conditions when EC claims
filed beyond the three-year prescriptive period may still be given due course. Section 4(b)(2) states
the condition for private sector employees, requiring that a claim for Medicare, sickness, burial,
disability or death should be filed within three (3) years from the occurrence of the contingency. In
the instant case, the petitioner was able to file her claim for death benefits under the SSS law within
the three-year prescriptive period. In fact, she has been receiving her pension under the SSS
law since November 1988.

It is true that under the proviso, the employees' compensation claim shall be filed with the GSIS/SSS
within a reasonable time as provided by law. It should be noted that neither statute nor jurisprudence
has defined the limits of "reasonable time." Thus, what is reasonable time depends upon the peculiar
facts and circumstances of each case.12 In the case at bar, we also find petitioner's claim to have
been filed within a reasonable time considering the situation and condition of the petitioner. We have
ruled that when the petitioner filed her claim for death benefits under the SSS law, her claim for the
same benefits under the Employees' Compensation Law should be considered as filed. The
evidence shows that the System failed to process her compensation claim. Under the
circumstances, the petitioner cannot be made to suffer for the lapse committed by the System. It is
the avowed policy of the State to construe social legislations liberally in favor of the
beneficiaries.13 This court has time and again upheld the policy of liberality of the law in favor of
labor. Presidential Decree No. 626 itself, in its Art. 166 reads:

"ART. 166. Policy. – The State shall promote and develop a tax-exempt employees'
compensation program whereby employees and their dependents, in the event of work-
connected disability or death, may promptly secure adequate income benefit, and medical or
related benefits." (emphasis supplied)

Furthermore, Art. 4 of P.D. No. 442, as amended, otherwise known as the Labor Code of the
Philippines, which P.D. No. 626 forms a part of, reads as follows:

"ART. 4. Construction in favor of labor. – All doubts in the implementation and interpretation
of the provisions of this Code, including its implementing rules and regulations, shall be
resolved in favor of labor."

Particularly, the policy of liberality in deciding claims for compensability was given emphasis by this
court in the case of Employees' Compensation Commission vs. Court of Appeals, 14 where it held
that:

". . . the liberality of law in favor of the working man and woman still prevails and the official
agency charged by law to implement the constitutional guarantee of social justice should
adopt a liberal attitude in favor of the employee in deciding claims for compensability,
especially in light of compassionate policy towards labor which the 1987 Constitution vivifies
and enhances. Elsewise stated, a humanitarian impulse, dictated by no less than the
Constitution itself under the social justice policy, calls for a liberal and sympathetic approach
to legitimate appeals of disabled public servants; or that all doubts to the right to
compensation must be resolved in favor of the employee or laborer. Verily the policy is to
extend the applicability of the law on employees' compensation to as many employees who
can avail of the benefits thereunder."

Claims falling under the Employees' Compensation Act should be liberally resolved to fulfill its
essence as a social legislation designed to afford relief to the working man and woman in our
society.15

The second issue of whether or not the illness of petitioner's husband, myocardial infarction which
was the cause of his death is work-related, must likewise be resolved in favor of the petitioner.

Under the law on employees' compensation, death is compensable only when it results from a work-
connected injury or sickness. In the instant case, the cause of petitioner's husband's death was
myocardial infarction and it must be considered work-connected. While it is true that myocardial
infarction is not among the occupational diseases listed under Annex "A" of the Amended Rules on
Employees' Compensation, the Commission, under ECC Resolution No. 432 dated July 20, 1977,
laid down the conditions under which cardio-vascular or heart diseases can be considered as work-
related and thus compensable, viz:

(a) If the heart disease was known to have been present during employment, there must be
proof that an acute exacerbation was clearly precipitated by the unusual strain by reasons of
the nature of his/her/her work.

(b) The strain of work that brings about an acute attack must be of sufficient severity and
must be followed within 24 hours by the clinical signs of a cardiac insult to constitute causal
relationship.

(c) If a person who was apparently asymptomatic before being subjected to strain at work
showed signs and symptoms of cardiac injury during the performance of his/her work and
such symptoms and signs persisted, it is reasonable to claim a causal relationship.

Myocardial infarction is also known as heart attack. It results in permanent heart damage or death. A
heart attack is called myocardial infarction because part of the heart muscle (myocardium) may
literally die (infarction). This occurs when a blood clot blocks one of the coronary arteries (the blood
vessels that bring blood and oxygen to the heart muscle). When the heart muscle does not obtain
the oxygen-rich blood that it needs, it will begin to die. The severity of a heart attack usually depends
on how much of the heart muscle is injured or dies during the heart attack. Heart attack accounts for
1 out of every 5 deaths. It is a major cause of sudden death in adults. Heavy exertion or emotional
stress can trigger a heart attack.16

In the case at bar, the petitioner's husband's heart disease falls under the second condition of ECC
Resolution No. 432 dated July 20, 1977 which states that the strain of work that brought about the
acute attack must be of sufficient severity and must be followed within 24 hours by the clinical signs
of a cardiac insult to constitute causal relationship. Petitioner's husband was driving a dump truck
within the company premises where they were stacking gravel and sand when he suffered the heart
attack. He had to be taken down from the truck and brought to the workers' quarters where he
expired at 10:30 a.m., just a few minutes after the heart attack, which is much less than the 24 hours
required by ECC Resolution No. 432. This is a clear indication that severe strain of work brought
about the acute attack that caused his death.

Professional drivers, especially truck drivers like the decedent in the instant case, carry the burden
of being more exposed and subjected to the stress and strain of everyday traffic, and the greater
physical exertion brought about by driving a large and heavy vehicle. In addition, according to the
petitioner, her husband was under a lot of stress in the workplace. He was a model worker and his
employer highly depended on him. He became the object of envy of his co-workers which caused
him much emotional stress. Add to this the fact that he has been a truck driver for more than twenty-
four (24) years. Due to the combination of emotional stress and vigorous physical exertion, it was
easy for him to succumb to the heart ailment. We hold that the illness of the decedent which caused
his death is work-connected, and thus compensable by virtue of ECC Resolution No. 432 dated 20
July 1977.

As a final note, we find it necessary to reiterate that P.D. No. 626, as amended, is a social legislation
whose primordial purpose is to provide meaningful protection to the working class against the
hazards of disability, illness and other contingencies resulting in the loss of income. Thus, as the
official agents charged by law to implement social justice guaranteed by the Constitution, the ECC
and the SSS should adopt a liberal attitude in favor of the employee in deciding claims for
compensability especially where there is some basis in the facts for inferring a work connection with
the illness or injury, as the case may be. It is only this kind of interpretation that can give meaning
and substance to the compassionate spirit of the law as embodied in Article 4 of the New Labor
Code which states that all doubts in the implementation and interpretation of the provisions of the
Labor Code including its implementing rules and regulations should be resolved in favor of labor. 17

IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 60704 dated 27 September 2000 and its Resolution dated 06 March 2001 are hereby SET
ASIDE. The SSS is hereby directed to pay herein petitioner the death/funeral benefits due him under
the existing law.

SO ORDERED.
G.R. No. 207354

CHARLIE HUBILLA, JOEL NAYRE, NENITA A. TAN, PEDRO MAGALLANES, JR., ARNEL
YUSON, JANICE CABATBAT, JUDY PAPINA, VANESSA ESPIRITU, NOEMI YALUNG,
GENALYN RESCOBILLO, FIDEL ZAQUITA, NYL B. CALINGASAN, JANICE MIRADORA,
EVANGELINE CHUA, ROSCHELLE MISSION, MELANIE BALLESTEROS, MARILYN BACALSO,
RENALYN ALCANTARA, FEDERICO B. VIERNES, CHRISTOPHER B. YARES, ANA MARY R.
AGUILAR, MELANIE SAN MARCOS, EMERLOVE MONTE, CHONALYN LUCAS, THERESA
MALI COSIO, MA. FE CERCARES, RUBELYN R. CLARO, JONALYN M. YALUNG, MARY ANN
V. MACANAG, RESLYN L. FLORES, CRISTEL C. ROQUE, TERESA G MUNAR, SUSAN A.
DELA CRUZ, SHEENA KAY P. DE VERA, ARLENE R. ANES, GINA B. BINIBINI, CHERINE V.
ZORILLA, MA. CRISTINE MAGTOTO, FRANCIS MARIE O. DE CASTRO, VANESSA R.
ESPIRITU, RACHELLE V. QUISTORIA, JULIE ANN ILAN, ANGELIE F. PANOTES, ANABEL
PAYOS, MELISSA M. PERLAS, MELANIE B. BERSES, BARVI ROSE PERALTA, RESIE AQUE,
ROWENA RIVERA, MELANIE M. DY, CHERYLYN CORO, RANELYN SUBONG, ANGELA
SUBILLAGA, THELMA BARTOLABAC, MICHELLE C. ILAGAN, PRECIOUS MAE DE GUZMAN,
MARY CAROLINE COLINA, FRELYN HIPOLITO, MYLINE A. CALLOS, JANETH B. SEMBILLO,
LEA LYN F. FERRANCO, MAY C. SANTOS, ROSELLE A. NOBLE, JENNIFER D. SUYOM,
WARREN PETCHIE C. CAJES, ROWELYN F. CATALAN, RIEZEL ANN A. ALEGRE, DEMETRIA
B. PEREZ, GENALYN OSOC, JUVILYN N. NERI, JOY B. PIMENTEL, AIRENE LAYON, MARY
JOY TURQUEZA, MARY ANN VALENTIN, ROSIE L. NIEBRES, MELCA MALLORCA, JOY
CAGATCAGAT, DIANA CAMARO, MARIVEL DIJUMO, SHEILA DELA CRUZ, ELIZABETH
ARINGO, JENALYN G. DISMAYA, MELANIE G. TRIA, GRETCHEN D. MEJOS, and JANELIE R.
JIMENEZ, Petitioners
vs.
HSY MARKETING LTD., CO., WANTOFREE ORIENTAL TRADING, INC., COEN FASHION
HOUSE AND GENERAL MERCHANDISE, ASIA CONSUMER VALUE TRADING, INC.,
FABULOUS JEANS & SHIRT & GENERAL MERCHANDISE, LSG MANUFACTURING
CORPORATION, UNITE GENERAL MERCHANDISE, ROSARIO Q. CO, LUCIA PUN LING
YEUNG, and ALEXANDER ARQUEZA, Respondents

DECISION

LEONEN, J.:

When the evidence in labor cases is in equipoise, doubt is resolved in favor of the employee.

This is a Petition for Review on Certiorari  assailing the February 25, 2013 Decision  and May 30,
1 2

2013 Resolution  of the Court of Appeals in CA-G.R. SP No. 126522, which upheld the Labor
3

Arbiter's finding that the employees voluntarily terminated their employment. The assailed judgments
also set aside the National Labor Relations Commission's application of the principle of equipoise on
the ground that the employees failed to present any evidence in their favor.

HSY Marketing Ltd., Co., Wantofree Oriental Trading, Inc., Coen Fashion House and General
Merchandise, Asia Consumer Value Trading, Inc., Fabulous Jeans & Shirt & General Merchandise,
LSG Manufacturing Corporation, Unite General Merchandise, Rosario Q. Co, Lucia Pun Lin Yeung,
and Alexander Arqueza (respondents) are engaged in manufacturing and selling goods under the
brand Novo Jeans & Shirt & General Merchandise (Novo Jeans). 4

Sometime in May 2010 and June 2010, several Novo Jeans employees  went to Raffy Tulfo's radio
5

program to air their grievances against their employers for alleged labor violations. They were
referred to the Department of Labor and Employment Camanava Regional Office.  6

These employees claimed that on June 7, 2010, they were not allowed to enter the Novo Jeans
branches they were employed in. They further averred that while Novo Jeans sent them a show
cause letter the next day, they were in truth already dismissed from employment. They sent a
demand letter on July 19, 2010 to amicably settle the case before the Department of Labor and
Employment but no settlement was reached. They alleged that upon learning that the Department of
Labor and Employment was not the proper forum to address their grievances, they decided to file a
notice of withdrawal and file their complaint with the Labor Arbiter.  7

On the other hand, Novo Jeans claimed that these employees voluntarily severed their employment
but that they filed complaints later with the Department of Labor and Employment. They alleged that
the employees' notice of withdrawal was not actually granted by the Department of Labor and
Employment but that the employees nonetheless filed their complaints before the Labor Arbiter.  8

On May 31, 2011, Labor Arbiter Arden S. Anni rendered a Decision  dismissing the complaints. He
9

found that other than the employees' bare allegations that they were dismissed from June 6 to 9,
2010, they did not present any other evidence showing that their employment was terminated or that
they were prevented from reporting for work.   The Labor Arbiter likewise ruled that the employees
10

voluntarily severed their employment since the airing of their grievances on Raffy Tulfo's radio
program "[was] enough reason for them not to report for work, simply because of a possible
disciplinary action by [Novo Jeans]."   The dispositive portion of the Labor Arbiter Decision read:
11

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered DISMISSING the above-

captioned consolidated cases for utter lack of merit and for forum-shopping.

SO ORDERED. 12

The employees appealed to the National Labor Relations Commission. 13

On June 25, 2012, the National Labor Relations Commission rendered a Decision   reversing that of
14

the Labor Arbiter and finding that the employees were illegally dismissed. It ruled that the allegations
of both parties "were unsubstantiated and thus [were] equipoised" and that "if doubt exists between
the evidence presented by the employer and that by the employee, the scales of justice must be
tilted in favor of the latter."  The dispositive portion of the National Labor Relations Commission
15

Decision read:

WHEREFORE, premises considered, judgment is hereby rendered finding the appeal meritorious
with respect to the issue of illegal dismissal. Complainants-appellants' respective employers are
hereby found liable, jointly and severally, to pay complainants-appellants their backwages and
separation pay plus ten percent thereof as attorney's fees. Accordingly, the decision of the Labor
Arbiter dated May 31, 2011 is hereby MODIFIED. All other dispositions STANDS (sic) undisturbed.

The computation of the aforesaid awards is as follows:

....

TOTAL AWARD Php30,969,426.00

SO ORDERED. 16

Novo Jeans moved for partial reconsideration  but was denied by the National Labor Relations
17

Commission in its August 24, 2012 Resolution.  Thus, it filed a Petition for Certiorari   with the Court
18 19

of Appeals.

On February 25, 2013, the Court of Appeals rendered a Decision  reversing the Decision of the
20

National Labor Relations Commission and reinstating the Labor Arbiter Decision. The Court of
Appeals found that Novo Jeans' counsel, as the affiant, substantially complied with the verification
requirement even if his personal knowledge was based on facts relayed to him by his clients and on
authentic records since he was not privy to the antecedents of the case. 21

The Court of Appeals stated that while the employees merely alleged that they were no longer
allowed to report to work on a particular day, Novo Jeans was able to present the First Notice of
Termination of Employment sent to them, asking them to explain their sudden absence from work
without proper authorization. It likewise found that the Notices of Termination of Employment
(Notices) did not indicate that the employees were dismissed or that they were prevented from
entering the stores. 22
According to the Court of Appeals, the equipoise rule was inapplicable in this case since it only
applied when the evidence between the parties was equally balanced. Considering that only Novo
Jeans was able to present proof of its claims, the Court of Appeals was inclined to rule in its
favor.   Thus, the Court of Appeals concluded that the case involved voluntary termination of
23

employment, not illegal dismissal.  The dispositive portion of its Decision read:
24

WHEREFORE, in view of the foregoing, the instant Petition is hereby GRANTED. The assailed
Decision dated June 25, 2012 and Resolution dated August 24, 2012 rendered by the National
Labor Relations Commission in NLRC LAC No. 07-001930-11/NLRC NCR Cases No. 08-10645-10,
08-10649-10, 08-10655-10, 08-10660-10, 08- 10662-10, 08-10666-10 and 08-10670-10 are hereby
REVERSED and SET ASIDE. Corollarily, the Decision dated May 31, 2011 rendered by the Labor
Arbiter is hereby REINSTATED.

SO ORDERED. 25

The employees filed a Motion for Reconsideration  but it was denied in the Court of Appeals May 30,
26

2013 Resolution.  Hence, this Petition  was filed before this Court.
27 28

Petitioners point out that the Court of Appeals erred in not finding grave abuse of discretion,
considering that the petition filed before it was a special civil action for certiorari. They aver that the
Court of Appeals should not have used the special remedy of certiorari merely to re-evaluate the
findings of a quasi-judicial body absent any finding of grave abuse of discretion.  29

Petitioners likewise argue that respondents were unable to substantially comply with the verification
requirement before the Court of Appeals. They submit that respondents' counsel would have been
privy to the antecedents of the case so as to have personal knowledge and not merely knowledge as
relayed by his clients.   They add that respondents "deliberately withheld the Annexes of the
30

Position Paper of the Petitioners submitted to the Labor Arbiter[;] hence, said Position Paper cannot
be considered authentic." 31

Petitioners assert that the Court of Appeals had no factual basis to rule in respondents' favor since
there was no evidence to prove that the Notices were sent to petitioners at their last known
addresses. The evidence on record merely showed sample letters of the Notices.  Petitioners32

maintain that this is a situation where the employees allege that they were prevented from entering
their work place and the employer alleges otherwise. They insist that if doubt exists between the
evidence presented by the employer and the evidence presented by the employees, the doubt must
be resolved in favor of the employees, consistent with the Labor Code's policy to afford protection to
labor. 
33

On the other hand, respondents argue that a defect in the verification will not necessarily cause the
dismissal of the pleading and that they had sufficiently complied with the requirement when the
affiant attested that the petition was based on facts relayed by his clients and on authentic
records.   They also point out that only relevant and pertinent documents should be attached to their
34

pleadings before the courts; thus, the annexes of petitioner, not being relevant or pertinent, need not
be attached to their pleadings.  35

Respondents contend that the Court of Appeals recognized that the issue in their Petition
for Certiorari concerned the alleged grave abuse of discretion of the National Labor Relations
Commission and thoroughly discussed the issue in the assailed judgment.   They likewise submit
36

that the Court of Appeals may review factual findings of the National Labor Relations Commission
since the finding of grave abuse of discretion requires a re-examination of the sufficiency or absence
of evidence. 37

Respondents maintain that the receipt of the Notices was admitted and recognized by the parties
before the Labor Arbiter and was never brought as an issue until the National Labor Relations
Commission made a finding that the Notices were never received.  According to respondents,
38

petitioners were estopped from questioning the receipt of the Notices when they already admitted to
their receipt before the Labor Arbiter.  They argue that the Labor Arbiter and the Court of Appeals
39

did not err in finding that the termination of employment was voluntary since petitioners failed to
present evidence of the fact of their dismissal.  40

The main issue before this Court is whether or not petitioners were illegally dismissed by
respondents. However, there are certain procedural issues that must first be addressed, in
particular: (1) whether or not the Court of Appeals may, in a petition for certiorari, review and re-
assess the factual findings of the National Labor Relations Commission; and (2) whether or not
verification based on facts relayed to the affiant by his clients is valid.

Before discussing the merits of the case, this Court takes this opportunity to clarify certain doctrines
regarding the review of factual findings by the Court of Appeals.

Factual findings of labor officials exercising quasi-judicial functions are accorded great respect and
even finality by the courts when the findings are supported by substantial evidence.  Substantial
41

evidence is "the amount of relevant evidence which a reasonable mind might accept as adequate to
support a conclusion. "  Thus, in labor cases, the issues in petitions for certiorari before the Court of
42

Appeals are limited only to whether the National Labor Relations Commission committed grave
abuse of discretion.

However, this does not mean that the Court of Appeals is conclusively bound by the findings of the
National Labor Relations Commission. If the findings are arrived at arbitrarily, without resort to any
substantial evidence, the National Labor Relations Commission is deemed to have gravely abused
its discretion:

However, this does not mean that the Court of Appeals is conclusively bound by the findings of the
National Labor Relations Commission. If the findings are arrived at arbitrarily, without resort to any
substantial evidence, the National Labor Relations Commission is deemed to have gravely abused
its discretion:

On this matter, the settled rule is that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to support a conclusion. We
emphasize, nonetheless, that these findings are not infallible. When there is a showing that they
were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the
courts. The [Court of Appeals] can then grant a petition for certiorari if it finds that the [National Labor
Relations Commission], in its assailed decision or resolution, has made a factual finding that is not
supported by substantial evidence. It is within the jurisdiction of the [Court of Appeals], whose
jurisdiction over labor cases has been expanded to review the findings of the [National Labor
Relations Commission]. 43

The Court of Appeals may also review factual findings if quasi-judicial agencies' findings are
contradictory to its own findings.   Thus, it must re-examine the records to determine which tribunal's
44

findings were supported by the evidence.

In this instance, the Labor Arbiter and the National Labor Relations Commission made contradictory
factual findings. Thus, it was incumbent on the Court of Appeals to re-examine their findings to
resolve the issues before it. The Court of Appeals also found that the findings of the National Labor
Relations Commission were not supported by substantial evidence, and therefore, were rendered in
grave abuse of discretion.

Thus, in the determination of whether the National Labor Relations Commission committed grave
abuse of discretion, the Court of Appeals may re-examine facts and re-assess the evidence.
However, its findings may still be subject to review by this Court.

This Court notes that in cases when the Court of Appeals acts as an appellate court, it is still a trier
of facts. Questions of fact may still be raised by the parties. If the parties raise pure questions of law,
they may directly file with this Court. Moreover, contradictory factual findings between the National
Labor Relations Commission and the Court of Appeals do not automatically justify this Court's review
of the factual findings. They merely present a prima facie basis to pursue the action before this
Court. The need to review the Court of Appeals' factual findings must still be pleaded, proved, and
substantiated by the party alleging their inaccuracy. This Court likewise retains its full discretion to
review the factual findings.

II
All petitions for certiorari are required to be verified upon filing.   The contents of verification are
45

stated under Rule 7, Section 4 of the Rules of Court:

Section 4. Verification. Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his personal knowledge or based on authentic records.

A pleading required to be verified which contains a verification based on "information and belief'', or
upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an
unsigned pleading.

Thus, for a pleading to be verified, the affiant must attest that he or she has read the pleading and
that the allegations are true and correct based on his or her personal knowledge or on authentic
records. Otherwise, the pleading is treated as an unsigned pleading.

Shipside Incorporation v. Court of Appeals required that the assurance should "not [be] the product
46

of the imagination or a matter of speculation, and that the pleading is filed in good faith."  However,
47

verification is merely a formal, not jurisdictional, requirement. It will not result in the outright dismissal
of the case since courts may simply order the correction of a defective verification. 48

Petitioners argue that respondents' verification was invalid since it was not based on authentic
records, alleging that respondents' failure to attach petitioners' position paper annexes to their
Petition for Certiorari before the Court of Appeals made their records inauthentic.  49

A pleading may be verified by attesting that the allegations are based either on personal
knowledge and on authentic records, or on personal knowledge or on authentic records. The use
of either, however, is not subject to the affiant's whim but rather on the nature of the allegations
being attested to. Circumstances may require that the affiant attest that the allegations are based
only on personal knowledge or only on authentic records. Certainly, there can be situations where
the affiant must attest to the allegations being based on both personal knowledge and on authentic
records, thus:

A reading of the above-quoted Section 4 of Rule 7 indicates that a pleading may be verified under
either of the two given modes or under both. The veracity of the allegations in a pleading may be
affirmed based on either one's own personal knowledge or on authentic records, or both, as
warranted. The use of the [conjunction] "or" connotes that either source qualifies as a sufficient basis
for verification and, needless to state, the concurrence of both sources is more than sufficient.
Bearing both a disjunctive and conjunctive sense, this parallel legal signification avoids a
construction that will exclude the combination of the alternatives or bar the efficacy of any one of the
alternatives standing alone.

Contrary to petitioner's position, the range of permutation is not left to the pleader's liking, but is
dependent on the surrounding nature of the allegations which may warrant that a verification be
based either purely on personal knowledge, or entirely on authentic records, or on both sources. 50

Authentic records may be the basis of verification if a substantial portion of the allegations in the
pleading is based on prior court proceedings.  Here, the annexes that respondents allegedly failed
51

to attach are employee information, supporting documents, and work-related documents proving that
petitioners were employed by respondents.   The fact of petitioners' employment, however, has not
52

been disputed by respondents. These documents would not have been the "relevant and
pertinent"  documents contemplated by the rules.
53

Petitioners likewise contend that respondents' Petition for Certiorari  before the Court of Appeals
54

should not have been given due course since the verification  signed by respondents' counsel, Atty.
55

Eller Roel I. Daclan (Atty. Daclan), attested that:

2. I caused the preparation of the foregoing petition and attest that, based upon facts relayed to me
by my clients and upon authentic records made available, all the allegations contained therein are
true and correct[.] 56
Thus, the issue on verification centers on whether the phrase "based upon facts relayed to me by my
clients" may be considered sufficient compliance. To resolve this issue, this Court must first address
whether respondents' counsel may sign the verification on their behalf.

The rules on compliance with the requirement of the verification and certification of non-forum
shopping were already sufficiently outlined in Altres v. Empleo,   where this Court stated:
57

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements already reflected above respecting non-compliance with the requirements on, or
submission of defective, verification and certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of

defective verification, and noncompliance with the requirement on or submission of defective
certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if
the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear
to the truth of the allegations in the complaint or petition signs the verification, and when matters
alleged in the petition have been made in good faith or are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in

verification, is generally not curable by its subsequent submission or correction thereof, unless there
is a need to relax the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons".

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a
case; otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his
counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he
must execute a Special Power of Attorney designating his counsel of record to sign on his behalf.  58

The policy behind the requirement of verification is to guard against the filing of fraudulent pleadings.
Litigants run the risk of perjury  if they sign the verification despite knowledge that the stated
59

allegations are not true or are products of mere speculation:

Verification is not an empty ritual or a meaningless formality. Its import must never be sacrificed in
the name of mere expedience or sheer caprice. For what is at stake is the matter of verity attested
by the sanctity of an oath to secure an assurance that the allegations in the pleading have been
made in good faith, or are true and correct and not merely speculative.  60

Thus, for verification to be valid, the affiant must have "ample knowledge to swear to the truth of the
allegations in the complaint or petition."  Facts relayed to the counsel by the client would be
61

insufficient for counsel to swear to the truth of the allegations in a pleading. Otherwise, counsel
would be able to disclaim liability for any misrepresentation by the simple expediency of stating that
he or she was merely relaying facts with which he or she had no competency to attest to. For this
reason, the Rules of Court require no less than personal knowledge of the facts to sufficiently verify
a pleading.

Respondents' counsel, not having sufficient personal knowledge to attest to the allegations of the
pleading, was not able to validly verify the facts as stated. Therefore, respondents' Petition
for Certiorari before the Court of Appeals should have been considered as an unsigned pleading.

Respondents' certification of non-forum shopping is likewise defective. The certification of non-forum

shopping must be signed by the litigant, not his or her counsel. The litigant may, for justifiable
reasons, execute a special power of attorney to authorize his or her counsel to sign on his or her
behalf.   In this instance, the verification and certification against forum shopping  was contained in
62 63

one ( 1) document and was signed by respondents' counsel, Atty. Daclan.

Corporations, not being natural persons, may authorize their lawyers through a Secretary's
Certificate to execute physical acts. Among these acts is the signing of documents, such as the
certification against forum shopping. A corporation's inability to perform physical acts is considered
as a justifiable reason to allow a person other than the litigant to sign the certification against forum
shopping.  By the same reasoning, partnerships, being artificial entities, may also authorize an
64

agent to sign the certification on their behalf.

Respondents include three (3) corporations, one (1) partnership, and three (3) sole proprietorships.
Respondents LSG Manufacturing Corporation, Asia Consumer Value Trading, Inc., and Wantofree
Oriental Trading, Inc. submitted Secretary's Certificates  authorizing Atty. Daclan to sign on their
65

behalf. On the other hand, respondent HSY Marketing Ltd., Co. submitted a Partnership
Certification.  Meanwhile, respondents Alexander Arqueza (Arqueza), proprietor of Fabulous Jeans
66

and Shirt and General Merchandise, Rosario Q. Co (Co), proprietor of Unite General Merchandise,
and Lucia Pun Ling Yeung (Yeung), proprietor of Coen Fashion House & General Merchandise,
submitted Special Powers of Attorney  on their behalf.
67

However, sole proprietorships, unlike corporations, have no separate legal personality from their
proprietors.  They cannot claim the inability to do physical acts as a justifiable circumstance to
68

authorize their counsel to sign on their behalf. Since there was no other reason given for authorizing
their counsel to sign on their behalf, respondents Arqueza, Co, and Yeung's certification against
forum shopping is invalid.

While courts may simply order the resubmission of the verification or its subsequent correction,  a 69

defect in the certification of non-forum shopping is not curable   unless there are substantial merits
70

to the case. 71

However, respondents' Petition for Certiorari before the Court of Appeals was unmeritorious. Thus,
its defective verification and certification of non-forum shopping should have merited its outright
dismissal.

III

When the evidence of the employer and the employee are in equipoise, doubts are resolved in favor
of labor.  This is in line with the policy of the State to afford greater protection to labor. 
72 73

Petitioners allege that they were illegally dismissed from service when they were prevented from
entering their work premises a day after airing their grievance in a radio show. On the other hand,
respondents deny this allegation and state that petitioners were never dismissed from employment.

In illegal dismissal cases, the burden of proof is on the employer to prove that the employee was
dismissed for a valid cause and that the employee was afforded due process prior to the dismissal.  74

Respondents allege that there was no dismissal since they sent petitioners a First Notice of
Termination of Employment, asking them to show cause why they should not be dismissed for their
continued absence from work. However, petitioners argue that this evidence should not be given
weight since there is no proof that they received this Notice.

Indeed, no evidence has been presented proving that each and every petitioner received a copy of
the First Notice of Termination of Employment.  There are no receiving copies or acknowledgement
1âwphi1

receipts. What respondents presented were "Sample Letters of Respondents"  and not the actual
75

Notices that were allegedly sent out.

While petitioners admitted that the Notices may have been sent, they have never actually admitted
to receiving any of them. In their Position Paper before the Labor Arbiter and in their Memorandum
of Appeal before the National Labor Relations Commission:

On June 7, 2010, all employees who went to complain against the respondent[ s] were not allowed
to enter the stores of respondent[s]. The next day, respondent[s] sent letter[s] to the employees
purporting to be a show cause letter but the truth of the matter is that all employees who went to the
office of Tulfo to complain against the respondent[ s] were already terminated[.] 76
The lack of evidence of petitioners' receipts suggests that the Notices were an afterthought,
designed to free respondents from any liability without having to validly dismiss petitioners.

There is likewise no proof that petitioners abandoned their employment. To constitute abandonment,
the employer must prove that "first, the employee must have failed to report for work or must have
been absent without valid or justifiable reason; and second, [that] there must have been a clear
intention on the part of the employee to sever the employer-employee relationship manifested by
some overt act." 77

Abandonment is essentially a matter of intent. It cannot be presumed from the occurrence of certain
equivocal acts.   There must be a positive and overt act signifying an employee's deliberate intent to
78

sever his or her employment. Thus, mere absence from work, even after a notice to return, is
insufficient to prove abandonment.   The employer must show that the employee unjustifiably
79

refused to report for work and that the employee deliberately intended to sever the employer-
employee relation. Furthermore, there must be a concurrence of these two (2) elements.  Absent 80

this concurrence, there can be no abandonment.

Respondents have not presented any proof that petitioners intended to abandon their employment.
They merely alleged that petitioners have already voluntarily terminated their employment due to
their continued refusal to report for work. However, this is insufficient to prove abandonment.

Where both parties in a labor case have not presented substantial evidence to prove their
allegations, the evidence is considered to be in equipoise. In such a case, the scales of justice are
tilted in favor of labor. Thus, petitioners are hereby considered to have been illegally dismissed.

This Court notes that had petitioners been able to substantially prove their dismissal, it would have
been rendered invalid not only for having been made without just cause  but also for being in
81

violation of their constitutional rights. A laborer does not lose his or her right to freedom of
expression upon employment.  This is "[a] political [right] essential to man's enjoyment of his [or her]
82

life, to his [or her] happiness, and to his [or her] full and complete fulfillment."  While the Constitution
83

and the courts recognize that employers have property rights that must also be protected, the human
rights of laborers are given primacy over these rights. Property rights may prescribe. Human rights
do not. 84

When laborers air out their grievances regarding their employment in a public forum, they do so in
the exercise of their right to free expression. They are "fighting for their very survival, utilizing only
the weapons afforded them by the Constitution-the untrammelled enjoyment of their basic human
rights."  Freedom and social justice afford them these rights and it is the courts' duty to uphold and
85

protect their free exercise. Thus, dismissing employees merely on the basis that they complained
about their employer in a radio show is not only invalid, it is unconstitutional.

However, there not being sufficient proof that the dismissal was meant to suppress petitioners'
constitutional rights, this Court is constrained to limit its conclusions to that of illegal dismissal under
the Labor Code.

Petitioners were not dismissed under any of the causes mentioned in Article 279 [282]  of the Labor
86

Code. They were not validly informed of the causes of their dismissal. Thus, their dismissal was
illegal.

An employee who is found to have been illegally dismissed is entitled to reinstatement without loss
of seniority rights and other privileges.   If reinstatement proves to be impossible due to the strained
87

relations between the parties, the illegally dismissed employee is entitled instead to separation pay. 88

WHEREFORE, the Petition is GRANTED. The February 25, 2013 Decision and May 30, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 126522 are SET ASIDE. Respondents
are DIRECTED to reinstate petitioners to their former positions without loss of seniority rights or
other privileges.

SO ORDERED.
G.R. No. 70615 October 28, 1986

VIRGILIO CALLANTA, petitioner,
vs.
CARNATION PHILIPPINES, INC., and NATIONAL LABOR RELATIONS COMMISSION
[NLRC], respondents.

Danilo L. Pilapil for petitioner.

FERNAN, J.:

The issue raised in this petition for certiorari is whether or not an action for illegal dismissal
prescribes in three [3] years pursuant to Articles 291 and 292 of the Labor Code which provide:

Art. 291. Offenses.— Offenses penalized under this Code and the rules and
regulations issued pursuant thereto shall prescribe in three [3] years.

xxx xxx xxx

Art. 292. Money Claims. — All money claims arising from employer-employee

relations accruing during the effectivity of this Code shall be filed within three [3]
years from the time the cause of action accrued; otherwise, they shall be forever
barred.

xxx xxx xxx

Petitioner Virgilio Callanta was employed by private respondent Carnation Philippines, Inc.
[Carnation, for brevity] in January 1974 as a salesman in the Agusan del Sur area. Five [51 years
later or on June 1, 1979, respondent Carnation filed with the Regional Office No. X of the Ministry of
Labor and Employment [MOLE], an application for clearance to terminate the employment of Virgilio
Callanta on the alleged grounds of serious misconduct and misappropriation of company funds
amounting to P12,000.00, more or less.

Upon approval on June 26, 1979 by MOLE Regional Director Felizardo G. Baterbonia, of said
clearance application, petitioner Virgilio Callanta's employment with Carnation was terminated
effective June 1, 1979.

On July 5, 1982, Virgilio Callanta filed with the MOLE, Regional Office No. X, a complaint for illegal
dismissal with claims for reinstatement, backwages, and damages against respondent Carnation.

In its position paper dated October 5, 1982, respondent Carnation put in issue the timeliness of
petitioner's complaint alleging that the same is barred by prescription for having been filed more than
three [3] years after the date of Callanta's dismissal.

On March 24, 1983, Labor Arbiter Pedro C. Ramos rendered a decision finding the termination of
Callanta's employment to be without valid cause. Respondent Carnation was therefore ordered to
reinstate Virgilio Callanta to his former position with backwages of one [1] year without qualification
including all fringe benefits provided for by law and company policy, within ten [10] days from receipt
of the decision. It was likewise provided that failure on the part of respondent to comply with the
decision shall entitle complainant to full backwages and all fringe benefits without loss of seniority
rights.
On April 18, 1983, respondent Carnation appealed to respondent National Labor Relations
Commission [NLRC] which in a decision dated February 25, 1985,   set aside the decision of the
1

Labor Arbiter. It declared the complaint for illegal dismissal filed by Virgilio Callanta to have already
prescribed. Thus:

Records show that Virgilio Callanta was dismissed from his employment with
respondent company effective June 1, 1979; and that on 5 July 1982, he filed the
instant complaint against respondent for: Unlawful Dismissal with Backwages, etc.

The provisions of the Labor Code applicable are:

Art. 291. Offenses. — Offenses penalized under this Code and the rules and
regulations issued pursuant thereto shall prescribe in three [3] years.

Art. 292. Money claims. — All money claims arising from employer-employee

relations accruing during the effectivity of this Code shall be filed within three [3]
years from the time the cause of action accrued; otherwise, they shall be forever
barred.

Obviously, therefore, the causes of action, i.e., "Unlawful Dismissal" and

"Backwages, etc." have already prescribed, the complaint therefore having been filed
beyond the three-year period from accrual date.

With this finding, there is no need to discuss the other issues raised in the appeal.

WHEREFORE, in view of the foregoing, the Decision appealed from is hereby SET
ASIDE and another one entered, dismissing the complaint.

SO ORDERED.

Hence, this petition, which We gave due course in the resolution dated September 18, 1985. 2

Petitioner contends that since the Labor Code is silent as to the prescriptive period of an action for
illegal dismissal with claims for reinstatement, backwages and damages, the applicable law, by way
of supplement, is Article 1146 of the New Civil Code which provides a four [4]-year prescriptive
period for an action predicated upon "an injury to the rights of the plaintiff" considering that an action
for illegal dismissal is neither a "penal offense" nor a mere "money claim," as contemplated under
Articles 291 and 292, respectively, of the Labor Code. Petitioner further claims that an action for
illegal dismissal is a more serious violation of the rights of an employee as it deprives him of his
means of livelihood; thus, it should correspondingly have a prescriptive period longer than the three
13] years provided for in "money claims."

Public respondent, on the other hand, counters with the arguments that a case for illegal dismissal
falls under the general category of "offenses penalized under this Code and the rules and
regulations pursuant thereto" provided under Article 291 or a money claim under Article 292, so that
petitioner's complaint for illegal dismissal filed on July 5, 1982, or three [3] years, one [1] month and
five [5] days after his alleged dismissal on June 1, 1979, was filed beyond the three-year prescriptive
period as provided under Articles 291 and 292 of the Labor Code, hence, barred by prescription; that
while it is admittedly a more serious offense as it involves an employee's means of livelihood, there
is no logic in assuming that it has a longer prescriptive period, as naturally, one who is truly
aggrieved would immediately seek the redress of his grievance; that assuming arguendo that the law
does not provide for a prescriptive period for the enforcement of petitioner's right, it is nevertheless
beyond dispute that the said right has already lapsed into a stale demand; and that considering the
seriousness of the act committed by petitioner, private respondent was justified in terminating the
employment.

We find for petitioner.

Verily, the dismissal without just cause of an employee from his employment constitutes a violation
of the Labor Code and its implementing rules and regulations. Such violation, however, does not
amount to an "offense" as understood under Article 291 of the Labor Code. In its broad sense, an
offense is an illegal act which does not amount to a crime as defined in the penal law, but which by
statute carries with it a penalty similar to those imposed by law for the punishment of a crime.   It is in
3
this sense that a general penalty clause is provided under Article 289 of the Labor Code which
provides that "... any violation of the provisions of this code declared to be unlawful or penal in
nature shall be punished with a fine of not less than One Thousand Pesos [P1,000.00] nor more
than Ten Thousand Pesos [10,000.00], or imprisonment of not less than three [3] months nor more
than three [3] years, or both such fine and imprisonment at the discretion of the court." [Emphasis
supplied.]

The confusion arises over the use of the term "illegal dismissal" which creates the impression that
termination of an employment without just cause constitutes an offense. It must be noted, however
that unlike in cases of commission of any of the probihited activities during strikes or lockouts under
Article 265, unfair labor practices under Article 248, 249 and 250 and illegal recruitment activities
under Article 38, among others, which the Code itself declares to be unlawful, termination of an
employment without just or valid cause is not categorized as an unlawful practice.

Besides, the reliefs principally sought by an employee who was illegally dismissed from his
employment are reinstatement to his former position without loss of seniority rights and privileges, if
any, backwages and damages, in case there is bad faith in his dismissal. As an affirmative relief,
reinstatement may be ordered, with or without backwages. While ordinarily, reinstatement is a
concomitant of backwages, the two are not necessarily complements, nor is the award of one a
condition precedent to an award of the other.   And, in proper cases, backwages may be awarded
4

without ordering reinstatement . In either case, no penalty of fine nor improsonment is imposed on
the employer upon a finding of illegality in the dismissal. By the very nature of the reliefs sought,
therefore, an action for illegal dismissal cannot be generally categorized as an "offense" as used
under Article 291 of the Labor Code, which according to public respondent, must be brought within
the period of three[3] years from the time the cause of action accrued, otherwise, the same is forever
barred.

It is true that the "backwwages" 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 the 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
5

Labor Code.   even though the practical effect is the enrichment of the individual, the award of
6

backwages is not inredness 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.  7

The case of Valencia vs. Cebu Portland Cement, et al., 106 Phil. 732, a 1959 case cited by
petitioner, is applicable in the instant case insofar as it concerns the issue of prescription of actions.
In said case, this Court had occasion to hold that an action for damages involving a plaintiff
seperated from his employment for alleged unjustifiable causes is one for " injury to the rights of the
plaintiff, and must be brought within four [4] years.  8

In Santos vs. Court of Appeals, 96 SCRA 448 [1980], this Court, thru then Chief Justice Enrique M.
Fernando, sustained the sand of the Solicitor General that the period of prescription mentioned
under Article 281, now Article 292, of the Labor Code, refers to and "is limited to money claims, an
other cases of injury to rights of a workingman being governed by the Civil Code." Accordingly, this
Court ruled that petitioner Marciana Santos, who sought reinstatement, had four [4] years within
which to file her complaint for the injury to her rights as provided under Article 1146 of the Civil
Code.

Indeed there is, merit in the contention of petitioner that the four [4]-year prescriptive period under
Article 1146 of the New Civil Code, applies by way of supplement, in the instant case, to wit:

Art. 1146. The following actions must be instituted within four years.

[1] Upon an injury to the lights of the plaintiff.

xxx xxx xxx

[Emphasis supplied]
As this Court stated in Bondoc us. People's Bank and Trust Co.,  when a person has no property, his
9

job may possibly be his only possession or means of livelihood, hence, he should be protected
against any arbitrary and unjust deprivation of his job. Unemployment, said the Court in Almira vs.
B.F. Goodrich Philippines,   brings "untold hardships and sorrows on those dependent on the wage
10

earners. The misery and pain attendant on the loss of jobs thus could be avoided if there be
acceptance of the view that under all the circumstances of this case, petitioners should not be
deprived of their means of livelihood."

It is a principle in American jurisprudence which, undoubtedly, is well-recognized in this jurisdiction

that one's employment, profession, trade or calling is a "property right," and the wrongful interference
therewith is an actionable wrong.   The right is considered to be property within the protection of a
11

constitutional guaranty of due process of law.   Clearly then, when one is arbitrarily and unjustly
12

deprived of his job or means of livelihood, the action instituted to contest the legality of one's
dismissal from employment constitutes, in essence, an action predicated "upon an injury to the rights
of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which must be brought
within four [4] years.

In the instant case, the action for illegal dismissal was filed by petitioners on July 5, 1982, or three [3]
years, one [1] month and five [5] days after the alleged effectivity date of his dismissal on June 1,
1979 which is well within the four [4]-year prescriptive period under Article 1146 of the New Civil
Code.

Even on the assumption that an action for illegal dismissal falls under the category of "offenses" or
"money claims" under Articles 291 and 292, Labor Code, which provide for a three-year prescriptive
period, still, a strict application of said provisions will not destroy the enforcement of fundamental
rights of the employees. As a statutory provision on limitations of actions, Articles 291 and 292 go to
matters of remedy and not to the destruction of fundamental rights.  As a general rule, a statute of
13

limitation extinguishes the remedy only. Although the remedy to enforce a right may be barred, that
right may be enforced by some other available remedy which is not barred.  14

More so, in the instant case, where the delay in filing the case was with justifiable cause. The threat
to petitioner that he would be charged with estafa if he filed a complaint for illegal dismissal, which
private respondent did after all on June 22, 1981, justifies, the delayed filing of the action for illegal
dismissal with the Regional Office No. X, MOLE on July 5, 1982. Laches will not in that sense
strengthen the cause of public respondent. Besides, it is deemed waived as it was never alleged
before the Labor Arbiter nor the NLRC.

Public respondent dismissed the action for illegal dismissal on the sole issue of prescription of
actions. It did not resolve the case of illegal dismissal on the merits. Nonetheless, to resolve once
and for all the issue of the legality of the dismissal, We find that petitioner, who has continuously
served respondent Carnation for five [5] years was, under the attendant circumstances, arbitrarily
dismissed from his employment. The alleged shortage in his accountabilities should have been
impartially investigated with all due regard for due process in view of the admitted enmity between
petitioner and E.L. Corsino, respondent's auditor.   Absent such an impartial investigation, the
15

alleged shortage should not have been attended with such a drastic consequence as termination of
the employment relationship. Outright dismissal was too severe a penalty for a first offense,
considering that the alleged shortage was explained to respondent's Auditor, E.L. Corsino, in
accordance with respondent's accounting and auditing policies.

The indecent haste of his dismissal from employment was, in fact, aggravated by the filing of the
estafa charge against petitioner with the City Fiscal of Butuan City on June 22, 1981, or two [2] years
after his questioned dismissal. After the case had remained pending for five [5] years, the Regional
Trial Court of Agusan del Norte and Butuan City, Branch V finally dismissed the same provisionally
in an order dated February 21, 1986 for failure of the prosecution's principal witness to appear in
court. Admittedly, loss of trust and confidence arising from the same alleged misconduct is sufficient
ground for dismissing an employee from his employment despite the dismissal of the criminal
case.   However, it must not be indiscriminately used as a shield to dismiss an employee
16

arbitrarily.   For, who can stop the employer from filing all the charges in the books for the simple
17

exercise of it, and then hide behind the pretext of loss of confidence which can be proved by mere
preponderance of evidence.

We grant the petition and the decision of the NLRC is hereby reversed and set aside. Although We
are strongly inclined to affirm that part of the decision of the Labor Arbiter ordering the reinstatement
of petitioner to his former position without loss of seniority rights and privileges, a supervening event,
which petitioner mentioned in his motion for early decision dated January 6, 1986   that is, FILIPRO,
18

Inc.'s taking over the business of Carnation, has legally rendered the order of reinstatement difficult
to enforce, unless there is an express agreement on assumption of liabilities   by the purchasing
19

corporation, FILIPRO, Inc. Besides, there is no law requiring that the purchasing corporation should
absorb the employees of the selling corporation.   In any case, the very concept of social justice
20

dictates that petitioner shall be entitled to backwages of three [3] years. 

21

WHEREFORE, respondent Carnation Philippines, Inc. is hereby ordered to pay petitioner Virgilio
Callanta backwages for three [3] years without qualification and deduction. This decision is
immediately executory. No costs.

SO ORDERED.
 [G.R. No. 47800. December 2, 1940.]

MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.

Maximo Calalang in his own behalf.

Solicitor General Ozaeta and Assistant Solicitor General Amparo for

respondents Williams, Fragante and Bayan

City Fiscal Mabanag for the other respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No. 648;

DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS
AND SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO PROMULGATE RULES
AND REGULATIONS. — The provisions of section 1 of Commonwealth Act No. 648 do
not confer legislative power upon the Director of Public Works and the Secretary of
Public Works and Communications. The authority therein conferred upon them and
under which they promulgated the rules and regulations now complained of is not to
determine what public policy demands but merely to carry out the legislative policy laid
down by the National Assembly in said Act, to wit, "to promote safe transit upon, and
avoid obstructions on, roads and streets designated as national roads by acts of the
National Assembly or by executive orders of the President of the Philippines" and to
close them temporarily to any or all classes of traffic "whenever the condition of the
road or the traffic thereon makes such action necessary or advisable in the public
convenience and interest." The delegated power, if at all, therefore, is not the
determination of what the law shall be, but merely the ascertainment of the facts and
circumstances upon which the application of said law is to be predicated. To promulgate
rules and regulations on the use of national roads and to determine when and how long
a national road should be closed to traffic, in view of the condition of the road or the
traffic thereon and the requirements of public convenience and interest, is an
administrative function which cannot be directly discharged by the National Assembly.
It must depend on the discretion of some other government official to whom is confided
the duty of determining whether the proper occasion exists for executing the law. But it
cannot be said that the exercise of such discretion is the making of the law.

2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY. —

Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the
paramount police power of the state. Said Act, by virtue of which the rules and
regulations complained of were promulgated, aims to promote safe transit upon and
avoid obstructions on national roads, in the interest and convenience of the public. In
enacting said law, therefore, the National Assembly was prompted by considerations of
public convenience and welfare. It was inspired by a desire to relieve congestion of
traffic, which is, to say the least, a menace to public safety. Public welfare, then, lies at
the bottom of the enactment of said law, and the state in order to promote the general
welfare may interfere with personal liberty, with property, and with business and
occupations. Persons and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of the state
(U.S. v. Gomer Jesus, 31 Phil., 218). To this fundamental aim of our Government the
rights of the individual are subordinated. Liberty is a blessing without which life is a
misery, but liberty should not be made to prevail over authority because then society
will fall into anarchy. Neither should authority be made to prevail over liberty because
then the individual will fall into slavery. The citizen should achieve the required balance
of liberty and authority in his mind through education and, personal discipline, so that
there may be established the resultant equilibrium, which means peace and order and
happiness for all. The moment greater authority is conferred upon the government,
logically so much is withdrawn from the residuum of liberty which resides in the people.
The paradox lies in the fact that the apparent curtailment of liberty is precisely the very
means of insuring its preservation.

3. ID.; ID.; SOCIAL JUSTICE. — Social justice is "neither communism, nor despotism,
nor atomism, nor anarchy," but the humanization of laws and the equalization of social
and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated. Social justice means the promotion of the
welfare of all the people, the adoption by the Government of measures calculated to
insure economic stability of all the competent elements of society, through the
maintenance of a proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers underlying the
existence of all governments on the time-honored principle of salus populi est suprema
lex. Social justice, therefore, must be founded on the recognition of the necessity of
interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and paramount objective of the
state of promoting the health, comfort, and quiet of all persons, and of bringing about
"the greatest good to the greatest number."

DECISION

LAUREL, J.:

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila,

brought before this court this petition for a writ of prohibition against the respondents,
A. D. Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as
Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and
Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan
Dominguez, as Acting Chief of Police of Manila.

It is alleged in the petition that the National Traffic Commission, in its resolution of July
17, 1940, resolved to recommend to the Director of Public Works and to the Secretary
of Public Works and Communications that animal-drawn vehicles be prohibited from
passing along Rosario Street extending from Plaza Calderon de la Barca to Dasmariñas
Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal
Avenue extending from the railroad crossing at Antipolo Street to Echague Street, from
7 a.m. to 11 p.m., from a period of one year from the date of the opening of the
Colgante Bridge to traffic; that the Chairman of the National Traffic Commission, on
July 18, 1940 recommended to the Director of Public Works the adoption of the
measure proposed in the resolution aforementioned, in pursuance of the provisions of
Commonwealth Act No. 548 which authorizes said Director of Public Works, with the
approval of the Secretary of Public Works and Communications, to promulgate rules
and regulations to regulate and control the use of and traffic on national roads; that on
August 2, 1940, the Director of Public Works, in his first indorsement to the Secretary
of Public Works and Communications, recommended to the latter the approval of the
recommendation made by the Chairman of the National Traffic Commission as
aforesaid, with the modification that the closing of Rizal Avenue to traffic to animal-
drawn vehicles be limited to the portion thereof extending from the railroad crossing at
Antipolo Street to Azcarraga Street; that on August 10, 1940, the Secretary of Public
Works and Communications, in his second indorsement addressed to the Director of
Public Works, approved the recommendation of the latter that Rosario Street and Rizal
Avenue be closed to traffic of animal-drawn vehicles, between the points and during the
hours as above indicated, for a period of one year from the date of the opening of the
Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of Police of
Manila have enforced and caused to be enforced the rules and regulations thus
adopted; that as a consequence of such enforcement, all animal-drawn vehicles are not
allowed to pass and pick up passengers in the places above-mentioned to the detriment
not only of their owners but of the riding public as well.

It is contended by the petitioner that Commonwealth Act No. 548 by which the Director
of Public Works, with the approval of the Secretary of Public Works and
Communications, is authorized to promulgate rules and regulations for the regulation
and control of the use of and traffic on national roads and streets is unconstitutional
because it constitutes an undue delegation of legislative power. This contention is
untenable. As was observed by this court in Rubi v. Provincial Board of Mindoro (39
Phil, 660, 700), "The rule has nowhere been better stated than in the early Ohio case
decided by Judge Ranney, and since followed in a multitude of cases, namely: ’The true
distinction therefore is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The
first cannot be done; to the latter no valid objection can be made.’ (Cincinnati, W. & Z.
R. Co. v. Comm’rs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief Justice
Marshall in Wayman v. Southard (10 Wheat., 1) may be committed by the Legislature
to an executive department or official. The Legislature may make decisions of executive
departments or subordinate officials thereof, to whom it has committed the execution of
certain acts, final on questions of fact. (U.S. v. Kinkead, 248 Fed., 141.) The growing
tendency in the decisions is to give prominence to the ’necessity’ of the case." cralaw virtua1aw library

Section 1 of Commonwealth Act No. 548 reads as follows: jgc:chanrobles.com.ph

"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and
streets designated as national roads by acts of the National Assembly or by executive
orders of the President of the Philippines, the Director of Public Works, with the
approval of the Secretary of Public Works and Communications, shall promulgate the
necessary rules and regulations to regulate and control the use of and traffic on such
roads and streets. Such rules and regulations, with the approval of the President, may
contain provisions controlling or regulating the construction of buildings or other
structures within a reasonable distance from along the national roads. Such roads may
be temporarily closed to any or all classes of traffic by the Director of Public Works and
his duly authorized representatives whenever the condition of the road or the traffic
thereon makes such action necessary or advisable in the public convenience and
interest, or for a specified period, with the approval of the Secretary of Public Works
and Communications." cralaw virtua1aw library

The above provisions of law do not confer legislative power upon the Director of Public
Works and the Secretary of Public Works and Communications. The authority therein
conferred upon them and under which they promulgated the rules and regulations now
complained of is not to determine what public policy demands but merely to carry out
the legislative policy laid down by the National Assembly in said Act, to wit, "to promote
safe transit upon and avoid obstructions on, roads and streets designated as national
roads by acts of the National Assembly or by executive orders of the President of the
Philippines" and to close them temporarily to any or all classes of traffic "whenever the
condition of the road or the traffic makes such action necessary or advisable in the
public convenience and interest." The delegated power, if at all, therefore, is not the
determination of what the law shall be, but merely the ascertainment of the facts and
circumstances upon which the application of said law is to be predicated. To promulgate
rules and regulations on the use of national roads and to determine when and how long
a national road should be closed to traffic, in view of the condition of the road or the
traffic thereon and the requirements of public convenience and interest, is an
administrative function which cannot be directly discharged by the National Assembly.
It must depend on the discretion of some other government official to whom is confided
the duty of determining whether the proper occasion exists for executing the law. But it
cannot be said that the exercise of such discretion is the making of the law. As was said
in Locke’s Appeal (72 Pa. 491): "To assert that a law is less than a law, because it is
made to depend on a future event or act, is to rob the Legislature of the power to act
wisely for the public welfare whenever a law is passed relating to a state of affairs not
yet developed, or to things future and impossible to fully know." The proper distinction
the court said was this: "The Legislature cannot delegate its power to make the law;
but it can make a law to delegate a power to determine some fact or state of things
upon which the law makes, or intends to make, its own action depend. To deny this
would be to stop the wheels of government. There are many things upon which wise
and useful legislation must depend which cannot be known to the law-making power,
and, must, therefore, be a subject of inquiry and determination outside of the halls of
legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)

In the case of People v. Rosenthal and Osmeña, G.R. Nos. 46076 and 46077,
promulgated June 12, 1939, and in Pangasinan Transportation v. The Public Service
Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to
observe that the principle of separation of powers has been made to adapt itself to the
complexities of modern governments, giving rise to the adoption, within certain limits,
of the principle of "subordinate legislation," not only in the United States and England
but in practically all modern governments. Accordingly, with the growing complexity of
modern life, the multiplication of the subjects of governmental regulations, and the
increased difficulty of administering the laws, the rigidity of the theory of separation of
governmental powers has, to a large extent, been relaxed by permitting the delegation
of greater powers by the legislative and vesting a larger amount of discretion in
administrative and executive officials, not only in the execution of the laws, but also in
the promulgation of certain rules and regulations calculated to promote public interest.

The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an
unlawful interference with legitimate business or trade and abridge the right to personal
liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the
National Assembly in the exercise of the paramount police power of the state.

Said Act, by virtue of which the rules and regulations complained of were promulgated,
aims to promote safe transit upon and avoid obstructions on national roads, in the
interest and convenience of the public. In enacting said law, therefore, the National
Assembly was prompted by considerations of public convenience and welfare. It was
inspired by a desire to relieve congestion of traffic. which is, to say the least, a menace
to public safety. Public welfare, then, lies at the bottom of the enactment of said law,
and the state in order to promote the general welfare may interfere with personal
liberty, with property, and with business and occupations. Persons and property may be
subjected to all kinds of restraints and burdens, in order to secure the general comfort,
health, and prosperity of the state (U.S. v. Gomez Jesus, 31 Phil., 218). To this
fundamental aim of our Government the rights of the individual are subordinated.
Liberty is a blessing without which life is a misery, but liberty should not be made to
prevail over authority because then society will fall into anarchy. Neither should
authority be made to prevail over liberty because then the individual will fall into
slavery. The citizen should achieve the required balance of liberty and authority in his
mind through education and personal discipline, so that there may be established the
resultant equilibrium, which means peace and order and happiness for all. The moment
greater authority is conferred upon the government, logically so much is withdrawn
from the residuum of liberty which resides in the people. The paradox lies in the fact
that the apparent curtailment of liberty is precisely the very means of insuring its
preservation.

The scope of police power keeps expanding as civilization advances. As was said in the
case of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to
exercise the police power is a continuing one, and a business lawful today may in the
future, because of the changed situation, the growth of population or other causes,
become a menace to the public health and welfare, and be required to yield to the
public good." And in People v. Pomar (46 Phil., 440), it was observed that "advancing
civilization is bringing within the police power of the state today things which were not
thought of as being within such power yesterday. The development of civilization, the
rapidly increasing population, the growth of public opinion, with an increasing desire on
the part of the masses and of the government to look after and care for the interests of
the individuals of the state, have brought within the police power many questions for
regulation which formerly were not so considered." cralaw virtua1aw library

The petitioner finally avers that the rules and regulations complained of infringe upon
the constitutional precept regarding the promotion of social justice to insure the well-
being and economic security of all the people. The promotion of social justice, however,
is to be achieved not through a mistaken sympathy towards any given group. Social
justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may at least be
approximated. Social justice means the promotion of the welfare of all the people, the
adoption by the Government of measures calculated to insure economic stability of all
the competent elements of society, through the maintenance of a proper economic and
social equilibrium in the interrelations of the members of the community,
constitutionally, through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the existence of all
governments on the time-honored principle of salus populi est suprema lex.

Social justice, therefore, must be founded on the recognition of the necessity of

interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and paramount objective of the
state of promoting the health, comfort, and quiet of all persons, and of bringing about
"the greatest good to the greatest number." cralaw virtua1aw library

In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs
against the petitioner. So ordered.
G.R. No. 205575               July 22, 2015

VISAYAN ELECTRIC COMPANY EMPLOYEES UNION-ALU-TUCP and CASMERO

MAHILUM, Petitioners,
vs.
VISAYAN ELECTRIC COMPANY, INC. (VECO), Respondent.

DECISION

PERLAS -BERNABE, J.:

Assailed in this petition for review on certiorari  are the Resolutions dated September 25, 2012   and
1 2

December 19, 2012   of the Court of Appeals (CA) in CA-G.R. SP No. 06329, which dismissed the
3

certiorari petition filed by petitioners Visayan Electric Company Employees Union-ALU TUCP (the
Union) and Casmero Mahilum (Mahilum; collectively petitioners) against the Decision   dated June
4

30, 2011 of the National Labor Relations Commission (NLRC) in NLRC CC(V)-12 000003-10
(NCMB-RBVII-NS-10-12-10) for failure of their new counsel to show cause why their certiorari
petition should not be dismissed for having been filed beyond the reglementary period.

Respondent Visayan Electric Company, Inc. (VECO) is a corporation engaged in the supply and
distribution of electricity in Cebu City and its neighboring cities, municipalities, and barangays.  The 5

Union is the exclusive bargaining agent of VECO's rank and-file employees, and Macyi.Jttm was the
Union's president from October 2007 until his termination from employment on October 28, 2010.  6

It was claimed that, before Mahilum was elected as union officer, he was transferred from VECO's
Public Relations Section to its Administrative Services Section without any specific work. When he
was elected as union secretary, he was transferred to the Line Services Department as its Customer
Service Representative.   At the time of his election as union president, VECO management
7

allegedly: (a) terminated active union members without going through the grievance machinery
procedure prescribed under the Collective Bargaining Agreement   (CBA); (b) refused to implement
8

the profit-sharing scheme provided under the same CBA   (c) took back the motorbikes issued to
9

active union members; and (d) revised the electricity privilege   granted to VECO's employees. 
10 11

Thus, on May 1, 2009, union members marched on the streets of Cebu City to protest VECO's
refusal to comply with the political and economic provisions of the CBA. Mahilum and other union
officers were interviewed by the media, and they handed out a document   containing their
12

grievances against VECO, the gist of which came out in local newspapers.  Following said incident,
13

Mahilum was allegedly demoted as warehouse staff to isolate him and restrict his movements. Other
union officers were transferred to positions that will keep them away from the general union
membership.  14

On May 8, 2009, Mahilum was issued a Notice to Explain   why he should not be terminated from
15

service due to loss of trust and confidence, as well as in violating the Company Code of Discipline,
for causing the publication of what VECO deemed as a libelous article. The other union officers
likewise received similar notices   for them to explain their actions, which they justified   as merely
16 17

an expression of their collective sentiments against the treatment of VECO's management towards
them. 18

On May 20, 2009, the union officers we.re notified  of the administrative investigation to be
19

conducted relative to the charges against them. During the scheduled investigation, the Union's
counsel initially raised its objection to the proceedings and insisted that the investigation should be
conducted through the grievance machinery procedure, as provided in the CBA.   However, upon
20

the agreement to proceed with the investigation of the Union Vice President, Renato Gregorio M.
Gimenez (Gimenez), through his own counsel, Mahilum and the other union officers likewise agreed
to proceed with the aforesaid investigation, with Gimenez's counsel representing the Union. 21

Prior to the said investigation, the Union filed on May 18, 2009, a Notice of Strike   with the National
22

Conciliation and Mediation Board (NCMB) against VECO, which facilitated a series of conferences
that yielded a Memorandum of Agreement   (MOA) signed by the parties on August 7, 2009.   The
23 24
parties likewise put to rest the critical issue of electricity privilege and agreed before the NCMB on a
conversion rate of said privilege to basic pay. Moreover, the administrative investigation on the
alleged libelous publication was deferred until after the CBA renegotiation.  25

However, even before the conclusion of the CBA renegotiation   on June 28, 2010, several
26

complaints for libel were filed against Mahilum and the other union officers by VECO's Executive
Vice President and Chief Operating Officer Jaime Jose Y. Aboitiz.   The administrative hearing on
27

the charges against Mahilum resumed with due notice to the latter, but he protested the same,
referring to it as "moro-mord' or "kangaroo" and insisting that the investigation should follow the
grievance machinery procedure under the CBA.   Nonetheless, VECO's management carried on
28

with its investigation and, on the basis of the findings thereof, issued a notice   terminating Mahilum 29

from employment on October 28, 2010.  30

On even date, the Union filed another Notice of Strike   with the NCMB against VECO on the
31

grounds of unfair labor practice, specifically union busting - for the dismissal and/or suspension of its
union president and officers, refusal to bargain collectively, as well as non-observance of the
grievance procedure in their CBA.   To avert any work stoppage that will prejudice VECO's power
32

distribution activity, the Secretary of Labor intervened and issued an Order   dated November 10, 33

2010 certifying the labor dispute to the NLRC for compulsory arbitration.  Consequently, the strike
34

was enjoined; Mahilum was ordered reinstated in the payroll; and the parties were directed to refrain
from committing any act that would exacerbate the situation. 35

The NLRC Ruling

After submission of the respective position papers   of both parties, the NLRC Seventh Division
36

rendered Decision   on June 30, 2011 dismissing the charge of unfair labor practice against VECO
37

for lack of merit, and declaring Mahilum's dismissal from employment as legal.

The NLRC found VECO to have acted within the bounds of law when it administratively investigated
the suspended or terminated employees and union officers/members, instead of subjecting their
respective cases to the grievance machinery procedure provided in the CBA.   In resolving 38

apparently conflicting provisions in the CBA, the NLRC applied the specific provision found in
Section 13 of Article XIV that disciplinary actions shall be governed by the rules and regulations
promulgated by the company. Since the administrative investigations conducted by VECO were
found to have complied with procedural due process requirements, there was no unfair labor
practice to speak of.  39

On the matter of Mahilum's dismissal and the filing of criminal cases against the union officers, the
NLRC found no substantial evidence to prove the imputation of union busting. Similarly
unsubstantiated were the allegations of fraud and deceit in hiring and contracting out services for
functions performed by union members, and declaring certain positions confidential and transferring
union members to other positions without prior discussions, thereby allegedly interfering with their
right to self-organization and reducing union membership. 40

The issue on VECO's alleged modification of the electricity privilege, which the Union claimed as
violative of the CBA, was declared mooted by the MOA entered into between the parties, with the
assistance of the NCMB, providing for, inter alia, electricity privilege conversion to basic pay. This
was subsequently incorporated in the Renegotiated CBA dated June 28, 2010.  41

Finally, the NLRC ruled that Mahilum was terminated for a just and valid cause under Article 282 (c)
of the Labor Code, i.e., fraud or willful breach of trust by the employee of the trust reposed in him by
his employer or duly authorized representative, when he, together with some other union officers,
caused the publication of a document which was deemed to have dishonored and blackened the
memory of former corporate officer Luis Alfonso Y. Aboitiz, besmirched VECO's name and
reputation, and exposed he latter to public hatred, contempt, and ridicule.  42

Aggrieved, petitioners filed a motion for reconsideration   from the foregoing NLRC Decision, which
43

was denied in a Resolution   dated July 29, 2011.They received said Resolution on August 18,
44

2011. 45

On October 18, 2011, petitioners elevated their case to the CA on certiorari petition,   docketed as 46

CA-G.R. SP No. 06329, imputing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC.
On February 29, 2012, the CA issued a Resolution   directing petitioners to show cause why the
47

certiorari petition should not be dismissed for having been filed "one day behind the reglementary
period."  48

On March 13, 2012, Atty. Jonas V. Asis (Atty. Asis) from the Seno Mendoza & Associates Law
Offices filed in behalf of petitioners a Manifestation/Explanation   claiming that "there was
49

unintended error/mistake in the computation of the period,"   and that there was no prejudice caused
50

to V~CO by the "unintended one-pay late filing of the petition."  51

The CA Ruling

On September 25, 2012, the CA issued the assailed September 25, 2012 Resolution   pointing out
52

that on March 7, 2012, petitioners had filed a Manifestation   that they had terminated the services of
53

Atty. Asis and the Seno Mendoza & Associates as their counsel in this case, and have contracted
the services of Atty. Remigio D. Saladero, Jr. (Atty. Saladero) as their new counsel. Consequently,
the CA deemed as not filed the Manifestation/Explanation filed by Atty. Asis, and dismissed the
certiorari petition for failure of Atty. Saladero to comply with the Resolution dated February 29, 2012.

The motion for reconsideration   filed by Atty. Saladero imploring the CA to consider the
54

Manifestation/Explanation filed by Atty. Asis despite the fact that he was no longer petitioners'
counsel of record was denied in a Resolution   dated December 19, 2012 for lack of merit.
55

The Issue

Undeterred, petitioners are now before the Court maintaining that the CA erred in dismissing the
certiorari petition on account of the one-day delay in its filing despite the serious errors committed by
the NLRC in absolving VECO from the charge of unfair labor practice and illegal dismissal of
Mahilum.

The Court's Ruling

The petition is not impressed with merit.

Under Section 4, Rule 65 of the 1997 Rules of Civil Procedure, certiorari should be filed "not later
than sixty (60) days from notice of the judgment, order or resolution" sought to be assailed. The
provisions on reglementary periods are strictly applied, indispensable as they are to the prevention
of needless delays, and are necessary to the orderly and speedy discharge of judicial business. The
timeliness of filing a pleading is a jurisdictional caveat that even this Court cannot trifle with.  56

The Union admittedly/   received on August 18, 2011 the NLRC's July 29, 2011 Resolution, which
57

denied their motion for reconsideration of the NLRC's June 30, 2011 Decision. Therefore, the 60-day
period within which to file a petition for certiorari ended on October 1 7, 2011. But the certiorari
petition was filed one day after, or on October 18, 2011. Thus, petitioners' failure to file said petition
within the required 60-day period rendered the NLRC's Decision and Resolution impervious to any
attack through a Rule 65 petition for certiorari, and no court can exercise jurisdiction to review the
same.  58

Petitioners adamantly insist, however, that the "one-day delay occasioned by an honest mistake in
the computation of dates should have been overlooked by the CA in favor of substantial
justice."  Their former counsel, Atty. Asis, allegedly thought in good faith that the month of August
59

has thirty (30) days, and that sixty (60) days from August 18, 2011 is October 18, 2011.  60

The Court is not convinced.

First, The fact that the delay in the filing of the petition for certiorari was only one day is not a legal
justification for non-compliance with the rule requiring that it be filed not later than sixty (60) days
from notice of the assailed judgment, order or resolution. The Court cannot subscribe to the theory
that the ends of justice would be better subserved by allowing a petition for certiorari filed only one
day late. When the law fixes sixty (60) days, it cannot be taken to mean also sixty-one ( 61) days, as
the Court had previously declared in this wise:

[W]hen the law fixes thirty days [or sixty days as in the present case], we cannot take it to mean also
thirty-one days. If that deadline could be stretched to thirty-one days in one case, what would
prevent its being further stretched to thirty-two days in another case, and so on, step by step, until
the original line is forgotten or buried in the growing confusion resulting from the alterations? That is
intolerable. We cannot fix a period with the solemnity of a statute and disregard it like a joke. If law is
founded on reason, whim and fancy should play no part in its application.  61

Second. While it is always in the power of the Court to suspend its own rules, or to except a
particular case from its operation,  the liberality with which equity jurisdiction is exercised must
62

always be anchored on the basic consideration that the same must be warranted by the
circumstances obtaining in the case.   However, there is no showing herein of any exceptional
63

circumstance that may rationalize a digression from the rule on timeliness of petitions.

Moreover, petitioners failed to satisfactorily show that the refusal of VECO to follow the grievance
machinery procedure under Section 4, Article XVII of the CBA in the suspension and termination
from employment of the other union officers and members constituted unfair labor practice.

True, it is a fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions. If the provisions of the CBA seem clear and unambiguous,
the literal meaning of their stipulations shall control. However, as in this case, when general and
specific provisions of the CBA are inconsistent, the specific provision shall be paramount to and
govern the general provision. 64

Section 4, Article XVII of the CBA states that "(a)ny difference of opinion, controversy, dispute
problem or complaint arising from Company-Union or Company-Worker relations concerning the
interpretation or application of this Agreement or regarding any matter affecting Company-Union or
Company-Worker relations shall be considered a grievance."   On the other hand, under Section 13,
65

Article XIV, "(t)he Company agrees that henceforth there shall be a fair and uniform application of its
rules and regulations. It is understood that disciplinary actions imposed on employee or laborer shall
be governed by the rules and regulations promulgated by the Company as well as those provided for
by existing laws on the matter. " 66

The Court is in accord with the ratiocination of the NLRC that the sweeping statement "any matter
affecting Company-Union or Company-Worker relations shall be considered a grievance" under
Section 4, Article XVII is general, as opposed to Section 13, Article XIV of the CBA, which is specific,
as it precisely refers to "what governs employee disciplinary actions."   Thus, the NLRC correctly
67

ruled that VECO acted within the bounds of law when it proceeded with its administrative
investigation of the charges against other union officers and members.

This is consistent with jurisprudential rulings supporting an employer's free reign and "wide latitude
of discretion to regulate all aspects of employment, including the prerogative to instill discipline in its
employees and to impose penalties, including dismissal, upon erring employees. This is
management prerogative, where the free will of management to conduct its own affairs to achieve its
purpose takes form. The only criterion to guide the exercise of its management prerogative is that
the policies, rules[,] and regulations on work-related activities of the employees must always be fair
and reasonable[,] and the corresponding penalties, when prescribed, are commensurate to the
offense involved and to the degree of the infraction."   The Labor Code does not excuse employees
68

from complying with valid company policies and reasonable regulations for their governance and
guidance. 69

Delving now into the merits of Mahilum's dismissal, the Court holds that the two requisites for a valid
dismissal from employment have been met, namely: ( 1) it must be for a just or authorized cause;
and (2) the employee must be afforded due process.  70

VECO anchored its termination of Mahilum on Article 282 ( c) of the Labor Code and Articles 5.1 and
4.4   of VECO's Company Code of Discipline, which read as follows:
71

Article 282 (c) of the Labor Code:

Art. 282. Termination by Employer. - An employer may terminate an employment for any of the
following causes:

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

Company Code of Discipline:

Art. 5.1 Every employee shall uphold company trust and confidence as well· as the trust relationship
between the company and its customers/ suppliers.

Art. 4.4 Every employee shall willfully respect the honor or person of his immediate superior and/or
department head or company officers.

VECO found the following "Press Release",   which Mahilum, together with other union officers,
72

caused to be published, as libelous for dishonoring and blackening the memory of then corporate
officer Luis Alfonso Y. Aboitiz, as well as for maliciously impeaching and besmirching the company's
name and reputation:

VECEU-ALU President, Casmero A. Mahilum, said that since 2004 up to present the new VECO
Management under the administration of the Aboitizes unceasingly attack the local Union by
continuously limit (sic) its membership and diminish (sic) and/or abolish (sic) worker's benefits and
privileges stipulated in the CBA. x x x. Through clever use of psychological warfare, intimidation,
deception, divide and rule tactic and taking great advantage of the weakness of the Union especially
of the leadership during that time, the [new] Management under the late Alfonso Y. Aboitiz was able
to secure a Memorandum of Agreement (MOA) signed by the Union and Management
representatives and ratified by the General Membership that gave Management more flexibility in
dealing with labor. x x x.

xxxx

The [l]ocal Union wrote a letter to Mr. Aboitiz expressing full support of his campaign for energy
conservation x x x. But Mr. Aboitiz was too hard and too arrogant to deal with. x x x.

x x x. We, therefore, ask the general public to understand our plight and support our actions. We
also urge everyone to oppose any electricity rate increase filed by VECO and NAPOCOR at the
Energy Regulatory Commission (ERC). Any rate increase in the electricity will only worsen the
already burdened public and further increase profits for the Aboitizes. The entire Union membership
are one with you in condemning such increase and brazen connivance of VECO and NAPOCOR to
justify increases in electricity rate.

x x x x 
73

The Court has consistently held that "x x x loss of trust and confidence must be based on willful
breach of the trust reposed in the employee by his employer. Such 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. Moreover, it must be based on substantial
evidence and not on the employer's whims or caprices or suspicions[,] otherwise, the employee
would eternally remain at the mercy of the employer. x x x. And, in order to constitute a just cause
for dismissal, the act complained of must be work-related and show that the employee concerned is
unfit to continue working for the employer.  In addition, loss of confidence x x x is premised on the
1âwphi1

fact that the employee concerned holds a position of responsibility, trust, and confidence or that the
employee concerned is entrusted with confidence with respect to delicate matters, such as handling
or care and protection of the property and assets of the employer. The betrayal of this trust is the
essence of the offense for which an employee is penalized." 74

Mahilum's attempt to rationalize his act as part of his "moral, legal or social duty xx x to make known
his legitimate perception"   against VECO does not, in any way, detract from the indubitable fact that
75

he intentionally, knowingly, and purposely caused the aforequoted "disparaging publication." Neither
can he hide behind the claim that the press release was simply "an expression of a valid
grievance."   As the NLRC aptly pointed out, "(i)nstead of him and the rest of the union officers
76

bringing their sentiments and/or grievances against the management to the proper forum, they
intentionally, knowingly and purposefully breached their employer's trust, by issuing x x x derogatory
statements and causing their publication, apparently, to incite public condemnation against the
latter."  It bears noting that, while petitioners harp on the refusal of VECO to follow the grievance
77
machinery procedure under the CBA, they conveniently forgot that they themselves shunned the
very procedure to which they now hang by a thread.

Moreover, the Court is unmoved by Mahilum's insistence that there was nothing in his position which
called for management's trust and confidence in him.   The NLRC, whose findings of facts and
78

conclusions are generally accorded not only great weight and respect but even with finality, correctly
held that, as Customer Service Representative, Mahilum occupied a position of responsibility
especially in dealing with VECO's clients.  His duties and responsibilities included: (1) accepting
79

pertinent documents and processing electrical service applications; (2) verifying authenticity of
documents submitted; (3) interviewing customer-applicant on applications, complaints, and requests;
(4) preparing job assignment of service inspectors; (5) filing all service .orders of inspectors; ( 6)
assessing and accepting bill deposits; (7) preparing and facilitating signing of Metered Service
Contract; (8) issuing service order for meter-related activities; (9) verifying existing account of
customer-applicant and approving account clearances; (10) accepting payment of bills from
customer applicant for account clearances; and (11) processing payment arrangements of
customers.  80

His performance was measured according to how he: (1) handled customers' transactions; (2) made
decisions in processing customers' applications and payment arrangements; and (3) maintained
posture at all times in handling customers transactions even with angry customers  . 81

It is clear from the foregoing that Mahilum was not an ordinary rank-and-file employee. His job
entailed the observance of proper company procedures relating to processing and determination of
electrical service applications culminating in the . signing of service contracts, which constitutes the
very lifeblood of VECO's existence. He was further entrusted with handling the accounts of
customers and accepting payments from them.

Not only that, it was his duty to address customer complaints and requests. Being a front liner of
VECO, with the most consistent and direct interaction with customers, Mahilum's job involved a high
degree of responsibility requiring a substantial amount of trust and confidence on the part of his
employer, i.e., VECO.

However, with the derogatory statements issued by Mahilum that were intended to incite, not just
public condemnation of VECO, but antagonism and obstruction against rate increases in electricity
that it may be allowed, by law, to fix, there can be no dispute that VECO, indeed, had lost its trust
and confidence in Mahilum and his ability to perform his tasks with utmost efficiency and loyalty
expected of an employee entrusted to handle customers and funds. Settled is the rule that an
employer cannot be compelled to retain an employee who is guilty of acts inimical to the interests of
the employer. A company has the right to dismiss its employee if only as a measure of self
protection. 82

Thus, Mahilum was terminated for a just and valid cause. Moreover, as declared by the NLRC,
VECO complied with the procedural due process requirements of furnishing Mahilum with two
written notices before the termination of employment can be effected. On May 8, 2009,   Mahilum 83

was apprised of the particular acts for which his termination was sought; and, after due investigation,
he was given a Notice of Decision  on October 28, 2010 informing him of his dismissal from service.
84

The fact that Mahilum served the company for a considerable period of time will not help his cause.
It is well to emphasize that the longer an employee stays in the service of the company, the greater
is his responsibility for knowledge and compliance with the norms of conduct and the code of
discipline in the company.  85

As a final word, while it is the state's responsibility to afford protection to labor, this policy should not
be used as an instrument to oppress management and capital. In resolving disputes between labor
and capital, fairness and justice should always prevail. Social justice does not mandate that every
dispute should be automatically decided in favor of labor. Justice is to be granted to the deserving
and dispensed in the light of the established facts and the applicable law and doctrine.  86

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.
G.R. No. 201701               June 3, 2013

UNILEVER PHILIPPINES, INC., Petitioner,

vs.
MARIA RUBY M. RIVERA, Respondent.

DECISION

MENDOZA, J.:

Subject of this disposition is the petition for review on certiorari 1 under Rule 45 of the Rules of Court
filed by petitioner Unilever Philippines, Inc. (Unilever) questioning the June 22, 2011 Decision 2 and
the April 25, 2012 Resolution3 of the Court of Appeals (CA)-Cagayan de Oro City, in CA G.R. SP No.
02963-MIN, an Illegal Dismissal case filed by respondent Maria Ruby M. Rivera (Rivera). The CA
affirmed with modification the March 31, 2009 Resolution of the National Labor Relations
Commission (NLRC) finding Rivera's dismissal from work to be valid as it was for a just cause and
declaring that she was not entitled to any retirement benefit. The CA, however, awarded separation
pay in her favor as a measure of social justice.

The Facts

Unilever is a company engaged in the production, manufacture, sale, and distribution of various
food, home and personal care products, while Rivera was employed as its Area Activation Executive
for Area 9 South in the cities of Cotabato and Davao. She was primarily tasked with managing the
sales, distribution and promotional activities in her area and supervising Ventureslink International,
Inc. (Ventureslink), a third party service provider for the company’s activation projects. Unilever
enforces a strict policy that every trade activity must be accompanied by a Trade Development
Program (TDP) and that the allocated budget for a specific activity must be used for such activity
only.4

Sometime in 2007, Unilever’s internal auditor conducted a random audit and found out that there
were fictitious billings and fabricated receipts supposedly from Ventureslink amounting to
₱11,200,000.00. It was also discovered that some funds were diverted from the original intended
projects. Upon further verification, Ventureslink reported that the fund deviations were upon the
instruction of Rivera.

On July 16, 2007, Unilever issued a show-cause notice to Rivera asking her to explain the following
charges, to wit: a) Conversion and Misappropriation of Resources; b) Breach of Fiduciary Trust; c)
Policy Breaches; and d) Integrity Issues.

Responding through an email, dated July 16, 2007, Rivera admitted the fund diversions, but
explained that such actions were mere resourceful utilization of budget because of the difficulty of
procuring funds from the head office.5 She insisted that the diverted funds were all utilized in the
company’s promotional ventures in her area of coverage.

Through a letter, dated August 23, 2007, Unilever found Rivera guilty of serious breach of the
company’s Code of Business Principles compelling it to sever their professional relations. In a letter,
dated September 20, 2007, Rivera asked for reconsideration and requested Unilever to allow her to
receive retirement benefits having served the company for fourteen (14) years already. Unilever
denied her request, reasoning that the forfeiture of retirement benefits was a legal consequence of
her dismissal from work.

On October 19, 2007, Rivera filed a complaint for Illegal Dismissal and other monetary claims
against Unilever.
On April 28, 2008, the Labor Arbiter (LA) dismissed her complaint for lack of merit and denied her
claim for retirement benefits, but ordered Unilever to pay a proportionate 13th month pay and the
corresponding cash equivalent of her unused leave credits. The decretal portion of the LA decision
reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing for lack of merit the
illegal dismissal complaint. However, UNILEVER PHILIPPINES, INC. is hereby ordered to pay
complainant the total amount of PESOS: FIFTY SEVEN THOUSAND EIGHTY TWO & 90/100 ONLY
(₱57,082.90) representing proportionate 13th month pay and unused leave credits.

The complaint against individual respondents Recto Sampang and Alejandro Concha are likewise
dismissed for it was not shown that they acted in bad faith in the dismissal of complainant. Moreover,
their legal personality is separate and distinct from that of the corporation.

All other money claims are dismissed for lack of basis. 6

On appeal, the NLRC partially granted Rivera’s prayer. In its Resolution, dated November 28, 2008,
the NLRC held that although she was legally dismissed from the service for a just cause, Unilever
was guilty of violating the twin notice requirement in labor cases. Thus, Unilever was ordered to pay
her ₱30,000.00 as nominal damages, retirement benefits and separation pay. The dispositive portion
reads:

WHEREFORE, foregoing premises considered, the appeal is PARTIALLY GRANTED. The assailed
Decision dated 28 April 2008 is hereby MODIFIED in the sense that respondent UNILEVER
PHILIPPINES, INC. is hereby ordered to pay the following sums:

1. The amount of ₱30,000.00 representing nominal damages for violation of complainant’s

right to procedural due process;

2. Retirement benefits under the company’s applicable retirement policy or written

agreement, and in the absence of which, to pay complainant her retirement pay equivalent to
at least one-half (1/2) month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year;

3. Separation pay under the company’s applicable policy or written agreement, and in the
absence of which, to pay separation pay equivalent to at least one-half (1/2) month salary for
every year of service, a fraction of at least six (6) months being considered as one whole
year.

The rest of the Decision is hereby AFFIRMED.

SO ORDERED.7

Unilever asked for a reconsideration of the NLRC decision. In its Resolution, dated March 31, 2009,
the NLRC modified its earlier ruling by deleting the award of separation pay and reducing the
nominal damages from ₱30,000.00 to ₱20,000.00, but affirmed the award of retirement benefits to
Rivera. The fallo reads:

WHEREFORE, foregoing premises considered, the instant Motion for Partial Reconsideration is
PARTLY GRANTED. The Resolution dated 28 November 2008 of the Commission is hereby

RECONSIDERED as follows:

(1)The award of separation pay is hereby deleted for lack of factual and legal basis; and

(2)The award of nominal damages is hereby tempered and reduced to the amount of
₱20,000.00.

The rest of the award for retirement benefits is affirmed in toto.

SO ORDERED.8
Unsatisfied with the ruling, Unilever elevated the case to CA-Cagayan de Oro City via a petition for
certiorari under Rule 65 of the Rules of Court.

On June 22, 2011, the CA affirmed with modification the NLRC resolution. Justifying the deletion of
the award of retirement benefits, the CA explained that, indeed, under Unilever’s Retirement Plan, a
validly dismissed employee cannot claim any retirement benefit regardless of the length of service.
Thus, Rivera is not entitled to any retirement benefit. It stated, however, that there was no proof that
she personally gained any pecuniary benefit from her infractions, as her instructions were aimed at
increasing the sales efficiency of the company and competing in the local market. For said reason,
the CA awarded separation pay in her favor as a measure of social justice. 9 The decretal portion of
the CA decision reads:

WHEREFORE, the assailed Resolution dated March 31, 2009 of the NLRC (Branch 5), Cagayan De
Oro City is hereby AFFIRMED with MODIFICATION. Consequently, UNILEVER is directed to pay
MARIA RUBY M. RIVERA the following:

a) Separation pay, to be computed based on the company’s applicable policy or written

agreement, or in the absence thereof, the equivalent of at least one-half (1/2) month salary
for every year of service, a fraction of at least six (6) months being considered as one whole
year;

b) ₱20,000.00 as nominal damages; and

c) Proportionate 13th month pay and unused leave credits, to be computed based on her
salary during the period relevant to the case.

The award of retirement benefits is hereby DELETED.

SO ORDERED.10

Unilever filed a motion for partial reconsideration, 11 but it was denied in a Resolution, dated April 25,
2012.

Hence, this petition.12

In support of its position, Unilever submits for consideration the following

GROUNDS

I.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
GRANTING AFFIRMATIVE RELIEFS IN FAVOR OF RIVERA EVEN IF SHE DID NOT FILE ANY
PETITION FOR CERTIORARI TO CHALLENGE THE NLRC RESOLUTIONS.

II.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AWARDING SEPARATION PAY IN FAVOR OF RIVERA CONSIDERING THAT THE LATTER WAS
VALIDLY DISMISSED FROM EMPLOYMENT BASED ON JUST CAUSES UNDER THE LAW.

III.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
RULING THAT THE COMPANY VIOLATED RIVERA’S RIGHT TO PROCEDURAL DUE PROCESS
BEFORE TERMINATING HER EMPLOYMENT, AND CONSEQUENTLY, IN AWARDING NOMINAL
DAMAGES.13

Unilever argues that Rivera did not file any separate petition for certiorari before the CA. Neither did
she file any comment on its petition. Hence, it was erroneous for the CA to grant an affirmative relief
because it was inconsistent with the doctrine that a party who has not appealed cannot obtain from
the appellate court any affirmative relief other than the ones granted in the appealed decision. The
petitioner stresses that Rivera misappropriated company funds amounting to millions of pesos and
that granting her separation pay undermines the serious misdeeds she committed against the
company. Moreover, the length of her service with Unilever does not mitigate her offense, but even
aggravates the depravity of her acts.14

The petition is partly meritorious.

The pivotal issue in the case at bench is whether or not a validly dismissed employee, like Rivera, is
entitled to an award of separation pay.

As a general rule, an employee who has been dismissed for any of the just causes enumerated
under Article 28215of the Labor Code is not entitled to a separation pay. 16 Section 7, Rule I, Book VI
of the Omnibus Rules Implementing the Labor Code provides:

Sec. 7. Termination of employment by employer. — The just causes for terminating the services of
an employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or practice.

In exceptional cases, however, the Court has granted separation pay to a legally dismissed
employee as an act of "social justice" or on "equitable grounds." In both instances, it is required that
the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the
employee.17 The leading case of Philippine Long Distance Telephone Co. vs. NLRC 18 is instructive
on this point:

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

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and the separation pay has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is granted separation pay even as he is
validly dismissed, it is not unlikely that he will commit a similar offense in his next employment
because he thinks he can expect a like leniency if he is again found out.  This kind of misplaced
1âwphi1

compassion is not going to do labor in general any good as it will encourage the infiltration of its
ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best, it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character. 19

In the subsequent case of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v.
National Labor Relations Commission, 20 it was further elucidated that "in addition to serious
misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and
habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the
employer or his family, separation pay should not be conceded to the dismissed employee." 21 In
Reno Foods, Inc, v. Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan, 22 the Court wrote that
"separation pay is only warranted when the cause for termination is not attributable to the
employee’s fault, such as those provided in Articles 283 and 284 of the Labor Code, as well as in
cases of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an
employee is dismissed for just cause."23
In this case, Rivera was dismissed from work because she intentionally circumvented a strict
company policy, manipulated another entity to carry out her instructions without the company’s
knowledge and approval, and directed the diversion of funds, which she even admitted doing under
the guise of shortening the laborious process of securing funds for promotional activities from the
head office. These transgressions were serious offenses that warranted her dismissal from
employment and proved that her termination from work was for a just cause. Hence, she is not
entitled to a separation pay.

More importantly, Rivera did not appeal the March 31, 2009 ruling of the NLRC disallowing the
award of separation pay to her. It was Unilever who elevated the case to the CA. It is axiomatic that
a party who does not appeal, or file a petition for certiorari, is not entitled to any affirmative
relief.24 Due process prevents the grant of additional awards to parties who did not appeal. 25 An
appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the
judgment, but he cannot seek modification or reversal of the judgment or claim affirmative relief
unless he has also appealed. 26 It was, therefore, erroneous for the CA to grant an affirmative relief to
Rivera who did not ask for it.

Lastly, Unilever questions the grant of nominal damages in favor of Rivera for its alleged non-
observance of the requirements of procedural due process. It insists that she was given ample
opportunity "to explain her side, interpose an intelligent defense and adduce evidence on her
behalf." 27

The Court is not persuaded. Section 2, Rule XXIII, Book V of the Rules Implementing the Labor
Code expressly states:

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

— In all cases of termination of employment, the following standards of due process shall be
substantially observed.

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

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

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

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

In case of termination, the foregoing notices shall be served on the employee’s last known address.

King of Kings Transport, Inc. v. Mamac28 detailed the steps on how procedural due process can be
satisfactorily complied with. Thus:

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
 company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing
or conference, the employees are given the chance to defend themselves personally, with
the assistance of a representative or counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances involving
the charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment. 29

In this case, Unilever was not direct and specific in its first notice to Rivera. The words it used were
couched in general terms and were in no way informative of the charges against her that may result
in her dismissal from employment. Evidently, there was a violation of her right to statutory due
process warranting the payment of indemnity in the form of nominal damages. Hence, the Court
finds no compelling reason to reverse the award of nominal damages in her favor. The Court,
however, deems it proper to increase the award of nominal damages from ₱20,000.00 to
₱30,000.00, as initially awarded by the NLRC, in accordance with existing jurisprudence. 30

WHEREFORE, the petition is hereby PARTIALLY GRANTED.  The June 22, 2011 Decision and the
1âwphi1

April 25, 2012 Resolution of the Court of Appeals (CA)-Cagayan de Oro City in CA-G.R. SP No.
02963-MIN are AFFIRMED with MODIFICATION. The dispositive portion should read as follows:

WHEREFORE, the March 31, 2009 Resolution of the NLRC (Branch 5), Cagayan de Oro City, is
hereby AFFIRMED with MODIFICATION. UNILEVER PHILIPPINES, INC., is hereby directed to pay
MARIA RUBY M. RIVERA the following:

a) ₱30,000.00 as nominal damages; and

b) Proportionate 13th month pay and unused leave credits, to be computed based on her
salary during the period relevant to the case.

The award of retirement benefit is DELETED.

SO ORDERED.
G.R. No. 184011               September 18, 2013

REYNALDO HAYAN MOYA, Petitioner,

vs.
FIRST SOLID RUBBER INDUSTRIES, INC., Respondent.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari 1 from the Decision2 of the Special Third
Division of the Court of Appeals in CA-G.R. SP No. 99500 dated 30 April 2008, modifying the
Decision of the National Labor Relations Commission (NLRC) by deleting the award of separation
pay in favor of Reynaldo Hayan Moya (Moya). The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED. The Resolutions dated
January 31, 2007 and April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA
No. 048653-06 (NLRC NCR Case No. 00-11-12626 2004) affirming the Decision dated February 28,
2006 of the Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting the award for separation
pay in favor of private respondent Reynaldo Hayan Moya. 3

The facts as gathered by this Court follow:

On 25 January 2005, Moya filed before the NLRC-National Capital Region a complaint for illegal
dismissal against First Solid Rubber Industries, Inc. (First Solid) and its President Edward Lee
Sumulong. In his complaint-affidavit,4 Moya alleged that:

1. Sometime in May 1993, he was hired by the company First Solid, a business engaged in
manufacturing of tires and rubbers, as a machine operator;

2. Through years of dedication to his job, he was promoted as head of the Tire Curing
Department of the company;

3. On October 15, 2004, he reported an incident about an under curing of tires within his
department which led to the damage of five tires;

4. The company conducted an investigation of the incident and he was later required to
explain;

5. In his explanation, he stated that the damage was caused by machine failure and the
incident was without any fault of the operator;

6. Despite his explanation of what transpired, he was terminated by the company through a
letter dated November 9, 2004.

From the foregoing, he prayed that payment of backwages, separation pay, moral damages and
exemplary damages be adjudged in his favor due to the illegal dismissal he suffered from the
company.

Moya, through his Reply,5 added that his termination fell short of any of the just causes of serious
misconduct, gross and habitual neglect of duties and willful breach of trust. He pointed out that the
company failed to prove that his act fell within the purview of improper or wrong misconduct, and that
a single act of negligence as compared to eleven (11) years of service of good record with the
company will not justify his dismissal.

First Solid, in its Position Paper, 6 Reply7 and Memorandum,8 admitted that Moya was a former
employee of the company and was holding the position of Officer-in-Charge of the Tire Curing
Department until his valid dismissal. However, it denied that it illegally dismissed Moya and
maintained that his severance from the company was due to a valid exercise of management
prerogative.9 The company insisted on its right to validly dismiss an employee in good faith if it has a
reasonable ground to believe that its employee is responsible of misconduct, and the nature of his
participation therein renders him absolutely unworthy of the trust and confidence demanded by his
position.10

Opposing the story of Moya, the company countered that Moya, who was exercising supervision and
control over the employees as a department head, failed to exercise the diligence required of him to
see to it that the machine operator, Melandro Autor, properly operated the machine. This act is
considered as a gross and habitual neglect of duty which caused actual losses to the company. 11

During the initial investigation, Moya, in his Explanation Letter 12 dated 15 October 2004, insisted that
the cause of the damage of five (5) tires was due to premature hauling of the tires below curing time.
Unsatisfied with the explanation, the company sent Moya a Letter 13 dated 26 October 2004 stating
that he failed to explain what really transpired in the under curing of tires. The company informed
Moya that the damage was caused by the operator’s unlawful setting of the timer from manual to
automatic without Moya’s permission. To make the matter worse, Moya failed to disclose the real
situation that the operator was at fault.

Moya was given twenty-four (24) hours to defend himself and explain the matter. In response, Moya
admitted in a letter dated 29 October 2004 his mistake of not disclosing the true incident and
explained that he found it more considerate to just let the operator be suspended and be fined for
the damage committed. He denied any willful intention to conceal the truth or cover up the mistake of
his employee. Finally, he asked for the company’s forgiveness for the fault he had committed. 14 In a
letter dated 3 November 2004, Moya reiterated his plea for forgiveness and asked for another
chance to continue his employment with the company. 15

Procedural due process, through issuance of twin notices, was also complied with by the company.
Moya was informed of the charges against him through a memorandum 16 indicating his violation and
was given an opportunity to answer or rebut the charges. After giving his explanation through
several letters to the company, a notice was sent informing him of the management’s decision of his
dismissal and termination from services on9 November 2004 based on serious misconduct, gross
and habitual neglect of duty and willful breach of trust reposed upon him by the company. 17

On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr. rendered a judgment 18 finding sufficient
and valid grounds to dismiss Moya for concealing and lying to First Solid about the factual
circumstances leading to the damage of five (5) tires on 15 October 2004. However, it ruled that the
dismissal from service of the complainant was too harsh as a penalty since it was a first offense and
there was no willful and malicious intention on his part to cause damage. The dispositive portion
reads:

WHEREFORE, judgment is hereby rendered ordering Respondents First Solid Rubber Industrial,
Inc. and Edward Lee Sumulong to jointly and severally pay complainant separation pay in lieu of
reinstatement the amount of ₱63, 654.00.

All other claims whether monetary or otherwise are hereby DISMISSED for lack of merit. 19

In justifying his decision, the Labor Arbiter explained that the length of time during which the
complainant was deprived of employment was sufficient penalty for the act he had committed
against the company. As a result, his reinstatement without backwages to his former position was in
order. However, since the employment was already strained and Moya was no longer seeking to be
reinstated, he decided that it was for the best interest of both parties to award instead a separation
pay of one (1) month salary for every year of credited service less the total of cash advances of the
complainant amounting to ₱19,000.00. 20

Not in total accord with the outcome of the decision, First Solid filed its partial appeal before the
NLRC on 13 April 2006. The company assailed as error on the part of the Labor Arbiter the grant of
separation pay in favor of Moya despite the finding that there was a just cause for the employee’s
dismissal from service. It was submitted that the complainant’s length of service to the company
cannot be invoked to justify the award. It was argued that Moya was dismissed for just causes;
hence, to award separation pay would be tantamount to giving a prize for disloyalty and breach of
trust.21

On 31 January 2007, the NLRC affirmed the Decision of the Labor Arbiter in its entirety. 22

The NLRC affirmed the finding of the Labor Arbiter that a separation pay should be given to Moya in
lieu of reinstatement citing primarily his length of service and years of contribution to the profitable
business operation of the company. It also noted that this transgression was the first mistake of
Moya in the performance of his functions. Finally, it cited as justification the Court’s ruling in St.
Michael’s Institute v. Santos,23 wherein the Court held that "even when an employee is found to have
transgressed the employer’s rules, in the actual imposition of penalties upon the erring employee,
due consideration must still be given to his length of service and the number of violations committed
during his employment."24

In its Motion for Reconsideration, 25 First Solid insisted that length of service cannot mitigate breach
of trust which is penalized with dismissal.

On 24 April 2007, the NLRC denied the motion of First Solid as it found no compelling justification to
overturn its findings.26

In its Petition for Certiorari before the Court of Appeals, the company reiterated its previous
arguments that separation pay cannot be awarded to validly dismissed employees and that length of
service was not a ground to reduce the penalty of dismissal due to breach of trust. 27

In his Comment28 and Memorandum,29 Moya capitalized on the pronouncement of the Labor Arbiter

that his alleged infraction does not merit a penalty of dismissal from service given his length of
service to the company as well as the failure of the company to prove that he acted maliciously and
with the intention to cause damage.

First Solid, in its Reply30 and Memorandum,31 argued that Moya, being a supervisor, the company
reposed on him its trust and confidence. He was expected to remain loyal and trustworthy and
promote the best interest of the company. His act of concealing, by making a fraudulent report to the
company regarding the transgression of the machine operator under him, is a valid basis for
dismissal based on breach of trust and confidence. The company further contended that the award
of separation pay made by the labor tribunals was contrary to law and jurisprudence.

In its Decision,32 the Court of Appeals ruled in favor of the company and reversed the decisions of
the labor tribunals. The dispositive portions reads:

WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated January 31,
2007 and April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA No. 048653-
06(NLRC NCR Case No. 00-11-12626-2004) affirming the Decision dated February 28, 2006 of the
Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting the award for separation pay in favor of
private respondent Reynaldo Hayan Moya.33

The appellate court ruled that an employee found to be guilty of serious misconduct or other acts
reflecting his moral character is not entitled to separation pay. Moya who held a supervisory position
as the Head of the Curing Department breached the trust reposed upon him when he did not
disclose what was actually done by the machine operator which eventually caused the damage. It
was only when the company discovered that the report was not in accordance with what really
transpired that Moya admitted its mistake. In sum, the appellate court agreed that First Solid
presented substantial proof to consider Moya as dishonest and disloyal to the company.

It took the position that instead of being a basis for the award of separation pay, Moya’s length of
service should have been taken against him. The reason for his dismissal was his lack of integrity
and loyalty to the company reflecting upon his moral character.

The appellate court emphasized that while the law is considerate to the welfare of the employees
whenever there is a labor conflict, it also protects the right of an employer to exercise its
management prerogative in good faith.
 The Court’s Ruling

That there is a valid ground for the dismissal of Moya based on breach and loss of trust and
confidence is no longer at issue. The Labor Arbiter, NLRC and the appellate court were unanimous
in their rulings on this matter. The remaining question is whether or not petitioner employee is
entitled to separation pay based on his length of service.

Petitioner is not entitled to separation pay. Payment of separation pay cannot be justified by his
length of service.

It must be stressed that Moya was not an ordinary rank-and-file employee. He was holding a
supervisory rank being an Officer-in-Charge of the Tire Curing Department. The position, naturally
one of trust, required of him abiding honesty as compared to ordinary rank-and-file employees.
When he made a false report attributing the damage of five tires to machine failure, he breached the
trust and confidence reposed upon him by the company.

In a number of cases,34 this Court put emphasis on the right of an employer 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.35 It is a general principle of labor law to discourage interference with an employer’s
judgment in the conduct of his business. As already noted, even as the law is solicitous of the
welfare of the employees, it also recognizes employer’s exercise of management prerogatives. 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.36

Following the ruling in The Coca-Cola Export Corporation v. Gacayan, 37 the employers have a right
to impose a penalty of dismissal on employees by reason of loss of trust and confidence. More so, in
the case of supervisors or personnel occupying positions of responsibility, does loss of trust justify
termination. Loss of confidence as a just cause for termination of employment is premised on the
fact that an employee concerned holds a position of trust and confidence. This situation holds where
a person is entrusted with confidence on delicate matters, such as the custody, handling, or care
and protection of the employer’s property. But, in order to constitute a just cause for dismissal, the
act complained of must be "work-related" such as would show the employee concerned to be unfit to
continue working for the employer. 38

The foregoing as viewpoint, the right of First Solid to handle its own affairs in managing its business
must be respected. The clear consequence is the denial of the grant of separation pay in favor of
Moya.

As pronounced in the recent case of Unilever Philippines, Inc., v. Rivera, 39 an employee who has
been dismissed for any of the just causes enumerated under Article 282 40 of the Labor Code,
including breach of trust, is not entitled to separation pay. 41 This is further bolstered by Section
7,Rule I, Book VI of the Omnibus Rules Implementing the Labor Code which provides that:

Sec. 7. Termination of employment by employer. — The just causes for terminating the services of
an employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or practice. 1âwphi1

However, this Court also provides exceptions to the rule based on "social justice" or on "equitable
grounds" following the ruling in Philippine Long Distance Telephone Co. v. NLRC, 42 stating that
separation pay shall be allowed as a measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the
employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice. 43
The PLDT case further elucidates why an erring employee could not benefit under the cloak of social
justice in the award of separation pay, we quote:

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character. 44

Moya’s dismissal is based on one of the grounds under Art. 282 of the Labor Code which is willful
breach by the employee of the trust reposed in him by his employer. Also, he is outside the
protective mantle of the principle of social justice as his act of concealing the truth from the company
is clear disloyalty to the company which has long employed him. 1âwphi1

Indeed, as found below, Moya’s length of service should be taken against him. The pronouncement
in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan 45 is instructive on the
matter:

x x x Length of service is not a bargaining chip that can simply be stacked against the employer.
After all, an employer-employee relationship is symbiotic where both parties benefit from mutual
loyalty and dedicated service. If an employer had treated his employee well, has accorded him
fairness and adequate compensation as determined by law, it is only fair to expect a long-time
employee to return such fairness with at least some respect and honesty. Thus, it may be said that
betrayal by a long-time employee is more insulting and odious for a fair employer. 46 (Emphasis
supplied).

WHEREFORE, we DENY the petition for review on certiorari. The Decision dated 30 April 2008 and
Resolution dated 1 August 2008 of the Special Third Division of the Court of Appeals in CA-G.R. SP
No. 99500 are hereby AFFIRMED.
G.R. No. 125792 November 9, 1998

PHILIPPINE AIRLINES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER MANUEL ASUNCION;
MANUEL PARENAS, DANIEL GACO, RODOLFO SIARON, ALFREDO C. MONTILLA, ROMULO
S. CASTRO, ELSA CASTRO, MARCELO PARAGAS, ROMULO PARANE, RAFAEL SANCHEZ,
INOCENCIO ALCANTARA, REYNALDO PARAISO, ROBERTO GERONIMO, NOMER E.
PESCANTE, BENEDICTO SANTOS, ALBERTO TOMAS, BONIFACIO BAYETA JR., DANILO
RODRIGUEZ, CARLETO DE LA CRUZ, RAFAEL BEQUIO, EDUARDO SITJAR, RUBEN
TANSECO, TODORO K. DISCAYA, ERNESTO EVARDONE, ARNULFO LAVILLA, GLECERIO
ELABARIN, MARCELINO CANEDA, EPIFANIO GALIBO, BENJAMIN GANDELARIA, LINO B.
DAHOHOY, AVELINO MULLET, JIMMY M. CORDERO, IVANHOE MAGINO, FELIX V.
CATINDOY, RUBEN DALUZ, ABENIR YARA, SANTIAGO CORTEZ JR., ARMANDO P. LUCIDO,
ALBERTO MONTILLA, RENERIO CAPON, LEONARDO BARROZO, IRENEO FRONDOZO,
DIONESIO BANARES, MARCELO MANZON, ALFREDO STA. MARIA, BERNARDO MAMARIL,
CARLOS DELLORO, ALCON DE LA TORRE, FLORENTINO PESTIDO and STELLAR
INDUSTRIAL SERVICES, INC., respondents.

PANGANIBAN, J.:

In legitimate job contracting, an independent contractor undertakes to perform work on its own
account, under its own responsibility and according to its own manner and method, free from the
control and direction of the principal. No employment relationship arises between its employees and
the principal. Consequently, the said employees can claim separation pay only from the independent
contractor, and not from the principal.

The Case

These principles are used by the Court in granting this special civil action for certiorari, seeking to
nullify the July 13, 1994 Decision and the June 27, 1996 Resolution of the National Labor Relations
Commission, which held Philippines Airlines, Inc. liable for separation pay.

In five separate complaints for separation pay  filed by the individual private respondents against
1

Philippine Airlines (PAL), Inc. (herein petitioner) and Stellar Industrial Services, Inc.
(STELLAR, for brevity), Labor Arbiter Manuel P. Asuncion rendered on October 29, 1993 a
Decision which held:  2

WHEREFORE, premises considered, . . . PAL is hereby ordered to pay the

following complainants separation pay at the rate of one month salary for
every year of service, thus:

1.) Manuel F. Parenas — P17,264.75

2.) Daniel Gaco — 37,982.45

3.) Rodolfo Siaron — 31,076.55

4.) Alfredo C. Montilla — 31,076.55

5.) Romulo S. Castro — 27,623.60

6.) Elsa C. Castro — 31,076.55

7.) Marcelo Paragas — 44,888.35

8.) Romulo Parane — 13,411.80

9.) Rafael Sanchez — 31,076.55

10.) Inocencio Alcantara — 51,794.25

11.) Reynaldo Paraiso — 17,264.75

12.) Roberto Geronimo — 58,700.15

13.) Nomer E. Pescante — 24,170.65

14.) Benedicto Santos — 55,247.20

15.) Alberto Tomas — 20,717.70

16.) Bonifacio Bayeta, Jr.— 27,623.60

17.) Danilo Rodriguez — 27,623.60

18.) Carleto de la Cruz — 44,888.35

19.) Rafael Bequio — 20,717.70

20.) Eduardo Sitjar — 20,717.70

21.) Ruben M. Tanseco — 20,717.70

22.) Teodoro K. Discaya — 44,888.35

23.) Ernesto Evardone — 48,341.30

24.) Arnulfo Lavilla — 10,358.85

25.) Glecerio Elabarin — 27,623.60

26.) Marcelino Caneda — 27,623.60

27.) Epifanio Galibo — 20,717.70

28.) Benjamin Gandalera — 58,700.15

29.) Lino B. Dagohoy — 27,623.60

30.) Avelino Mullet — 27,623.60

31.) Jimmy M. Cordero — 20,717.70

32.) Ivanhoe Magno — 41,435.40

 33.) Felix V. Catindoy — 24,170.65

34.) Ruben Daluz — 37,982.45

35.) Abenir R. Yarra — 41,435.40

36.) Santiago Cortes Jr. — 24,170.65

37.) Armando P. Lucido — 24,170.65

38.) Alberto Montilla — 34,529.50

39.) Renerio Capon — 17,264.75

40.) Leonardo Barroso — 6,905.90

41.) Ireneo Frondozo — 62,153.10

42.) Dionesio Banares — 24,170.65

43.) Marcelo Marzan — 20,717.70

44.) Alfredo Sta. Maria — 55,247.20

45.) Bernardo Mamaril — 13,811.80

46.) Carlos Delloro — 44,888.35

47.) Alcon de la Torre — 24,170.65

48.) Florentino Pestijo — 24,170.65

The complaints of Edwin Pilapil, Pedro Bermas, and Orlando Orpiada against
Stellar Industrial Services, Inc., are dismissed for lack of merit.

On appeal, the National Labor Relations Commission (NLRC)  affirmed the labor arbiter's
3

Decision in this wise:

4

WHEREFORE, except insofar as Stellar Industrial Services, Inc. is held jointly

and severally liable with Philippine Airlines for the payment of complainants'
separation benefits, the Decision appealed from is hereby AFFIRMED.

However, acting on the Motions for Reconsideration separately filed by petitioner and
STELLAR, the NLRC modified its earlier Decision and ruled:  5

WHEREFORE, our July 13, 1994 decision is hereby modified in that the
separation pay adjudged in this case is hereby declared to be the sole liability
of [Petitioner] Philippine Airlines, Inc.

The Facts

The undisputed facts of this case, as summarized by the solicitor general, are as follows: 6

Sometime in 1977, PAL, a local air carrier, entered into a service agreement
with STELLAR, a domestic corporation engaged, among others, in the
business of job contracting janitorial services (PAL and STELLAR's
Agreement, Annex "1" of PAL's Position Paper, Annex "F", id.).

Pursuant to their service agreement, which was impliedly renewed year after
year, STELLAR hired workers to perform janitorial and maintenance services
for PAL. Among those employed were [Complainants] Manuel Parenas, Daniel
 Gaco, Rodolfo Siaron, Alfredo C. Montilla, Romulo S. Castro, Elsa C. Castro,
Marcelo Paragas, Romulo Parane, Rafael Sanchez, Inocencio [Alcantara],
Reynaldo Paraiso, Roberto Geronimo, Nomer E. Pescante, Benedicto Santos,
Alberto Tomas, Bonifacio Bayeta, Jr., Danilo Rodriguez, Carleto dela Cruz,
Rafael Bequio, Eduardo Sitjar, Ruben Tanseco, Teodoro K. Discaya, Ernesto
Evardone, Arnulfo Lavilla, Glecerio Elabarin, Marcelino Caneda, Epifanio
Galibo, Benjamin Gandelaria, Lino B. Dahohoy, Avelino Mullet, Jimmy M.
Cordero, Ivanhoe Magino, Felix B. Catindoy, Ruben Daluz, Abenir Yara,
Santiago Co[r]tez, Jr., Armando P. Lucido, Alberto Montilla, Renerio Capon,
Leonardo Barrozo, Ireneo Frondozo, Dionesio Banares, Marcelo Marzon,
Alfredo Sta. Maria, Bernardo Mamaril, Carlos Delloro, Aldon dela Torre and
Florentino Pestido, who were assigned at PAL's various premises under the
supervision of STELLAR's supervisors/foremen and timekeepers. The workers
were also furnished by STELLAR with janitorial supplies, such as vacuum
cleaner and polisher (Please see Manuel Parenas' Contract of Employment
with STELLAR, Annex "1" of Annex "E", id.; STELLAR's Position Paper, pp. 2-
5, supra; TSN, May 20, 1993, pp. 15-16 and 19-20).

On December 31, 1990, the service agreement between PAL and STELLAR
expired. PAL then called for [the] bidding of its janitorial requirements. This
notwithstanding, STELLAR exerted efforts to maintain its janitorial contract
with PAL which, in the meantime, allowed Manuel Parenas and others to work
at the PAL's premises (STELLAR's Position Paper, pp. 2-5, supra, and
Memorandum of Appeal, Annex "H", pp. 3-4, id.; Carlos Callanga's Affidavit, p.
2, pp. 156-160 Records; Annex "2" of STELLAR's Position Paper, supra; PAL's
Memorandum of Appeal, p. 2, Annex "G", Petition).

Subsequently, in a letter dated October 31, 1990, PAL formally informed

STELLAR that the service agreement would no longer be renewed effective
November 16, 1991, since PAL's janitorial requirements were bidded to three
other job contractors (Annex "2" of STELLAR's Position Paper, supra; PAL's
Memorandum of Appeal, p. 2, supra).

Alleging that they were illegally dismissed, the aforenamed individual private
respondents filed, from January to June 1992, five complaints against PAL and
STELLAR for illegal dismissal and for payment of separation pay (Annexes
"C", "C-1" to "C-19", id.).

The Ruling of Respondent Commission

In its Decision affirming the ruling of the labor arbiter, Respondent Commission held
petitioner, as an indirect employer, jointly and severally liable with STELLAR for separation
pay. First, the individual private respondent's work, although not directly related to the
business of petitioner, was necessary and desirable for the maintenance of the petitioner's
premises and airplanes. Second, the individual private respondents were retained for thirteen
long years, despite the fact that the contract, which petitioner had entered into STELLAR in
1977, was only for one year.

On reconsideration, the NLRC modified its earlier Decision by absolving STELLAR of liability,
thereby making PAL solely responsible for the award decreed by the labor arbiter. It held
that, first, petitioner was the employer of the individual private respondents, for it engaged in
labor-only contracting with STELLAR. This was shown by the failure of petitioner to refute the
factual finding that it continued to employ the individual private respondents after the
expiration of the service contract on December 31, 1990. Second, the individual private
respondents' admission in their Complaint that they were employees of STELLAR was not
conclusive, as the existence of an employer-employee relation was a question of law that
could not be the subject of stipulation. Respondent Commission concluded that their
dismissal was without just and valid cause. Because they were no longer seeking
reinstatement, petitioner was liable for separation pay.

Hence, this petition.   When required by the Court to comment on behalf of Respondent
7

Commission, the solicitor general manifested his disagreement with the assailed Decision
and Resolution. Thus, Respondent Commission, in compliance with the February 5, 1997
Resolution of this Court,  filed its own Comment.
8
 The Issues

In its Memorandum,  petitioner imputes grave abuse of discretion to Respondent Commission

9

in this wise: 
10

(a) [I]n holding that the janitorial service agreement with STELLAR was a labor-
only arrangement;

(b) [I]n holding that PAL continued with the services of the individual
respondents after November 16, 1991, when the janitorial agreement with
STELLAR expired; and

(c) [I]n holding PAL liable for payment of separation pay to the individual
respondents.

The petition raises two main issues. First, whether the individual private respondents are
regular employees of PAL. Second, whether petitioner is liable to them for separation pay.
The resolution of the first issue involves a determination of (1) whether petitioner was a
labor-only contractor; and (2) whether the individual private respondents became regular
employees of PAL because they were allowed to continue working for petitioner after the
expiration of the service contract.

The Court's Ruling

The petition is meritorious.

First Issue: No Employer-Employee Relation

Between Complainants and Petitioner

Janitorial Service Agreement Is

Not Labor-Only Contacting

Prohibited labor-only contracting is defined in Article 106 of the Labor Code as follows:

Art. 106. Contractor or subcontractor. — . . .

x x x           x x x          x x x

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 persons 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.

This definition covers any person who undertakes to supply workers to an employer, where
such person:

(1) Does not have substantial capital or investment in the form of tools,
equipment, [machinery], work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the
employer in which workers are habitually employed.  11

On the other hand, permissible job contracting requires the following conditions:

(1) The contractor carries on an independent business and undertakes the

contract work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of his
 employer or principal in all matters connected with the performance of the
work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools,
equipment, [machinery], work premises, and other materials which are
necessary in the conduct of his business.  12

Applying the foregoing provisions to the present case, the Court finds no basis for holding
that PAL engaged in labor-only contracting. The true nature of the individual private
respondents' employment is evident from the service agreement between petitioner and
STELLAR, which we reproduce hereunder:

1. The CONTRACTOR [STELLAR] undertakes to provide the following cleaning

and janitorial maintenance services.

Daily Routine:

(a) Dusting and/or damp-wiping of other vertical

and horizontal surfaces that require daily
attention;

(b) Sweeping and mopping of floors;

(c) Polishing and spot-scrubbing of [illegible];

(d) Dusting, damp-wiping and polishing of

[furniture], counters, . . . and other office fixtures;

(e) Emptying and cleaning of ash trays;

(f) Cleaning and disinfecting of toilets and

washrooms;

(g) Cleaning of inside windows, glasses, surfaces,

[partitions], etc.;

(h) On-the-job supervision.

2. The CONTRACTOR shall provide sufficient personnel, equipments [sic],

supplies, and materials to carry out the undertakings; specified in the
preceding paragraph, except that water and electricity consumption shall be
for the account of the OWNER. The CONTRACTOR expressly represents that to
adequately and suitably comply with the undertakings under paragraph 1 of
this Agreement, the CONTRACTOR shall assign at least eight (8) employees,
six (6) days a week except Legal Holidays, to the OWNER's premises to
perform the work undertaken by the CONTRACTOR under this Agreement. To
comply with such minimum requirements, the CONTRACTOR shall at all times
be ready with relievers and/or replacements to ensure continuous and
uninterrupted work in case of absences of each assigned employee.

(3) The equipment, materials and supplies to be used by the CONTRACTOR in

connection with its aforesaid undertakings shall be of high quality and shall
not cause any damage to OWNER's premises and properties or cause any
injury or annoyance to the persons working or present in the premises. The
OWNER shall place at the disposal of the CONTRACTOR a suitable storage
space with lock and key for the safe-keeping of the cleaning equipment and
materials which the . . . CONTRACTOR shall use in connection with its
undertakings in . . . Agreement.

4. The CONTRACTOR warrants that the persons it shall employ to perform the
work subject to this Agreement shall be honest, reliable, carefully screened,
trained, cooperative, and in possession of health certificates and police
clearances; they will be neat, presentable in appearance, attired in identifying
 uniforms and provided with identification cards. The uniforms and
identification cards shall be at the expense of the CONTRACTOR.

5. In consideration of the services to be rendered by the CONTRACTOR, the

OWNER shall pay to the CONTRACTOR the sum of PESOS: THREE
THOUSAND EIGHT HUNDRED FORTY (P3,840.00) per month in Philippine
Currency, payable in two equal payments on the 15th and end of each month
without necessity of demand. In the event that the minimum wage rate shall be
increased by the operation of law, there shall be a corresponding automatic
increase in the consideration of the contract price to be paid by the OWNER to
the CONTRACTOR in consideration of the latter's services.

6. In case the OWNER shall require the CONTRACTOR to perform the work
provided under paragraph 1 hereof in excess of eight hours on: (1) any regular
working day, the OWNER shall pay the CONTRACTOR an additional amount to
be computed in the following manner:

x x x           x x x          x x x

7. It is agreed that no authority has been conferred upon the CONTRACTOR by

the OWNER to hire any person on behalf of the latter and that each person
employed or hired by the CONTRACTOR in carrying out its part of this
Agreement shall be paid by the CONTRACTOR, and that no such person
employed or hired shall be deemed [an] employee or agent of the OWNER.

8. It is furthermore agreed that the CONTRACTOR shall select, engage and

discharge its employees and shall have direct . . . control [of their] services.
The CONTRACTOR shall likewise have absolute prerogative to determine the
rate of wages or salaries of the employees.

9. It is further agreed that the CONTRACTOR shall comply with all the
requirements of laws, decrees, municipal ordinances, and regulations
including but not limited to payment of State Insurance Fund, Medicare
contributions, SSS contributions, and the Withholding Taxes of its employees.

10. This agreement shall be for a period of one (1) year from May 1, 1977 to
April 30, 1978 and [illegible].

The foregoing agreement clearly indicates that an employee-employer relation existed

between the individual private respondents and STELLAR, not PAL. The provisions of the
agreement demonstrate that STELLAR possessed these earmarks of an employer: (1) the
power of selection and engagement of employees (Stipulation Nos. 1, 4, 7 and 8), (2) the
payment of wages (Stipulation Nos. 5, 6, 7 and 8), (3) the power of dismissal, and (4) the
power to control the employee's conduct (Stipulation No. 8).  13

Aside from these stipulations in the service agreement, other pieces of evidence support the
conclusion that STELLAR, not PAL, was the employer of the individual private respondents.
A contract of employment   existed between STELLAR and the individual private
14

respondents, proving that it was said corporation which hired them. It was also STELLAR
which dismissed them, as evidenced by Complainant Parenas' termination letter, which was
signed by Carlos P. Callanga, vice president for operations and comptroller of
STELLAR.   Likewise, they worked under STELLAR's own supervisors, Rodel Pagsulingan,
15

Napoleon Parungao and Renato Topacio.   STELLAR even had its own collective bargaining
16

agreement with its employees, including the individual private respondents.   Moreover, PAL
17

had no power of control and dismissal over them.

In fact, STELLAR claims that it falls under the definition of an independent job contractor.
Thus, it alleges that it has sufficient capital in the form of tools and equipment, like vacuum
cleaners and polishers, and substantial capitalization as proven by its financial
statements.   Further, STELLAR has clients other than petitioner, like San Miguel
18

Corporation, Hongkong and Shanghai Bank, Eveready, Benguet Management Corporation

and Japan Airlines.  19
All these circumstances establish that STELLAR undertook said contract on its account,
under its own responsibility, according to its own manner and method, and free from the
control and direction of the petitioner. Where the control of the principal is limited only to the
result of the work, independent job contracting exists.   The janitorial service agreement
20

between petitioner and STELLAR is definitely a case of permissible job contracting.

Extension of Service Contract is

Not a Source of Employer-Employee
Relation

Respondent NLRC found that petitioner was the individual private respondents' employer,
based primarily on the continued engagement of the employees after the expiration of the
service contract. It ruled: 
21

Our taking cognizance of the fact that PAL, despite the expiration of its
contract with Stellar on December 31, 1990 continued with the service of some
of the complainants "as late as 1991", should have been enough notice for
them to refute this fact come [the] . . . motion for reconsideration.

But again, perusing PAL's motion for reconsideration, we note that . . . it never refuted the
finding below that it continued employing the complainants after its service contract with
Stellar expired. We thus cannot but hold on to our view that PAL should be answerable to the
separation pay awarded below not only for its engaging in a labor-only contract with Stellar
but more importantly for its continued employment of complainants after its service contract
with Stellar (the argued employer of complainants) expired.

In its Comment,   NLRC, citing Loadstar Shipping Co, Inc. v. Gallo,   defended its position on
22 23

the ground that judicial review by this Court does not include appreciation of the evidence,
but is confined only to issues of jurisdiction or grave abuse of discretion.

In trying to support this finding, the individual respondents presented, on the other hand, an
entirely different theory — that petitioner, by allowing them to continue working after the
expiration of the service agreement, because their successor — employer. In their
Memorandum,   they argue:
24

. . . [T]he records and evidence show that the janitorial service contract
between PAL and Stellar expired on December 31, 1990, and not on November
16, 1991 [as stated in the October 31, 1990 letter of the petitioner].

x x x           x x x          x x x

As a consequence of petitioner's letter and upon knowledge of the termination

of [the] janitorial service contract, respondent Stellar formally notified each of
the [complainants] that their individual employment contract likewise be
terminated effective November 16, 1991. Furthermore, it has been expressly
and uniformly stated in each of [complainants'] employment contract that their
services would last upon the termination of the janitorial service contract
between PAL and Stellar which was of course supposedly on December 31,
1990. By working up to the time of the final termination which is November 16,
1991, from December 31, 1990, private respondents became direct employees
of PAL.

x x x           x x x          x x x

Petitioner's continued employment of [complainants] inspite of the expiration

of the janitorial contract is an implied absorption to the point of making them
its regular employees and making illegal their subsequent termination from
service. . . . As held by the Supreme Court, employees absorbed by [a]
successor employer enjoy the continuity of their employment status and their
rights and privileges (International Container Terminal Services, Inc. vs. NLRC,
G.R. N[o]. 982950-99, April 10, 1996, citing the case of Sumandi vs.
Leogardo, et al., G.R. N[o]. 67635, January 17, 1985). . . . .  25
Both contentions are untenable. First, while the issue of labor-only contracting may involve
some factual considerations, the existence of an employer-employee relation is nonetheless
a question of law.   Thus, it falls squarely within the ambit of this Court's judicial
26

review. Second, individual private respondents' invocation of the successor-employer

doctrine is not warranted. This doctrine involves a transfer of ownership of the business to a
new employer. Where the change of ownership is in bad faith or is used to defeat the rights
of labor, the successor-employer is deemed to have absorbed the employees and is held
liable for the transgressions of his or her
predecessor.   Petitioner, however did not become the successor-employer of the individual
27

private respondents when the service contract expired. There was no transfer of the business
of STELLAR in this particular case. The separate undertakings of petitioner and STELLAR
continued even after the expiration of the service contract and the dismissal of individual
private respondents.

Indeed, we agree with the solicitor general's explanation of this matter:  28

. . . What actually happened was that PAL and STELLAR impliedly renewed, as
they had previously done before, their service agreement until PAL's janitorial
requirements were bidded to other job contractors. This explains why the
individual private respondents remained working at PAL's premises even after
December 31, 1990.

From the foregoing disquisition, it is evident that petitioner was engaged in permissible job
contracting and that the individual private respondents, for the entire duration of their
employ, were employees not of petitioner but of STELLAR. In legitimate job contracting, no
employer-employee relation exists between the principal and the job contractor's employees.
The principal is responsible to the job contractor's employees only for the proper payment of
wages.   But in labor-only contracting, an employer-employee relation is created by law
29

between the principal and the labor-only contractor's employees, such that the former is
responsible to such employees, as if he or she had directly employed them.   Besides, the
30

Court has already taken judicial notice of the general practice adopted in several government
and private institutions of securing janitorial services on an independent contractor basis.  31

Second Issue:
STELLAR Is Liable for Separation Pay

Short of expressly admitting to be the employer of the individual private respondents,

STELLAR avers that the former were project employees, whose employment was
coterminous with the service agreement,   as evidenced by the following stipulations in their
32

contract:  33

1. The EMPLOYER hereby contracts the services of the EMPLOYEE to work

as Janitor-CPD at the project of the EMPLOYER with PAL.

2. It is expressly agreed and understood that the work of the EMPLOYEE shall
last only during and shall in no case extend beyond the period fixed for the
duration of the contract between the EMPLOYER and PAL covering the project
to which the EMPLOYEE is assigned as specified in the second "WHEREAS"
hereof. Upon the expiration of said contract the employment of the said
employee is deemed automatically terminated without further notice.

In order to avoid liability for separation pay, STELLAR argues that it terminated the services
of the individual private respondents for a just and valid cause: the completion of a specific
project. Thus, they are not entitled to separation pay.

The Court is not convinced. The position of STELLAR that individual private respondents
were its project employees is totally unfounded. A regular employee is distinguished from a
project employee by the fact that the latter is employed to carry out a specific project or
undertaking, the duration or scope of which was specified at the time the employees were
engaged.   A "project" has reference to a particular job or undertaking that may or may not
34

be within the regular or usual business of the employer.   In either case, the project must be
35

distinct, separate and identifiable from the main business of the employer, and its duration
must be determined or determinable.
In the case at bar, despite the protestations of STELLAR, the service agreement was not a
project because its duration was not determined or determinable. While the service
agreement may have had a specific term, STELLAR disregarded it, repeatedly renewed the
service agreement, and continued hiring the individual private respondents for thirteen
consecutive years. Had STELLAR won the bidding, the alleged "project" would have never
ended. In any event, the aforesaid stipulations in the employment contract are not included in
Articles 282 and 283 of the Labor Code as valid causes for the dismissal of employees.

Again, we must emphasize that the main business of STELLAR is the supply of manpower to
perform janitorial services for its clients, and the individual private respondents were janitors
engaged to perform activities that were necessary and desirable to STELLAR's
enterprise.   In this case, we hold that the individual private respondents were STELLAR's
36

regular employees, and there was no valid cause for their dismissal.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution are
SET ASIDE insofar as they held PAL liable for separation pay. The July 13, 1994 Decision is
however reinstated insofar as it ORDERED STELLAR liable for such award.

SO ORDERED.
G.R. No. 160073 October 24, 2005

ABUNDIO BARAYOGA and BISUDECO-PHILSUCOR CORFARM WORKERS UNION (PACIWU

CHAP-TPC), Petitioners,
vs.
ASSET PRIVATIZATION TRUST,* Respondent.

DECISION

PANGANIBAN, J.:

esponsibility for the liabilities of a mortgagor towards its employees cannot be transferred via an
auction sale to a purchaser who is also the mortgagee-creditor of the foreclosed assets and chattels.
Clearly, the mortgagee-creditor has no employer- __________________

* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo, p. 480.

employee relations with the mortgagor’s workers. The mortgage constitutes a lien on the
determinate properties of the employer-debtor, because it is a specially preferred credit to which the
worker’s monetary claims is deemed subordinate.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 30,
2003 Decision2 and the August 27, 2003 Resolution 3 of the Court of Appeals (CA), in CA-GR SP No.
58813. The disposition or fallo of the questioned Decision reads as follows:

"IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the assailed NLRC
Decision dated February 18, 2000 is hereby RECALLED and SET ASIDE insofar as herein
petitioner APT is concerned. No cost."4

The reversed Decision5 of the National Labor Relations Commission (NLRC) disposed as follows:

"WHEREFORE, premises considered, the decision appealed from is AFFIRMED with modifications
as follows:

‘1. Complainants are awarded their monetary claims for underpayment of salaries and payment of
allowances per their computation on pp. 97-99 and 142-144 of the records;

‘2. Complainants are declared to have been illegally dismissed and should be paid their backwages
from 01 May 1991 to 30 October 1992.’" 6

The challenged August 27, 2003 Resolution denied petitioners’ Motion for Reconsideration.

The Facts

The CA summarized the antecedents in this portion of its Decision, which we quote:

"Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar

Development Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines
Sur.
"On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created
under Proclamation No. 50, as amended, mandated to take title to and possession of, conserve,
provisionally manage and dispose of non-performing assets of the Philippine government identified
for privatization or disposition.

"Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued
Administrative Order No. 14 identifying certain assets of government institutions that were to be
transferred to the National Government. Among the assets transferred was the financial claim of the
Philippine National Bank against BISUDECO in the form of a secured loan. Consequently, by virtue
of a Trust Agreement executed between the National Government and APT on February 27, 1987,
APT was constituted as trustee over BISUDECO’s account with the PNB.

"Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar
Corporation (Philsucor) to take over the management of the sugar plantation and milling operations
until August 31, 1992.

"Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its
mortgaged properties were foreclosed and subsequently sold in a public auction to APT, as the sole
bidder. On April 2, 1991, APT was issued a Sheriff’s Certificate of Sale.

"On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal
deduction and underpayment of wages and other labor standard benefits plus damages.

"In the meantime, on July 15, 1992, APT’s Board of Trustees issued a resolution accepting the offer
of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar plantation and mill. Again, on
September 23, 1992, the board passed another resolution authorizing the payment of separation
benefits to BISUDECO’s employees in the event of the company’s privatization. Then, on October
30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took over its sugar
milling operations under the trade name Peñafrancia Sugar Mill (Pensumil).

"On December 17, 1992, the union filed a similar complaint, later to be consolidated with its earlier
complaint and docketed as RAB V Case No. 07-00184-91.

"On March 2, 1993, it filed an amended complaint, impleading as additional party respondents APT
and Pensumil.

"In their Position Paper, the union alleged that when Philsucor initially took over the operations of the
company, it retained BISUDECO’s existing personnel under the same terms and conditions of
employment. Nonetheless, at the start of the season sometime in May 1991, Philsucor started
recalling workers back to work, to the exception of the union members. Management told them that
they will be re-hired only if they resign from the union. Just the same, thereafter, the company
started to employ the services of outsiders under the ‘pakyaw’ system.

"BISUDECO, Pensumil and APT all interposed the defense of lack of employer-employee
relationship.

xxxxxxxxx

"After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed as follows:

‘WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein

complainants of the mandated employment benefits provided for under Section 27 of Proclamation
No. 50 which benefits had been earlier extended to other employees similarly situated.

‘SO ORDERED.’

"Both the union and APT elevated the labor arbiter’s decision before NLRC." 7

The NLRC affirmed APT’s liability for petitioners’ money claims. While no employer-employee
relationship existed between members of the petitioner union and APT, at the time of the employees’
illegal dismissal, the assets of BISUDECO had been transferred to the national government through
APT. Moreover, the NLRC held that APT should have treated petitioners’ claim as a lien on the
assets of BISUDECO. The Commission opined that APT should have done so, considering its
awareness of the pending complaint of petitioners at the time BISUDECO sold its assets to BAPCI,
and APT started paying separation pay to the workers.

Finding their computation to be in order, the NLRC awarded to petitioners their money claims for
underpayment, labor-standard benefits, and ECOLA. It also awarded them their back wages,
computed at the prevailing minimum wage, for the period May 1, 1991 (the date of their illegal
dismissal) until October 30, 1992 (the sale of BISUDECO assets to the BAPCI). On the other hand,
the NLRC ruled that petitioners were not entitled to separation pay because of the huge business
losses incurred by BISUDECO, which had resulted in its bankruptcy.

Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of
Court.

Ruling of the Court of Appeals

The CA ruled that APT should not be held liable for petitioners’ claims for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages, as well as other labor-standard benefits
plus damages. As found by the NLRC, APT was not the employer of petitioners, but was impleaded
only for possessing BISUDECO’s mortgaged properties as trustee and, later, as the highest bidder
in the foreclosure sale of those assets.

Citing Batong Buhay Gold Mines v. Dela Serna,8 the CA concluded that petitioners’ claims could not
be enforced against APT as mortgagee of the foreclosed properties of BISUDECO.

Hence, this Petition.9

Issues

In their Memorandum, petitioners raise the following issues for our consideration:

"I. Whether or not the Court of Appeals erred in ruling that Respondent Asset Privatization Trust
(APT) should not be held liable for the petitioner union’s claim for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages and other labor standard benefits plus
damages.

"II. Whether or not the claims of herein petitioners cannot be enforced against APT/PNB as
mortgagee of the foreclosed properties of BISUDECO.

"III. Whether or not the entitlement of petitioners upon their claims against Respondent APT is
recognized under the law."10

In brief, the main issue raised is whether Respondent APT is liable for petitioners’ monetary claims.

The Court’s Ruling

The Petition has no merit.

Main Issue:

Whether APT Is Liable for the Claims of

Petitioners Against Their Former Employer

It should be stressed at the outset that, pursuant to Administrative Order No. 14, Series of
1987,11 PNB’s assets, loans and receivables from its borrowers were transferred to APT as trustee of
the national government. Among the liabilities transferred to APT was PNB’s financial claim against
BISUDECO, not the latter’s assets and chattel. Contrary to petitioners’ assertions, BISUDECO
remained the owner of the mortgaged properties in August 1988, when the Philippine Sugar
Corporation (Philsucor) undertook the operation and management of the sugar plantation until
August 31, 1992, under a so-called Contract of Lease between the two corporations. At the time,
APT was merely a secured creditor of BISUDECO.12
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO because of the
latter’s continued failure to pay outstanding loan obligations to PNB/APT. The properties were sold
at public auction to APT, the highest bidder, as indicated in the Sheriff’s Certificate of Sale issued on
April 2, 1991. It was only in September 1992 (after the expiration of the lease/management Contract
with Philsucor in August 1992), however, when APT took over BISUDECO assets, preparatory to the
latter’s privatization.

In the present case, petitioner-union’s members who were not recalled to work by Philsucor in May
1991 seek to hold APT liable for their monetary claims and allegedly illegal dismissal. Significantly,
prior to the actual sale of BISUDECO assets to BAPCI on October 30, 1992, the APT board of
trustees had approved a Resolution on September 23, 1992. The Resolution authorized the payment
of separation benefits to the employees of the corporation in the event of its privatization. Not
included in the Resolution, though, were petitioner-union’s members who had not been recalled to
work in May 1991.

The question now before the Court is whether APT is liable to pay petitioners’ monetary claims,
including back wages from May 1, 1991, to October 30, 1992 (the date of the sale of BISUDECO
assets to BAPCI).

We rule in the negative. The duties and liabilities of BISUDECO, including its monetary liabilities to
its employees, were not all automatically assumed by APT as purchaser of the foreclosed properties
at the auction sale. Any assumption of liability must be specifically and categorically agreed upon.
In Sundowner Development Corp. v. Drilon,13 the Court ruled that, unless expressly assumed, labor
contracts like collective bargaining agreements are not enforceable against the transferee of an
enterprise. Labor contracts are in personam and thus binding only between the parties.

No succession of employment rights and obligations can be said to have taken place between the
two. Between the employees of BISUDECO and APT, there is no privity of contract that would make
the latter a substitute employer that should be burdened with the obligations of the corporation. To
rule otherwise would result in unduly imposing upon APT an unwarranted assumption of accounts
not contemplated in Proclamation No. 50 or in the Deed of Transfer between the national
government and PNB.

Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially
all, the properties of the seller or transferor is not obliged to absorb the latter’s employees. 14 The
most that the purchasing company may do, for reasons of public policy and social justice, is to give
preference of reemployment to the selling company’s qualified separated employees, who in its
judgment are necessary to the continued operation of the business establishment. 15

In any event, the national government (in whose trust APT previously held the mortgage credits of
BISUDECO) is not the employer of petitioner-union’s members, who had been dismissed sometime
in May 1991, even before APT took over the assets of the corporation. Hence, under existing law
and jurisprudence, there is no reason to expect any kind of bailout by the national
government.16 Even the NLRC found that no employer-employee relationship existed between APT
and petitioners. Thus, the Commission gravely abused its discretion in nevertheless holding that
APT, as the transferee of the assets of BISUDECO, was liable to petitioners.

Petitioners also contend that in Central Azucarera del Danao v. Court of Appeals, 17 this Court
supposedly ruled that the "sale of a business of a going concern does not ipso facto terminate the
employer-employee relations insofar as the successor-employer is concerned, and that change of
ownership or management of an establishment or company is not one of the just causes provided by
law for termination of employment[.]"18

A careful reading of the Court’s Decision in that case plainly shows that it does not contain the words
quoted by counsel for petitioners. At this juncture, we admonish their counsel 19 of his bounden duty
as an officer of the Court to refrain from misquoting or misrepresenting the text of its
decisions.20 Ever present is the danger that, if not faithfully and exactly quoted, they may lose their
proper and correct meaning, to the detriment of other courts, lawyers and the public who may
thereby be misled.21

In that case, contrary to the assertions of petitioners, the Court held as follows:
"There can be no controversy for it is a principle well-recognized, that it is within the employer’s
legitimate sphere of management control of the business to adopt economic policies or make some
changes or adjustments in their organization or operations that would insure profit to itself or protect
the investment of its stockholders. As in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sell or dispose all or substantially all of its
assets and properties which may bring about the dismissal or termination of its employees in the
process. Such dismissal or termination should not however be interpreted in such a manner as to
permit the employer to escape payment of termination pay. x x x.

"In a number of cases on this point, the rule has been laid down that the sale or disposition must be
motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee of a
business establishment has no liability to the employees of the transferor to continue employing
them. Nor is the transferee liable for past unfair labor practices of the previous owner, except, when
the liability therefor is assumed by the new employer under the contract of sale, or when liability
arises because of the new owner’s participation in thwarting or defeating the rights of the
employees."22 (Citations omitted.)

In other words, the liabilities of the previous owner to its employees are not enforceable against the
buyer or transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was
made in bad faith. Thus, APT cannot be held responsible for the monetary claims of petitioners who
had been dismissed even before it actually took over BISUDECO’s assets.

Moreover, it should be remembered that APT merely became a transferee of BISUDECO’s assets
for purposes of conservation because of its lien on those assets -- a lien it assumed as assignee of
the loan secured by the corporation from PNB. Subsequently, APT, as the highest bidder in the
auction sale, acquired ownership of the foreclosed properties.

Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act No.
6715, which reads:

"Article 110. Worker’s preference in case of bankruptcy. – In the event of bankruptcy or liquidation of
the employer’s business, his workers shall enjoy first preference as regards their unpaid wages and
other monetary claims shall be paid in full before the claims of the Government and other creditors
may be paid."23

This Court has ruled in a long line of cases24 that under Articles 2241 and 2242 of the Civil Code, a
mortgage credit is a special preferred credit that enjoys preference with respect to a
specific/determinate property of the debtor. On the other hand, the worker’s preference under Article
110 of the Labor Code is an ordinary preferred credit. While this provision raises the worker’s money
claim to first priority in the order of preference established under Article 2244 of the Civil Code, the
claim has no preference over special preferred credits.

Thus, the right of employees to be paid benefits due them from the properties of their employer
cannot have any preference over the latter’s mortgage credit. In other words, being a mortgage
credit, APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied
first before the claims of the workers.

Development Bank of the Philippines v. NLRC25 explained the rationale of this ruling as follows:

"x x x. A preference applies only to claims which do not attach to specific properties. A lien creates a
charge on a particular property. The right of first preference as regards unpaid wages recognized by
Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is
but a preference of credit in their favor, a preference in application. It is a method adopted to
determine and specify the order in which credits should be paid in the final distribution of the
proceeds of the insolvent’s assets. It is a right to a first preference in the discharge of the funds of
the judgment debtor. x x x"

Furthermore, workers’ claims for unpaid wages and monetary benefits cannot be paid outside of a
bankruptcy or judicial liquidation proceedings against the employer. 26 It is settled that the application
of Article 110 of the Labor Code is contingent upon the institution of those proceedings, during which
all creditors are convened, their claims ascertained and inventoried, and their preferences
determined.27 Assured thereby is an orderly determination of the preference given to creditors’
claims; and preserved in harmony is the legal scheme of classification, concurrence and preference
of credits in the Civil Code, the Insolvency Law, and the Labor Code.

The Court hastens to add that the present Petition was brought against APT alone. In holding that
the latter, which has never really been an employer of petitioners, is not liable for their claims, this
Court is not reversing or ruling upon their entitlement to back wages and other unpaid benefits from
their previous employer.

On the basis of the foregoing clarification, the Court finds no reversible error in the questioned CA
Decision, which set aside the February 8, 2000 Decision of the NLRC. As a mere transferee of the
mortgage credit and later as the purchaser in a public auction of BISUDECO’s foreclosed properties,
APT cannot be held liable for petitioners’ claims against BISUDECO: illegal dismissal, unpaid back
wages and other monetary benefits.

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and

Resolution AFFIRMED. Costs against petitioners.

SO ORDERED.
G.R. No. 215281

ROLANDO DE ROCA, Petitioner
vs.
EDUARDO C. DABUY AN, JENNIFER A. BRANZUELA, JENNYL YN A. RI CARTE, and
HERMINIGILDO F. SABANATE, Respondents

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari  seeks to set aside the June 19, 2014 Decision  and October
1 2

28, 2014 Resolution  of the Court of Appeals (CA) dismissing the Petition for Certiorari  in CA-G.R.
3 4

SP No. 127974 and denying herein petitioner's Motion for Reconsideration,  respectively.
5

Factual Antecedents

As found by the CA, the facts are as follows:

In 2012, private respondents filed a complaint  for illegal dismissal against "RAF Mansion Hotel Old
6

Management and New Management and Victoriano Ewayan." Later, private respondents amended
the complaint and included petitioner Rolando De Roca as [co]-respondent. Summons was sent
through registered mail to petitioner but it was returned.

Thereafter, a conference was set but only complainants attended. Thus, another summons was
issued and personally served to petitioner by the bailiff of the NLRC as evidenced by the latter’s
return dated 14 March 2012. Despite service of summons, petitioner did not attend the subsequent
hearings prompting the labor arbiter to direct private respondents to submit their position paper.

On 18 April 2012, private respondents submitted their position paper. On the same day, petitioner
filed his motion to dismiss  on the ground of lack of jurisdiction. He alleged that[,] while he [was] the
7

owner of RA.F Mru1sion Hotel building, the same [was being] leased by Victoriano Ewayan., the
owner of Oceanics Travel and Tour Agency. Petitioner claims that Ewayan was the employer of
private respondents, Consequently, he asserted that there was no employer-employee relationship
between him and private respondents and the labor arbiter had no jurisdiction.

On 29 June 2012. the labor arbiter rendered a decision directing petitioner, among others, to pay
backwages and other monetary award to private respondents. In said decision, the labor arbiter also
denied the motion to dismiss for having been filed beyond the reglementary period. Petitioner
received a copy of the decision on 3 August 2012.

On 4 September 2012, petitioner filed a petition  for annulment of judgment on the ground of lack of
8

jurisdiction before the NLRC. However, the petition was dismissed because it was also filed beyond
the period allowed by the 2011 NLRC Rules of Procedure. Petitioner sought reconsideration but the
same was also denied. 9

Ruling of the Labor Arbiter

In the above-mentioned June 29, 2012 Decision  in NLRC-NCR-Case No. 02-02490-12, Labor
10

Arbiter J. Potenciano F. Napenas, Jr. held, among others, that -

x x x [R]espondent Rolando De Roca surprisingly filed a "Motion to Dismiss" on the ground of lack of
jurisdiction. In substance, the motion is anchored on the alleged lack of employer-employee
relationship between the parties thereto. In support thereof: respondent De Roca further alleged that
it was rather the Oceanic Travel and Tour Agency and respondent Ewayan in whose favor
respondent De Roca leased the subject Hotel, rule the true employers of the complainants as
evidenced by the Contract of Lease of Buildings (Annex "1" respondent’s Motion to Dismiss).

Subsequent thereof [sic], complainants filed an Opposition with Motion to Implead (to Respondent’s
Motion to Dismiss), seeking, among others, that the corporation "Oceanic Travel and Tour Agency"
be impleaded as additional respondent.

xxxx

Anent the Motion to Dismiss, Rule V, Sections 6 and 7 of the Revised 2011 NLRC Rules of
Procedure explicitly provide:

‘SECTION 6. MOTION TO DISMISS. - Before the date set for the mandatory conciliation and
mediation conference, the respondent may file a motion to dismiss on grounds provided under
Section 5, paragraph (a) hereof Such motion shall be immediately resolve[ d] by the Labor Arbiter
through a written order. An order denying the motion to dismiss, or suspending its resolution until the
final determination of the case, is not appealable.

SECTION 7. EFFECT OF FAILURE TO FILE. - No motion to dismiss shall be allowed or entertained

after the lapse of the period provided in Section 6 hereof.’

Clearly, respondent De Roca’s Motion to Dismiss, having been filed long after the date set for the
mandatory conference, should be dismissed on such ground being a prohibited pleading.

Coming now on [sic] the meat of the controversy, since respondents obviously failed to controvert
the allegations by the complainants in their Position Papers accompanied with supporting evidence,
We have no recourse but to accord them credence for being uncontradicted.

xxxx

Obviously, respondents had failed to discharge such burden.

WHEREFORE, premises considered, judgement is hereby rendered finding all the respondents
liable for illegal dismissal.

Accordingly, all of them are hereby ordered to pay complainants their full backwages and other
monetary claims computed from date of their dismissal up to the promulgation of this decision plus
10% of the total monetary award as attorney’s fees.

xxxx

Lastly, the Motion to Dismiss is denied for being filed beyond the period allowed by the rules, thus, a
prohibited pleading. Also, the Motion to implead Oceanic Travel and Tours Agency as additional
respondent is denied for the same reason.

SO ORDERED. 11

Ruling of the National Labor Relations Commission

Instead of filing an appeal before the National Labor Relations Commission (NLRC), petitioner
instituted the petition for annulment of judgment referred to above, which the NLRC dismissed in its
September 28, 2012 Resolution  for being tardy, as it was filed beyond the 10-day reglementary
12

period prescribed under Section 3, Rule XII of the 2011 NLRC Rules of Procedure.

Ruling of the Court of Appeals

Petitioner filed a Petition for Certiorari before the CA, where he argued, among others, that he was
never an employer of the respondents, as he was merely the owner of the premises which were
leased out to and occupied by respondents' true employer, Victoriano Ewayan (Ewayan), who
owned Oceanic Travel and Tours Agency which operated the RAF Mansion Hotel where
respondents were employed as cook, waitress, and housekeeper; and that his inclusion in the labor
case was borne of malice which is shown by the fact that when the labor complaint was filed, he was
not originally impleaded as a respondent, and was made so only after respondents discovered that
their employer had already absconded - in which case he was impleaded under the pretext that he
constituted the "new management of RAF Mansion Hotel".

On June 19, 2014, the CA rendered the assailed Decision dismissing the petition, decreeing thus:

At the outset, We note that the issue raised by petitioner is imprecise because the NLRC did not rule
on the propriety of finding petitioner liable to private respondents. It is obvious from the assailed
resolution that the petition for annulment of judgment was denied because it was filed after the lapse
of the period prescribed under the 2011 NLRC Rules of Procedure and this is the issue that this
Court will resolve.

xxxx

Record shows that petitioner received the decision of the labor arbiter on 3 August 2012 but he filed
his petition on 4 September 2012 or thirty-one days after such receipt. In this regard, the NLRC did
not commit any error in denying the petition much more grave abuse of discretion. The rule is clear
and the NLRC may not ‘arbitrarily disregard specific provisions of the Rules which are precisely
intended to assist the parties in obtaining just, expeditious and inexpensive settlement of labor
disputes.’

Similarly, the labor arbiter did not commit any grave abuse of discretion because he just observed
the NLRC rules when he denied petitioner's motion to dismiss. x x x

In addition, We also cannot attribute grave abuse of discretion in the labor arbiter’s resolution of the
motion to dismiss in the decision itself: While this may seem peculiar, it must be emphasized that the
motion to dismiss was filed at about the period when the case was about to be submitted for
decision. x xx

In the case at bar, the inclusion of the denial of the motion to dismiss in the decision is not without
justification. Petitioner not only failed to submit the motion to dismiss on time but also forfeited the
right to submit his position paper because he did not attend the conference and subsequent
hearings. Even if the labor arbiter denied the motion to dismiss in a separate order, petitioner would
still be precluded from submitting a position paper where he can buttress his claim of lack of
jurisdiction. The labor arbiter, therefore, could not be said to have committed grave abuse of
discretion in denying the motion to dismiss and in incorporating its order in the decision.

xxxx

As regards the claim of petitioner on the merits of his ground, We cannot consider his arguments
and assume that his allegation of lack of employer-employment [sic] relationship between him and
private respondents is true. First, he did not present any evidence to support his claim because he
lost the opportunity to submit a position paper. Thus, his allegations will remain mere allegations.

Second, it would transgress fairness if his allegations in this petition should be given any attention
because the private respondents never had the [opportunity to] present evidence to meet his claims.
Private respondents' arguments were correctly centered on the provisions of the 2011 NLRC Rules
of Procedure because they were the bases for the denial of petitioner's motion to dismiss and
petition for annulment of judgment.

Furthermore, petitioner did not submit the position paper of private respondents where We can find
their averments on the employment relationship between them and petitioner or lack thereof. This
omission not only rendered useless the evaluation of the asseverations in the petition but also gave
Us another reason to dismiss this petition under Section 3, Rule 46 of the Rules of Court. Petitioner
is well-aware that this pleading is material to the resolution of his petition and in neglecting to attach
the same to his petition, the same would warrant the dismissal of this petition.
Lastly, the ultimate aim of petitioner is for Us to review the findings of the labor arbiter on the
employment relationship between him and the private respondents. 'The basic issue of whether or
not the NLRC has jurisdiction over the case resolves itself into the question of whether an employer-
employee relationship existed' between them. 111us, it is an issue which necessitates presentation
of evidence on the part of petitioner and evaluation of the pieces of evidence of each party. Again,
this is not proper in a petition for certiorari.

WHEREEFORE, the petition is DISMISSED.

SO ORDERED. 13

Petitioner filed a motion for reconsideration, but the CA denied the same via its October 28, 2014
Resolution. Hence, the instant Petition, which includes a prayer for injunctive relief against execution
of the judgment pending appeal.

On December 10, 2014 and January 12, 2015, the Court issued Resolutions  respectively granting
14

temporary injunctive relief and issuing in favor of petitioner a Temporary Restraining Order  upon
15

filing of a cash or surety bond.

In a November 9, 2015 Resolution,  the Court resolved to give due course to the Petition.
16

Issue

Petitioner frames the issue in this Petition thus -

Petitioner submits before this Honorable Court that the Court of Appeals erred in affirming the
findings of both the labor arbiter and the NLRC and in concluding that they did not abuse their
discretion and acted beyond their jurisdiction when they asserted their authorities and found
petitioner DE ROCA solidarily liable with EWAYAN/ OCEANIC TRAVEL AND TOUR AGENCY to
private respondents, despite the patent lack of employer-employee relationship between the
petitioner and private respondents. 17

Petitioner’s Arguments

In his Petition and Reply  seeking reversal of the assailed CA dispositions as well as the nullification
18

of the decisions of the labor tribunals, petitioner argues that the Labor Arbiter's decision is null and
void as there was no determination of facts and evidence relative to his supposed liability to
respondents; that he was not at any time the respondents' employer, but merely the owner-lessor of
the premises where Ewayan and his Oceanic Travel and Tours Agency operated the RAF Mansion
Hotel where respondents were employed as hotel staff; that the labor tribunals did not acquire
jurisdiction over him since the element of employer-employee relationship was lacking; that he was
impleaded in the case only because respondents could no longer trace the whereabouts of their true
employer, Ewayan, who appears to have absconded - for which reason respondents aim to unduly
recover their claims from him; that the labor tribunals and the CA strictly applied the labor procedural
laws and rules, when the rule in labor cases is that technical rules of procedure are not binding and
must yield to the merits of the case and the interests of justice and due process; and that since the
labor tribunals did not have jurisdiction over him as he was not at any given period the respondents'
employer, their decisions are a nullity.

Respondents’ Arguments

In their Comment  to the Petition, respondents argue that the Petition should be denied for lack of
19

merit; that the CA's dispositions are just and correct; that the issue in this case does not involve the
merits of the labor arbiter's decision, but merely the propriety of the NLRC’s dismissal of petitioner's
petition for annulment of judgment; that nonetheless, they have satisfactorily proved below that
petitioner is their employer, by the evidence they submitted - consisting of identification cards (IDs)
issued to them and signed by Ewayan, and pay envelopes and advise slips showing their salaries as
the basis for their claims; that since petitioner owned the building which was a hotel, it follows that he
is their employer; that since he is their employer, the labor arbiter acquired jurisdiction over him; and
that since the decision of the labor arbiter on the merits became final and executory for petitioner's
failure to appeal the same, the same may no longer be impugned.

Our Ruling
The Court grants the Petition.

All throughout the proceedings, petitioner has insisted that he was not the employer of respondents;
that he did not hire the respondents, nor pay their salaries, nor exercise supervision or control over
them, nor did he have the power to terminate their services. In support of his claim, he attached
copies of a lease agreement - a Contract of Lease of a Building  - executed by him and Oceanic
20

Tours and Travel Agency (Oceanic) represented by Ewayan through his attorney-in- fact Marilou
Buenafe. The agreement would show that petitioner was the owner of a building called the RAF
Mansion Hotel in Roxas Boulevard, Baclaran, Parañaque City; that on September 25, 2007, Oceanic
agreed to lease the entire premises of RAF Mansion Hotel, including the elevator, water pump,
airconditioning units, and existing furnishings and all items found in the hotel and included in the
inventory list attached to the lease agreement, except for certain portions of the building where
petitioner conducted his personal business and which were leased out to other occupants, including
a bank; that the lease would be for a period of five years, or from October 15, 2007 up to October
15, 2012; that the monthly rental would be ₱450,000.00; and that all expenses, utilities,
maintenance, and taxes - except real property truces - incurred and due on the leased building
would be for the lessee's account.

Petitioner likewise attached to the instant Petition copies of: 1) a January 23, 2012 letter  of demand
21

to pay and vacate sent to Ewayan, directing the latter's attention to previous demand letters sent to
him and making a final demand to pay rentals in arrears; and 2) a written waiver and
acknowledgment  executed by respondents - except respondent Herminigildo Sabanate - and other
22

Oceanic employees to the effect that petitioner should not be held liable as owner of the premises
for the "problems" caused by Ewayan.

Thus, it would appear from the fact on record and the evidence that petitioner's building was an
existing hotel called the "RAF Mansion Hotel", which Oceanic agreed to continue to operate under
the same name. There is no connection between petitioner and Oceanic other than through the
lease agreement executed by them; they are not partners in the operation of RAF Mansion Hotel. It
just so happens that Oceanic decided to continue operating the hotel using the original name – "RAF
Mansion Hotel".

The only claim respondents have in resorting to implead petitioner as a corespondent in the labor
case is the fact that he is the owner of the entire building called "RAF Mansion Hotel" which happens
to be the very same name of the hotel which Ewayan and Oceanic continued to adopt, for reasons
not evident in the pleadings. It must be noted as well that when they originally filed the labor case,
respondents did not include petitioner as respondent therein. It was only later on that they moved to
amend their complaint, impleading petitioner and thus amending the title of the case to "x xx,
Complainants, versus RAF Mansion Hotel Old Management and New Management/Victoriano
Ewayan and Rolando De Roca, Respondents."

As correctly observed by petitioner, such belated attempt to implead him in the labor case must be
seen as an afte1thought. Moreover, the fact that respondents recognize petitioner as embodying the
"new management" of RAF Mansion Hotel betrays an admission on their part that he had no hand in
the "old management" of the hotel under Ewayan, during which they were hired and maintained as
hotel employees - meaning that petitioner was never considered as Ewayan's partner and co-
employer; respondents merely viewing petitioner as the subsequent manager taking over from
Ewayan, which bolsters petitioner’s allegation that Ewayan had absconded and left respondents
without recourse other than to implead him as the "new management" upon whom the obligation to
settle the claims abandoned by Ewayan now fell.

"Contracts take effect only between the parties, their assigns and heirs, except in case where the
lights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law."  The contract of employment between respondents, on the one hand, and
23

Oceanic and Ewayan on the other, is effective only between them; it does not extend to petitioner,
who is not a party thereto. His only role is as lessor of the premises which Oceanic leased to operate
as a hotel; he cannot be deemed as respondent's employer - not even under the pretext that he took
over as the "new management" of the hotel operated by Oceanic. There simply is no truth to such
claim.

Thus, to allow respondents to recover their monetary claims from petitioner would necessarily result
in their unjust enrichment.
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 x 24

"In rendering justice, courts have always been, as they ought to be, conscientiously guided by the
norm that on the balance, technicalities take a backseat against substantive rights, and not the other
way around."  In short, substantive law outweighs procedural technicalities as in this case.
25

Indeed, where as here, there is a strong showing that grave miscarriage of justice would result from
the strict application of the [r]ules, we will not hesitate to relax the same in the interest of substantial
justice. It bears stressing that the rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated to effectively aid the court in the
dispensation of justice. Courts are not slaves to or robots of technical rules, shorn to be,
conscientiously guided by the norm that on the balance, technicalities take a backseat against
substantive rights, and not the other way around. Thus, if the application of the rules would tend to
frustrate rather than promote justice. it is always within our power to suspend the rules, or except a
particular case from its operation. 26

Taking this to mind, the labor tribunals and the CA should have considered petitioner’s repeated
pleas to scrutinize the facts and particularly the lease agreement executed by him and Oceanic,
which would naturally exculpate him from liability as this would prove the absence of an employment
relation between him and respondents. Instead, the case was determined on pure technicality which
in labor disputes, is not necessarily sanctioned –given that proceedings before the Labor Arbiter and
the NLRC are non-litigious in nature where they are encouraged to avail of all reasonable means to
ascertain the facts of the case without regard to technicalities of law or procedure.  Petitioner's
27

motion to dismiss, though belated, should have been given due attention.

In arriving at the foregoing conclusions, the Court is guided by the allegations and arguments of the
parties on the existence of an employment relation between them, which may be found in their
pleadings - even at this stage. In particular, respondents squarely addressed the issue in their
Comment to the herein Petition. On the other hand, petitioner has consistently raised the issue and
argued against it all throughout. Since the issue was raised in the Petition and adequately met by the
respondents in their Comment thereto, the Court is not precluded from ruling thereon. There is thus
no need to remand the case to the Labor Arbiter for further proceedings. Finally, this resolves
respondents' claim that the issue here involves only the propriety of the NLRC's dismissal of
petitioner’s petition for annulment of judgment; having argued against petitioner's claim of absence
of an employment relation between them - and having presented documentary evidence below to
prove their case against petitioner - the issue relative to existence or non-existence of an
employment relation is ripe for adjudication before this Court.

With the view taken of the case, it necessarily follows that the decision of the Labor Arbiter must be
set aside for being grossly erroneous and unjust.  At worst, it is null and void, and, as petitioner
1âwphi1

correctly put it, it is a "lawless thing, which can be treated act an outlaw and slain at sight, or ignored
wherever it exhibits its head."  Being of such nature, it could not have acquired finality, contrary to
28

what respondents believe - as it "creates no rights and imposes no duties. Any act performed
pursuant to it and any claim emanating from it have no legal effect." 29

WHEREFORE, the Petition is GRANTED. The June 19, 2014 Decision and October 28, 2014
Resolution of the Court of Appeals in CA-G.R. SP No. 127974 are REVERSED and SETASIDE.
NLRC-NCR-Case No. 02-02490-12 is ordered DISMISSED, but only as against petitioner Rolando
De Roca.

SO ORDERED.
G.R. No. 184517               October 8, 2013

SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR,
JR., Petitioners,
vs.
PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR., ELICERIO GASPAR, , RICARDO
GASPAR JR., EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO
MANGOBA, Respondents.

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

G.R. No. 186641

SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR,
JR., Petitioners,
vs.
ELICERIO GASPAR, RICARDO GASPAR, JR., EUFEMIA ROSETE, FIDEL ESPIRITU,
SIMEONESPIRITU, JR., and LIBERATO MANGOBA, Respondents.

DECISION

SERENO, CJ.:

Security of tenure is a constitutionally guaranteed right. 1 Employees may not be terminated from
their regular employment except for just or authorized causes under the Labor Code 2 and other
pertinent laws. A mere change in the equity composition of a corporation is neither a just nor an
authorized cause that would legally permit the dismissal of the corporation’s employees en masse.

Before this Court are consolidated Rule 45 Petitions for Review on Certiorari 3 assailing the
Decision4 and Resolution5 of the Court of Appeals(CA) in CA-G.R. SP No. 97510 and its
Decision6 and Resolution7 in CA-G.R. SP No. 97942.

The facts of the case are as follows:

Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr.(Ricardo), Eufemia Rosete
(Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato Mangoba (Liberato)
were employees of Small and Medium Enterprise Bank, Incorporated (SME Bank).Originally, the
principal shareholders and corporate directors of the bank were Eduardo M. Agustin, Jr. (Agustin)
and Peregrin de Guzman, Jr. (De Guzman).

In June 2001, SME Bank experienced financial difficulties. To remedy the situation, the bank officials
proposed its sale to Abelardo Samson(Samson).8

Accordingly, negotiations ensued, and a formal offer was made to Samson. Through his attorney-in-
fact, Tomas S. Gomez IV, Samson then sent formal letters (Letter Agreements) to Agustin and De
Guzman, demanding the following as preconditions for the sale of SME Bank’s shares of stock:
4. You shall guarantee the peaceful turn over of all assets as well as the peaceful transition of
management of the bank and shall terminate/retire the employees we mutually agree upon, upon
transfer of shares in favor of our group’s nominees;

xxxx

7. All retirement benefits, if any of the above officers/stockholders/board of directors are hereby
waived upon consummation [sic] of the above sale. The retirement benefits of the rank and file
employees including the managers shall be honored by the new management in accordance with
B.R. No. 10, S. 1997.9

Agustin and De Guzman accepted the terms and conditions proposed by Samson and signed the
conforme portion of the Letter Agreements.10

Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting with all the
employees of the head office and of the Talaveraand Muñoz branches of SME Bank and persuaded
them to tender their resignations,11 with the promise that they would be rehired upon reapplication.
His directive was allegedly done at the behest of petitioner Olga Samson. 12

Relying on this representation, Elicerio, 13 Ricardo,14 Fidel,15 Simeon, Jr.,16 and Liberato17 tendered

their resignations dated 27 August 2001. As for Eufemia, the records show that she first tendered a
resignation letter dated27 August 2001, 18 and then a retirement letter dated September 2001. 19

Elicerio,20 Ricardo,21 Fidel,22 Simeon, Jr.,23 and Liberato24 submitted application letters on 11

September 2001. Both the resignation letters and copies of respondent employees’ application
letters were transmitted by Espiritu to Samson’s representative on 11 September 2001. 25

On 11 September 2001, Agustin and De Guzman signified their conformity to the Letter Agreements
and sold 86.365% of the shares of stock of SME Bank to spouses Abelardo and Olga Samson.
Spouses Samson then became the principal shareholders of SME Bank, while Aurelio Villaflor, Jr.
was appointed bank president. As it turned out, respondent employees, except for Simeon,
Jr.,26 were not rehired. After a month in service, Simeon, Jr. again resigned on October 2001. 27

Respondent-employees demanded the payment of their respective separation pays, but their
requests were denied. 1âwphi1

Aggrieved by the loss of their jobs, respondent employees filed a Complaint before the National
Labor Relations Commission (NLRC)– Regional Arbitration Branch No. III and sued SME Bank,
spouses Abelardo and Olga Samson and Aurelio Villaflor (the Samson Group) for unfair labor
practice; illegal dismissal; illegal deductions; underpayment; and nonpayment of allowances,
separation pay and 13th month pay.28 Subsequently, they amended their Complaint to include
Agustin and De Guzman as respondents to the case. 29

On 27 October 2004, the labor arbiter ruled that the buyer of an enterprise is not bound to absorb its
employees, unless there is an express stipulation to the contrary. However, he also found that
respondent employees were illegally dismissed, because they had involuntarily executed their
resignation letters after relying on representations that they would be given their separation benefits
and rehired by the new management. Accordingly, the labor arbiter decided the case against Agustin
and De Guzman, but dismissed the Complaint against the Samson Group, as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents Eduardo

Agustin, Jr. and Peregrin De Guzman to pay complainants’ separation pay in the total amount of
₱339,403.00 detailed as follows:

Elicerio B. Gaspar = P 5,837.00

Ricardo B. Gaspar, Jr. = ₱11,674.00

Liberato B. Mangoba = ₱64,207.00

Fidel E. Espiritu = ₱29,185.00

 Simeon B. Espiritu, Jr. = ₱26,000.00

Eufemia E. Rosete = ₱202,510.00

All other claims including the complaint against Abelardo Samson, Olga Samson and Aurelio Villaflor
are hereby DISMISSED for want of merit.

SO ORDERED.30

Dissatisfied with the Decision of the labor arbiter, respondent employees, Agustin and De Guzman
brought separate appeals to the NLRC. Respondent employees questioned the labor arbiter’s failure
to award backwages, while Agustin and De Guzman contended that they should not be held liable
for the payment of the employees’ claims.

The NLRC found that there was only a mere transfer of shares – and therefore, a mere change of
management – from Agustin and De Guzman to the Samson Group. As the change of management
was not a valid ground to terminate respondent bank employees, the NLRC ruled that they had
indeed been illegally dismissed. It further ruled that Agustin, De Guzman and the Samson Group
should be held jointly and severally liable for the employees’ separation pay and backwages, as
follows:

WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED.

Respondents are hereby Ordered to jointly and severally pay the complainants backwages from 11
September 2001 until the finality of this Decision, separation pay at one month pay for every year of
service, ₱10,000.00 and ₱5,000.00 moral and exemplary damages, and five (5%) percent attorney’s
fees.

Other dispositions are AFFIRMED

SO ORDERED.31

On 28 November 2006, the NLRC denied the Motions for Reconsideration filed by Agustin, De
Guzman and the Samson Group.32

Agustin and De Guzman filed a Rule 65 Petition for Certiorari with the CA, docketed as CA-G.R. SP
No. 97510. The Samson Group likewise filed a separate Rule 65 Petition for Certiorari with the CA,
docketed as CA-G.R. SP No. 97942. Motions to consolidate both cases were not acted upon by the
appellate court.

On 13 March 2008, the CA rendered a Decision in CA-G.R. SP No.97510 affirming that of the
NLRC. The fallo of the CA Decision reads:

WHEREFORE, in view of the foregoing, the petition is DENIED. Accordingly, the Decision dated
May 8, 2006, and Resolution dated November 28, 2006 of the National Labor Relations Commission
in NLRC NCR CA No. 043236-05 (NLRC RAB III-07-4542-02) are hereby AFFIRMED.

SO ORDERED.33

Subsequently, CA-G.R. SP No. 97942 was disposed of by the appellate court in a Decision dated 15
January 2008, which likewise affirmed that of the NLRC. The dispositive portion of the CA Decision
states:

WHEREFORE, premises considered, the instant Petition for Certiorari is denied, and the herein
assailed May 8, 2006 Decision and November 28, 2006 Resolution of the NLRC are hereby
AFFIRMED.

SO ORDERED.34

The appellate court denied the Motions for Reconsideration filed by the parties in Resolutions dated
1 September 200835 and 19 February 2009.36
The Samson Group then filed two separate Rule 45 Petitions questioning the CA Decisions and
Resolutions in CA-G.R. SP No. 97510 and CA-G.R. SP No. 97942. On 17 June 2009, this Court
resolved to consolidate both Petitions.37

THE ISSUES

Succinctly, the parties are asking this Court to determine whether respondent employees were
illegally dismissed and, if so, which of the parties are liable for the claims of the employees and the
extent of the reliefs that may be awarded to these employees.

THE COURT’S RULING

The instant Petitions are partly meritorious.

Respondent employees were illegally dismissed.

As to Elicerio Gaspar, Ricardo Gaspar, Jr., Fidel Espiritu, Eufemia Rosete and Liberato Mangoba

The Samson Group contends that Elicerio, Ricardo, Fidel, and Liberato voluntarily resigned from
their posts, while Eufemia retired from her position. As their resignations and retirements were
voluntary, they were not dismissed from their employment. 38 In support of this argument, it presented
copies of their resignation and retirement letters,39 which were couched in terms of gratitude.

We disagree. While resignation letters containing words of gratitude may indicate that the employees
were not coerced into resignation, 40 this fact alone is not conclusive proof that they intelligently, freely
and voluntarily resigned. To rule that resignation letters couched in terms of gratitude are, by
themselves, conclusive proof that the employees intended to relinquish their posts would open the
floodgates to possible abuse. In order to withstand the test of validity, resignations must be made
voluntarily and with the intention of relinquishing the office, coupled with an act of
relinquishment.41 Therefore, in order to determine whether the employees truly intended to resign
from their respective posts, we cannot merely rely on the tenor of the resignation letters, but must
take into consideration the totality of circumstances in each particular case.

Here, the records show that Elicerio, Ricardo, Fidel, and Liberato only tendered resignation letters
because they were led to believe that, upon reapplication, they would be reemployed by the new
management.42 As it turned out, except for Simeon, Jr., they were not rehired by the new
management. Their reliance on the representation that they would be reemployed gives credence to
their argument that they merely submitted courtesy resignation letters because it was demanded of
them, and that they had no real intention of leaving their posts. We therefore conclude that Elicerio,
Ricardo, Fidel, and Liberato did not voluntarily resign from their work; rather, they were terminated
from their employment.

As to Eufemia, both the CA and the NLRC discussed her case together with the cases of the rest of
respondent-employees. However, a review of the records shows that, unlike her co-employees, she
did not resign; rather, she submitted a letter indicating that she was retiring from her former
position.43

The fact that Eufemia retired and did not resign, however, does not change our conclusion that
illegal dismissal took place.

Retirement, like resignation, should be an act completely voluntary on the part of the employee. If
the intent to retire is not clearly established or if the retirement is involuntary, it is to be treated as a
discharge.44

In this case, the facts show that Eufemia’s retirement was not of her own volition. The circumstances
could not be more telling. The facts show that Eufemia was likewise given the option to resign or
retire in order to fulfill the precondition in the Letter Agreements that the seller should
"terminate/retire the employees [mutually agreed upon] upon transfer of shares" to the
buyers.45 Thus, like her other co-employees, she first submitted a letter of resignation dated 27
August 2001.46 For one reason or another, instead of resigning, she chose to retire and submitted a
retirement letter to that effect.47 It was this letter that was subsequently transmitted to the
representative of the Samson Group on 11 September 2001. 48

In San Miguel Corporation v. NLRC,49 we have explained that involuntary retirement is tantamount to
dismissal, as employees can only choose the means and methods of terminating their employment,
but are powerless as to the status of their employment and have no choice but to leave the
company. This rule squarely applies to Eufemia’s case. Indeed, she could only choose between
resignation and retirement, but was made to understand that she had no choice but to leave SME
Bank. Thus, we conclude that, similar to her other co-employees, she was illegally dismissed from
employment.

The Samson Group further argues50 that, assuming the employees were dismissed, the dismissal is
legal because cessation of operations due to serious business losses is one of the authorized
causes of termination under Article 283 of the Labor Code. 51

Again, we disagree.

The law permits an employer to dismiss its employees in the event of closure of the business
establishment.52 However, the employer is required to serve written notices on the worker and the
Department of Labor at least one month before the intended date of closure. 53 Moreover, the
dismissed employees are entitled to separation pay, except if the closure was due to serious
business losses or financial reverses.54 However, to be exempt from making such payment, the
employer must justify the closure by presenting convincing evidence that it actually suffered serious
financial reverses.55

In this case, the records do not support the contention of SME Bank that it intended to close the
business establishment. On the contrary, the intention of the parties to keep it in operation is
confirmed by the provisions of the Letter Agreements requiring Agustin and De Guzman to
guarantee the "peaceful transition of management of the bank" and to appoint "a manager of [the
Samson Group’s] choice x x x to oversee bank operations."

Even assuming that the parties intended to close the bank, the records do not show that the
employees and the Department of Labor were given written notices at least one month before the
dismissal took place. Moreover, aside from their bare assertions, the parties failed to substantiate
their claim that SME Bank was suffering from serious financial reverses.

In fine, the argument that the dismissal was due to an authorized cause holds no water.

Petitioner bank also argues that, there being a transfer of the business establishment, the innocent
transferees no longer have any obligation to continue employing respondent employees, 56 and that
the most that they can do is to give preference to the qualified separated employees; hence, the
employees were validly dismissed.57

The argument is misleading and unmeritorious. Contrary to petitioner bank’s argument, there was no
transfer of the business establishment to speak of, but merely a change in the new majority
shareholders of the corporation.

There are two types of corporate acquisitions: asset sales and stock sales. 58 In asset sales, the
corporate entity59 sells all or substantially all of its assets60 to another entity. In stock sales, the
individual or corporate shareholders61 sell a controlling block of stock62 to new or existing
shareholders.

In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected
employees, but is liable for the payment of separation pay under the law. 63 The buyer in good faith,
on the other hand, is not obliged to absorb the employees affected by the sale, nor is it liable for the
payment of their claims.64 The most that it may do, for reasons of public policy and social justice, is to
give preference to the qualified separated personnel of the selling firm. 65

In contrast with asset sales, in which the assets of the selling corporation are transferred to another
entity, the transaction in stock sales takes place at the shareholder level. Because the corporation
possesses a personality separate and distinct from that of its shareholders, a shift in the composition
of its shareholders will not affect its existence and continuity. Thus, notwithstanding the stock sale,
the corporation continues to be the employer of its people and continues to be liable for the payment
of their just claims. Furthermore, the corporation or its new majority share holders are not entitled to
lawfully dismiss corporate employees absent a just or authorized cause.

In the case at bar, the Letter Agreements show that their main object is the acquisition by the
Samson Group of 86.365% of the shares of stock of SME Bank. 66 Hence, this case involves a stock
sale, whereby the transferee acquires the controlling shares of stock of the corporation. Thus,
following the rule in stock sales, respondent employees may not be dismissed except for just or
authorized causes under the Labor Code.

Petitioner bank argues that, following our ruling in Manlimos v. NLRC,67 even in cases of stock sales,
the new owners are under no legal duty to absorb the seller’s employees, and that the most that the
new owners may do is to give preference to the qualified separated employees. 68 Thus, petitioner
bank argues that the dismissal was lawful.

We are not persuaded.

Manlimos dealt with a stock sale in which a new owner or management group acquired complete
ownership of the corporation at the shareholder level. 69 The employees of the corporation were later
"considered terminated, with their conformity"70 by the new majority shareholders. The employees
then re-applied for their jobs and were rehired on a probationary basis. After about six months, the
new management dismissed two of the employees for having abandoned their work, and it
dismissed the rest for committing "acts prejudicial to the interest of the new
management."71 Thereafter, the employees sought reinstatement, arguing that their dismissal was
illegal, since they "remained regular employees of the corporation regardless of the change of
management."72

In disposing of the merits of the case, we upheld the validity of the second termination, ruling that
"the parties are free to renew the contract or not [upon the expiration of the period provided for in
their probationary contract of employment]."73 Citing our pronouncements in Central Azucarera del
Danao v. Court of Appeals,74 San Felipe Neri School of Mandaluyong, Inc. v. NLRC, 75 and MDII
Supervisors & Confidential Employees Association v. Presidential Assistant on Legal Affairs, 76 we
likewise upheld the validity of the employees’ first separation from employment, pronouncing as
follows:

A change of ownership in a business concern is not proscribed bylaw. In Central Azucarera del
Danao vs. Court of Appeals, this Court stated:

There can be no controversy for it is a principle well-recognized, that it is within the employer’s
legitimate sphere of management control of the business to adopt economic policies or make some
changes or adjustments in their organization or operations that would insure profit to itself or protect
the investment of its stockholders. As in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sellor dispose all or substantially all of its
assets and properties which may bring about the dismissal or termination of its employees in the
process. Such dismissal or termination should not however be interpreted in such a manner as to
permit the employer to escape payment of termination pay. For such a situation is not envisioned in
the law. It strikes at the very concept of social justice.

In a number of cases on this point, the rule has been laid down that the sale or disposition must be
motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee of a
business establishment has no liability to the employees of the transfer or to continue employer
them. Nor is the transferee liable for past unfair labor practices of the previous owner, except, when
the liability therefor is assumed by the new employer under the contract of sale, or when liability
arises because of the new owner’s participation in thwarting or defeating the rights of the employees.

Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb the
transferor’s employees as there is no law compelling such absorption. The most that the transferee
may do, for reasons of public policy and social justice, is to give preference to the qualified
separated employees in the filling of vacancies in the facilities of the purchaser.

Since the petitioners were effectively separated from work due to a bona fide change of ownership
and they were accordingly paid their separation pay, which they freely and voluntarily accepted, the
private respondent corporation was under no obligation to employ them; it may, however, give them
preference in the hiring. x x x. (Citations omitted)
We take this opportunity to revisit our ruling in Manlimos insofar as it applied a doctrine on asset
sales to a stock sale case. Central Azucarera del Danao, San Felipe Neri School of Mandaluyong
and MDII Supervisors &Confidential Employees Association all dealt with asset sales, as they
involved a sale of all or substantially all of the assets of the corporation. The transactions in those
cases were not made at the shareholder level, but at the corporate level. Thus, applicable to those
cases were the rules in asset sales: the employees may be separated from their employment, but
the seller is liable for the payment of separation pay; on the other hand, the buyer in good faith is not
required to retain the affected employees in its service, nor is it liable for the payment of their claims.

The rule should be different in Manlimos, as this case involves a stock sale. It is error to even
discuss transfer of ownership of the business, as the business did not actually change hands. The
transfer only involved a change in the equity composition of the corporation. To reiterate, the
employees are not transferred to a new employer, but remain with the original corporate employer,
notwithstanding an equity shift in its majority shareholders. This being so, the employment status of
the employees should not have been affected by the stock sale. A change in the equity composition
of the corporate shareholders should not result in the automatic termination of the employment of the
corporation’s employees. Neither should it give the new majority shareholders the right to legally
dismiss the corporation’s employees, absent a just or authorized cause.

The right to security of tenure guarantees the right of employees to continue in their employment
absent a just or authorized cause for termination. This guarantee proscribes a situation in which the
corporation procures the severance of the employment of its employees – who patently still desire to
work for the corporation – only because new majority stockholders and a new management have
come into the picture. This situation is a clear circumvention of the employees’ constitutionally
guaranteed right to security of tenure, an act that cannot be countenanced by this Court.

It is thus erroneous on the part of the corporation to consider the employees as terminated from their
employment when the sole reason for so doing is a change of management by reason of the stock
sale. The conformity of the employees to the corporation’s act of considering them as terminated
and their subsequent acceptance of separation pay does not remove the taint of illegal dismissal.
Acceptance of separation pay does not bar the employees from subsequently contesting the legality
of their dismissal, nor does it estop them from challenging the legality of their separation from the
service.77

We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it upheld that, in a stock
sale, the buyer in good faith has no obligation to retain the employees of the selling corporation; and
that the dismissal of the affected employees is lawful, even absent a just or authorized cause.

As to Simeon Espiritu, Jr.

The CA and the NLRC discussed the case of Simeon, Jr. together with that of the rest of
respondent-employees. However, a review of the records shows that the conditions leading to his
dismissal from employment are different. We thus discuss his circumstance separately.

The Samson Group contends that Simeon, Jr., likewise voluntarily resigned from his
post.78 According to them, he had resigned from SME Bank before the share transfer took place. 79

Upon the change of ownership of the shares and the management of the company, Simeon, Jr.
submitted a letter of application to and was rehired by the new management. 80 However, the Samson
Group alleged that for purely personal reasons, he again resigned from his employment on 15
October 2001.81

Simeon, Jr., on the other hand, contends that while he was reappointed by the new management
after his letter of application was transmitted, he was not given a clear position, his benefits were
reduced, and he suffered a demotion in rank.82 These allegations were not refuted by the Samson
Group.

We hold that Simeon, Jr. was likewise illegally dismissed from his employment.

Similar to our earlier discussion, we find that his first courtesy resignation letter was also executed
involuntarily. Thus, it cannot be the basis of a valid resignation; and thus, at that point, he was
illegally terminated from his employment. He was, however, rehired by SME Bank under new
management, although based on his allegations, he was not reinstated to his former position or to a
substantially equivalent one. 83 Rather, he even suffered a reduction in benefits and a demotion in
rank.84 These led to his submission of another resignation letter effective 15 October 2001. 85

We rule that these circumstances show that Simeon, Jr. was constructively dismissed. In

Peñaflor v. Outdoor Clothing Manufacturing Corporation, 86 we have defined constructive dismissal as
follows:

Constructive dismissal is an involuntary resignation by the employee due to the harsh, hostile, and
unfavorable conditions set by the employer and which arises when a clear discrimination,
insensibility, or disdain by an employer exists and has become unbearable to the employee. 87

Constructive dismissal exists where there is cessation of work, because "continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a
diminution in pay" and other benefits.88

These circumstances are clearly availing in Simeon, Jr.’s case. He was made to resign, then rehired
under conditions that were substantially less than what he was enjoying before the illegal termination
occurred. Thus, for the second time, he involuntarily resigned from his employment. Clearly, this
case is illustrative of constructive dismissal, an act prohibited under our labor laws.

II

SME Bank, Eduardo M. Agustin, Jr. and Peregrin de Guzman, Jr. are liable for illegal dismissal.

Having ruled on the illegality of the dismissal, we now discuss the issue of liability and determine
who among the parties are liable for the claims of the illegally dismissed employees.

The settled rule is that an employer who terminates the employment of its employees without lawful
cause or due process of law is liable for illegal dismissal. 89

None of the parties dispute that SME Bank was the employer of respondent employees. The fact
that there was a change in the composition of its shareholders did not affect the employer-employee
relationship between the employees and the corporation, because an equity transfer affects neither
the existence nor the liabilities of a corporation. Thus, SME Bank continued to be the employer of
respondent employees notwithstanding the equity change in the corporation. This outcome is in line
with the rule that a corporation has a personality separate and distinct from that of its individual
shareholders or members, such that a change in the composition of its shareholders or members
would not affect its corporate liabilities.

Therefore, we conclude that, as the employer of the illegally dismissed employees before and after
the equity transfer, petitioner SME Bank is liable for the satisfaction of their claims.

Turning now to the liability of Agustin, De Guzman and the Samson Group for illegal dismissal, at the
outset we point out that there is no privity of employment contracts between Agustin, De Guzman
and the Samson Group, on the one hand, and respondent employees on the other. Rather, the
employment contracts were between SME Bank and the employees. However, this fact does not
mean that Agustin, De Guzman and the Samson Group may not be held liable for illegal dismissal
as corporate directors or officers. In Bogo-Medellin Sugarcane Planters Association, Inc. v.
NLRC,90 we laid down the rule as regards the liability of corporate directors and officers in illegal
dismissal cases, as follows:

Unless they have exceeded their authority, corporate officers are, as a general rule, not personally
liable for their official acts, because a corporation, by legal fiction, has a personality separate and
distinct from its officers, stockholders and members. However, this fictional veil may be pierced
whenever the corporate personality is used as a means of perpetuating a fraud or an illegal act,
evading an existing obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate
directors and officers are solidarily liable with the corporation, where terminations of employment are
done with malice or in bad faith.91 (Citations omitted)

Thus, in order to determine the respective liabilities of Agustin, De Guzman and the Samson Group
under the afore-quoted rule, we must determine, first, whether they may be considered as corporate
directors or officers; and, second, whether the terminations were done maliciously or in bad faith.
There is no question that both Agustin and De Guzman were corporate directors of SME Bank. An
analysis of the facts likewise reveals that the dismissal of the employees was done in bad faith.
Motivated by their desire to dispose of their shares of stock to Samson, they agreed to and later
implemented the precondition in the Letter Agreements as to the termination or retirement of SME
Bank’s employees. However, instead of going through the proper procedure, the bank manager
induced respondent employees to resign or retire from their respective employments, while
promising that they would be rehired by the new management. Fully relying on that promise, they
tendered courtesy resignations or retirements and eventually found themselves jobless. Clearly, this
sequence of events constituted a gross circumvention of our labor laws and a violation of the
employees’ constitutionally guaranteed right to security of tenure. We therefore rule that, as Agustin
and De Guzman are corporate directors who have acted in bad faith, they may be held solidarily
liable with SME Bank for the satisfaction of the employees’ lawful claims.

As to spouses Samson, we find that nowhere in the records does it appear that they were either
corporate directors or officers of SME Bank at the time the illegal termination occurred, except that
the Samson Group had already taken over as new management when Simeon, Jr. was
constructively dismissed. Not being corporate directors or officers, spouses Samson were not in
legal control of the bank and consequently had no power to dismiss its employees.

Respondent employees argue that the Samson Group had already taken over and conducted an
inventory before the execution of the share purchase agreement. 92 Agustin and De Guzman likewise
argued that it was at Olga Samson’s behest that the employees were required to resign from their
posts.93 Even if this statement were true, it cannot amount to a finding that spouses Samson should
be treated as corporate directors or officers of SME Bank. The records show that it was Espiritu who
asked the employees to tender their resignation and or retirement letters, and that these letters were
actually tendered to him.94 He then transmitted these letters to the representative of the Samson
Group.95 That the spouses Samson had to ask Espiritu to require the employees to resign shows that
they were not in control of the corporation, and that the former shareholders – through Espiritu –
were still in charge thereof. As the spouses Samson were neither corporate officers nor directors at
the time the illegal dismissal took place, we find that there is no legal basis in the present case to
hold them in their personal capacities solidarily liable with SME Bank for illegally dismissing
respondent employees, without prejudice to any liabilities that may have attached under other
provisions of law.

Furthermore, even if spouses Samson were already in control of the corporation at the time that
Simeon, Jr. was constructively dismissed, we refuse to pierce the corporate veil and find them liable
in their individual steads. There is no showing that his constructive dismissal amounted to more than
a corporate act by SME Bank, or that spouses Samson acted maliciously or in bad faith in bringing
about his constructive dismissal.

Finally, as regards Aurelio Villaflor, while he may be considered as a corporate officer, being the
president of SME Bank, the records are bereft of any evidence that indicates his actual participation
in the termination of respondent employees. Not having participated at all in the illegal act, he may
not be held individually liable for the satisfaction of their claims.

III

Respondent employees are entitled to separation pay, full backwages, moral damages, exemplary
damages and attorney’s fees.

The rule is that illegally dismissed employees are entitled to (1) either reinstatement, if viable, or
separation pay if reinstatement is no longer viable; and (2) backwages. 96

Courts may grant separation pay in lieu of reinstatement when the relations between the employer
and the employee have been so severely strained; when reinstatement is not in the best interest of
the parties; when it is no longer advisable or practical to order reinstatement; or when the employee
decides not to be reinstated. 97 In this case, respondent employees expressly pray for a grant of
separation pay in lieu of reinstatement. Thus, following a finding of illegal dismissal, we rule that they
are entitled to the payment of separation pay equivalent to their one-month salary for every year of
service as an alternative to reinstatement.

Respondent employees are likewise entitled to full backwages notwithstanding the grant of
separation pay. In Santos v. NLRC,98 we explained that an award of backwages restores the income
that was lost by reason of the unlawful dismissal, while separation pay "provides the employee with
'the wherewithal during the period that he is looking for another employment." 99 Thus, separation pay
is a proper substitute only for reinstatement; it is not an adequate substitute for both reinstatement
and backwages.100 Hence, respondent employees are entitled to the grant of full backwages in
addition to separation pay.

As to moral damages, exemplary damages and attorney's fees, we uphold the appellate court's
grant thereof based on our finding that the forced resignations and retirement were fraudulently done
and attended by bad faith.

WHEREFORE, premises considered, the instant Petitions for Review are PARTIALLY GRANTED.

The assailed Decision and Resolution of the Court of Appeals in CAG.R. SP No. 97510 dated 13
March 2008 and 1 September 2008,respectively, are hereby REVERSED and SET ASIDE insofar as
it held Abelardo P. Samson, Olga Samson and Aurelio Villaflor, Jr. solidarily liable for illegal
dismissal.

The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 97942 dated 15
January 2008 and 19 February 2009,respectively, are likewise REVERSED and SETASIDE insofar
as it held Abelardo P. Samson, Olga Samson and Aurelio Villaflor, Jr. solidarily liable for illegal
dismissal.

We REVERSE our ruling in Manlimos v. NLRC insofar as it upheld that, in a stock sale, the buyer in
good faith has no obligation to retain the employees of the selling corporation, and that the dismissal
of the affected employees is lawful even absent a just or authorized cause.

SO ORDERED.
G.R. No. 114311 November 29, 1996

COSMIC LUMBER CORPORATION, petitioner,

vs.
COURT OF APPEAL and ISIDRO PEREZ, respondents.

BELLOSILLO, J.:

COSMIC LUMBER CORPORATION through its General Manager executed on 28 January

1985 a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact —

. . . to initiate, institute and file any court action for the ejectment of third persons
and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and
37649, for the said squatters to remove their houses and vacate the premises in
order that the corporation may take material possession of the entire lot, and for this
purpose, to appear at the pre-trial conference and enter into any stipulation of facts
and/or compromise agreement so far as it shall protect the rights and interest of the
corporation in the aforementioned lots.  1

On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an

action for the ejectment of private respondent Isidro Perez and recover the possession of a
portion of Lot No. 443 before the Regional Trial Court of Dagupan, docketed as Civil Case
No. D-7750. 2

On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with

respondent Perez, the terms of which follow:

1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer
Rodolfo dela Cruz the area at present occupied by defendant wherein his house is
located is 333 square meters on the easternmost part of lot 443 and which portion
has been occupied by defendant for several years now;

2. That to buy peace said defendant pays unto the plaintiff through herein attorney-
in-fact the sum of P26,640.00 computed at P80.00/square meter;

3. That plaintiff hereby recognizes ownership and possession of the defendant by

virtue of this compromise agreement over said portion of 333 square m. of lot 443
which portion will be located on the easternmost part as indicated in the sketch as
annex A;

4. Whatever expenses of subdivision, registration, and other incidental expenses

shall be shouldered by the defendant.  3

On 27 November 1985 the "Compromise Agreement" was approved by the trial court and
judgment was rendered in accordance therewith.  4
Although the decision became final and executory it was not executed within the 5-year
period from date of its finality allegedly due to the failure of petitioner to produce the owner's
duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the portion sold by
the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise
agreement. Thus on 25 January 1993 respondent filed a complaint to revive the judgment,
docketed as Civil Case No. D-10459.  5

Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the
revival of judgment was served upon it that it came to know of the compromise agreement
entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon which the
trial court based its decision of 26 July 1993 in Civil Case No. D-7750. Forthwith, upon
learning of the fraudulent transaction, petitioner sought annulment of the decision of the trial
court before respondent Court of Appeals on the ground that the compromise agreement
was void because: (a) the attorney-in-fact did not have the authority to dispose of, sell,
encumber or divest the plaintiff of its ownership over its real property or any portion thereof;
(b) the authority of the attorney-in-fact was confined to the institution and filing of an
ejectment case against third persons/squatters on the property of the plaintiff, and to cause
their eviction therefrom; (c) while the special power of attorney made mention of an authority
to enter into a compromise agreement, such authority was in connection with, and limited to,
the eviction of third persons/squatters thereat, in order that "the corporation may take
material possession of the entire lot;" (d) the amount of P26,640.00 alluded to as alleged
consideration of said agreement was never received by the plaintiff; (e) the private defendant
acted in bad faith in. the execution of said agreement knowing fully well the want of authority
of the attorney-in-fact to sell, encumber or dispose of the real property of plaintiff; and, (f) the
disposal of a corporate property indispensably requires a Board Resolution of its Directors, a
fact which is wanting in said Civil Case No. D-7750, and the General Manager is not the
proper officer to encumber a corporate property.  6

On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that
not one of the grounds for annulment, namely, lack of jurisdiction, fraud or illegality was
shown to exist.   It also denied the motion for reconsideration filed by petitioner, discoursing
7

that the alleged nullity of the compromise judgment on the ground that petitioner's attorney-
in-fact Villamil-Estrada was not authorized to sell the subject propety may be raised as a
defense in the execution of the compromise judgment as it does not bind petitioner, but not
as a ground for annulment of judgment because it does not affect the jurisdiction of the trial
court over the action nor does it amount to extrinsic fraud.  8

Petitioner challenges this verdict. It argues that the decision of the trial court is void because
the compromise agreement upon which it was based is void. Attorney-in-fact Villamil-Estrada
did not possess the authority to sell or was she armed with a Board Resolution authorizing
the sale of its property. She was merely empowered to enter into a compromise agreement
in the recovery suit she was authorized to file against persons squatting on Lot No. 443,
such authority being expressly confined to the "ejectment of third persons or squatters of . . .
lot . . . (No.) 443 . . . for the said squatters to remove their houses and vacate the premises
in order that the corporation may take material possession of the entire lot . . ."

We agree with petitioner. The authority granted Villamil-Estrada under the special power of
attorney was explicit and exclusionary: for her to institute any action in court to eject all
persons found on Lots Nos. 9127 and 443 so that petitioner could take material possession
thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts
and/or compromise agreement but only insofar as this was protective of the rights and
interests of petitioner in the property. Nowhere in this authorization was Villamil-Estrada
granted expressly or impliedly any power to sell the subject property nor a portion thereof.
Neither can a conferment of the power to sell be validly inferred from the specific authority
"to enter into a compromise agreement" because of the explicit limitation fixed by the grantor
that the compromise entered into shall only be "so far as it shall protect the rights and
interest of the corporation in the aforementioned lots." In the context of the specific
investiture of powers to Villamil-Estrada, alienation by sale of an immovable certainly cannot
be deemed protective of the right of petitioner to physically possess the same, more so when
the land was being sold for a price of P80.00 per square meter, very much less than its
assessed value of P250.00 per square meter, and considering further that petitioner never
received the proceeds of the sale.
When the sale of a piece of land or any interest thereon is through an agent, the authority of
the latter shall be in writing; otherwise, the sale shall be void.   Thus the authority of an agent
9

to execute a contract for the sale of real estate must be conferred in writing and must give
him specific authority, either to conduct the general business of the principal or to execute a
binding contract containing terms and conditions which are in the contract he did
execute.   A special power of attorney is necessary to enter into any contract by which the
10

ownership of an immovable is transmitted or acquired either gratuitously or for a valuable

consideration.   The express mandate required by law to enable an appointee of an agency
11

(couched) in general terms to sell must be one that expressly mentions a sale or that
includes a sale as a necessary ingredient of the act mentioned.   For the principal to confer
12

the right upon an agent to sell real estate, a power of attorney must so express the powers of
the agent in clear and unmistakable language. When there is any reasonable doubt that the
language so used conveys such power, no such construction shall be given the document.  13

It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso
jure is consequently void. So is the compromise agreement. This being the case, the
judgment based thereon is necessarily void. Antipodal to the opinion expressed by
respondent court in resolving petitioner's motion for reconsideration, the nullity of the
settlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to
render its decision based on the compromise agreement. In Alviar v. Court of First Instance
of La Union,   the Court held —
14

. . . this court does not hesitate to hold that the judgment in question is null and
void ab initio. It is not binding upon and cannot be executed against the petitioners. It
is evident that the compromise upon which the judgment was based was not
subscribed by them . . . Neither could Attorney Ortega bind them validly in the
compromise because he had no special authority . . .

As the judgment in question is null and void ab initio, it is evident that the court
acquired no jurisdiction to render it, much less to order the execution thereof . . .

. . . A judgment, which is null and void ab initio, rendered by a court without

jurisdiction to do so, is without legal efficacy and may properly be impugned in any
proceeding by the party against whom it is sought to be enforced . . .

This ruling was adopted in Jacinto v. Montesa,  by Mr. Justice J. B.L. Reyes, a much-
15

respected authority on civil law, where the Court declared that a judgment based on a
compromise entered into by an attorney without specific authority from the client is void.
Such judgment may be impugned and its execution restrained in any proceeding by the party
against whom it is sought to be enforced. The Court also observed that a defendant against
whom a judgment based on a compromise is sought to be enforced may file a petition
for certiorari to quash the execution. He could not move to have the compromise set aside
and then appeal from the order of denial since he was not a party to the compromise. Thus it
would appear that the obiter of the appellate court that the alleged nullity of the compromise
agreement should be raised as a defense against its enforcement is not legally feasible.
Petitioner could not be in a position to question the compromise agreement in the action to
revive the compromise judgment since it was never privy to such agreement. Villamil-Estrada
who signed the compromise agreement may have been the attorney-in-fact but she could
not legally bind petitioner thereto as she was not entrusted with a special authority to sell the
land, as required in Art. 1878, par. (5), of the Civil Code.

Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of
Appeals to annul and set aside judgments of Regional Trial Courts.   "Thus, the Intermediate
16

Appellant Court (now Court of Appeals) shall exercise . . . (2) Exclusive original jurisdiction
over action for annulment of judgments of the Regional Trial Courts . . ." However, certain
requisites must first be established before a final and executory judgment can be the subject
of an action for annulment. It must either be void for want of jurisdiction or for lack of due
process of law, or it has been obtained by fraud.  17

Conformably with law and the above-cited authorities, the petition to annul the decision of
the trial court in Civil Case No. D-7750 before the Court of Appeals was proper. Emanating
as it did from a void compromise agreement, the trial court had no jurisdiction to render a
judgment based thereon.  18
It would also appear, and quite contrary to the finding of the appellate court, that the highly
reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil Case No. 7750 constituted
an extrinsic or collateral fraud by reason of which the judgment rendered thereon should
have been struck down. Not all the legal semantics in the world can becloud the unassailable
fact that petitioner was deceived and betrayed by its attorney-in-fact, Villamil-Estrada
deliberately concealed from petitioner, her principal, that a compromise agreement had been
forged with the end-result that a portion of petitioner's property was sold to the deforciant,
literally for a song. Thus completely kept unaware of its agent's artifice, petitioner was not
accorded even a fighting chance to repudiate the settlement so much so that the judgment
based thereon became final and executory.

For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow
limits. Fraud may assume different shapes and be committed in as many different ways and
here lies the danger of attempting to define fraud. For man in his ingenuity and fertile
imagination will always contrive new schemes to fool the unwary.

There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is
one the effect of which prevents a party from hearing a trial, or real contest, or from
presenting all of his case to the court, or where it operates upon matters, not pertaining to
the judgment itself, but to the manner in which it was procured so that there is not a fair
submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of
the prevailing party in the litigation which is committed outside of the trial of the case,
whereby the defeated party has been prevented from exhibiting fully his side of the case by
fraud or deception practiced on him by his opponent.   Fraud is extrinsic where the
19

unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception
practiced on him by his opponent, as by keeping him away from court, a false promise of a
compromise; or where the defendant never had knowledge of the suit, being kept in
ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority
connives at his defeat; these and similar cases which show that there has never been a real
contest in the trial or hearing of the case are reasons for which a new suit may be sustained
to set aside and annul the former judgment and open the case for a new and fair hearing.  20

It may be argued that petitioner knew of the compromise agreement since the principal is
chargeable with and bound by the knowledge of or notice to his agent received while the
agent was acting as such. But the general rule is intended to protect those who exercise
good faith and not as a shield for unfair dealing. Hence there is a well-established exception
to the general rule as where the conduct and dealings of the agent are such as to raise a
clear presumption that he will not communicate to the principal the facts in
controversy.   The logical reason for this exception is that where the agent is committing a
21

fraud, it would be contrary to common sense to presume or to expect that he would

communicate the facts to the principal. Verily, when an agent is engaged in the perpetration
of a fraud upon his principal for his own exclusive benefit, he is not really acting for the
principal but is really acting for himself, entirely outside the scope of his agency.   Indeed,
22

the basic tenets of agency rest on the highest considerations of justice, equity and fair play,
and an agent will not be permitted to pervert his authority to his own personal advantage,
and his act in secret hostility to the interests of his principal transcends the power afforded
him. 23

WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of
Appeals dated 29 October 1993 and 10 March 1994, respectively, as well as the decision of
the Regional Trial Court of Dagupan City in Civil Case No. D-7750 dated 27 November 1985,
are NULLIFIED and SET ASIDE. The "Compromise Agreement" entered into between
Attorney-in-fact Paz G. Villamil-Estrada and respondent Isidro Perez is declared VOID. This
is without prejudice to the right of petitioner to pursue its complaint against private
respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession of a portion
of Lot No. 443.

SO ORDERED.
G.R. No. 161757             January 25, 2006

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S.
DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City and
DIVINA A. MONTEHERMOZO, Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner, Sunace International Management Services (Sunace), a corporation duly organized and
existing under the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo (Divina) as a
domestic helper under a 12-month contract effective February 1, 1997. 1 The deployment was with
the assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued working for her
Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to the
Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint2 before the National Labor
Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the
employer-foreign principal alleging that she was jailed for three months and that she was underpaid.

The following day or on February 15, 2000, Labor Arbitration Associate Regina T. Gavin issued
Summons3 to the Manager of Sunace, furnishing it with a copy of Divina’s complaint and directing it
to appear for mandatory conference on February 28, 2000.

The scheduled mandatory conference was reset. It appears to have been concluded, however.

On April 6, 2000, Divina filed her Position Paper 4 claiming that under her original one-year contract
and the 2-year extended contract which was with the knowledge and consent of Sunace, the
following amounts representing income tax and savings were deducted:

Year Deduction for Income Tax Deduction for Savings

1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;5

and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999
were not. On even date, Sunace, by its Proprietor/General Manager Maria Luisa Olarte, filed its
Verified Answer and Position Paper,6 claiming as follows, quoted verbatim:

COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS SAVINGS

3. Complainant could not anymore claim nor entitled for the refund of her 24 months savings as she
already took back her saving already last year and the employer did not deduct any money from her
salary, in accordance with a Fascimile Message from the respondent SUNACE’s employer, Jet
Crown International Co. Ltd., a xerographic copy of which is herewith attached as ANNEX
"2" hereof;

COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX AND PAYMENT OF

ATTORNEY’S FEES

4. There is no basis for the grant of tax refund to the complainant as the she finished her  one year
contract and hence, was not illegally dismissed by her employer . She could only lay claim over the
tax refund or much more be awarded of damages such as attorney’s fees as said reliefs are
available only when the dismissal of a migrant worker is without just valid or lawful cause as defined
by law or contract.

The rationales behind the award of tax refund and payment of attorney’s fees is not to enrich the
complainant but to compensate him for actual injury suffered. Complainant did not suffer injury,
hence, does not deserve to be compensated for whatever kind of damages.

Hence, the complainant has NO cause of action against respondent SUNACE for monetary claims,
considering that she has been totally paid of all the monetary benefits due her under her
Employment Contract to her full satisfaction.

6. Furthermore, the tax deducted from her salary is in compliance with the Taiwanese law, which
respondent SUNACE has no control and complainant has to obey and this Honorable Office has no
authority/jurisdiction to intervene because the power to tax is a sovereign power which the
Taiwanese Government is supreme in its own territory. The sovereign power of taxation of a state is
recognized under international law and among sovereign states.

7. That respondent SUNACE respectfully reserves the right to file supplemental Verified Answer
and/or Position Paper to substantiate its prayer for the dismissal of the above case against the
herein respondent. AND BY WAY OF -

x x x x (Emphasis and underscoring supplied)

Reacting to Divina’s Position Paper, Sunace filed on April 25, 2000 an ". . . answer to complainant’s
position paper"7 alleging that Divina’s 2-year extension of her contract was without its knowledge and
consent, hence, it had no liability attaching to any claim arising therefrom, and Divina in fact
executed a Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy of
each document was annexed to said ". . . answer to complainant’s position paper."

To Sunace’s ". . . answer to complainant’s position paper," Divina filed a 2-page reply, 8 without,
however, refuting Sunace’s disclaimer of knowledge of the extension of her contract and without
saying anything about the Release, Waiver and Quitclaim and Affidavit of Desistance.

The Labor Arbiter, rejected Sunace’s claim that the extension of Divina’s contract for two more years
was without its knowledge and consent in this wise:

We reject Sunace’s submission that it should not be held responsible for the amount withheld
because her contract was extended for 2 more years without its knowledge and consent because as
Annex "B"9 shows, Sunace and Edmund Wang have not stopped communicating with each
other and yet the matter of the contract’s extension and Sunace’s alleged non-consent thereto has
not been categorically established.

What Sunace should have done was to write to POEA about the extension and its objection thereto,
copy furnished the complainant herself, her foreign employer, Hang Rui Xiong and the Taiwanese
broker, Edmund Wang.

And because it did not, it is presumed to have consented to the extension and should be liable for
anything that resulted thereform (sic).10 (Underscoring supplied)

The Labor Arbiter rejected too Sunace’s argument that it is not liable on account of Divina’s
execution of a Waiver and Quitclaim and an Affidavit of Desistance. Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall
be reduced to writing and signed by the parties and their respective counsel (sic), if any, before the
Labor Arbiter.

The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily
entered into by the parties and after having explained to them the terms and consequences thereof.

A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before
whom the case is pending shall be approved by him, if after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and conditions of the settlement and
that it was entered into freely voluntarily (sic) by them and the agreement is not contrary to law,
morals, and public policy.

And because no consideration is indicated in the documents, we strike them down as contrary to
law, morals, and public policy.11

He accordingly decided in favor of Divina, by decision of October 9, 2000, 12 the dispositive portion of
which reads:

Wherefore, judgment is hereby rendered ordering respondents SUNACE INTERNATIONAL

SERVICES and its owner ADELAIDA PERGE, both in their personal capacities and as agent of
Hang Rui Xiong/Edmund Wang to jointly and severally pay complainant DIVINA A.
MONTEHERMOZO the sum of NT91,950.00 in its peso equivalent at the date of payment, as refund
for the amounts which she is hereby adjudged entitled to as earlier discussed plus 10% thereof as
attorney’s fees since compelled to litigate, complainant had to engage the services of counsel.

SO ORDERED.13 (Underescoring supplied)

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002, 14 affirmed the Labor Arbiter’s
decision.

Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals which dismissed it
outright by Resolution of November 12, 2002, 16 the full text of which reads:

The petition for certiorari faces outright dismissal.

The petition failed to allege facts constitutive of grave abuse of discretion on the part of the public
respondent amounting to lack of jurisdiction when the NLRC affirmed the Labor Arbiter’s finding that
petitioner Sunace International Management Services impliedly consented to the extension of the
contract of private respondent Divina A. Montehermozo. It is undisputed that petitioner was
continually communicating with private respondent’s foreign employer (sic). As agent of the foreign
principal, "petitioner cannot profess ignorance of such extension as obviously,  the act of the
principal extending complainant (sic) employment contract necessarily bound it." Grave abuse
of discretion is not present in the case at bar.

ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.17

SO ORDERED.

(Emphasis on words in capital letters in the original; emphasis on words in small letters and
underscoring supplied)

Its Motion for Reconsideration having been denied by the appellate court by Resolution of January
14, 2004,18 Sunace filed the present petition for review on certiorari.

The Court of Appeals affirmed the Labor Arbiter and NLRC’s finding that Sunace knew of and
impliedly consented to the extension of Divina’s 2-year contract. It went on to state that "It is
undisputed that [Sunace] was continually communicating with [Divina’s] foreign employer." It thus
concluded that "[a]s agent of the foreign principal, ‘petitioner cannot profess ignorance of such
extension as obviously, the act of the principal extending complainant (sic) employment contract
necessarily bound it.’"
Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese broker Wang, not with the foreign employer Xiong.

The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the only basis of a
finding of continuous communication, reads verbatim:

xxxx

Regarding to Divina, she did not say anything about her saving in police station. As we
contact with her employer, she took back her saving already last years. And they did not
deduct any money from her salary. Or she will call back her employer to check it again. If
her employer said yes! we will get it back for her.

Thank you and best regards.

(Sgd.)
Edmund Wang
President19

The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that
Sunace continually communicated with the foreign "principal" (sic) and therefore was aware of and
had consented to the execution of the extension of the contract is misplaced. The message does not
provide evidence that Sunace was privy to the new contract executed after the expiration on
February 1, 1998 of the original contract. That Sunace and the Taiwanese broker communicated
regarding Divina’s allegedly withheld savings does not necessarily mean that Sunace ratified the
extension of the contract. As Sunace points out in its Reply 20 filed before the Court of Appeals,

As can be seen from that letter communication, it was just an information given to the petitioner that
the private respondent had t[aken] already her savings from her foreign employer and that no
deduction was made on her salary. It contains nothing about the extension or the petitioner’s
consent thereto.21

Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it
was sent to enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to
appear on February 28, 2000 for a mandatory conference following Divina’s filing of the complaint on
February 14, 2000.

Respecting the Court of Appeals following dictum:

As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as
obviously, the act of its principal extending [Divina’s] employment contract necessarily bound it, 22

it too is a misapplication, a misapplication of the theory of imputed knowledge.

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal,
employer Xiong, not the other way around.23 The knowledge of the principal-foreign employer
cannot, therefore, be imputed to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner"
cannot be held solidarily liable for any of Divina’s claims arising from the 2-year employment
extension. As the New Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs, except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law.24

Furthermore, as Sunace correctly points out, there was an implied revocation of its agency
relationship with its foreign principal when, after the termination of the original employment contract,
the foreign principal directly negotiated with Divina and entered into a new and separate employment
contract in Taiwan. Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the business entrusted to the agent, dealing
directly with third persons.

thus applies.

In light of the foregoing discussions, consideration of the validity of the Waiver and Affidavit of
Desistance which Divina executed in favor of Sunace is rendered unnecessary.

WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court of Appeals are
hereby REVERSED and SET ASIDE. The complaint of respondent Divina A. Montehermozo against
petitioner is DISMISSED.

SO ORDERED.

G.R. No. 207888               June 9, 2014

DIONARTO Q. NOBLEJAS, Petitioner,
vs.
ITALIAN MARITIME ACADEMY PHILS., INC., CAPT. NICOLO S. TERREI, RACELI B. FERREZ
and MA. TERESA R. MENDOZA, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking the reversal of the February 22, 2013 Decision  and
1

the June 21, 2013 Resolution  of the Court of Appeals (CA), in CA-G.R. SP No. 124146, concerning
2

an illegal dismissal case.

Petitioner Dionarto Q. Noblejas (Noblejas) filed a complaint for illegal dismissal, tax refund, moral
and exemplary damages, non-payment of 13th month pay, food, gasoline and schooling allowances,
health insurance, monetized leave, and attorney's fees, against Italian Maritime Academy Phils., Inc.
(IMAPI), Capt. Nicolo S. Terrei (Capt. Terrei), Raceli S. Ferrez (Ferrez), and Ma. Teresa R. Mendoza
(Mendoza).

IMAPI was a training center for seamen and an assessment center for determination of the
qualifications and competency of seamen and officers for possible promotion. Capt. Terrei was the
Managing Director of IMAPI while Ferrez was his secretary. Mendoza was the company’s
Administrative Manager.

Record shows that Procerfina SA. Terrei, IMAPI President, wrote a Letter  to Noblejas informing him
3

that he had been appointed as training instructor/assessor of the company on a contractual basis for
a period of three (3) months effective May 20,2009, with a monthly salary of 75,000.00 inclusive of
tax. After the expiration of the 3-month period, IMAPI hired Noblejas anew as training
instructor/assessor with the same salary rate, but no written contract was drawn for his rehiring. 4

The absence of a written contract to cover the renewal of his employment became Noblejas’ major
concern. To address all his apprehensions, he wrote Capt. Terrei a letter, dated March 9, 2010,
requesting that a new contract be executed to reflect the following provisions that they had allegedly
agreed upon during their conversation on May 19, 2009, to wit: 1] that his monthly salary would be
₱75,000.00, tax excluded, and that 50% of his SSS premium would be shouldered by the company;
and 2] that after the completion of his 3-month contract, he would be given the option to choose
either - a) to be regularly employed as an instructor of IMAPI; or b) to go on board a vessel with the
company extending him financial aid for the processing of pertinent documents, which amount would
be later on deducted from his salary. Likewise in the same letter, Noblejas intimated that he was
electing to continue working for the company as its regular instructor.

Noblejas averred that the company did not act on his letter-request, so he sought an audience with
Capt. Terrei on March 16, 2010. During the meeting, an altercation between them ensued. He
claimed that after that incident, Capt. Terrei instructed Ferrez to dismiss him from employment. He
claimed that when he asked from Ferrez for a copy of his old contract, she allegedly replied, "No,
you better pack up all your things now and go, you are now dismissed and you are no longer part in
this office – clearly, you are terminated from this day on."5
In their position paper,  respondents submitted that they could not be adjudged guilty of illegal
6

dismissal because there was no positive and overt act of dismissing Noblejas from employment.

Respondents presented a different version of what took place on March 16, 2010. According to
respondents, Noblejas got angry, hurled invectives against Ferrez and even threatened to file a case
against them after she had relayed to him the response of Capt. Terrei to his March 9, 2010 letter to
the effect that there was no previous agreement to grant him tax refund, health insurance and food,
schooling and gasoline allowances and that he had to render at least one year of service before the
company could decide whether to accord him the status of a regular employee. The following day,
March 17, 2010, he did not report for work anymore and filed the complaint against them.

Respondents theorized that the complaint was filed on the mistaken impression by Noblejas that the
failure to meet his demands, enumerated in his March 9, 2010 letter, was tantamount to his
termination from employment. They, however, insisted that he was not entitled to 13th month pay
because he was hired as a consultant and not as a regular employee. For unused leave credits, they
posited that IMAPI could not be held liable in view of their payment to him of his sick leave pay in the
aggregate amount of ₱21,075.00.

On October 15, 2010, Labor Arbiter Lutricia F. Quitevis-Alconcel (LA) handed down her
decision,  finding that Noblejas was illegally dismissed from his employment, and awarded him
7

limited backwages. The LA gave credence to his allegation that Capt. Terrei instructed his secretary,
Ferrez, to terminate his employment after he had sought clarification on matters pertaining to his
employment contract and monetary benefits. The LA concluded that Noblejas was a regular
employee and, as such, was entitled to his proportionate 13th month pay. The other monetary claims
were denied for being unfounded. The LA added that, as reinstatement was no longer feasible
considering the strained relationship between the parties, payment of separation pay was the more
equitable relief. The dispositive portion of the LA decision reads:

WHEREFORE, in light of the foregoing, judgment is hereby rendered declaring respondents guilty of
illegal dismissal.

Respondent Italian Maritime Academy Philippines, Inc. is hereby ordered to pay complainant
Dionarto Q. Noblejas, as follows:

1. Limited backwages computed from March 16, 2010 up to the date of this decision, in the
amount of FOUR HUNDRED EIGHTY EIGHT THOUSAND NINE HUNDRED THIRTY NINE
PESOS and 90/100 (Php488,939.90);

2. Separation pay, in lieu of reinstatement, equivalent to one (1) month salary, in the amount
of SEVENTY FIVE THOUSAND PESOS (Php75,000.00)

3. Proportionate 13th month pay, in the amount of FIFTEEN THOUSAND SIX HUNDRED
TWENTY FIVE PESOS (Php15,625.00).

Other claims herein sought and prayed for are hereby denied for lack of legal and factual bases.

SO ORDERED. 8

Dissatisfied, respondents appealed the October 15, 2010 decision of the LA before the National
Labor Relations Commission (NLRC).

On October 27, 2011, the NLRC reversed the LA decision in a Judgment  exonerating respondents
9

from the charge of illegal dismissal. The NLRC explained that there was no showing that
respondents committed any positive and overt act of dismissal and that the claim of Noblejas that
Capt. Terrei ordered Ferrez to terminate his employment was not substantiated. According to the
NLRC, it was Noblejas who severed his employment with IMAPI after it had refused to grant his
numerous demands. Moreover, Noblejas was a contractual employee of IMAPI and, hence, there
was no basis for his monetary award. The decretal portion of the decision reads:

WHEREFORE, premises considered, the appealed Decision is hereby REVERSED AND SET
ASIDE and another one is entered DISMISSING the complaint for lack of merit.

SO ORDERED. 10
Noblejas filed a motion for reconsideration, but it was denied by the NLRC in its Resolution, dated
January 27, 2012.

Aggrieved, Noblejas filed a petition for certiorari before the CA ascribing grave abuse of discretion
on the part of the NLRC for ruling that he was a contractual employee and that he was not illegally
dismissed.

On February 22, 2013, the CA rendered the challenged decision finding the petition for certiorari to
be devoid of merit. It upheld the findings of the NLRC that Noblejas was a contractual employee of
IMAPI and that there was no evidence to prove that he was dismissed from employment.
Accordingly, the CA adjudged:

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The decision dated October 27,
2011, and the resolution dated January 27, 2012, both issued by the public respondent National
Labor Relations Commission are AFFIRMED.

SO ORDERED. 11

Noblejas filed a motion for reconsideration, but the same was denied by the CA in its Resolution,
dated June 21, 2013.

Unfazed, Noblejas filed the present petition for review on certiorari imputing to the CA the following

ERRORS:

A.

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER IS A CONTRACTUAL

EMPLOYEE.

B.

THE COURT OF APPEALS ERRED IN DECLARING THAT PETITIONER WAS NOT

ILLEGALLY DISMISSED.

C.

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER WAS NOT

ENTITLED TO HIS MONEY CLAIMS. 12

It is the position of petitioner Noblejas that in illegal dismissal cases, the burden of proving that an
employee was not dismissed, or if dismissed, that the dismissal was not illegal, rests on the
employer. He submits that the failure of respondents to discharge this burden shows that his
dismissal from employment was not justified. He avers that his act of immediately filing a complaint
for illegal dismissal praying for reinstatement effectively negated the finding that he was
disinterested in continuing his employment with IMAPI.

Noblejas further points out that the nature of an employment is determined by the nature of activities
being performed by the employee. In his case, he already attained the status of a regular employee
because he was allowed to work beyond the stipulated period of his employment and he performed
functions which were necessary or desirable in the usual business or trade of IMAPI.

Resolution of the Court

Before the Court tackles the issue of illegal dismissal, there should first be a determination of the
status of his employment. In this regard, the Court finds Noblejas to be a regular employee of IMAPI.

Pursuant to Article 280 of the Labor Code, there are two kinds of regular employees, namely: (1)
those who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activities in which they are employed. 13
Regular employees are further classified into (1) regular employees - by nature of work and (2)
regular employees - by years of service.  The former refers to those employees who perform a
14

particular function which is necessary or desirable in the usual business or trade of the employer,
regardless of their length of service; while the latter refers to those employees who have been
performing the job, regardless of its nature thereof, for at least a year.15

In the case at bench, Noblejas was employed by IMAPI as a training instructor/assessor for a period
of three (3) months effective May 20, 2009. After the end of the 3-month period, he was rehired by
IMAPI for the same position and continued to work as such until March 16, 2010. There is no dispute
that the work of Noblejas was necessary or desirable in the business or trade of IMAPI, a training
and assessment center for seamen and officers of vessels. Moreover, such continuing need for his
services is sufficient evidence of the necessity and indispensability of his services to IMAPI’s
business. Taken in this light, Noblejas had indeed attained the status of a regular employee at the
time he ceased to report for work on March 17, 2010.

There was, however, no illegal dismissal.

Fair evidentiary rule dictates that before employers are burdened to prove that they did not commit
illegal dismissal, it is incumbent upon the employee to first establish by substantial evidence the fact
of his or her dismissal.  The Court is not unmindful of the rule in labor cases that the employer has
16

the burden of proving that the termination was for a valid or authorized cause. It is likewise
incumbent upon the employees, however, that they should first establish by competent evidence the
fact of their dismissal from employment.  It is an age-old rule that the one who alleges a fact has the
17

burden of proving it and the proof should be clear, positive and convincing.  Mere allegation is not
18

evidence. 19

Aside from his mere assertion, no corroborative and competent evidence was adduced by Noblejas
to substantiate his claim that he was dismissed from employment. The record is bereft of any
indication that he was prevented from returning to work or otherwise deprived of any work
assignment. It is also noted that no evidence was submitted to show that respondent Ferrez, the
secretary of Capt. Terrei, was actually authorized by IMAPI to terminate the employment of the
company’s employees or that Ferrez was indeed instructed by Capt. Terrei to dismiss him from
employment.

The Court finds it odd that, instead of clarifying from Capt. Terrei what he heard from Ferrez,
Noblejas immediately instituted an illegal dismissal case against the respondents the day following
the alleged incident and never reported back for work since then. The Court quotes with approval the
observation of the NLRC on this score:

Complainant’s allegation that he was dismissed from employment cannot be accorded credence for
it is obvious that being unhappy with not being granted his demands, it was he himself who is no
longer interested to continue his employment with respondent company. The filing of a complaint for
illegal dismissal with numerous money claims on March 17, 2010, against respondent is obviously
intended to compel respondent company to abide with his demands.

Respondents’ refusal to grant complainant’s demands does not constitute an overt act of dismissal.
On the contrary, it is rather the apparent disinterest of complainant to continue his employment with
respondent company that may be considered a covert act that severed his employment when the
latter did not grant the litany of his demands. xxx. 20

Let it be underscored that the fact of dismissal must be established by positive and overt acts of an
employer indicating the intention to dismiss.  Indeed, a party alleging a critical fact must support his
21

allegation with substantial evidence, for any decision based on unsubstantiated al legation cannot
stand without offending due process.  Here, there is no sufficient proof showing that Noblejas was
22

actually laid off from work. In any event, his filing of a complaint for illegal dismissal, irrespective of
whether reinstatement or separation pay was prayed for, could not by itself be the sole consideration
in determining whether he has been illegally dismissed.

All circumstances surrounding the alleged termination should also be taken into account.

For the above reasons, the Court sustains the LA in granting Noblejas proportionate 13th month pay
covering the period of January 1, 2010 to March 15, 2010 in the aggregate amount of ₱15,625.00. 23
Furthermore, the respondents should accept him back and reinstate him to his former position.
There should, however, be no payment of backwages under the principle of "no work, no pay." 24

WHEREFORE, the petition is DENIED. The assailed February 22, 2013 Decision of the Court of
Appeals in CA-G.R. SP No. 124146 is AFFIRMED with MODIFICATION. Accordingly, respondent
Italian Maritime Academy Philippines, Inc. is ordered to pay petitioner Dionarto Q.

Noblejas his proportionate 13th month pay in the amount of ₱15,625.00; and to reinstate him to his
former position.

SO ORDERED.

G.R. No. 175532               April 19, 2010

ROMEO BASAY, JULIAN LITERAL and JULIAN ABUEVA, Petitioners,

vs.
HACIENDA CONSOLACION, and/or BRUNO BOUFFARD III, JOSE RAMON BOUFFARD,
MALOT BOUFFARD, SPOUSES CARMEN and STEVE BUMANLAG, BERNIE BOUFFARD,
ANALYN BOUFFARD, and DONA BOUFFARD, as Owners, Respondents.

DECISION

DEL CASTILLO, J.:

Fair evidentiary rule dictates that before employers are burdened to prove that they did not commit
illegal dismissal, it is incumbent upon the employee to first establish the fact of his or her dismissal.

This Petition for Review on Certiorari1 assails the Decision2 dated June 7, 2006 of the Court of
Appeals (CA) in CA-G.R. SP No. 00313, which affirmed the March 22, 2004 Decision 3 of the
National Labor Relations Commission (NLRC), dismissing the illegal dismissal case filed by
petitioners against respondents.

Factual Antecedents

Respondents hired petitioners Romeo Basay (Basay) in 1967 and Julian Literal (Literal) in 1984, as
tractor operators, and petitioner Julian Abueva (Abueva) in 1989, as laborer, in the hacienda
devoted for sugar cane plantation.

On August 29, 2001, petitioners filed a complaint4 for illegal dismissal with monetary claims against
respondents. They alleged that sometime in July 2001, respondents verbally informed them to stop
working. Thereafter, they were not given work assignments despite their status as regular
employees. They alleged that their termination was done in violation of their right to substantive and
procedural due process. Petitioners also claimed violation of Minimum Wage Law and non-payment
of overtime pay, premium pay for holiday and rest day, five days service incentive leave pay,
separation pay and 13th month pay. They also prayed for damages and attorney’s fees.

Respondents denied petitioners’ allegations. As regards Abueva, respondents averred that he is not
an employee but a mere contractor in the hacienda. According to respondents, Abueva hired other
men to perform weeding jobs and even entered into contract with neighboring haciendas for similar
jobs. Respondents alleged that Abueva’s name does not appear in the payroll, thus indicating that
he is not an employee. As such, there can be no dismissal to speak of, much less an illegal
dismissal.

With regard to petitioners Literal and Basay, respondents admitted that both are regular employees,
each receiving ₱130.00 per day’s work as evidenced by a Master Voucher. 5 However, respondents
denied having illegally dismissed them and asserted that they abandoned their jobs.

Respondents alleged that Literal was facing charges of misconduct, insubordination, damaging and
taking advantage of hacienda property, and unauthorized cultivation of a portion of the hacienda.
Literal was ordered to explain; instead of complying, Literal did not anymore report for work. Instead,
he filed a complaint for illegal dismissal.
Respondents asserted that they sent a representative to convince petitioners to return but to no
avail. Respondents maintained that they have been religiously giving 13th month pay to their
employees as evidenced by a voucher6 corresponding to year 2000.

Ruling of the Labor Arbiter

On December 19, 2001, the Labor Arbiter rendered a Decision 7 exonerating respondents from the
charge of illegal dismissal as petitioners were the ones who did not report for work despite
respondents’ call. The Labor Arbiter, however, awarded petitioners’ claim of 13th month pay and
salary differentials. The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring
the Respondent not guilty of Illegal Dismissal but is however directed to pay the complainants their
13th Month Pay covering the years 1998 and 1999, and their Salary Differentials for 2 years at 6
months per year of service. The computation of the foregoing monetary awards are as follows:

I - 13th Month Pay: (For Each Complainant)

1998 & 1999 = 2 years or 12 months @ 6 months per year of service

₱145.00/day x 26 days = P3,770.00/mo.
₱3,770.00/mo. x 12 mos. = ₱45,240.00 = ₱7,540.00

6
II – Salary Differential:
(a) Romeo Basay:
Basic Pay = P145.00/day
Salary Received = ₱122.00/day

Salary Differential = ₱ 23.00/day

1998 & 1999 = 2 years or 312 days
₱23.00/day x 312 days = ₱7,176.00
(b) Julian Literal:
Basic Pay = P145.00/day
Salary Received = P 91.00/day

Salary Differential = P 54.00/day

1998 & 1999 = 2 years or 312 days
₱54.00/day x 312 days = ₱16,848.00
(c) Julian Abueva:
Basic Pay = ₱145.00/day
Salary Received = ₱ 91.50/day

Salary Differential = ₱ 53.50/day

1998 & 1999 = 2 years or 312 days
₱53.50/day x 312 days = ₱16, 692.00

SUMMARY
 1. ROMEO BASAY:

a) 13th Month Pay = ₱7,540.00

b) Salary Differential = ₱7,176.00

Total ₱14,716.00
2. JULIAN LITERAL
a) 13th Month Pay = ₱ 7,540.00
b) Salary Differential = P16,848.00

Total ₱24,388.00
3. JULIAN ABUEVA
a) 13th Month Pay = ₱ 7,540.00
b) Salary Differential = ₱16,692.00

Total ₱24,232.00

GRAND TOTAL . . . . . . . . . . . . . ₱63,336.00

Ten Percent (10%) Attorney’s Fees is also adjudicated from the total monetary award.

SO ORDERED.8

Ruling of the National Labor Relations Commission

Both parties sought recourse to the NLRC. Petitioners filed a Partial Appeal 9 to the Decision
declaring respondents not guilty of illegal dismissal. They argued that there was no proof of clear
and deliberate intent to abandon their work. On the contrary, their filing of an illegal dismissal case
negates the intention to abandon. Petitioners likewise alleged that respondents failed to observe
procedural due process.

Respondents, for their part, filed a Memorandum on Appeal 10 with respect to the award of salary
differentials and 13th month pay to petitioners. Respondents averred that the Labor Arbiter erred in
finding that petitioners are entitled to receive a minimum wage of ₱145.00/day instead of
₱130.00/day which is the minimum wage rate for sugarcane workers in Negros Oriental per Wage
Order No. ROVII-07.11 Respondents likewise presented vouchers 12 to prove payment of 13th month
pay for the years 1998 and 1999.

The NLRC, in its Decision13 dated March 22, 2004, found merit in respondents’ appeal. It ruled that
respondents have satisfactorily proven payment of the correct amount of wages and 13th month pay
for the years 1998, 1999 and 2000, as shown in the Master Voucher indicating the workers’ payroll
and the various vouchers for 13th month pay. The NLRC further ruled that Abueva is not an
employee of the hacienda but a mere contractor; thus, he is not entitled to any of his claims. The
NLRC thus affirmed with modification the Decision of the Labor Arbiter, viz:

WHEREFORE, finding complainants not illegally dismissed, judgment is hereby

rendered AFFIRMING the Decision of the Labor Arbiter dated December 13, 2001, with
the MODIFICATION that complainants Julian Literal and Romeo Basay are not entitled to their
claims for salary differentials and 13th month pay for lack of legal basis. However, respondents are
ordered to pay complainants Julian Literal and Romeo Basay proportionate 13th month pay
computed from January 1, 2001 to August 29, 2001.

All other claims are dismissed for lack of merit.

SO ORDERED.14

Petitioners filed a Motion for Reconsideration15 which was denied by the NLRC in a

Resolution16 dated September 3, 2004.

Ruling of the Court of Appeals

Aggrieved, petitioners filed with the CA a petition for certiorari. On June 7, 2006, however, the CA
dismissed the petition and affirmed the findings of the NLRC. It opined that respondents have
manifested their willingness to retain petitioners but the latter intentionally abandoned their work.
The CA also struck down petitioners’ contention that abandonment is inconsistent with the filing of a
complaint for illegal dismissal as this rule applies only when a complainant seeks reinstatement and
not when separation pay is instead prayed for, as in the case of petitioners. As to the issue posed by
petitioners assailing the admissibility of the Master Voucher due to lack of petitioners’ authentic
signatures, the CA refrained from resolving the matter since the issue was only raised for the first
time on appeal.

Petitioners moved for reconsideration, but to no avail.

Issue

Hence, this petition raising the issue of whether petitioners were illegally dismissed and are entitled
to their money claims.

Petitioners contend that the CA erred in affirming the findings of the labor tribunals that they
deliberately abandoned their work on the basis of respondents’ self-serving allegation that they sent
emissaries to persuade them to return to work. They maintain that in the absence of competent
evidence to show clear intention to sever the employment relationship and compliance with the two-
notice rule, no abandonment can exist. Moreover, the theory that abandonment of work is
inconsistent with the filing of a complaint for illegal dismissal is applicable in the present case since
what was prayed for in the complaint was reinstatement, contrary to the CA’s finding that they were
asking for separation pay. Petitioners likewise insist that the CA gravely erred in holding that they
assailed the admissibility of the Master Voucher for the first time only during appeal. They claim that
such issue was raised in their motion for reconsideration of the NLRC Decision. Finally, petitioners
allege that the fact that they were staying inside the premises of the hacienda and had been working
therein for more than a year is an indication that they are regular employees entitled to their
monetary claims, as correctly found by the Labor Arbiter.

Our Ruling

The petition is partly meritorious.

There was no illegal dismissal.

We are not unmindful of the rule in labor cases that the employer has the burden of proving that the
termination was for a valid or authorized cause; however, it is likewise incumbent upon the
employees that they should first establish by competent evidence the fact of their dismissal from
employment.17 The one who alleges a fact has the burden of proving it and the proof should be clear,
positive and convincing.18 In this case, aside from mere allegations, no evidence was proffered by
the petitioners that they were dismissed from employment. The records are bereft of any indication
that petitioners were prevented from returning to work or otherwise deprived of any work assignment
by respondents.

The CA, in sustaining the Labor Arbiter and NLRC’s finding that there was no illegal dismissal, ruled
that respondents have manifested their willingness to retain petitioners in their employ. Petitioners,
however, complained that this finding is anchored on mere allegations of respondents.

We do not agree. Respondents presented a declaration 19 made under oath by Leopoldo Utlang, Jr.,
assistant supervisor of the hacienda, attesting that petitioners were asked to return to do some work
for the hacienda but refused to do so upon the advice of their lawyer. Interestingly too, as late as
November of 2001 or even after almost three months from the filing of the illegal dismissal case, the
names of Literal and Basay were still listed and included in respondents’ payroll as can be gleaned
in the Master Voucher covering the employees’ payroll of November 12 to 16, 2001. While a voucher
does not necessarily prove payment, it is an acceptable documentary record of a business
transaction.20 As such, entries made therein, being entered in the ordinary or regular course of
business, enjoy the presumption of regularity. 21 Hence, on the basis of this material proof evincing
respondents’ intention to retain petitioners as employees, we are not convinced that petitioners were
told to stop working or were prevented from working in the hacienda. This may well be an indication
of respondents’ lack of intention to dismiss petitioners from employment since they were still
considered employees as of that time. Records are likewise bereft of any showing that to date,
respondents had already terminated petitioners from employment.

We are not persuaded by petitioners’ contention that nothing was presented to establish their
intention of abandoning their work, or that the fact that they filed a complaint for illegal dismissal
negates the theory of abandonment.

It bears emphasizing that this case does not involve termination of employment on the ground of
abandonment. As earlier discussed, there is no evidence showing that petitioners were actually
dismissed. Petitioners’ filing of a complaint for illegal dismissal, irrespective of whether reinstatement
or separation pay was prayed for, could not by itself be the sole consideration in determining
whether they have been illegally dismissed. All circumstances surrounding the alleged termination
should also be taken into account.

In Abad v. Roselle Cinema,22 we ruled that the substantial evidence proffered by the employer that it
had not terminated the employee should not be ignored on the pretext that the employee would not
have filed the complaint for illegal dismissal if he had not really been dismissed. We held that
such non sequitur reasoning cannot take the place of the evidence of both the employer and the
employee. 1avvphi1

Given that there was no dismissal to speak of, there can be no question as to the legality or illegality
thereof.

Basay and Literal are entitled to salary differentials for two years and proportionate 13th month pay
from January 1-29, 2001. Abueva is not an employee, thus not entitled to his claims.

We agree with the petitioners that the issue on the admissibility of the Master Voucher, which does
not show that they actually received the amount of salary indicated therein, was raised in their
motion for reconsideration of the NLRC Decision dated March 22, 2004 where the labor tribunal
ruled that petitioners were duly compensated for their work on the basis of such voucher. At any
rate, even if its admission as evidence is not put into issue, still, the Master Voucher did not prove
that petitioners were indeed paid the correct amount of wages.

A perusal of the Master Voucher shows that it covers the employees’ payroll for the period of
November 12-16, 2001 only. Clearly, the Master Voucher cannot constitute as proof that petitioners
were duly paid for other periods not covered by such voucher. No other pertinent vouchers, payrolls,
records or other similar documents have been presented as proof of payment of the correct amount
of salaries paid, particularly, for the years 1998 and 1999. As a general rule, one who pleads
payment has the burden of proving it.23 Consequently, respondents failed to discharge the burden of
proving payment thereby making them liable for petitioners’ claim for salary differentials. We thus
reinstate the Labor Arbiter’s award of salary differentials for 1998 and 1999, computed at 6 months
per year of service. However, the Labor Arbiter’s computation must be modified pursuant to Wage
Order No. ROVII-07. Under this wage order, the minimum wage rate of sugarcane plantation
workers is at ₱130.00/day. The correct computation for the salary differentials due to Basay and
Literal, who claimed to have received only ₱122.00 and ₱91.00 per day, respectively, should be as
follows:

For ROMEO BASAY:

Basic Pay = ₱130.00/day

Salary Received = ₱122.00/day

Salary Differential = ₱ 8.00/day

₱8.00/day x 312 days (for 1998 & 1999) = ₱2,496.00

For JULIAN LITERAL:

 Basic Pay = ₱130.00/day
Salary Received = ₱ 91.00/day

Salary Differential = ₱ 39.00/day

₱39.00/day x 312 days (for 1998 & 1999) = ₱12,168.00

As regards the 13th month pay, respondents were able to adduce evidence that the benefit was
given to the employees for the years 1998, 1999, and 2000. However, for an employee who has
been separated from service before the time for payment of the 13th month pay, he is entitled to this
monetary benefit in proportion to the length of time he worked during the year, reckoned from the
time he started working during the calendar year up to the time of his separation. 24 The NLRC’s
award of proportionate 13th month pay computed from January 1, 2001 to August 29, 2001 in favor
of Basay and Literal, is therefore proper.

As for petitioner Abueva, he is not entitled to his claims. The NLRC excluded Abueva in its judgment
award, ruling that he is not an employee but a mere contractor. The existence of an employer-
employee relationship is ultimately a question of fact.25 Settled is the rule that only errors of law are
generally reviewed by this Court.26 Factual findings of administrative and quasi-judicial agencies
specializing in their respective fields, especially when affirmed by the CA, must be accorded high
respect, if not finality.27

The elements to determine the existence of an employment relationship are: (1) selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee’s conduct. 28 In filing a complaint for illegal dismissal, it is
incumbent upon Abueva to prove the relationship by substantial evidence.

In this regard, petitioners claim that Abueva has worked with respondents for more than a year
already and was allowed to stay inside the hacienda. As such, he is a regular employee entitled to
monetary claims. However, petitioners have not presented competent proof that respondents
engaged the services of Abueva; that respondents paid his wages or that respondents could dictate
what his conduct should be while at work. In other words, Abueva’s allegations did not establish that
his relationship with respondents has the attributes of employer-employee on the basis of the above-
mentioned four-fold test. Therefore, Abueva was not able to discharge the burden of proving the
existence of an employer-employee relationship. Moreover, Abueva was not able to refute
respondents’ assertions that he hires other men to perform weeding job in the hacienda and that he
is not exclusively working for respondents.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals in CA-G.R.
SP No. 00313 dated June 7, 2006, finding petitioners Romeo Basay, Julian Literal and Julian
Abueva not illegally dismissed and awarding petitioners Romeo Basay and Julian Literal their
proportionate 13th month pay computed from January 1, 2001 to August 29, 2001,
is AFFIRMED with MODIFICATION that the petitioners Romeo Basay and Julian Literal are entitled
to receive the amounts of ₱2,496.00 and ₱12,168.00 as salary differentials, respectively.

SO ORDERED.
G.R. No. 194884               October 22, 2014

IMASEN PHILIPPINE MANUFACTURING CORPORATION, Petitioner,

vs.
RAMONCHITO T. ALCON and JOANN S. PAPA, Respondents.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari  the challenge to the June 9, 2010 decision  and
1 2

the December 22, 2010 resolution  of the Court of Appeals (CA) in CA-G.R. SP No. 110327. This CA
3

decision nullified the December 24, 2008 decision  of the National Labor Relations Commission
4

(NLRC) in NLRC CA No. 043915-05 (NLRC CASE No. RAB IV-12-1661-02-L). The NLRC ruling, in
turn, affirmed the December 10, 2004 decision  of the Labor Arbiter (LA), dismissing the illegal
5

dismissal complaint filed by respondents Ramonchito T. Alcon and Joann S. Papa (collectively
referred to as respondents).

The Factual Antecedents

Petitioner Imasen Philippine Manufacturing Corporation is a domestic corporation engaged in the

manufacture of auto seat-recliners and slide-adjusters. It hired the respondents as manual welders
in 2001.

On October 5, 2002, the respondents reported for work on the second shift – from 8:00 pm to 5:00
am of the following day. At around 12:40 am, Cyrus A. Altiche, Imasen’s security guard on duty,
went to patrol and inspect the production plant’s premises. When Altiche reached Imasen’s Press
Area, he heard the sound of a running industrial fan. Intending to turn the fan off, he followed the
sound that led him to the plant’s "Tool and Die" section.

At the "Tool and Die" section, Altiche saw the respondents having sexual intercourse on the floor,
using a piece of carton as mattress. Altiche immediately went back to the guard house and relayed
what he saw to Danilo S. Ogana, another security guard on duty.

On Altiche’s request, Ogana madea follow-up inspection. Ogana went to the "Tool and Die" section
and saw several employees, including the respondents, already leaving the area. He noticed,
however, that Alcon picked up the carton that Altiche claimed the respondents used as mattress
during their sexual act, and returned it to the place where the cartons were kept. Altiche then
submitted a handwritten report  of the incident to Imasen’s Finance and Administration Manager.
6

On October 14, 2002, Imasen issued the respondents separate interoffice memoranda  informing
7

them of Altiche’sreport on the October 5, 2002 incident and directing them to submit their individual
explanation. The respondents complied with the directive; they claimed that they were merely
sleeping in the "Tool and Die" section at the time of the incident. They also claimed that other
employees were near the area, making the commission of the act charged impossible.

On October 22, 2002, Imasen issued the respondents another interoffice memorandum  directing8

them to appear atthe formal hearing of the administrative charge against them. The hearing was
conducted on October 30, 2002,  presided by a mediator and attended by the representatives of
9

Imasen, the respondents, Altiche and Ogana. Altiche and Ogana reiterated the narrations in Altiche’s
handwritten report.
On December 4, 2002, Imasen issued the respondents separate interoffice memoranda  terminating
10

their services. It found the respondents guilty of the act charged which it considered as "gross
misconduct contrary to the existing policies, rules and regulations of the company."

On December 5, 2002, the respondents filed before the LA the Complaint  for illegal dismissal. The
11

respondents maintained their version of the incident.

In the December 10, 2004 decision,  the LA dismissed the respondents’ complaint for lack of merit.
12

The LA found the respondents’ dismissal valid, i.e., for the just cause of gross misconduct and with
due process. The LA gave weight to Altiche’s account of the incident, which Ogana corroborated,
over the respondents’mere denial of the incident and the unsubstantiated explanation that other
employees were present near the "Tool and Die" section, making the sexual act impossible. The LA
additionally pointed out that the respondents did not show any ill motive or intent on the part of
Altiche and Ogano sufficient to render their accounts of the incident suspicious.

The NLRC’s ruling

In its December 24, 2008 decision,  the NLRC dismissed the respondents’ appeal  for lack of merit.
13 14

In affirming the LA’s ruling, the NLRC declared that Imasen substantially and convincingly proved
just cause for dismissing the respondents and complied with the required due process.

The respondents filed before the CA a petition for certiorari  after the NLRC denied their motion for
15

reconsideration  in its May 29, 2009 resolution.

16 17

The CA’s ruling

In its June 9, 2010 decision,  the CA nullified the NLRC’s ruling. The CA agreed with the labor
18

tribunals’ findings regarding the infraction charged – engaging in sexual intercourse on October 5,
2002 inside company premises – and Imasen’s observance of due process in dismissing the
respondents from employment.

The CA, however, disagreed with the conclusion that the respondents’ sexual intercourse inside
company premises constituted serious misconduct that the Labor Code considers sufficient tojustify
the penalty of dismissal. The CA pointed out that the respondents’ act, while provoked by "reckless
passion in an inviting environment and time," was not done with wrongful intent or with the grave or
aggravated character that the law requires. To the CA, the penalty of dismissal is not commensurate
to the respondents’ act, considering especially that the respondents had not committed any
infraction in the past.

Accordingly, the CA reduced the respondents’ penalty to a threemonth suspension and ordered
Imasen to: (1) reinstate the respondents to their former position without loss of seniority rights and
other privileges; and (2) pay the respondents backwages from December 4, 2002 until actual
reinstatement, less the wages corresponding to the three-month suspension.

Imasen filed the present petition after the CA denied its motion for Reconsideration  in the CA’s
19

December 22, 2010 resolution. 20

The Petition

Imasen argues in this petition that the act of engaging in sexual intercourse inside company
premises during work hours is serious misconduct by whatever standard it is measured. According
to Imasen, the respondents’ infraction is an affront to its core values and high ethical work
standards, and justifies the dismissal. When the CA reduced the penalty from dismissal to three-
month suspension, Imasen points out that the CA, in effect, substituted its own judgment with its
(Imasen’s) own legally protected management prerogative.

Lastly, Imasen questions the CA’s award of backwages in the respondents’ favor. Imasen argues
that the respondents would virtually gain from their infraction as they would be paid eight years worth
of wages without having rendered any service; eight (8) years, in fact, far exceeds their actual period
of service prior to their dismissal.

The Case for the Respondents

The respondents argue in their comment  that the elements of serious misconduct that justifies an
21

employee’s dismissal are absent in this case, adopting thereby the CA’s ruling. Hence, to the
respondents, the CA correctly reversed the NLRC’s ruling; the CA, in deciding the case, took a
wholistic consideration of all the attendant facts, i.e., the time, the place, the persons involved, and
the surrounding circumstances before, during, and after the sexual intercourse, and not merely the
infraction committed.

The Issue

The sole issue for this Court’s resolution is whether the respondents’ infraction – engaging in sexual
intercourse inside company premises during work hours – amounts to serious misconduct within the
terms of Article 282 (now Article 296) of the Labor Code justifying their dismissal.

The Court’s Ruling

We GRANT the petition.

We find that the CA reversibly erred when it nullified the NLRC’s decision for grave abuse of
discretion the NLRC’s decision.

Preliminary considerations: tenurial security vis-à-vis management prerogative

The law and jurisprudence guaranteeto every employee security of tenure. This textual and the
ensuing jurisprudential commitment to the cause and welfare of the working class proceed from the
social justice principles of the Constitution that the Court zealously implements out of its concern for
those with less in life. Thus, the Court will not hesitate to strike down as invalid any employer act that
attempts to undermine workers’ tenurial security. All these the State undertakes under Article 279
(now Article 293)  of the Labor Code which bar an employer from terminating the services of an
22

employee, except for just or authorized cause and upon observance of due process.

In protecting the rights of the workers, the law, however, does not authorize the oppression or self-
destruction of the employer.  The constitutional commitment to the policy of social justice cannot be
23

understood to mean that every labor dispute shall automatically be decided in favor of labor.  The
24

constitutional and legal protection equally recognize the employer’s right and prerogative to manage
its operation according to reasonable standards and norms of fair play.

Accordingly, except as limited by special law, an employer is free to regulate, according to his own
judgment and discretion, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to beused, processes to be followed, supervision of
workers, working regulations, transfer of employees, worker supervision, layoff of workers and the
discipline, dismissal and recall of workers.  As a general proposition, an employer has free reign
25

over every aspect of its business, including the dismissal of his employees as long as the exercise of
its management prerogativeis done reasonably, in good faith, and in a manner not otherwise
intended to defeat or circumvent the rights of workers.

In these lights, the Court’s task inthe present petition is to balance the conflicting rights of the
respondents to security of tenure, on one hand, and of Imasen to dismiss erring employees pursuant
to the legitimate exercise of its management prerogative, on the other.

Management’s right to dismiss an employee; serious misconduct as just cause for the dismissal

The just causes for dismissing an employee are provided under Article 282  (now Article 296)  of the
26 27

Labor Code. Under Article 282(a), serious misconduct by the employee justifies the employer in
terminating his or her employment.

Misconduct is defined as an improper or wrong conduct. It is a 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.  To constitute a valid cause for the dismissal within
28

the text and meaning of Article 282 of the Labor Code, the employee’s misconduct must be serious,
i.e., of such grave and aggravated character and not merely trivial or unimportant. 29
Additionally, the misconduct must be related to the performance of the employee’s duties showing
him tobe unfit to continue working for the employer.  Further, and equally important and required,
30

the act or conduct must have been performed with wrongful intent. 31

To summarize, for misconduct or improper behavior to be a just cause for dismissal, the following
elements must concur: (a) the misconduct must be serious; (b) it must relate to the performance of
the employee’s duties showing that the employee has become unfit to continue working for the
employer;  and (c) it must have been performed with wrongful intent.
32

The respondents’ infraction amounts to serious misconduct within the terms of Article 282 (now
Article296) of the Labor Code justifying their dismissal

Dismissal situations (on the ground of serious misconduct) involving sexual acts, particularly sexual
intercourse committed by employees inside company premises and during workhours, are not usual
violations  and are not found in abundance under jurisprudence. Thus, in resolving the present
33

petition, we are largely guided by the principles we discussed above, as applied to the totality of the
circumstances that surrounded the petitioners’ dismissal.

In other words, we view the petitioners’ act from the prism of the elements that must concur for an
act to constitute serious misconduct, analyzed and understood within the context of the overall
circumstances of the case. In taking this approach, weare guided, too, by the jurisdictional limitations
that a Rule 45 review of the CA’s Rule 65 decision in labor cases imposes on our discretion. 34

In addressing the situation that we are faced with in this petition, we determine whether Imasen
validly exercised its prerogative as employer to dismiss the respondents-employees who, within
company premises and during work hours, engaged in sexual intercourse. As framed within our
limited Rule 45 jurisdiction, the question that we ask is: whether the NLRC committed grave abuse of
discretion in finding that the respondents’ act amounted to what Article 282 of the Labor Code
textually considers as serious misconduct to warrant their dismissal.

After due consideration, we find the NLRC legally correct and well within its jurisdiction when it
affirmed the validity of the respondents’ dismissal on the ground of serious misconduct.

Sexual acts and intimacies between two consenting adults belong, as a principled ideal, to the realm
of purely private relations.  Whether aroused by lust or inflamed by sincere affection, sexual acts
1âwphi1

should be carried out at such place, time and circumstance that, by the generally accepted norms of
conduct, will not offend public decency nor disturb the generally held or accepted social morals.
Under these parameters, sexual acts between two consenting adults do not have a place in the work
environment.

Indisputably, the respondents engaged in sexual intercourse inside company premisesand during
work hours. These circumstances, by themselves, are already punishablemisconduct. Added to
these considerations, however, is the implication that the respondents did not only disregard
company rules but flaunted their disregard in a manner that could reflect adversely on the status of
ethics and morality in the company.

Additionally, the respondents engaged in sexual intercourse in an area where co-employees or other
company personnel have ready and available access. The respondents likewise committed their act
at a time when the employees were expected to be and had, in fact, been at their respective posts,
and when they themselves were supposed to be, as all other employees had in fact been, working.

Under these factual premises and inthe context of legal parameters we discussed, we cannot help
but consider the respondents’ misconduct to be of grave and aggravated character so that the
company was justified in imposing the highest penalty available ― dismissal. Their infraction
transgressed the bounds of sociallyand morally accepted human public behavior, and at the same
time showedbrazen disregard for the respect that their employer expected of them as employees. By
their misconduct, the respondents, in effect, issued an open invitation for othersto commit the same
infraction, with like disregard for their employer’s rules, for the respect owed to their employer, and
for their co-employees’ sensitivities. Taken together, these considerations reveal a depraved
disposition that the Court cannot but consider as a valid cause for dismissal. In ruling as we do now,
we considered the balancing between the respondents’ tenurial rights and the petitioner’s interests –
the need to defend their management prerogative and to maintain as well a high standard of ethics
and morality in the workplace. Unfortunately for the respondents, in this balancing under the
circumstances ofthe case, we have to rule against their tenurial rights in favor of the employer’s
management rights.

All told, the respondents’ misconduct,under the circumstances of this case, fell within the terms of
Article 282 (now Article 296) of the Labor Code. Consequently, we reverse the CA’s decision for its
failure to recognize that no grave abuse of discretion attended the NLRC’s decision to support the
respondents’ dismissal for serious misconduct.

WHEREFORE, in light of these considerations, we hereby GRANT the petition. We REVERSE the
decision dated June 9, 2010 and the resolution dated December 22, 2010 of the Court of Appeals in
CA-G.R. SP No. 110327 and REINSTATE the decision dated December 24, 2008 of the National
Labor Relations Commission in NLRC CA No. 043915-05 (NLRC Case No. RAB IV-12-1661-02-
L).SO ORDERED.

G.R. No. 194765

MARSMAN & COMPANY, INC.,, Petitioner

vs
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  dated June 25, 2010 and the Resolution  dated
1 2

December 9, 2010 of the Court of Appeals in CA-G.R. SP No. 106516. The appellate court's
issuances reversed the Decision  dated July 31, 2008 of the National Labor Relations Commission
3

(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  denying his motion for
4

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.   Marsman
5

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 ₱2,577.00. 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 ₱3,166.00.  Marsman then confirmed Sta. Rita's
6

status as a regular employee on September 18, 1994 and adjusted his monthly wage to ₱3,796.00.
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 Din 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,  dated June 1996, which provides:
9

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/DF A 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/DF A

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) (signed)
LUISITO N. REYES JOSE MILO M. GILLESANIA
Vice-President 1st Vice-President
Finance & Administration MEU-PSMM/DFA

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  dated January 14, 2000, issued by
13
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  dated January 17, 2000, conveying therein Sta. Rita's impending termination. The letter
15

stated:

The Regional Director

Department of Labor & Employment
National Capital Region
Palacio De Gobemador
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 Terminated x x x Occupation/Skills Salary
RION L. V. RUZGAL x x x WHSE SUPERVISOR ₱16,000.00
GLENN V. VISTO x x x WHSE SUPERVISOR ₱15,600.00
CONRADO C. TIUSINGCO, x x x SR. WHSEMAN ₱7,200.00 16

JR.
LO LIT A D. JAMERO x x x WHSE SUPERVISOR ₱14,500.00
ARTURO G. CASTRO, JR. x x x WHSEMAN ₱7,616.00
RODIL C. STA. RITA x x x WHSEMAN ₱7,746.00
EMILIO MADRIAGA x x x WHSEMAN ₱7,616.00

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 ₱3,790.00 more (sic);

2. As a regular employee, his salary was increased by ₱1,600.00 in 1995; in 1996 was increased by
₱1,300.00; in 1997 was increased by ₱1,050.00, making a total of ₱7,740.00 up to his separation
from employment on January 18, 2000 x xx;

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  on March 16, 2000 on the premise that the Labor Arbiter had no
18

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  on April 10, 2002
19

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 ₱152,757.55. 20

Mars man appealed the fore going 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  applied only to Collective Bargaining
21

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  imputing grave abuse of
25

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 P,15,000.00 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
1âwphi1

cases.  This petition however falls under the exception because of variance in the factual findings of
28

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.  The Court in the case of South Cotabato Communications
29

Corporation v. Sta. Tomas  held that:

30

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.   In an illegal dismissal case, the onus
31

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.  In this instance, it was incumbent upon Sta. Rita as the complainant to prove
32

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,   we held that:
35

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  also acknowledged management's prerogative to transfer its employees
36

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  and the employees
37

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.   Other than Sta. Rita's bare allegation that
39

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.  On the contrary, the Memorandum of Agreement guaranteed
41

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 fourfold 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.  There is no hard and fast rule designed to establish the aforesaid elements.
42

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.  This conclusion draws its force from the right of an employer
44

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  to Sta. Rita dated September 29, 1997 neither assumed nor disturbed CPDSI's
45

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 EACLibis 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.  The submission of his Social Security System (SSS)
46

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.  Thus, Sta. Rita fell short in his claim that Marsman still had him in its
47

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.   Control in
48

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.  The Court likewise
49

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.   Thus the "new" ID confirmed that
50

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.

G.R. No. 198534               July 3, 2013

JENNY F. PECKSON, Petitioner,
vs.
ROBINSONS SUPERMARKET CORPORATION, JODY GADIA, ROENA SARTE, and RUBY
ALEX, Respondents.

DECISION

REYES, J.:

For resolution is the Petition for Review on Certiorari1 of the Decision2 dated June 8, 2011 of the
Court of Appeals (CA) in CA-G.R. SP No. 109604 affirming the Decision 3 dated February 25, 2009 of
the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 00-11-09316-06/NLRC
LAC No. 002020-07, which upheld the Dismissal4 by the Labor Arbiter (LA) on May 30, 2007 of
Jenny F. Peckson's (petitioner) complaint for constructive dismissal.

Antecedent Facts and Proceedings

The petitioner first joined the Robinsons Supermarket Corporation (RSC) as a Sales Clerk on
November 3, 1987. On October 26, 2006, she was holding the position of Category Buyer when
respondent Roena Sarte (Sarte), RSC’s Assistant Vice-President for Merchandising, reassigned her
to the position of Provincial Coordinator, effective November 1, 2006. Claiming that her new
assignment was a demotion because it was non-supervisory and clerical in nature, the petitioner
refused to turn over her responsibilities to the new Category Buyer, or to accept her new
responsibilities as Provincial Coordinator. Jody Gadia (Gadia) and Ruby Alex (Alex) were impleaded
because they were corporate officers of the RSC.

In a memorandum to the petitioner dated November 13, 2006, 6 the RSC, through Sarte, demanded
an explanation from her within 48 hours for her refusal to accept her new assignment despite written
and verbal demands. Sarte cited a company rule, Offenses Subject to Disciplinary Action No. 4.07,
which provided that "[d]isobedience, refusal or failure to do assigned task or to obey
superior’s/official’s orders/instructions, or to follow established procedures or practices without valid
reason" would be meted the penalty of suspension.

The petitioner ignored the 48-hour deadline to explain imposed by Sarte. On November 23, 2006,
Sarte issued her another memorandum, 7 reiterating her demand to explain in writing within 48 hours
why she persistently refused to assume her new position, and warning her that this could be her final
chance to present her side or be deemed to have waived her right to be heard.

In her one-paragraph reply submitted on November 27, 2006, 8 the petitioner stated that she could
not accept the position of Provincial Coordinator since she saw it as a demotion. As it turned out,
however, on November 9, 2006, the petitioner had already filed a complaint for constructive
dismissal9 against RSC, Sarte, Gadia and Alex (respondents).
On November 30, 2006, Sarte issued an instruction to the petitioner to report to RSC’s Metroeast
Depot to help prepare all shipping manifests for Cagayan de Oro and Bacolod, but as witnessed by
RSC employees Raquel Torrechua and Alex, she did not obey as instructed. 10 Again on December
8, 2006, Sarte issued a similar instruction, citing the need for certain tasks from the petitioner in
preparation for the coming Christmas holidays, but the petitioner again refused to heed. 11

As culled from the assailed appellate court decision, 12 the petitioner argued before the LA that the
true organizational chart of the RSC showed that the position of Category Buyer was one level
above that of the Provincial Coordinator, and that moreover, the job description of a Provincial
Coordinator was largely clerical and did not require her to analyze stock levels and order points, or
source new local and international suppliers, or monitor stock level per store and recommend items
for replenishment, or negotiate better items and discounts from suppliers, duties which only a
Category Buyer could perform. She also claimed that she was instructed to file a courtesy
resignation in exchange for a separation pay of one-half salary per year of service.

The respondents in their position paper denied the correctness of the organizational chart presented
by the petitioner. They maintained that her transfer was not a demotion since the Provincial
Coordinator occupied a "Level 5" position like the Category Buyer, with the same work conditions,
salary and benefits. But while both positions had no significant disparity in the required skill,
experience and aptitude, the position of Category Buyer demanded the traits of punctuality, diligence
and attentiveness because it is a frontline position in the day-to-day business operations of RSC
which the petitioner, unfortunately, did not possess.

The respondents also raised the petitioner’s record of habitual tardiness as far back as 1999, as well
as poor performance rating in 2005. In addition to her performance rating of "2.8" out of "4.0" in 2005
equivalent to "below expectation," the petitioner was found to be tardy in June and July 2005, 13
times, and for the entire 2005, 57 times; that she was suspended twice in 2006 for 20 instances of
tardiness and absences from July to September 2006 alone. 13 We also note that the petitioner was
suspended for seven (7) days in September and October 2005 for deliberately violating a company
policy after she was seen having lunch with a company supplier. 14

In her affidavit,15 respondent Sarte denied that the reassignment of the petitioner as Provincial
Coordinator was motivated by a desire to besmirch the name of the latter. She asserted that it was
made in the exercise of management prerogative and sound discretion, in view of the nsitive position
occupied by the Category Buyer in RSC’s daily operations, vis-à-vis the petitioner’s "below
expectation" performance rating and habitual tardiness.

In dismissing the petitioner’s complaint, the LA in its Decision 16 dated May 30, 2007 ruled that job
reassignment or classification is a strict prerogative of the employer, and that the petitioner cannot
refuse her transfer from Category Buyer to Provincial Coordinator since both positions commanded
the same salary structure, high degree of responsibility and impeccable honesty and integrity.
Upholding the employer’s right not to retain an employee in a particular position to prevent losses or
to promote profitability, the LA found no showing of any illegal motive on the part of the respondents
in reassigning the petitioner. The transfer was dictated by the need for punctuality, diligence and
attentiveness in the position of Category Buyer, which the petitioner clearly lacked. Moreover, the LA
ruled that her persistent refusal to accept her new position amounted to insubordination, entitling the
RSC to dismiss her from employment.

A month after the above ruling, or on June 22, 2007, the petitioner tendered her written "forced"
resignation,17 wherein she complained that she was being subjected to ridicule by clients and co-
employees alike on account of her floating status since the time she refused to accept her transfer.
She likewise claimed that she was being compelled to accept the position of Provincial Coordinator
without due process.

On appeal, the NLRC in its Decision18 dated February 25, 2009 sustained the findings of the LA. It
agreed that the lateral transfer of the petitioner from Category Buyer to Provincial Coordinator was
not a demotion amounting to constructive dismissal, since both positions belonged to Job Level 5
and between them there is no significant disparity in terms of the requirements of skill, experience
and aptitude. Contrary to the petitioner’s assertion, the NLRC found that the position of Provincial
Coordinator is not a rank-and-file position but in fact requires the exercise of discretion and
independent judgment, as well as appropriate recommendations to management to ensure the
faithful implementation of its policies and programs; that it even exercises influence over the
Category Buyer in that it includes performing a recommendatory function to guide the Category
Buyer in making decisions on the right assortment, price and quantity of the items, articles or
merchandise to be sold by the store.

The NLRC then reiterated the settled rule that management may transfer an employee from one
office to another within the business establishment, provided there is no demotion in rank or
diminution of salary, benefits, and other privileges, and the action is not motivated by discrimination
or bad faith or effected as a form of punishment without sufficient cause. It ruled that the
respondents were able to show that the petitioner’s transfer was not unreasonable, inconvenient or
prejudicial, but was prompted by her failure to meet the demands of punctuality, diligence, and
personal attention of the position of Category Buyer; that management wanted to give the petitioner
a chance to improve her work ethic, but her obstinate refusal to assume her new position has
prejudiced respondent RSC, even while she continued to receive her salaries and benefits as
Provincial Coordinator.

On petition for certiorari to the CA, the petitioner insisted that her transfer from Category Buyer to
Provincial Coordinator was a form of demotion without due process, and that the respondents
unjustifiably depicted her as remiss in her duties, flawed in her character, and unduly obstinate in her
refusal to accept her new post.

In its Decision19 dated June 8, 2011, the CA found no basis to deviate from the oft-repeated tenet
that the findings of fact and conclusions of the NLRC when supported by substantial evidence are
generally accorded not only great weight and respect but even finality, and are thus deemed
binding.20

Petition for Review in the Supreme Court

Now on petition for review to this Court, the petitioner maintains that her lateral transfer from
Category Buyer to Provincial Coordinator was a demotion amounting to constructive dismissal
because her reassignment was not a valid exercise of management prerogative, but was done in
bad faith and without due process. She claims that the respondents manipulated the facts to show
that she was tardy; that they even surreptitiously drew up a new organizational chart of the
Merchandising Department of RSC, soon after she filed her complaint for illegal dismissal, to show
that the position of Provincial Coordinator belonged to Job Level 5 as the Category Buyer, and not
one level below; that the company deliberately embarrassed her when it cut off her email access;
that they sent memoranda to her clients that she was no longer a Category Buyer, and to the various
Robinsons branches that she was now a Provincial Coordinator, while Milo Padilla (Padilla) was
taking over her former position as Category Buyer; that for seven (7) months, they placed her on
floating status and subjected her to mockery and ridicule by the suppliers and her co-employees;
that not only was there no justification for her transfer, but the respondents clearly acted in bad faith
and with discrimination, insensibility and disdain to make her stay with the company intolerable for
her.

Our Ruling

We find no merit in the petition.

This Court has consistently refused to interfere with the exercise by management of its prerogative
to regulate the employees’ work assignments, the working methods and the place and manner of
work.

As we all know, there are various laws imposing all kinds of burdens and obligations upon the
employer in relation to his employees, and yet as a rule this Court has always upheld the employer’s
prerogative to regulate all aspects of employment relating to the employees’ work assignment, the
working methods and the place and manner of work. Indeed, labor laws discourage interference with
an employer’s judgment in the conduct of his business.21

In Rural Bank of Cantilan, Inc. v. Julve,22 the Court had occasion to summarize the general
jurisprudential guidelines affecting the right of the employer to regulate employment, including the
transfer of its employees:

Under the doctrine of management prerogative, every employer has the inherent right to regulate,
according to his own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, the time, place and manner of work, work supervision, transfer of
employees, lay-off of workers, and discipline, dismissal, and recall of employees. The only limitations
to the exercise of this prerogative are those imposed by labor laws and the principles of equity and
substantial justice.

While the law imposes many obligations upon the employer, nonetheless, it also protects the
employer’s right to expect from its employees not only good performance, adequate work, and
diligence, but also good conduct and loyalty. In fact, the Labor Code does not excuse employees
from complying with valid company policies and reasonable regulations for their governance and
guidance.

Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a
transfer is a movement from one position to another of equivalent rank, level or salary without break
in the service or a lateral movement from one position to another of equivalent rank or salary; (b) the
employer has the inherent right to transfer or reassign an employee for legitimate business
purposes; (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is
effected as a form of punishment or is a demotion without sufficient cause; (d) the employer must be
able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the
employee.23 (Citations omitted)

In Philippine Japan Active Carbon Corporation v. NLRC, 24 it was held that the exercise of
management’s prerogative concerning the employees’ work assignments is based on its
assessment of the qualifications, aptitudes and competence of its employees, and by moving them
around in the various areas of its business operations it can ascertain where they will function with
maximum benefit to the company. 1âwphi1

It is the employer’s prerogative, based on its assessment and perception of its employees’
qualifications, aptitudes, and competence, to move them around 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
deprive the company of its prerogative to change his assignment or transfer him where he will be
most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it
does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the
employee may not complain that it amounts to a constructive dismissal. 25

As a privilege inherent in the employer’s right to control and manage its enterprise effectively, its
freedom to conduct its business operations to achieve its purpose cannot be denied. 26 We agree with
the appellate court that the respondents are justified in moving the petitioner to another equivalent
position, which presumably would be less affected by her habitual tardiness or inconsistent
attendance than if she continued as a Category Buyer, a "frontline position" in the day-to-day
business operations of a supermarket such as Robinsons.

If the transfer of an employee is not unreasonable, or inconvenient, or prejudicial to him, and it does
not involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the
employee may not complain that it amounts to a constructive dismissal.

As we have already noted, the respondents had the burden of proof that the transfer of the petitioner
was not tantamount to constructive dismissal, which as defined in Blue Dairy Corporation v.
NLRC,27 is a quitting because continued employment is rendered impossible, unreasonable or
unlikely, or an offer involving a demotion in rank and diminution of pay:

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 that right is exercised. Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker. 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. Should the
employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to
constructive dismissal, which has been defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and
diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the employee leaving him with
no option but to forego with his continued employment.
Thus, as further held in Philippine Japan Active Carbon Corporation, 28 when the transfer of an
employee is not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a
demotion in rank or a diminution of his salaries, benefits and other privileges, the employee may not
complain that it amounts to a constructive dismissal.29

But like all other rights, there are limits to the exercise of managerial prerogative to transfer
personnel, and on the employer is laid the burden to show that the same is without grave abuse of
discretion, bearing in mind the basic elements of justice and fair play. 30 Indeed, management
prerogative may not be used as a subterfuge by the employer to rid himself of an undesirable
worker.31

Interestingly, although the petitioner claims that she was constructively dismissed, yet until the
unfavorable decision of the LA on May 30, 2007, for seven (7) months she continued to collect her
salary while also adamantly refusing to heed the order of Sarte to report to the Metroeast Depot. It
was only on June 22, 2007, after the LA’s decision, that she filed her "forced" resignation. Her
deliberate and unjustified refusal to assume her new assignment is a form of neglect of duty, and
according to the LA, an act of insubordination. We saw how the company sought every chance to
hear her out on her grievances and how she ignored the memoranda of Sarte asking her to explain
her refusal to accept her transfer. All that the petitioner could say was that it was a demotion and
that her floating status embarrassed her before the suppliers and her co-employees.

The respondents have discharged the burden of proof that the transfer of the petitioner was not
tantamount to constructive dismissal.

In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC,32 a machinist who had been employed with
the petitioner company for 16 years was reduced to the service job of transporting filling materials
after he failed to report for work for one (1) day on account of an urgent family matter. This is one
instance where the employee’s demotion was rightly held to be an unlawful constructive dismissal
because the employer failed to show substantial proof that the employee’s demotion was for a valid
and just cause:

In case of a constructive dismissal, the employer has the burden of proving that the transfer and
demotion of an employee are for valid and legitimate grounds such as genuine business necessity.
Particularly, for a transfer not to be considered a constructive dismissal, the employer must be able
to show that such 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.
Failure of the employer to overcome this burden of proof, the employee’s demotion shall no doubt be
tantamount to unlawful constructive dismissal. x x x.33 (Citation omitted)

In the case at bar, we agree with the appellate court that there is substantial showing that the
transfer of the petitioner from Category Buyer to Provincial Coordinator was not unreasonable,
inconvenient, or prejudicial to her. The petitioner failed to dispute that the job classifications of
Category Buyer and Provincial Coordinator are similar, or that they command a similar salary
structure and responsibilities. We agree with the NLRC that the Provincial Coordinator’s position
does not involve mere clerical functions but requires the exercise of discretion from time to time, as
well as independent judgment, since the Provincial Coordinator gives appropriate recommendations
to management and ensures the faithful implementation of policies and programs of the company. It
even has influence over a Category Buyer because of its recommendatory function that enables the
Category Buyer to make right decisions on assortment, price and quantity of the items to be sold by
the store.34

We also cannot sustain the petitioner’s claim that she was not accorded due process and that the
respondents acted toward her with discrimination, insensibility, or disdain as to force her to forego
her continued employment. In addition to verbal reminders from Sarte, the petitioner was asked in
writing twice to explain within 48 hours her refusal to accept her transfer. In the first, she completely
remained silent, and in the second, she took four (4) days to file a mere one-paragraph reply,
wherein she simply said that she saw the Provincial Coordinator position as a demotion, hence she
could not accept it. Worse, she may even be said to have committed insubordination when she
refused to turn over her responsibilities to the new Category Buyer, Padilla, and to assume her new
responsibilities as Provincial Coordinator and report to the Metroeast Depot as directed. This was
precisely the reason why the petitioner was kept on floating status. To her discredit, her defiance
constituted a neglect of duty, or an act of insubordination, per the LA.
Neither can we consider tenable the petitioner’s contention that the respondents deliberately held
her up to mockery and ridicule when they cut off her email access, sent memoranda to her clients
that she was no longer a Category Buyer, and to the various Robinsons branches that she was now
a Provincial Coordinator on floating status and that Padilla was taking over her position as the new
Category Buyer. It suffices to state that these measures are the logical steps to take for the
petitioner’s unjustified resistance to her transfer, and were not intended to subject her to public
embarrassment.

Judicial review of labor cases does not go beyond the evaluation of the sufficiency of the evidence
upon which labor officials’ findings rest.

Finally, as reiterated in Acebedo Optical,35 this Court is not a trier of facts, and only errors of law are
generally reviewed in petitions for review on certiorari criticizing decisions of the CA. Questions of
fact are not entertained, and in labor cases, this doctrine applies with greater force.

Factual questions are for labor tribunals to resolve. 36 Thus:

Judicial Review or labor cases does not go beyond the evaluation of the sufficiency of the evidence
upon which its labor officials' findings rest. As such, the findings of facts and conclusion of the NLRC
are generally accorded not only great weight and respect but even clothed with finality and deemed
binding on this Court as long as they are supported by substantial evidence. This Court finds no
basis for deviating from said doctrine without any clear showing that the findings of the Labor Arbiter,
as affirmed by the NLRC, are bereft of substantiation. Particularly when passed upon and upheld by
the Court of Appeals, they are binding and conclusive upon the Supreme Court and will not normally
be disturbed.

xxxx

As earlier stated, we find no basis for deviating from the oft espoused legal tenet that findings of
facts and conclusion of the labor arbiter are generally accorded not only great weight and respect
but even clothed with finality and deemed binding on this Court as long as they are supported by
substantial evidence, without any clear showing that such findings of fact, as affirmed by the NLRC,
are bereft of substantiation. More so, when passed upon and upheld by the Com1 of Appeals, they
are binding and conclusive upon us and will not normally be disturbed; x x x. 37 (Citations omitted)

It is our ruling, that the findings of fact and conclusion of the LA, as affirmed by the NLRC, are
supported by substantial evidence, as found by the CA.

WHEREFORE, the premises considered, the Decision of the Court of Appeals dated June 8, 2011 in
CA-G.R. SP No. 109604 is AFFIRMED.

SO ORDERED.
G.R. No. 191281               December 5, 2012

BEST WEAR GARMENTS and/or WARREN PARDILLA, Petitioners,

vs.
ADELAIDA B. DE LEMOS and CECILE M. OCUBILLO, Respondents.

DECISION

VILLARAMA, J.:

This is a petition for review on certiorari under Rule 45 assailing the Decision dated February 24,
1 

2009 and Resolution dated February 10, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
2 

102002. TheCA reversed the Decision dated August 28, 2007 of the National Labor Relations
3 

Commission (NLRC) and reinstated the September 5, 2005 Decision  of the Labor Arbiter.
4 

Petitioner Best Wear Garments is a sole proprietorship represented by its General Manager Alex
Sitosta. Respondents Cecile M. Ocubillo and Adelaida B. De Lemos were hired as sewers on piece-
rate basis by petitioners on October 27, 1993 andJuly 12, 1994, respectively.

On May 20, 2004, De Lemos filed a complaint for illegal dismissal with prayer for backwages and
5 

other accrued benefits, separation pay, service incentive leave pay and attorney’s fees. A similar
complaint was filed by Ocubillo on June 10, 2004. Both alleged in their position paper that in August
6 

2003, Sitosta arbitrarily transferred them to other areas of operation of petitioner’s garments
company, which they said amounted to constructive dismissal as it resulted in less earnings for
them.

De Lemos claimed that after two months in her new assignment, she was able to adjust but Sitosta
again transferred her to a "different operation where she could not earn [as] much as before because
by-products require long period of time to finish." She averred that the reason for her transfer was
her refusal "to render [overtime work] up to 7:00 p.m." Her request to be returned to her previous
assignment was rejected and she was "constrained not to report for work as Sitosta had become
indifferent to her since said transfer of operation." She further alleged that her last salary was
withheld by petitioner company. 7

On her part, Ocubillo alleged that her transfer was precipitated by her having "incurred excessive
absences since 2001." Her absences were due to the fact that her father became very sick since
2001 until his untimely demise on November 9, 2003; aside from this, she herself became very
sickly. She claimed that from September to October 2003, Sitosta assigned her to different machines
"whichever is available" and that "there were times, she could not earn for a day because there was
no available machine to work for [sic]." Sitosta also allegedly required her to render overtime work up
to 7:00 p.m. which she refused "because she was only paid up to 6:25 p.m." 8
Petitioners denied having terminated the employment of respondents who supposedly committed
numerous absences without leave (AWOL). They claimed that sometime in February 2004, De
Lemos informed Sitosta that due to personal problem, she intends to resign from the company. She
then demanded the payment of separation pay. In March 2004, Ocubillo likewise intimated her
intention to resign and demanded separation pay. Sitosta explained to both De Lemos and Ocubillo
that the company had no existing policy on granting separation pay, and hence he could not act on
their request. De Lemos never reported back to work since March 2004, while Ocubillo failed to
report for work from October 2004 to the present.

As to the allegation of respondents that the reason for their transfer was their refusal to render
overtime work until 7:00 p.m., petitioners asserted that respondents are piece-rate workers and
hence they are not paid according to the number of hours worked.

On September 5, 2005, Labor Arbiter Arden S. Anni rendered a Decision granting respondents’
claims, as follows:

WHEREFORE, ALL THE FOREGOING CONSIDERED, judgment is rendered, as follows:

1. Declaring that complainants were constructively, nay, illegally dismissed from

employment;

2. Ordering respondents to pay each of the complainants SEPARATION PAY equivalent to

one-month salary for every year of service, a fraction of at least six (6) months being
considered as one (1) whole year;

3. Ordering respondents to pay each of the complainants BACKWAGES computed from the
time of their dismissal up to the finality of this decision.

For this purpose, both parties are directed to submit their respective computations of the total
amount awarded for approval by this office.

All other claims are dismissed for lack of merit.

SO ORDERED. 9

Labor Arbiter Anni ruled that since respondents neither resigned nor abandoned their jobs, the
ambiguities in the circumstances surrounding their dismissal are resolved in favor of the workers. It
was emphasized that respondents could no longer be deemed terminated for reason of AWOL
because this prerogative should have been exercised before the dismissals have been effected.
Moreover, it would have been illogical for respondents to resign and then file a complaint for illegal
dismissal.

Petitioners appealed to the NLRC which reversed the Labor Arbiter’s decision and dismissed
respondents’ complaints. The NLRC found no basis for the charge of constructive dismissal, thus:

Complainants’ alleged demotion is vague. They simply allege that by reason of their transfer in
August 2003, they did not earn as much as they earned in their previous assignments. They failed to
state how much they earned before and after their transfer, if only to determine whether or not there
was indeed a diminution in their earnings. Further, it is to be stressed that complainants were paid
on a piece rate basis, which simply means that the more output, they produced the more earnings
they will have. In other words, the earning is dependent upon complainants.

We find more credible respondents’ assertion that complainants’ transfer was a valid exercise of
management prerogative. Respondent company points out that it is engaged in the business of
garments manufacturing as a sub-contractor. That, the kind of work it performs is dependent into
with its client which specifies the work it has to perform. And, that corollary thereto, the work to
be performed by its employees will depend on the work specifications in the contract. Thus, if
complainants have been assigned to different operations, it was pursuant to the
requirements of its contracts. x x x.

In furtherance of their defense that complainants were not dismissed, either actual or constructive in
August 2003, respondents allege that complainants continued to report for work until February 2004
for complainant De Lemos and August 2004 for complainant Ocubillo. We lend credence to this
allegation of respondents because it remains unrebutted by complainants.

It is to be noted that it was only [on] May 20, 2004 and June 10, 2004 that the instant
consolidated cases were filed by complainant De Lemos and Ocubillo, respectively. It may not be
amiss to state that the date of filing jibe with respondents’ allegation that sometime in February and
March 2004, complainants intimated their intention to resign and demanded for payment of
separation pay but was not favorably acted upon by management.

Be that as it may, considering that complainants were not dismissed by respondents, they should be
ordered to report back to work without backwages and for the respondents to accept them.

WHEREFORE, premises considered, the Decision dated September 5, 2005 is hereby SET ASIDE
and a new one entered dismissing complainants’ charge of illegal dismissal for lack of merit.
However, there being no dismissal, complainants Adelaida B. De Lemos and Cecile M. Ocubillo are
hereby directed to report back to work without backwages within ten (10) days from receipt of this
Resolution and for the respondent Company to accept them under the same terms and conditions at
the time of their employment.

SO ORDERED. (Italics in the original; emphasis supplied)

10 

Respondents filed a motion for reconsideration which the NLRC denied. Thus, they elevated the
case to the CA alleging grave abuse of discretion on the part of the NLRC.

By Decision dated February 24, 2009, the CA granted the petition for certiorari, reversed the ruling of
the NLRC and reinstated the Labor Arbiter’s decision with modification that the service incentive
leave pay shall be excluded in the computation of the monetary award. The CA found no valid and
legitimate business reason for the transfer order which entailed the reduction of respondents’
earnings. Because respondents’ plea to be returned to their former posts was not heeded by
petitioners, no other conclusion "is discernible from the attendant circumstances except the fact that
[respondents’] transfer was unreasonable, inconvenient and prejudicial to them which [is] tantamount
to a constructive dismissal." Moreover, the unauthorized absences of respondents did not warrant a
11 

finding of abandonment in view of the length of their service with petitioner company and the
difficulty in finding similar employment. The CA further invoked the rule that an employee who
forthwith takes steps to protest his layoff cannot by any logic be said to have abandoned his work.

Petitioners filed a motion for partial reconsideration which was denied by the CA.

Hence, this petition alleging that the CA has glaringly overlooked and clearly erred in its findings of
fact and in applying the law on constructive dismissal.

At the outset, it must bestated that the main issue in this case involves a question of fact. It is an
established rule that the jurisdiction of the Supreme Court in cases brought before it from the CA via
Rule 45 of the 1997 Rules of Civil Procedure is generally limited to reviewing errors of law. This
Court is not a trier of facts. In the exercise of its power of review, the findings of fact of the CA are
conclusive and binding and consequently, it is not our function to analyze or weigh evidence all over
again.12

There are, however, recognized exceptions to this rule such as when there is a divergence between
13 

the findings of facts of the NLRC and that of the CA. In this case, the CA’s findings are contrary to
14 

those of the NLRC. There is, therefore, a need to review the records to determine which of them
should be preferred as more conformable to evidentiary facts. 15

The right of employees to security of tenure does not give them vested rights to their positions to the
extent of depriving management of its prerogative to change their assignments or to transfer them.
Thus, an employer may transfer or assign employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary, benefits, and other privileges, and the
action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. 16

In Blue Dairy Corporation v. NLRC, we held that:

17 
x x x. 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 that right is exercised. Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker. 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. Should the
employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to
constructive dismissal, which has been defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and
diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the employee leaving him with
no option but to forego with his continued employment. 18

With the foregoing as guidepost, we hold that the CA erred in reversing the NLRC’s ruling that
respondents were not constructively dismissed.

Being piece-rate workers assigned to individual sewing machines, respondents’ earnings depended
on the quality and quantity of finished products. That their work output might have been affected by
the change in their specific work assignments does not necessarily implythat any resultingreduction
in payis tantamount to constructive dismissal. Workers under piece-rate employment have no fixed
salaries and their compensation is computed on the basis of accomplished tasks. As admitted by
respondent De Lemos, some garments or by-products took a longer time to finish so they could not
earn as much as before. Also,the type of sewing jobs available would depend on the specifications
made by the clients of petitioner company. Under these circumstances, it cannot be said that the
transfer was unreasonable, inconvenient or prejudicial to the respondents. Such deployment of
sewers to work on different types of garments as dictated by present business necessity is within the
ambit of management prerogative which, in the absence of bad faith, ill motive or discrimination,
should not be interfered with by the courts.

The records are bereft of any showing of clear discrimination, insensibility or disdain on the part of
petitioners in transferring respondents to perform a different type of sewing job.It is unfair to charge
petitioners with constructive dismissal simply because the respondents insist that their transfer to a
new work assignment was against their will. We have long stated that "the objection to the transfer
being grounded on solely upon the personal inconvenience or hardship that will be caused to the
employee by reason of the transfer is not a valid reason to disobey an order of transfer." That 19 

respondents eventually discontinued reporting for work after their plea to be returned to their former
work assignment was their personal decision, for which the petitioners should not be held liable
particularly as the latter did not, in fact, dismiss them.

Indeed, there was no evidence that respondents were dismissed from employment.  In fact, 1âwphi1

petitioners expressed willingness to accept them back to work. There being no termination of
employment by the employer, the award of backwages cannot be sustained. It is well settled that
backwages may be granted only when there is a finding of illegal dismissal. In cases where there is
20 

no evidence of dismissal, the remedy is reinstatement but without backwages. 21

The constitutional policy of providing full protection to labor is not intended to oppress or destroy
management. While the Constitution is committed to the policy of social justice and the protection of
22 

the working class, it should not be supposed that every labor dispute will be automatically decided in
favor of labor. Management also has its rights which are entitled to respect and enforcement in the
interest of simple fair play. Thus, where management prerogative to transfer employees is validly
23 

exercised, as in this case, courts will decline to interfere.

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated February 24,
2009 and Resolution dated February 10, 2010 of the Court of Appeals in CA-G.R. SP No. 102002
are SET ASIDE. The Decision dated August 28, 2007 of the National Labor Relations Commission is
hereby REINSTATED and UPHELD.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 177467               March 9, 2011

PFIZER, INC. AND/OR REY GERARDO BACARRO, AND/OR FERDINAND CORTES, AND/OR
ALFRED MAGALLON, AND/OR ARISTOTLE ARCE, Petitioners,
vs.
GERALDINE VELASCO, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure to annul and
set aside the Resolution1 dated October 23, 2006 as well as the Resolution 2 dated April 10, 2007
both issued by the Court of Appeals in CA-G.R. SP No. 88987 entitled, "Pfizer, Inc. and/or Rey
Gerardo Bacarro, and/or Ferdinand Cortes, and/or Alfred Magallon, and/or Aristotle Arce v. National
Labor Relations Commission Second Division and Geraldine Velasco." The October 23, 2006
Resolution modified upon respondent’s motion for reconsideration the Decision 3 dated November 23,
2005 of the Court of Appeals by requiring PFIZER, Inc. (PFIZER) to pay respondent’s wages from
the date of the Labor Arbiter’s Decision4 dated December 5, 2003 until it was eventually reversed
and set aside by the Court of Appeals. The April 10, 2007 Resolution, on the other hand, denied
PFIZER’s motion for partial reconsideration.

The facts of this case, as stated in the Court of Appeals Decision dated November 23, 2005, are as
follows:

Private respondent Geraldine L. Velasco was employed with petitioner PFIZER, INC. as
Professional Health Care Representative since 1 August 1992. Sometime in April 2003, Velasco had
a medical work up for her high-risk pregnancy and was subsequently advised bed rest which
resulted in her extending her leave of absence. Velasco filed her sick leave for the period from 26
March to 18 June 2003, her vacation leave from 19 June to 20 June 2003, and leave without pay
from 23 June to 14 July 2003.

On 26 June 2003, while Velasco was still on leave, PFIZER through its Area Sales Manager, herein
petitioner Ferdinand Cortez, personally served Velasco a "Show-cause Notice" dated 25 June 2003.
Aside from mentioning about an investigation on her possible violations of company work rules
regarding "unauthorized deals and/or discounts in money or samples and unauthorized withdrawal
and/or pull-out of stocks" and instructing her to submit her explanation on the matter within 48 hours
from receipt of the same, the notice also advised her that she was being placed under "preventive
suspension" for 30 days or from that day to 6 August 2003 and consequently ordered to surrender
the following "accountabilities;" 1) Company Car, 2) Samples and Promats, 3)
CRF/ER/VEHICLE/SOA/POSAP/MPOA and other related Company Forms, 4) Cash Card, 5) Caltex
Card, and 6) MPOA/TPOA Revolving Travel Fund. The following day, petitioner Cortez together with
one Efren Dariano retrieved the above-mentioned "accountabilities" from Velasco’s residence.

In response, Velasco sent a letter addressed to Cortez dated 28 June 2003 denying the charges. In
her letter, Velasco claimed that the transaction with Mercury Drug, Magsaysay Branch covered by
her check (no. 1072) in the amount of ₱23,980.00 was merely to accommodate two undisclosed
patients of a certain Dr. Renato Manalo. In support thereto, Velasco attached the Doctor’s letter and
the affidavit of the latter’s secretary.

On 12 July 2003, Velasco received a "Second Show-cause Notice" informing her of additional
developments in their investigation. According to the notice, a certain Carlito Jomen executed an
affidavit pointing to Velasco as the one who transacted with a printing shop to print PFIZER discount
coupons. Jomen also presented text messages originating from Velasco’s company issued
cellphone referring to the printing of the said coupons. Again, Velasco was given 48 hours to submit
her written explanation on the matter. On 16 July 2003, Velasco sent a letter to PFIZER via Aboitiz
courier service asking for additional time to answer the second Show-cause Notice.

That same day, Velasco filed a complaint for illegal suspension with money claims before the
Regional Arbitration Branch. The following day, 17 July 2003, PFIZER sent her a letter inviting her to
a disciplinary hearing to be held on 22 July 2003. Velasco received it under protest and informed
PFIZER via the receiving copy of the said letter that she had lodged a complaint against the latter
and that the issues that may be raised in the July 22 hearing "can be tackled during the hearing of
her case" or at the preliminary conference set for 5 and 8 of August 2003. She likewise opted to
withhold answering the Second Show-cause Notice. On 25 July 2003, Velasco received a "Third
Show-cause Notice," together with copies of the affidavits of two Branch Managers of Mercury Drug,
asking her for her comment within 48 hours. Finally, on 29 July 2003, PFIZER informed Velasco of
its "Management Decision" terminating her employment.

On 5 December 2003, the Labor Arbiter rendered its decision declaring the dismissal of Velasco
illegal, ordering her reinstatement with backwages and further awarding moral and exemplary
damages with attorney’s fees. On appeal, the NLRC affirmed the same but deleted the award of
moral and exemplary damages.5

The dispositive portion of the Labor Arbiter’s Decision dated December 5, 2003 is as follows:

WHEREFORE, judgment is hereby rendered declaring that complainant was illegally dismissed.
Respondents are ordered to reinstate the complainant to her former position without loss of seniority
rights and with full backwages and to pay the complainant the following:

1. Full backwages (basic salary, company benefits, all allowances

as of December 5, 2003 in the amount of ₱572,780.00);
2. 13th Month Pay, Midyear, Christmas and performance bonuses
in the amount of ₱105,300.00;
3. Moral damages of ₱50,000.00;
4. Exemplary damages in the amount of ₱30,000.00;
5. Attorney’s Fees of 10% of the award excluding damages in the
amount of ₱67,808.00.
The total award is in the amount of ₱758,080.00.6

PFIZER appealed to the National Labor Relations Commission (NLRC) but its appeal was
denied via the NLRC Decision7 dated October 20, 2004, which affirmed the Labor Arbiter’s ruling but
deleted the award for damages, the dispositive portion of which is as follows:

WHEREFORE, premises considered, the instant appeal and the motion praying for the deposit in
escrow of complainant’s payroll reinstatement are hereby denied and the Decision of the Labor
Arbiter is affirmed with the modification that the award of moral and exemplary damages is deleted
and attorney’s fees shall be based on the award of 13th month pay pursuant to Article III of the
Labor Code.8
PFIZER moved for reconsideration but its motion was denied for lack of merit in a NLRC
Resolution9 dated December 14, 2004.

Undaunted, PFIZER filed with the Court of Appeals a special civil action for the issuance of a writ
of certiorari under Rule 65 of the Rules of Court to annul and set aside the aforementioned NLRC
issuances. In a Decision dated November 23, 2005, the Court of Appeals upheld the validity of
respondent’s dismissal from employment, the dispositive portion of which reads as follows:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the NLRC dated 20
October 2004 as well as its Resolution of 14 December 2004 is hereby ANNULED and SET ASIDE.
Having found the termination of Geraldine L. Velasco’s employment in accordance with the two
notice rule pursuant to the due process requirement and with just cause, her complaint for illegal
dismissal is hereby DISMISSED.10

Respondent filed a Motion for Reconsideration which the Court of Appeals resolved in the assailed
Resolution dated October 23, 2006 wherein it affirmed the validity of respondent’s dismissal from
employment but modified its earlier ruling by directing PFIZER to pay respondent her wages from
the date of the Labor Arbiter’s Decision dated December 5, 2003 up to the Court of Appeals
Decision dated November 23, 2005, to wit:

IN VIEW WHEREOF, the dismissal of private respondent Geraldine Velasco is AFFIRMED, but
petitioner PFIZER, INC. is hereby ordered to pay her the wages to which she is entitled to from the
time the reinstatement order was issued until November 23, 2005, the date of promulgation of Our
Decision.11

Respondent filed with the Court a petition for review under Rule 45 of the Rules of Civil Procedure,
which assailed the Court of Appeals Decision dated November 23, 2005 and was docketed as G.R.
No. 175122. Respondent’s petition, questioning the Court of Appeals’ dismissal of her complaint,
was denied by this Court’s Second Division in a minute Resolution 12 dated December 5, 2007, the
pertinent portion of which states:

Considering the allegations, issues and arguments adduced in the petition for review on certiorari,
the Court resolves to DENY the petition for failure to sufficiently show any reversible error in the
assailed judgment to warrant the exercise of this Court’s discretionary appellate jurisdiction, and for
raising substantially factual issues.

On the other hand, PFIZER filed the instant petition assailing the aforementioned Court of Appeals
Resolutions and offering for our resolution a single legal issue, to wit:

Whether or not the Court of Appeals committed a serious but reversible error when it ordered Pfizer
to pay Velasco wages from the date of the Labor Arbiter’s decision ordering her reinstatement until
November 23, 2005, when the Court of Appeals rendered its decision declaring Velasco’s dismissal
valid.13

The petition is without merit.

PFIZER argues that, contrary to the Court of Appeals’ pronouncement in its assailed Decision dated
November 23, 2005, the ruling in Roquero v. Philippine Airlines, Inc.14 is not applicable in the case at
bar, particularly with regard to the nature and consequences of an order of reinstatement, to wit:

The order of reinstatement is immediately executory. The unjustified refusal of the employer to
reinstate a dismissed employee entitles him to payment of his salaries effective from the time the
employer failed to reinstate him despite the issuance of a writ of execution. Unless there is a
restraining order issued, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement. In the case at bar, no restraining order was granted. Thus, it was mandatory on PAL
to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so, PAL must pay
Roquero the salary he is entitled to, as if he was reinstated, from the time of the decision of the
NLRC until the finality of the decision of the Court. 15 (Emphases supplied.)

It is PFIZER’s contention in its Memorandum16 that "there was no unjustified refusal on [its part] to
reinstate [respondent] Velasco during the pendency of the appeal," 17 thus, the pronouncement
in Roquero cannot be made to govern this case. During the pendency of the case with the Court of
Appeals and prior to its November 23, 2005 Decision, PFIZER claimed that it had already required
respondent to report for work on July 1, 2005. However, according to PFIZER, it was respondent
who refused to return to work when she wrote PFIZER, through counsel, that she was opting to
receive her separation pay and to avail of PFIZER’s early retirement program.

In PFIZER’s view, it should no longer be required to pay wages considering that (1) it had already
previously paid an enormous sum to respondent under the writ of execution issued by the Labor
Arbiter; (2) it was allegedly ready to reinstate respondent as of July 1, 2005 but it was respondent
who unjustifiably refused to report for work; (3) it would purportedly be tantamount to allowing
respondent to choose "payroll reinstatement" when by law it was the employer which had the right to
choose between actual and payroll reinstatement; (4) respondent should be deemed to have
"resigned" and therefore not entitled to additional backwages or separation pay; and (5) this Court
should not mechanically apply Roquero but rather should follow the doctrine in Genuino v. National
Labor Relations Commission18 which was supposedly "more in accord with the dictates of fairness
and justice."19

We do not agree.

At the outset, we note that PFIZER’s previous payment to respondent of the amount of
₱1,963,855.00 (representing her wages from December 5, 2003, or the date of the Labor Arbiter
decision, until May 5, 2005) that was successfully garnished under the Labor Arbiter’s Writ of
Execution dated May 26, 2005 cannot be considered in its favor. Not only was this sum legally due
to respondent under prevailing jurisprudence but also this circumstance highlighted PFIZER’s
unreasonable delay in complying with the reinstatement order of the Labor Arbiter. A perusal of the
records, including PFIZER’s own submissions, confirmed that it only required respondent to report
for work on July 1, 2005, as shown by its Letter 20 dated June 27, 2005, which is almost two years
from the time the order of reinstatement was handed down in the Labor Arbiter’s Decision dated
December 5, 2003.

As far back as 1997 in the seminal case of Pioneer Texturizing Corporation v. National Labor
Relations Commission,21 the Court held that an award or order of reinstatement is immediately self-
executory without the need for the issuance of a writ of execution in accordance with the third
paragraph of Article 22322 of the Labor Code. In that case, we discussed in length the rationale for
that doctrine, to wit:

The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not
stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and
its issuance could be delayed for numerous reasons. A mere continuance or postponement of a
scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could
easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose
envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of
a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a
reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered
ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible
law, one which operates no further than may be necessary to achieve its specific purpose. Statutes,
as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be
prevented. x x x In introducing a new rule on the reinstatement aspect of a labor decision under
Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic
exercise. x x x23 (Italics in the original; emphasis and underscoring supplied.)

In the case at bar, PFIZER did not immediately admit respondent back to work which, according to
the law, should have been done as soon as an order or award of reinstatement is handed down by
the Labor Arbiter without need for the issuance of a writ of execution. Thus, respondent was entitled
to the wages paid to her under the aforementioned writ of execution. At most, PFIZER’s payment of
the same can only be deemed partial compliance/execution of the Court of Appeals Resolution
dated October 23, 2006 and would not bar respondent from being paid her wages from May 6, 2005
to November 23, 2005.

It would also seem that PFIZER waited for the resolution of its appeal to the NLRC and, only after it
was ordered by the Labor Arbiter to pay the amount of ₱1,963,855.00 representing respondent’s full
backwages from December 5, 2003 up to May 5, 2005, did PFIZER decide to require respondent to
report back to work via the Letter dated June 27, 2005.

PFIZER makes much of respondent’s non-compliance with its return- to-work directive by
downplaying the reasons forwarded by respondent as less than sufficient to justify her purported
refusal to be reinstated. In PFIZER’s view, the return-to-work order it sent to respondent was
adequate to satisfy the jurisprudential requisites concerning the reinstatement of an illegally
dismissed employee.

It would be useful to reproduce here the text of PFIZER’s Letter dated June 27, 2005:

Dear Ms. Velasco:

Please be informed that, pursuant to the resolutions dated 20 October 2004 and 14 December 2004
rendered by the National Labor Relations Commission and the order dated 24 May 2005 issued by
Executive Labor Arbiter Vito C. Bose, you are required to report for work on 1 July 2005, at 9:00
a.m., at Pfizer’s main office at the 23rd Floor, Ayala Life–FGU Center, 6811 Ayala Avenue, Makati
City, Metro Manila.

Please report to the undersigned for a briefing on your work assignments and other responsibilities,
including the appropriate relocation benefits.

For your information and compliance.

Very truly yours,

(Sgd.)
Ma. Eden Grace Sagisi

Labor and Employee Relations Manager24

To reiterate, under Article 223 of the Labor Code, an employee entitled to reinstatement "shall either
be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll."

It is established in jurisprudence that reinstatement means restoration to a state or condition from

which one had been removed or separated. The person reinstated assumes the position he had
occupied prior to his dismissal. Reinstatement presupposes that the previous position from which
one had been removed still exists, or that there is an unfilled position which is substantially
equivalent or of similar nature as the one previously occupied by the employee. 25

Applying the foregoing principle to the case before us, it cannot be said that with PFIZER’s June 27,
2005 Letter, in belated fulfillment of the Labor Arbiter’s reinstatement order, it had shown a clear
intent to reinstate respondent to her former position under the same terms and conditions nor to a
substantially equivalent position. To begin with, the return-to-work order PFIZER sent respondent is
silent with regard to the position or the exact nature of employment that it wanted respondent to take
up as of July 1, 2005. Even if we assume that the job awaiting respondent in the new location is of
the same designation and pay category as what she had before, it is plain from the text of PFIZER’s
June 27, 2005 letter that such reinstatement was not "under the same terms and conditions" as her
previous employment, considering that PFIZER ordered respondent to report to its main office in
Makati City while knowing fully well that respondent’s previous job had her stationed in Baguio City
(respondent’s place of residence) and it was still necessary for respondent to be briefed regarding
her work assignments and responsibilities, including her relocation benefits.

The Court is cognizant of the prerogative of management to transfer an employee from one office to
another within the business establishment, provided that there is no demotion in rank or diminution
of his salary, benefits and other privileges and the action is not motivated by discrimination, made in
bad faith, or effected as a form of punishment or demotion without sufficient cause. 26 Likewise, the
management prerogative to transfer personnel must be exercised without grave abuse of discretion
and putting to mind the basic elements of justice and fair play. There must be no showing that it is
unnecessary, inconvenient and prejudicial to the displaced employee. 27
The June 27, 2005 return-to-work directive implying that respondent was being relocated to
PFIZER’s Makati main office would necessarily cause hardship to respondent, a married woman
with a family to support residing in Baguio City. However, PFIZER, as the employer, offered no
reason or justification for the relocation such as the filling up of respondent’s former position and the
unavailability of substantially equivalent position in Baguio City. A transfer of work assignment
without any justification therefor, even if respondent would be presumably doing the same job with
the same pay, cannot be deemed faithful compliance with the reinstatement order. In other words, in
this instance, there was no real, bona fide reinstatement to speak of prior to the reversal by the
Court of Appeals of the finding of illegal dismissal.

In view of PFIZER’s failure to effect respondent's actual or payroll reinstatement, it is indubitable that
the Roquero ruling is applicable to the case at bar. The circumstance that respondent opted for
separation pay in lieu of reinstatement as manifested in her counsel’s Letter 28 dated July 18, 2005 is
of no moment. We do not see respondent’s letter as taking away the option from management to
effect actual or payroll reinstatement but, rather under the factual milieu of this case, where the
employer failed to categorically reinstate the employee to her former or equivalent position under the
same terms, respondent was not obliged to comply with PFIZER’s ambivalent return-to-work order.
To uphold PFIZER’s view that it was respondent who unjustifiably refused to work when PFIZER did
not reinstate her to her former position, and worse, required her to report for work under conditions
prejudicial to her, is to open the doors to potential employer abuse. Foreseeably, an employer may
circumvent the immediately enforceable reinstatement order of the Labor Arbiter by crafting return-
to-work directives that are ambiguous or meant to be rejected by the employee and then disclaim
liability for backwages due to non-reinstatement by capitalizing on the employee’s purported refusal
to work. In sum, the option of the employer to effect actual or payroll reinstatement must be
exercised in good faith.

Moreover, while the Court has upheld the employer’s right to choose between actually reinstating an
employee or merely reinstating him in the payroll, we have also in the past recognized that
reinstatement might no longer be possible under certain circumstances. In F.F. Marine Corporation
v. National Labor Relations Commission,29 we had the occasion to state:

It is well-settled that when a person is illegally dismissed, he is entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages. In the event, however, that
reinstatement is no longer feasible, or if the employee decides not be reinstated, the employer
shall pay him separation pay in lieu of reinstatement. Such a rule is likewise observed in the case of
a strained employer-employee relationship or when the work or position formerly held by the
dismissed employee no longer exists. In sum, an illegally dismissed employee is entitled to: (1)
either reinstatement if viable or separation pay if reinstatement is no longer viable, and (2)
backwages.30 (Emphasis supplied.)

Similarly, we have previously held that an employee’s demand for separation pay may be indicative
of strained relations that may justify payment of separation pay in lieu of reinstatement. 31 This is not
to say, however, that respondent is entitled to separation pay in addition to backwages. We stress
here that a finding of strained relations must nonetheless still be supported by substantial evidence. 32

In the case at bar, respondent’s decision to claim separation pay over reinstatement had no legal
effect, not only because there was no genuine compliance by the employer to the reinstatement
order but also because the employer chose not to act on said claim. If it was PFIZER’s position that
respondent’s act amounted to a "resignation" it should have informed respondent that it was
accepting her resignation and that in view thereof she was not entitled to separation pay. PFIZER
did not respond to respondent’s demand at all. As it was, PFIZER’s failure to effect reinstatement
and accept respondent’s offer to terminate her employment relationship with the company meant
that, prior to the Court of Appeals’ reversal in the November 23, 2005 Decision, PFIZER’s liability for
backwages continued to accrue for the period not covered by the writ of execution dated May 24,
2005 until November 23, 2005.

Lastly, PFIZER exhorts the Court to re-examine the application of Roquero with a view that a
mechanical application of the same would cause injustice since, in the present case, respondent
was able to gain pecuniary benefit notwithstanding the circumstance of reversal by the Court of
Appeals of the rulings of the Labor Arbiter and the NLRC thereby allowing respondent to profit from
the dishonesty she committed against PFIZER which was the basis for her termination. In its stead,
PFIZER proposes that the Court apply the ruling in Genuino v. National Labor Relations
Commission33 which it believes to be more in accord with the dictates of fairness and justice. In that
case, we canceled the award of salaries from the date of the decision of the Labor Arbiter awarding
reinstatement in light of our subsequent ruling finding that the dismissal is for a legal and valid
ground, to wit:

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the
salaries due to the complainant from the date it reinstated complainant in the payroll (computed at
₱60,000.00 a month, as found by the Labor Arbiter) up to and until the date of this decision," the
Court hereby cancels said award in view of its finding that the dismissal of Genuino is for a legal and
valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal
pursuant to Art. 223, paragraph 3 of the Labor Code, which states:

xxxx

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll
reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her
employer under existing laws, collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the pendency of the appeal, then the
employee is entitled to the compensation received for actual services rendered without need of
refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3
of the fallo of the September 3, 1994 NLRC Decision.34 (Emphases supplied.)

Thus, PFIZER implores the Court to annul the award of backwages and separation pay as well as to
require respondent to refund the amount that she was able to collect by way of garnishment from
PFIZER as her accrued salaries.

The contention cannot be given merit since this question has been settled by the Court en banc.

In the recent milestone case of Garcia v. Philippine Airlines, Inc.,35 the Court wrote finis to the stray
posture in Genuino requiring the dismissed employee placed on payroll reinstatement to refund the
salaries in case a final decision upholds the validity of the dismissal. In Garcia, we clarified the
principle of reinstatement pending appeal due to the emergence of differing rulings on the issue, to
wit:

On this score, the Court's attention is drawn to seemingly divergent decisions concerning
reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is
the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora,
while on the other is the recent case of Genuino v. National Labor Relations Commission. At the
core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code x x
x.

xxxx

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is

obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. On the other hand, if
the employee has been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever salary he received for he
is entitled to such, more so if he actually rendered services during the period. (Emphasis in the
original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is
entitled to receive wages pending appeal upon reinstatement, which is immediately executory.
Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement and it is mandatory on the employer to comply therewith.
The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on
payroll reinstatement to refund the salaries [he] received while the case was pending appeal, or
it can be deducted from the accrued benefits that the dismissed employee was entitled to receive
from [his] employer under existing laws, collective bargaining agreement provisions, and company
practices. However, if the employee was reinstated to work during the pendency of the appeal, then
the employee is entitled to the compensation received for actual services rendered without need of
refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3
of the fallo of the September 3, 1994 NLRC Decision. (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the
employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena
of cases, the Court did not order the refund of salaries garnished or received by payroll-reinstated
employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render
inutile the rationale of reinstatement pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although temporarily since the appeal may be
decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the
dismissed or separated employee and his family.36

Furthermore, in Garcia, the Court went on to discuss the illogical and unjust effects of the "refund
doctrine" erroneously espoused in Genuino:

Even outside the theoretical trappings of the discussion and into the mundane realities of human
experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter
could harm, more than help, a dismissed employee. The employee, to make both ends meet, would
necessarily have to use up the salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading
the employee to a risky cliff of insolvency.
1avvphi1

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to
refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available.
Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able
and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll
reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll
reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also
institutes a scheme unduly favorable to management. Under such scheme, the salaries
dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the
event of a reversal of the Labor Arbiter's decision ordering reinstatement, the employer gets back the
same amount without having to spend ordinarily for bond premiums. This circumvents, if not directly
contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not
stay the execution for reinstatement."

In playing down the stray posture in Genuino requiring the dismissed employee on payroll
reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the
Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis
the effect of a reversal on appeal.
xxxx

The Court reaffirms the prevailing principle that even if the order of reinstatement of the
Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate
and pay the wages of the dismissed employee during the period of appeal until reversal by
the higher court. x x x.37 (Emphasis supplied.)

In sum, the Court reiterates the principle that reinstatement pending appeal necessitates that it must
be immediately self-executory without need for a writ of execution during the pendency of the
appeal, if the law is to serve its noble purpose, and any attempt on the part of the employer to evade
or delay its execution should not be allowed. Furthermore, we likewise restate our ruling that an
order for reinstatement entitles an employee to receive his accrued backwages from the moment the
reinstatement order was issued up to the date when the same was reversed by a higher court
without fear of refunding what he had received. It cannot be denied that, under our statutory and
jurisprudential framework, respondent is entitled to payment of her wages for the period after
December 5, 2003 until the Court of Appeals Decision dated November 23, 2005, notwithstanding
the finding therein that her dismissal was legal and for just cause. Thus, the payment of such wages
cannot be deemed as unjust enrichment on respondent’s part.

WHEREFORE, the petition is DENIED and the assailed Resolution dated October 23, 2006 as well
as the Resolution dated April 10, 2007 both issued by the Court of Appeals in CA-G.R. SP No.
88987 are hereby AFFIRMED. SO ORDERED.

G.R. No. 187188               June 27, 2012

SALVADOR O. MOJAR, EDGAR B. BEGONIA, Heirs of the late JOSE M. CORTEZ, RESTITUTO
GADDI, VIRGILIO M. MONANA, FREDDIE RANCES, and EDSON D. TOMAS, Petitioners,
vs.
AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC., et al., Respondents. 1 

DECISION

SERENO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to annul the
entire proceedings before the Court of Appeals (CA) in CA-G.R. SP No. 102201, in which it issued
its Decision dated 21 July 2008 and Resolution dated 16 March 2009. 2

Statement of Facts and of the Case

Petitioners were employed as security guards by respondent and assigned to the various branches
of the Bank of Commerce in Pangasinan, La Union and Ilocos Sur.

In separate Office Orders dated 23 and 24 May 2002, petitioners were relieved from their respective
posts and directed to report to their new assignments in Metro Manila effective 3 June 2002. They,
however, failed to report for duty in their new assignments, prompting respondent to send them a
letter dated 18 June 2002. It required a written explanation why no disciplinary action should be
taken against them, but the letter was not heeded.

On 15 February 2005, petitioners filed a Complaint for illegal dismissal against respondent and the
Bank of Commerce, Dagupan Branch, before the National Labor Relations Commission (NLRC).
Petitioners claimed, among others, that their reassignment was a scheme to sever the employer-
employee relationship and was done in retaliation for their pressing their claim for salary differential,
which they had earlier filed against respondent and the Bank of Commerce before the NLRC. They
also contended that the transfer to Manila was inconvenient and prejudicial, since they would incur
additional expenses for board and lodging.

On 22 May 2006, the Labor Arbiter (LA) rendered a Decision finding that petitioners were illegally
3 

dismissed. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents to reinstate

all the complainants to their former assignment in Pangasinan with full backwages and if
reinstatement is no longer possible, to pay separation pay of one month for every year of service
each of the seven complainant security guards. (A detailed computation of the judgment award is
attached as Annex "A.") (Italicized in the original)
4 

On appeal, the NLRC affirmed the LA’s ruling, with the modification that the Complaint against the
Bank of Commerce was dismissed. The dispositive portion provides:
5 

WHEREFORE, premises considered, the appeal of Agro Commercial Security Service Agency, Inc.
is hereby DISMISSED for lack of merit. The Appeal of Bank of Commerce is GRANTED for being
impressed with merit. Accordingly, judgment is hereby rendered MODIFYING the Decision of the
Labor Arbiter dated May 22, 2006 by DISMISSING the complaint against Bank of Commerce-
Dagupan. All other dispositions of the Labor Arbiter not so modified, STAYS. 6

On 23 January 2008, respondent filed a Motion for Extension to file a Petition for Certiorari before
the CA. In a Resolution dated 20 February 2008, the latter granted the Motion for Extension,
allowing respondent until 10 February 2008 within which to file its Petition. On 9 February 2008,
respondent filed its Petition for Certiorari before the appellate court.

On 30 June 2008, the CA issued a Resolution noting that no comment on the Petition had been filed,
and stating that the case was now deemed submitted for resolution.

On 21 July 2008, the CA rendered its Decision. Finding merit in the Petition, it found the Orders
transferring petitioners to Manila to be a valid exercise of management prerogative. The records
were bereft of any showing that the subject transfer involved a diminution of rank or salaries.
Further, there was no showing of bad faith or ill motive on the part of the employer. Thus, petitioners’
refusal to comply with the transfer orders constituted willful disobedience of a lawful order of an
employer and abandonment, which were just causes for termination under the Labor Code.
However, respondent failed to observe the due process requirements in terminating them. The
dispositive portion of the CA Decision provides:

WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision and
Resolution of the NLRC dated July 31, 2007 and October 31, 2007[,] respectively, in NLRC NCR CA
No. 046036-05 are REVERSED and SET ASIDE. The complaints of private respondents for illegal
dismissal are hereby DISMISSED. However, petitioner is ordered to pay private respondents the
sum of ₱ 10,000.00 each for having violated the latter’s right to statutory due process. 7

On 1 August 2008, petitioner Mojar filed a Manifestation before the CA, stating that he and the other
8 

petitioners had not been served a copy of the CA Petition. He also said that they were not aware
whether their counsel before the NLRC, Atty. Jose C. Espinas, was served a copy thereof, since the
latter had already been bedridden since December 2007 until his demise on "25 February
2008." Neither could their new counsel, Atty. Mario G. Aglipay, enter his appearance before the CA,
9 

as petitioners failed to "get [the] folder from the office of Atty. Espinas, as the folder can no longer be
found."10

Thereafter, petitioners filed a Motion to Annul Proceedings dated 9 September 2008 before the CA.
11 

They moved to annul the proceedings on the ground of lack of jurisdiction. They argued that the
NLRC Decision had already attained finality, since the Petition before the CA was belatedly filed,
and the signatory to the Certification of non-forum shopping lacked the proper authority.

In a Resolution dated 16 March 2009, the CA denied the Motion to Annul Proceedings.

Hence, this Petition.

The Petition raised the following arguments: (1) There was no proof of service attached to the
Motion for Extension to file a Petition for Certiorari before the CA; thus, both the Motion and the
Petition were mere scraps of paper. (2) Respondent purposely intended to exclude petitioners from
the proceedings before the CA by omitting their actual addresses in the CA Petition, a mandatory
requirement under Section 3, Rule 46; in relation to Section 1, Rule 65 of the Rules of Court.
Further, respondent failed to prove the valid service of its CA Petition upon petitioners’ former
counsel of record. (3) The CA was grossly ignorant of the law in ignoring jurisprudence, which states
that when the floating status of an employee lasts for more than six months, the latter may be
considered to have been constructively dismissed.
On 3 September 2009, respondent filed its Comment on the Petition, pursuant to this Court’s 29
June 2009 Resolution. In its Comment, it argued that the CA Decision had already become final and
executory, inasmuch as the Motion to Annul Proceedings, a procedural approach not provided for in
the Rules, was filed some 44 days after the service of the CA Decision on the counsel for petitioners.
Further, Atty. Aglipay had then no legal standing to appear as counsel, considering that there was
still no substitution of counsel at the time he filed the Motion to Annul Proceedings. In any case,
petitioners are bound by the actions of their counsel, Atty. Espinas.

On 1 March 2010, this Court issued a Resolution requiring petitioners to file their reply, which
petitioners complied with on 26 April 2010. In their Reply, petitioners state among others that the
records of the CA case showed that there was a deliberate violation of their right to due process.
The CA Petition did not contain the required affidavit of service, which alone should have caused the
motu proprio dismissal thereof. Further, the instant Petition before this Court is an appropriate mode
to contest the CA Decision and Resolution, which petitioners contend are void judgments. They also
argue that there is no rule on the client’s substitution in case of the death of counsel. Instead, the
reglementary period to file pleadings in that case must be suspended and made more lenient,
considering that the duty of substitution is transferred to a non-lawyer.

On 30 March 2011, respondent filed a Motion for Early Resolution of the case. Petitioners likewise
filed a Motion for Leave (For the Admission of the Instant Comment on Private Respondent’s Motion
for Early Resolution), stating that they were joining respondent in moving for the early resolution of
the case.

This Court will resolve the issues raised in seriatim.

Actual Addresses of Parties

Petitioners contend that the CA should not have taken cognizance of the Petition before it, as their
actual addresses were not indicated therein as required under Section 3, Rule 46 of the Rules of
12 

Court, and pursuant to Cendaña v. Avila. In the 2008 case Cendaña, this Court ruled that the
13 

requirement that a petition for certiorari must contain the actual addresses of all the petitioners and
the respondents is mandatory. The failure to comply with that requirement is a sufficient ground for
the dismissal of a petition.

This rule, however, is not absolute. In the 2011 case Santos v. Litton Mills Incorporated, this Court
14 

ruled that where the petitioner clearly mentioned that the parties may be served with the court’s
notices or processes through their respective counsels, whose addresses have been clearly
specified as in this case, this act would constitute substantial compliance with the requirements of
Section 3, Rule 46. The Court further observed that the notice required by law is notice to counsel if
the party has already appeared by counsel, pursuant to Section 2, Rule 13 of the Rules of Court.

In its Petition before the CA, respondent clearly indicated the following:

THE PARTIES

2.0. The petitioner AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC. (hereafter petitioner
AGRO), is a corporation existing under Philippine laws, and may be served with process thru
counsel, at his address hereunder indicated; private respondents (1) SALVADOR O. MOJAR; (2)
EDGAR B. BEGONIA; (3) JOSE M. CORTEZ; (4) FREDDIE RANCES; (5) VIRGILIO MONANA; (6)
RESTITUTU [sic] GADDI; and, (7) EDSON D. TOMAS, are all of age, and during the material period,
were in the employ of petitioner AGRO as security guards; said respondents may be served with
process thru their common counsel, ATTY. JOSE C. ESPINAS at No. 51 Scout Tuazon, Quezon
City; on the other hand, respondent National Labor Relations Commission, 1st Division, Quezon
City, is the agency having jurisdiction over labor disputes in the Philippines and may be served with
process at offices in Quezon City; 15

The foregoing may thus be considered as substantial compliance with Section 3, Rule 46. In any
case, and as will be discussed further below, the CA had sufficient reason to take cognizance of the
Petition.

Affidavit of Service
Section 3, Rule 46 provides that the petition for certiorari should be filed together with the proof of
service thereof on the respondent. Under Section 13, Rule 13 of the Rules of Court, if service is
made by registered mail, as in this case, proof shall be made by an affidavit of the person mailing
and the registry receipt issued by the mailing office. Section 3, Rule 46 further provides that the
failure to comply with any of the requirements shall be sufficient ground for the dismissal of the
petition.

Petitioners allege that no affidavit of service was attached to the CA Petition. Neither is there any in
the copy of the CA Petition attached to the instant Petition. In its Comment, respondent claims that
petitioners – through their counsel, Atty. Aglipay – can be charged with knowledge of the pendency
of the CA Petition. It says that on April 2008, Atty. Aglipay filed before the NLRC an Entry of
Appearance and Motion for Execution Pending Appeal. However, petitioners merely indicated
16 

therein that they were "respectfully mov[ing] for the execution pending appeal of the Labor Arbiter’s
decision dated 22 May 2006 affirmed by the NLRC." There was no indication that they had been
17 

served a copy of the CA Petition. No other proof was presented by respondent to show petitioners’
actual receipt of the CA Petition. In any case, this knowledge, even if presumed, would not – and
could not – take the place of actual service and proof of service by respondent.

In Ferrer v. Villanueva, petitioner therein failed to append the proof of service to his Petition for
18 

Certiorari. Holding that this failure was a fatal defect, the Court stated:

There is no question that petitioner herein was remiss in complying with the foregoing Rule. In Cruz
v. Court of Appeals, we ruled that with respect to motions, proof of service is a mandatory
requirement. We find no cogent reason why this dictum should not apply and with more reason to a
petition for certiorari, in view of Section 3, Rule 46 which requires that the petition shall be filed
"together with proof of service thereof." We agree with the Court of Appeals that the lack of proof of
service is a fatal defect. The utter disregard of the Rule cannot be justified by harking to substantial
justice and the policy of liberal construction of the Rules. Technical rules of procedure are not meant
to frustrate the ends of justice. Rather, they serve to effect the proper and orderly disposition of
cases and thus effectively prevent the clogging of court dockets. (Emphasis in the original)

Indeed, while an affidavit of service is required merely as proof that service has been made on the
other party, it is nonetheless essential to due process and the orderly administration of justice. 19

Be that as it may, it does not escape the attention of this Court that in the CA Resolution dated 16
March 2009, the appellate court stated that their records revealed that Atty. Espinas, petitioners’
counsel of record at the time, was duly served a copy of the following: CA Resolution dated 20
February 2008 granting respondent’s Motion for Extension of Time to file the CA Petition; CA
Resolution dated 24 April 2008 requiring petitioners to file their Comment on the CA Petition; and CA
Resolution dated 30 June 2008, submitting the case for resolution, as no comment was filed.

Such service to Atty. Espinas, as petitioners’ counsel of record, was valid despite the fact he was
already deceased at the time. If a party to a case has appeared by counsel, service of pleadings and
judgments shall be made upon his counsel or one of them, unless service upon the party is
specifically ordered by the court. It is not the duty of the courts to inquire, during the progress of a
case, whether the law firm or partnership representing one of the litigants continues to exist lawfully,
whether the partners are still alive, or whether its associates are still connected with the firm.20

It is the duty of party-litigants to be in contact with their counsel from time to time in order to be
informed of the progress of their case. It is likewise the duty of parties to inform the court of the fact
of their counsel’s death. Their failure to do so means that they have been negligent in the protection
21 

of their cause. They cannot pass the blame to the court, which is not tasked to monitor the changes
22 

in the circumstances of the parties and their counsel.

Substitution of Counsel

Petitioners claim that Atty. Espinas passed away on 8 February 2008. They further claim that he was
already bedridden as early as December 2007, and thus they "failed to get any information whether
[he] was served with a copy of the [CA Petition]." 23

Petitioners were negligent in the conduct of their litigation. Having known that Atty. Espinas was
already bedridden as early as December 2007, they should have already obtained new counsel who
could adequately represent their interests. The excuse that Atty. Aglipay could not enter his
appearance before the CA "because [petitioners] failed to get [their] folder from the office of Atty.
Espinas" is flimsy at best.
24 

The requirements for a valid substitution of counsel have been jurisprudentially settled in this wise:

Under Section 26, Rule 138 of the Rules of Court and established jurisprudence, a valid substitution
of counsel has the following requirements: (1) the filing of a written application for substitution; (2)
the client's written consent; (3) the consent of the substituted lawyer if such consent can be
obtained; and, in case such written consent cannot be procured, (4) a proof of service of notice of
such motion on the attorney to be substituted in the manner required by the Rules. Where death of
the previous attorney is the cause of substitution of the counsel, a verified proof of the death of such
attorney (usually a death certificate) must accompany the notice of appearance of the new counsel. 25

The fact that petitioners were unable to obtain their folder from Atty. Espinas is immaterial. Proof of
service upon the lawyer to be substituted will suffice where the lawyer’s consent cannot be obtained.
With respect to the records of the case, these may easily be reconstituted by obtaining copies
thereof from the various courts involved.

Petitioners allegedly went to the CA sometime prior to 31 July 2008, or the date of filing of their
Manifestation before the CA, to inquire about the status of their case. Allegedly, they "always visited
the Court of Appeals for [the] development of their case." It is doubtful that a person who regularly
26 

follows up the status of his case before a court would not be told, first, that a petition has been filed
against him; and, second, that the court’s resolutions have been sent to his counsel. It is
questionable why, knowing these matters, petitioners did not seek the replacement of their counsel,
if the latter was unable to pursue their case. Further, despite their manifestation that, sometime prior
to 31 July 2008, they were already aware that the case had been submitted for resolution, they still
waited until 9 September 2008 – or until they allegedly had knowledge of the CA Decision – before
they filed the Motion to Annul Proceedings.

In Ampo v. Court of Appeals, this Court explained the vigilance that must be exercised by a party:
27 

We are not persuaded by petitioner’s argument that he was not aware that his counsel had died or
that an adverse judgment had already been rendered until he received the notice of promulgation
from the RTC of Butuan City on April 20, 2005. Time and again we have stated that equity aids the
vigilant, not those who slumber on their rights. Petitioner should have taken it upon himself to
periodically keep in touch with his counsel, check with the court, and inquire about the status of the
case. Had petitioner been more prudent, he would have found out sooner about the death of his
counsel and would have taken the necessary steps to prevent his present predicament.

x x x           x x x          x x x

Litigants who are represented by counsel should not expect that all they need to do is sit back, relax
and await the outcome of their cases. Relief will not be granted to a party who seeks avoidance from
the effects of the judgment when the loss of the remedy at law was due to his own negligence. The
circumstances of this case plainly show that petitioner only has himself to blame. Neither can he
invoke due process. The essence of due process is simply an opportunity to be heard. Due process
is satisfied when the parties are afforded a fair and reasonable opportunity to explain their respective
sides of the controversy. Where a party, such as petitioner, was afforded this opportunity to
participate but failed to do so, he cannot complain of deprivation of due process. If said opportunity
is not availed of, it is deemed waived or forfeited without violating the constitutional guarantee.

In this case, petitioners must bear the fruits of their negligence in the handling of their case. They
may not decry the denial of due process, when they were indeed afforded the right to be heard in the
first place.

Substantive Issue: Illegal Dismissal

Petitioners argue that they were illegally dismissed, based on the 1989 case Agro Commercial
Security Services Agency, Inc. v. NLRC., which holds that when the floating status of employees
28 

lasts for more than six (6) months, they may be considered to have been illegally dismissed from the
service.
Unfortunately, the above-mentioned case is not applicable here. In Agro, the service contracts of the
security agency therein with various corporations and government agencies – to which the security
guards were previously assigned – were terminated, generally due to the sequestration of the said
offices. Accordingly, many of the security guards were placed on floating status. "Floating status"
means an indefinite period of time when one does not receive any salary or financial benefit
provided by law. In this case, petitioners were actually reassigned to new posts, albeit in a different
29 

location from where they resided. Thus, there can be no floating status or indefinite period to speak
of. Instead, petitioners were the ones who refused to report for work in their new assignment.

In cases involving security guards, a relief and transfer order in itself does not sever the employment
relationship between the security guards and their agency. Employees have the right to security of
tenure, but this does not give them such a vested right to their positions as would deprive the
company of its prerogative to change their assignment or transfer them where their services, as
security guards, will be most beneficial to the client.
30

An employer has the right to transfer or assign its employees from one office or area of operation to
another in pursuit of its legitimate business interest, provided there is no demotion in rank or
diminution of salary, benefits, and other privileges; and the transfer is not motivated by discrimination
or bad faith, or effected as a form of punishment or demotion without sufficient cause. 31

While petitioners may claim that their transfer to Manila will cause added expenses and
inconvenience, we agree with the CA that, absent any showing of bad faith or ill motive on the part of
the employer, the transfer remains valid.

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated 21 July 2008 and
Resolution dated 16 March 2009 in CA-G.R. SP No. 102201 are hereby AFFIRMED. SO
ORDERED.

G.R. No. 167760             March 7, 2007

MANILA JOCKEY CLUB EMPLOYEES LABOR UNION-PTGWO, Petitioner,

vs.
MANILA JOCKEY CLUB, INC., Respondent.

DECISION

GARCIA, J.:

Challenged in this petition for review under Rule 45 of the Rules of Court is the decision 1 dated
December 17, 2004 of the Court of Appeals (CA), as reiterated in its resolution 2 of April 4, 2005,
dismissing the petition for review of herein petitioner in CA-G.R. SP No. 69240, entitled Manila
Jockey Club Employees Labor Union- PTGWO v. Manila Jockey Club, Inc.

The facts:

Petitioner Manila Jockey Club Employees Labor Union-PTGWO and respondent Manila Jockey
Club, Inc., a corporation with a legislative franchise to conduct, operate and maintain horse races,
entered into a Collective Bargaining Agreement (CBA) effective January 1, 1996 to December 31,
2000. The CBA governed the economic rights and obligations of respondent’s regular monthly paid
rank-and-file employees.3 In the CBA, the parties agreed to a 7-hour work schedule from 9:00 a.m.
to 12:00 noon and from 1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday, as contained
under Section 1, Article IV,4 of the same CBA, to wit:

Section 1. Both parties to this Agreement agree to observe the seven-hour work schedule herewith
scheduled to be from 9:00 a.m. to 12:00 noon and 1:00 p.m. to 5 p.m. on work week of Monday to
Saturday. All work performed in excess of seven (7) hours work schedule and on days not included
within the work week shall be considered overtime and paid as such. Except those monthly
compensation which includes work performed during Saturday, Sunday, and Holiday when races are
held at the Club.

xxx xxx xxx

Accordingly, overtime on an ordinary working day shall be remunerated in an amount equivalent to
the worker's regular basic wage plus twenty five percent (25%) thereof. Where the employee is
permitted or suffered to work on legally mandated holidays or on his designated rest day which is not
a legally mandated holiday, thirty percent (30%) shall be added to his basic wage for a seven hour
work; while work rendered in excess of seven hours on legally mandated holidays and rest days not
falling within the aforestated categories day shall be additionally compensated for the overtime work
equivalent to his rate for the first seven hours on a legally mandated holiday or rest day plus thirty
percent (30%) thereof.

The CBA likewise reserved in respondent certain management prerogatives, including the
determination of the work schedule, as provided under Section 2, Article XI:

Section 2. The COMPANY shall have exclusive control in the management of the offices and
direction of the employees. This shall include, but shall not be limited to, the right to plan, direct and
control office operations, to hire, assign and transfer employees from one job to another or from one
department to another; to promote, demote, discipline, suspend, discharge or terminate employees
for proper cause and/or in accordance with law, to relieve employees from duty because of lack of
work or for other legitimate reasons; or to introduce new or improved methods or facilities; or to
change existing methods or facilities to change the schedules of work; and to make and enforce
rules and regulations to carry out the functions of management, provided, however, that the
COMPANY will not use these rights for the purpose of discrimination against any employee because
of his membership in the UNION. Provided, further, that the prerogatives provided for under this
Section shall be subject to, and in accordance with pertinent directives, proclamations and their
implementing rules and regulations.

On April 3, 1999, respondent issued an inter-office memorandum declaring that, effective April 20,
1999, the hours of work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00 p.m.
when horse races are held, that is, every Tuesday and Thursday. The memorandum, however,
maintained the 9:00 a.m. to 5:00 p.m. schedule for non-race days.

On October 12, 1999, petitioner and respondent entered into an Amended and Supplemental CBA
retaining Section 1 of Article IV and Section 2 of Article XI, supra, and clarified that any conflict
arising therefrom shall be referred to a voluntary arbitrator for resolution.

Subsequently, before a panel of voluntary arbitrators of the National Conciliation and Mediation
Board (NCMB), petitioner questioned the above office memorandum as violative of the prohibition
against non-diminution of wages and benefits guaranteed under Section 1, Article IV, of the CBA
which specified the work schedule of respondent's employees to be from 9:00 a.m. to 5:00 p.m.
Petitioner claimed that as a result of the memorandum, the employees are precluded from rendering
their usual overtime work from 5:00 p.m. to 9:00 p.m.

The NCMB’s panel of voluntary arbitrators, in a decision dated October 18, 2001, upheld
respondent's prerogative to change the work schedule of regular monthly-paid employees under
Section 2, Article XI, of the CBA. Petitioner moved for reconsideration but the panel denied the
motion.

Dissatisfied, petitioner then appealed the panel’s decision to the CA in CA-G.R. SP No. 69240. In
the herein assailed decision of December 17, 2004, the CA upheld that of the panel and denied
petitioner’s subsequent motion for reconsideration via its equally challenged resolution of April 4,
2005.

Hence, petitioner’s present recourse, raising the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

RESPONDENT MJCI DID NOT RELINQUISH PART OF ITS MANAGEMENT PREROGATIVE
WHEN IT STIPULATED A WORK SCHEDULE IN THE CBA.

II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT MJCI DID NOT VIOLATE THE NON-DIMINUTION PROVISION CONTAINED IN
ARTICLE 100 OF THE LABOR CODE.

We DENY.

Respondent, as employer, cites the change in the program of horse races as reason for the
adjustment of the employees’ work schedule. It rationalizes that when the CBA was signed, the
horse races started at 10:00 a.m. When the races were moved to 2:00 p.m., there was no other
choice for management but to change the employees' work schedule as there was no work to be
done in the morning. Evidently, the adjustment in the work schedule of the employees is justified.

We are not unmindful that every business enterprise endeavors to increase profits. As it is, the Court
will not interfere with the business judgment of an employer in the exercise of its prerogative to
devise means to improve its operation, provided that it does not violate the law, CBAs, and the
general principles of justice and fair play. We have thus held that management is free to regulate,
according to its own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be followed,
supervision of workers, working regulations, transfer of employees, work supervision, layoff of
workers and discipline, dismissal, and recall of workers.5

While it is true that Section 1, Article IV of the CBA provides for a 7-hour work schedule from 9:00
a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays, Section 2, Article
XI, however, expressly reserves on respondent the prerogative to change existing methods or
facilities to change the schedules of work. As aptly ruled by the CA:

x x x. Such exact language lends no other meaning but that while respondent may have allowed the
initial determination of the work schedule to be done through collective bargaining, it expressly
retained the prerogative to change it.

Moreover, it cannot be said that in agreeing to Section 1 of Article IV, respondent already waived
that customary prerogative of management to set the work schedule. Had that been the intention,
Section 2 of Article XI would not have made any reference at all to the retention by respondent of
that prerogative. The CBA would have instead expressly prohibited respondent from exercising it. x x
x As it were, however, the CBA expressly recognized in respondent the prerogative to change the
work schedule. This effectively rules out any notion of waiver on the part of respondent of its
prerogative to change the work schedule.

The same provision of the CBA also grants respondent the prerogative to relieve employees from
duty because of lack of work. Petitioner’s argument, therefore, that the change in work schedule
violates Article 100 of the Labor Code because it resulted in the diminution of the benefit enjoyed by
regular monthly-paid employees of rendering overtime work with pay, is untenable. Section 1, Article
IV, of the CBA does not guarantee overtime work for all the employees but merely provides that "all
work performed in excess of seven (7) hours work schedule and on days not included within the
work week shall be considered overtime and paid as such.". 5

While it is true that Section 1, Article IV of the CBA provides for a 7-hour work schedule from 9:00
a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays, Section 2, Article
XI, however, expressly reserves on respondent the prerogative to change existing methods or
facilities to change the schedules of work. As aptly ruled by the CA:

x x x. Such exact language lends no other meaning but that while respondent may have allowed the
initial determination of the work schedule to be done through collective bargaining, it expressly
retained the prerogative to change it.

Moreover, it cannot be said that in agreeing to Section 1 of Article IV, respondent already waived
that customary prerogative of management to set the work schedule. Had that been the intention,
Section 2 of Article XI would not have made any reference at all to the retention by respondent of
that prerogative. The CBA would have instead expressly prohibited respondent from exercising it. x x
x As it were, however, the CBA expressly recognized in respondent the prerogative to change the
work schedule. This effectively rules out any notion of waiver on the part of respondent of its
prerogative to change the work schedule.
The same provision of the CBA also grants respondent the prerogative to relieve employees from
duty because of lack of work. Petitioner’s argument, therefore, that the change in work schedule
violates Article 100 of the Labor Code because it resulted in the diminution of the benefit enjoyed by
regular monthly-paid employees of rendering overtime work with pay, is untenable. Section 1, Article
IV, of the CBA does not guarantee overtime work for all the employees but merely provides that "all
work performed in excess of seven (7) hours work schedule and on days not included within the
work week shall be considered overtime and paid as such."

Respondent was not obliged to allow all its employees to render overtime work everyday for the
whole year, but only those employees whose services were needed after their regular working hours
and only upon the instructions of management. The overtime pay was not given to each employee
consistently, deliberately and unconditionally, but as a compensation for additional services
rendered. Thus, overtime pay does not fall within the definition of benefits under Article 100 of the
Labor Code on prohibition against elimination or diminution of benefits.

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be presumed that every labor dispute will be automatically decided in favor of
labor. The partiality for labor has not in any way diminished our belief that justice in every case is for
the deserving, to be dispensed in the light of the established facts and the applicable law and
doctrine.6

WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA are
AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 149640               October 19, 2007

SAN MIGUEL CORPORATION, ANDRES SORIANO III, FRANCISCO C. EIZMENDI, JR., and
FAUSTINO F. GALANG, Petitioners,
vs.
NUMERIANO LAYOC, JR., CARLOS APONESTO, PAULINO BALDUGO, QUEZON BARIT,
BONIFACIO BOTOR, HERMINIO CALINA, DANILO CAMINGAL, JUAN DE MESA, REYNOLD
DESEMBRANA, BERNARDITO DEUS, EDUARDO FILLARTA, MAXIMIANO FRANCISCO,
MARIO MARILIM, DEMETRIO MATEO, FILOMENO MENDOZA, CONRADO NIEVA, FRANCISCO
PALINES, FELIPE POLINTAN, MALCOLM SATORRE, and ALEJANDRO
TORRES, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the decision2 promulgated on

29 August 2001 by the Court of Appeals (appellate court) in CA-G.R. SP No. 55838. The appellate
court’s decision set aside the decision3 in NLRC NCR Case No. 00-12-08656-94 dated 23 March
1998, the decision4 dated 27 November 1998, and the resolution5 dated 31 August 1999 in NLRC CA
No. 015710-98. The appellate court ordered San Miguel Corporation (SMC), Andres Soriano III,
Francisco C. Eizmendi, Jr., and Faustino F. Galang (collectively, petitioners) to pay respondent
Numeriano Layoc, Jr. (Layoc) ₱125,000, representing overtime pay for services that he could have
rendered from January 1993 up to his retirement on 30 June 1997, and respondents Carlos
Aponesto, Paulino Baldugo, Quezon Barit, Bonifacio Botor, Herminio Calina, Danilo Camingal, Juan
de Mesa, Reynold Desembrana, Bernardito Deus, Eduardo Fillarta, Maximiano Francisco, Mario
Marilim, Demetrio Mateo, Filomeno Mendoza, Conrado Nieva, Francisco Palines, Felipe Polintan,
Malcolm Satorre, and Alejandro Torres (collectively, respondents) ₱10,000 each as nominal
damages.

The Facts

The appellate court stated the facts as follows:

[Respondents] were among the "Supervisory Security Guards" of the Beer Division of the San
Miguel Corporation (p. 10, Rollo), a domestic corporation duly organized and existing under and by
virtue of the laws of the Republic of the Philippines with offices at No. 40 San Miguel Avenue,
Mandaluyong City.  They started working as guards with the petitioner San Miguel Corporation
1âwphi1

assigned to the Beer Division on different dates until such time that they were promoted as
supervising security guards. The dates of their employment commenced as follows (Ibid., pp. 87-89):

    As guards As supervising guards

       
a. Aponesto, Carlos June 1970 February 1983
b. Baldugo, Paulino November 1978 May 1984
c. Barit, Quezon January 1969 May 1984
d. Botor, Bonifacio April 1980 January 1987
e. De Mesa, Juan November 1977 May 1984
f. Calina, Herminio February 1976 May 1984
g. Desembrana, Reynold November 1976 April 1983
h. Camingal, Danilo December 1975 December 1985
i. Deus, Bernardito July 1976 May 1983
j. Fillarta, Eduardo January 1979 May 1989
k. Francisco, Maximiano October 1977 May 1984
l. Layoc, Numeriano June 1974 January 1982
m. Marilim, Mario December 1977 June 1984
n. Mateo, Demetrio November 1976 March 1984
o. Mendoza, Filomena March 1980 May 1983
p. Palines, Francisco May 1979 May 1985
q. Nieva, Conrado January 1977 June 1987
r. Polintan, Felipe June 1972 May 1983
s. Satorre, Malcolm September 1970 May 1984
t. Torres, Alejandro January 1974 May 1984

As supervising security guards, the private respondents were performing the following functions
(Ibid., pp. 202-204):

1. Supervises the facility security force under his shift;

2. Inspects all company-owned firearms and ammunition and promptly submits report as
regards to discrepancy and/or state of doubtful/suspected serviceability;

3. Receives and transfers from outgoing to incoming supervising security guard all company
property, all official papers, documents and/or cases investigated including pieces of
evidence properly labeled and secured;
 4. Physically checks and accounts for all company property within his area of responsibility
immediately upon assumption of duty;

5. Updates compilation of local security rules, policies and regulations and ensures that all
his guards are posted thereon;

6. Conducts regular and irregular inspection to determine his guards’ compliance with all
guard force instructions, corporate security standards and procedures;

7. Passes on all official communications, requests, applications of leaves, etc. and makes his
comments and/or recommendations to his superior;

8. Systematically and continuously screens the good performers from the marginal or poor
among his guards; concentrates on teaching and guiding the latter; determines further what
training and/or skills that should be learned and submits appropriate report to superior;

9. Corrects, on the spot, all deficiencies noted and institutes corrective measures within his
authority; recommends commendations for those guards who deserves [sic] recognition for
good work;

10. Conducts an investigation of all cases coming to his attention and promptly submits
appropriate report to his superiors;

11. Evaluates individual guard performance and renders efficiency reports in accordance
with standing instructions;

12. Ensures that all his guards are courteous, respectful and accommodating at all times;

13. Ensures that even those who have been found violating the facility’s policies, rules and
procedures are professionally treated with courtesy and understanding to preclude
embarrassment and humiliation;

14. Ensures the maintenance of [a] logbook of all incidents, communications, personnel and
materials’ movements;

15. Responds to all calls for assistance;

16. Conducts continuing physical checks of the facility’s critical and vulnerable areas;

17. Obtains critical security information and passes it on to his superiors;

18. Assesses the need for extra guard service requirements;

19. Continuously monitors the personal needs and problems of his men to his superiors;

20. Acts as Detachment Commander in the latter’s absence;

21. Responds to emergencies and activates the Corporate Security Alerting System as
appropriate; and

22. Performs such other duties as may be required by his Detachment Commander/Plant
Security Officer.

From the commencement of their employment, the private respondents were required to punch their
time cards for purposes of determining the time they would come in and out of the company’s work
place. Corollary [sic], the private respondents were availing the benefits for overtime, holiday and
night premium duty through time card punching (Rollo, p. 89). However, in the early 1990’s, the San
Miguel Corporation embarked on a Decentralization Program aimed at enabling the separate
divisions of the San Miguel Corporation to pursue a more efficient and effective management of their
respective operations (Ibid., p. 99).
As a result of the Decentralization Program, the Beer Division of the San Miguel Corporation
implemented on January 1, 1993 a "no time card policy" whereby the Supervisory I and II composing
of the supervising security guards of the Beer Division were no longer required to punch their time
cards (Ibid., p. 100). Consequently, on January 16, 1993, without prior consultation with the private
respondents, the time cards were ordered confiscated and the latter were no longer allowed to
render overtime work (Ibid., p. 117).

However, in lieu of the overtime pay and the premium pay, the personnel of the Beer Division of the
petitioner San Miguel Corporation affected by the "No Time Card Policy" were given a 10% across-
the-board increase on their basic pay while the supervisors who were assigned in the night shift
(6:00 p.m. to 6:00 a.m.) were given night shift allowance ranging from ₱2,000.00 to ₱2,500.00 a
month (Rollo, p. 12).6

On 1 December 1994, respondents filed a complaint for unfair labor practice, violation of Article 100
of the Labor Code of the Philippines, and violation of the equal protection clause and due process of
law in relation to paragraphs 6 and 8 of Article 32 of the New Civil Code of the Philippines.
Respondents prayed for actual damages for two years (1993-1994), moral damages, exemplary
damages, and overtime, holiday, and night premium pay.

In their position paper dated 28 February 1995, respondents stated that the Beer Division of SMC
maliciously and fraudulently refused payment of their overtime, holiday, and night premium pay from
1 to 15 January 1993 because of the "no time card policy." Moreover, petitioners had no written
authority to stop respondents from punching their time cards because the alleged memorandum
authorizing such stoppage did not include supervisory security guards. Thus, the respondents
suffered a diminution of benefits, making petitioners liable for non-payment of overtime, holiday, and
night premium pay.

In their position paper dated 23 February 1995, petitioners maintained that respondents were
supervisory security guards who were exempt from the provisions of the Labor Code on hours of
work, weekly rest periods, and rest days. The "no time card policy" did not just prevent respondents
from punching their time cards, but it also granted respondents an across-the-board increase of 10%
of basic salary and either a ₱2,000 or ₱2,500 night shift allowance on top of their yearly merit
increase. Petitioners further asserted that the "no time card policy" was a valid exercise of
management prerogative and that all supervisors in the Beer Division were covered by the "no time
card policy," which classification was distinct and separate from the other divisions within SMC.

Respondents filed their reply dated 15 March 1995 to petitioners’ position paper. Petitioners, on the
other hand, filed their rejoinder dated 27 March 1995 to respondents’ reply. Respondents filed a
request for admission dated 2 May 1995 to which petitioners filed their reply dated 15 May 1995.

The Ruling of the Labor Arbiter

In his decision dated 23 March 1998, Labor Arbiter Potenciano S. Canizares, Jr. (Arbiter Canizares)
stated that the principal issue is whether petitioners can, in their "no time card policy," remove the
benefits that respondents have obtained through overtime services. Arbiter Canizares then stated
that the facts and the evidence are in respondents’ favor. Arbiter Canizares ruled that rendering
services beyond the regular eight-hour work day has become company practice. Moreover,
petitioners failed to show good faith in the exercise of their management prerogative in altering
company practice because petitioners changed the terms and conditions of employment from "hours
of work rendered" to "result" only with respect to respondents and not with other supervisors in other
departments. The dispositive portion of Arbiter Canizares’ decision reads:

WHEREFORE, the [petitioners] are hereby ordered to restore to the [respondents] their right to earn
for overtime services rendered as enjoyed by the other employees.

The [petitioners] are further ordered to indemnify the [respondents] for lost earnings after their terms
and conditions of employment have been unilaterally altered by the [petitioners], namely in the
amount of ₱500,000.00 each as computed by the [respondents], and the [petitioners] failed to refute.

[Petitioners] are furthermore ordered to pay the [respondents] ₱100,000.00 each as moral and
exemplary damages.

All other claims are hereby dismissed for lack of evidence.

SO ORDERED.7

On 26 May 1998, petitioners filed their notice of appeal and memorandum of appeal with the
National Labor Relations Commission (NLRC).

The Ruling of the NLRC

On 27 November 1998, the NLRC affirmed with modification the ruling of Arbiter Canizares that
respondents suffered a diminution of benefits as a result of the adoption of the "no time card policy."
The NLRC cited a well-established rule that employees have a vested right over existing benefits
voluntarily granted to them by their employer, who may not unilaterally withdraw, eliminate, or
diminish such benefits. In the present case, there was a company practice which allowed the
enjoyment of substantial additional remuneration. Furthermore, there is no rule excluding managerial
employees from the coverage of the principle of non-diminution of benefits.

The NLRC ruled thus:

WHEREFORE, the decision appealed from is hereby AFFIRMED, with slight modification deleting
the award of moral and exemplary damages.

SO ORDERED.8

Both petitioners and respondents filed their respective motions for reconsideration. Petitioners stated
that the NLRC erred in sustaining the award of overtime pay despite its finding that respondents
were managerial personnel. Furthermore, there was no evidence that respondents rendered
overtime work and respondents admitted that they never or seldom rendered overtime work. The
award of overtime pay was thus contrary to the principle of no work, no pay. For their part,
respondents stated that the NLRC erred in deleting the award of moral and exemplary damages.
The implementation of the "no time card policy," the discrimination against them vis-a-vis the
supervising security officers in other divisions of SMC, and the execution of quitclaims and releases
during the pendency of the case were all attended with bad faith, thus warranting the award of moral
and exemplary damages.

On 31 August 1999, the NLRC further modified Arbiter Canizares’ decision. The NLRC ruled thus:

WHEREFORE, the November 27, 1998 Decision of this Commission is hereby REITERATED with a
slight modification to the effect that the computation of the [respondents]’ withdrawn benefits at
₱125,000.00 yearly from 1993 should terminate in 1996 or the date of each complainant’s
retirement, whichever came first.

SO ORDERED.9

Petitioners then filed their petition for certiorari before the appellate court on 16 November 1999.

The Ruling of the Appellate Court

On 29 August 2001, the appellate court set aside the ruling of the NLRC and entered a new
judgment in favor of respondents. The appellate court stated that there is no legal issue that
respondents, being the supervisory security guards of the Beer Division of SMC, were performing
duties and responsibilities being performed by those who were considered as officers or members of
the managerial staff as defined under Section 2, paragraph (c), Rule 1, Book III of the Implementing
Rules of the Labor Code.10 The appellate court ruled that while the implementation of the "no time
card policy" was a valid exercise of management prerogative, the rendering of overtime work by
respondents was a long-accepted practice in SMC which could not be peremptorily withdrawn
without running afoul with the principles of justice and equity. The appellate court affirmed the
deletion of the award of actual, moral, and exemplary damages. With the exception of Layoc,
respondents did not present proof of previous earnings from overtime work and were not awarded
with actual damages. Moreover, the appellate court did not find that the implementation of the "no
time card policy" caused any physical suffering, moral shock, social humiliation, besmirched
reputation, and similar injury to respondents to justify the award of moral and exemplary damages.
Nonetheless, in the absence of competent proof on the specific amounts of actual damages suffered
by respondents, the appellate court awarded them nominal damages.
The dispositive portion of the appellate court’s decision reads thus:

WHEREFORE, foregoing considered, the instant petition is hereby GIVEN DUE COURSE and is
GRANTED. The Decision issued in NLRC NCR CASE No. 00-12-08656-94 dated March 23, 1998,
the Decision issued in NLRC CA No. 015710-98 dated November 27, 1998 and the Resolution dated
August 31, 1999, are hereby ANNULLED and SET ASIDE, and a new judgment is hereby entered
ordering the petitioners to pay as follows:

1) the private respondent Numeriano Layoc, Jr., the amount of One Hundred Twenty-Five
Thousand (₱125,000.00) Pesos per year, representing overtime pay for overtime services
that he could have rendered computed from the date of the implementation of the "no time
card policy" or on January 1993 and up to the date of his retirement on June 30, 1997; and

2) the other private respondents, the amount of Ten Thousand (₱10,000.00) Pesos each as
nominal damages.

SO ORDERED.11

Dissatisfied with the appellate court’s ruling, petitioners filed a petition before this Court.

The Issues

Petitioners ask whether the circumstances in the present case constitute an exception to the rule
that supervisory employees are not entitled to overtime pay.

Respondents, on the other hand, question petitioners’ procedure. Respondents submit that the Court
should dismiss the present petition because petitioners did not file a motion for reconsideration
before the appellate court.

The Ruling of the Court

The petition has merit.

Requirement of Prior Filing of a

Motion for Reconsideration

It appears that respondents confuse certiorari as a mode of appeal under Rule 45 of the 1997 Rules
of Civil Procedure with certiorari as an original special civil action under Rule 65 of the same Rules.
In Paa v. Court of Appeals,12 we stated that:

There are, of course, settled distinctions between a petition for review as a mode of appeal and a
special civil action for certiorari, thus:

a. In appeal by certiorari, the petition is based on questions of law which the appellant

desires the appellate court to resolve. In certiorari as an original action, the petition raises
the issue as to whether the lower court acted without or in excess of jurisdiction or with grave
abuse of discretion.

b. Certiorari, as a mode of appeal, involves the review of the judgment, award or final order
on the merits. The original action for certiorari may be directed against an interlocutory order
of the court prior to appeal from the judgment or where there is no appeal or any other plain,
speedy or adequate remedy.

c. Appeal by certiorari must be made within the reglementary period for appeal. An original
action for certiorari may be filed not later than sixty (60) days from notice of the judgment,
order or resolution sought to be assailed.

d. Appeal by certiorari stays the judgment, award or order appealed from. An original action
for certiorari, unless a writ of preliminary injunction or a temporary restraining order shall
have been issued, does not stay the challenged proceeding.
 e. In appeal by certiorari, the petitioner and respondent are the original parties to the action,
and the lower court or quasi-judicial agency is not to be impleaded. In certiorari as an original
action, the parties are the aggrieved party against the lower court or quasi-judicial agency
and the prevailing parties, who thereby respectively become the petitioner and respondents.

f. In certiorari for purposes of appeal, the prior filing of a motion for reconsideration is
not required (Sec. 1, Rule 45); while in certiorari as an original action, a motion for
reconsideration is a condition precedent (Villa-Rey Transit vs. Bello, L-18957, April 23,
1963), subject to certain exceptions.

g. In appeal by certiorari, the appellate court is in the exercise of its appellate jurisdiction and
power of review for, while in certiorari as an original action, the higher court exercises
original jurisdiction under its power of control and supervision over the proceedings of lower
courts. (Emphasis added)

Respondents’ contention that the present petition should be denied for failure to file a motion for
reconsideration before the appellate court is, therefore, incorrect.

Overtime Work and Overtime Pay

for Supervisory Employees

Both petitioners and respondents agree that respondents are supervising security guards and, thus,
managerial employees.  The dispute lies on whether respondents are entitled to render overtime
1avvphi1

work and receive overtime pay despite the institution of the "no time card policy" because (1) SMC
previously allowed them to render overtime work and paid them accordingly, and (2) supervising
security guards in other SMC divisions are allowed to render overtime work and receive the
corresponding overtime pay.

Article 8213 of the Labor Code states that the provisions of the Labor Code on working conditions and
rest periods shall not apply to managerial employees. The other provisions in the Title include
normal hours of work (Article 83), hours worked (Article 84), meal periods (Article 85), night shift
differential (Article 86), overtime work (Article 87), undertime not offset by overtime (Article 88),
emergency overtime work (Article 89), and computation of additional compensation (Article 90). It is
thus clear that, generally, managerial employees such as respondents are not entitled to overtime
pay for services rendered in excess of eight hours a day. Respondents failed to show that the
circumstances of the present case constitute an exception to this general rule.

First, respondents assert that Article 100 14 of the Labor Code prohibits the elimination or diminution
of benefits. However, contrary to the nature of benefits, petitioners did not freely give the payment
for overtime work to respondents. Petitioners paid respondents overtime pay as compensation for
services rendered in addition to the regular work hours. Respondents rendered overtime work only
when their services were needed after their regular working hours and only upon the instructions of
their superiors. Respondents even differ as to the amount of overtime pay received on account of
the difference in the additional hours of services rendered. To illustrate, Layoc’s records 15 show the
varying number of hours of overtime work he rendered and the varying amounts of overtime pay he
received from the years 1978 to 1981 and from 1983 to 1994:

  Number of Hours Worked Overtime Pay

Overtime Received
(in Pesos)

1974 – Appointment No record No record

as guard

1975 No record No record

1976 No record No record

1977 No record No record

1978 1,424.00 5,214.88

1979 1,312.56 5,189.30

1980 1,357.50 5,155.71

 1981 474.00 1,781.81

1982 – Appointment as No record No record

supervising security
guard

1983 947.50 6,304.33

1984 889.00 8,937.00

1985 898.00 12,337.47

1986 1,086.60 18,085.34

1987 1,039.50 32,109.85

1988 633.00 29,126.10

1989 723.50 39,594.55

1990 376.50 21,873.33

1991 149.50 12,694.97

1992 144.00 17,403.38

1993 0.50 47.69

1994 0.00 0.00

1995 0.00 0.00

Aside from their allegations, respondents were not able to present anything to prove that petitioners
were obliged to permit respondents to render overtime work and give them the corresponding
overtime pay. Even if petitioners did not institute a "no time card policy," respondents could not
demand overtime pay from petitioners if respondents did not render overtime work. The requirement
of rendering additional service differentiates overtime pay from benefits such as thirteenth month pay
or yearly merit increase. These benefits do not require any additional service from their beneficiaries.
Thus, overtime pay does not fall within the definition of benefits under Article 100 of the Labor
Code.16

Second, respondents allege that petitioners discriminated against them vis-a-vis supervising security
guards in other SMC divisions. Respondents state that they should be treated in the same manner
as supervising security guards in the Packaging Products Division, who are allowed to render
overtime work and thus receive overtime pay. Petitioners counter by saying that the "no time card
policy" was applied to all supervisory personnel in the Beer Division. Petitioners further assert that
there would be discrimination if respondents were treated differently from other supervising security
guards within the Beer Division or if other supervisors in the Beer Division are allowed to render
overtime work and receive overtime pay. The Beer Division merely exercised its management
prerogative of treating its supervisors differently from its rank-and-file employees, both as to
responsibilities and compensation, as they are not similarly situated.

We agree with petitioners’ position that given the discretion granted to the various divisions of SMC
in the management and operation of their respective businesses and in the formulation and
implementation of policies affecting their operations and their personnel, the "no time card policy"
affecting all of the supervisory employees of the Beer Division is a valid exercise of management
prerogative. The "no time card policy" undoubtedly caused pecuniary loss to
respondents.17 However, petitioners granted to respondents and other supervisory employees a 10%
across-the-board increase in pay and night shift allowance, in addition to their yearly merit increase
in basic salary, to cushion the impact of the loss. So long as a company’s management prerogatives
are exercised in good faith for the advancement of the employer’s interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.18

WHEREFORE, the petition is GRANTED. The Decision dated 29 August 2001 of the Court of
Appeals in CA-G.R. SP No. 55838 ordering petitioners San Miguel Corporation, Andres Soriano III,
Francisco C. Eizmendi, Jr., and Faustino F. Galang to pay Numeriano Layoc, Jr. overtime pay and
the other respondents nominal damages is SET ASIDE. The complaint of respondents
is DISMISSED.

SO ORDERED.

G.R. No. 119205 April 15, 1998

SIME DARBY PILIPINAS, INC. Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION

(2ND DIVISION) and SIME DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-
TUCP), Respondents.

BELLOSILLO, J.:

Is the act of management in revising the work schedule of its employees and discarding their paid
lunch break constitutive of unfair labor practice?

Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and
other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is
an association of monthly salaried employees of petitioner at its Marikina factory. Prior to the present
controversy, all company factory workers in Marikina including members of private respondent union
worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break.

On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its
monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality
Assurance Department working on shifts, a change in work schedule effective 14 September 1992
thus -

TO: ALL FACTORY-BASED EMPLOYEES

RE: NEW WORK SCHEDULE

Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows:
7:45 A.M. - 4:45 P.M. (Monday to Friday)

7:45 A.M. - 11:45 A.M. (Saturday).

Coffee break time will be ten minutes only anytime between:

9:30 A.M. - 10:30 A.M. and

2:30 P.M. - 3:30 P.M.

Lunch break will be between:

12:00 NN - 1:00 P.M. (Monday to Friday).

Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their
work and break time schedules will be maintained as it is now.  1

Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability
pursuant to the resolution of this Court in Sime Darby International Tire Co., Inc. v. NLRC. 2 However,
the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and the
elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise of
management prerogative and that the new work schedule, break time and one-hour lunch break did
not have the effect of diminishing the benefits granted to factory workers as the working time did not
exceed eight (8) hours.

The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to
be paid during their lunch break even if they were no longer "on call" or required to work during the
break. He also ruled that the decision in the earlier Sime Darby case  3 was not applicable to the instant
case because the former involved discrimination of certain employees who were not paid for their 30-
minute lunch break while the rest of the factory workers were paid; hence, this Court ordered that the
discriminated employees be similarly paid the additional compensation for their lunch break.

Private respondent appealed to respondent National Labor Relations Commission (NLRC) which
sustained the Labor Arbiter and dismissed the appeal.  4 However, upon motion for reconsideration by
private respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier
retired, reversed its earlier decision of 20 April 1994 as well as the decision of the Labor Arbiter.  5 The
NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case
wherein petitioner was ordered to pay "the money value of these covered employees deprived of lunch
and/or working time breaks." The public respondent declared that the new work schedule deprived the
employees of the benefits of a time-honored company practice of providing its employees a 30-minute
paid lunch break resulting in an unjust diminution of company privileges prohibited by Art. 100 of the
Labor Code, as amended. Hence, this petition alleging that public respondent committed grave abuse
of discretion amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair
labor practice in the implementation of the change in the work schedule of its employees from 7:45
a.m. - 3:45 p.m. to 7:45 a.m. - 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b)
in holding that there was diminution of benefits when the 30-minute paid lunch break was eliminated;
(c) in failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC,
petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break should it
decide to do so; and, (d) in ignoring petitioner's inherent management prerogative of determining and
fixing the work schedule of its employees which is expressly recognized in the collective bargaining
agreement between petitioner and private respondent.

The Office of the Solicitor General filed in a lieu of comment a manifestation and motion
recommending that the petitioner be granted, alleging that the 14 August 1992 memorandum which
contained the new work schedule was not discriminatory of the union members nor did it constitute
unfair labor practice on the part of petitioner.

We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests
principally on their employer. In the instant case petitioner, as the employer, cites as reason for the
adjustment the efficient conduct of its business operations and its improved production.  6 It
rationalizes that while the old work schedule included a 30-minute paid lunch break, the employees
could be called upon to do jobs during that period as they were "on call." Even if denominated as
lunch break, this period could very well be considered as working time because the factory employees
were required to work if necessary and were paid accordingly for working. With the new work
schedule, the employees are now given a one-hour lunch break without any interruption from their
employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively use
this hour not only for eating but also for their rest and comfort which are conducive to more efficiency
and better performance in their work. Since the employees are no longer required to work during this
one-hour lunch break, there is no more need for them to be compensated for this period. We agree
with the Labor Arbiter that the new work schedule fully complies with the daily work period of eight
(8) hours without violating the Labor Code. 7 Besides, the new schedule applies to all employees in the
factory similarly situated whether they are union members or not.  8

Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby
case 9 with the facts obtaining in this case. That ruling in the former case is not applicable here. The
issue in that case involved the matter of granting lunch breaks to certain employees while depriving
the other employees of such breaks. This Court affirmed in that case the NLRC's finding that such act
of management was discriminatory and constituted unfair labor practice.

The case before us does not pertain to any controversy involving discrimination of employees but only
the issue of whether the change of work schedule, which management deems necessary to increase
production, constitutes unfair labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all factory employees engaged in the
same line of work whether or not they are members of private respondent union. Hence, it cannot be
said that the new scheme adopted by management prejudices the right of private respondent to self-
organization.

Every business enterprise endeavors to increase its profits. In the process, it may devise means to
attain that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives.  10 Thus, management is
free to regulate, according to its own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off
of workers and discipline, dismissal and recall of workers.  11 Further, management retains the
prerogative, whenever exigencies of the service so require, to change the working hours of its
employees. So long as such prerogative 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 under valid agreements, this Court will uphold such exercise.  12

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the interest of
simple fair play. Although this Court has inclined more often than not toward the worker and has
upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the
rule that justice is in every case for the deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine. 13

WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission
dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993
dismissing the complaint against petitioner for unfair labor practice is AFFIRMED.

SO ORDERED.
 G.R. No. 195297, December 05, 2018

COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner, v. ILOILO COCA-COLA

PLANT EMPLOYEES LABOR UNION (ICCPELU), AS REPRESENTED BY WILFREDO
L. AGUIRRE, Respondent.

DECISION

A. REYES, JR., J.:

Challenged before this Court via this Petition for Review on Certiorari1 under Rule 45 of

the Rules of Court is the Decision2 dated June 23, 2010 of the Court of Appeals (CA),
and its Resolution3 dated October 19, 2010 which reversed the Decision 4 dated
September 7, 2006 of the National Conciliation and Mediation Board (NCMB), Regional
Branch No.6, Iloilo City, in Case No. PAC-613-RB6-02-01-06-2006.

The Antecedent Facts

Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation

engaged in the business of manufacturing and selling of leading non-alcoholic products
and other beverages.5 It operates a manufacturing plant in Ungka, Pavia, Iloilo City,
where the aggrieved former employees herein, as represented by respondent Iloilo
Coca-Cola Plant Employees Labor Union (respondent), worked as regular route drivers
and helpers.6

The conflict arose due to the CCBPI's policy involving Saturday work. In the said policy,
several of CCBPI's employees were required to report for work on certain Saturdays to
perform a host of activities, usually involving maintenance of the facilities. This
prerogative was supposedly consistent with the pertinent provisions 7 in the Collective
Bargaining Agreement (CBA) between CCBPI and its employees, which stated that
management had the sole option to schedule, work on Saturdays on the basis of
operational necessity.8

CCBPI later on informed the respondent that, starting July 2, 2005, Saturday work
would no longer be scheduled, with CCBPI citing operational necessity as the reason for
the decision.9 Specifically, the discontinuance was done with the purpose of saving on
operating expenses and compensating for the anticipated decreased revenues. As
Saturday work involved maintenance-related activities, CCBPI would then only schedule
the day's work as the need arose for these particular undertakings, particularly on
some Saturdays from September to December 2005.10

On July 1, 2005, the parties met, with CCBPI's Manufacturing Manager setting forth the
official proposal to stop the work schedule during Saturdays. 11 This proposal was
opposed and rejected by the officers and members of the respondent who were present
at the meeting. Despite this opposition, CCBPI pushed through with the non-scheduling
of work on the following Saturday, July 2, 2005.

As a result of the foregoing, the respondent submitted to CCBPI its written grievance,
stating therein that CCBPI's act of disallowing its employees to report during Saturday
is a violation of the CBA provisions, specifically Section 1, Article 10 thereof. 12 Along
with the submission of the written grievance, the respondent also requested a meeting
with CCBPI to discuss the issue. CCBPI response to the request, however, was to
merely send a letter reiterating to the respondent that under the set of facts,
management has the option to schedule work on Saturday on the basis of operational
necessity.13 Further letters on the part of the respondent were responded to in the
same way by CCBPI.

Respondent thus brought its grievances to the office of the NCMB, and on June 9, 2006,
the parties pursuant to the provisions of their CBA submitted the case for voluntary
arbitration.14 The panel comprised of three (3) voluntary arbitrators (the Panel of
Arbitrators), was charged with resolving two issues: First, whether or not members of
the respondent were entitled to receive their basic pay during Saturdays under the CBA
even if they would not report for work, and second, whether or not CCBPI could be
compelled by the respondent to provide work to its members during Saturdays under
the CBA.15

After the presentation of evidence and the subsequent deliberations, the Panel of
Arbitrators ruled in favor of CCBPI, the dispositive part of the decision reading:
IN VIEW OF THE FOREGOING, the Panel of Arbitrators, rules on the first issue, that the
Complainant's Union members are nary entitled to receive their Basic Pay during
Saturdays under the CBA if they are not reporting for work, under Section I Article 10,
and Sections 1(c) and 3(c) Article II of the CBA.

On the second issue, the PANEL, rules that [CCBPI] cannot be compelled by the
Complainant Union to provide works to its members during Saturdays under the CBA,
for lack of legal and factual basis.

SO ORDERED.16
Respondent's Motion for Reconsideration to the Panel of Arbitrators' ruling was denied
for lack of merit on October 24, 2006. 17

Unwilling to accept the findings of the Panel of Arbitrators, the respondent elevated its
case to the CA via a Petition for Review under Rule 43 of the Rules of Court. After a
review of the same, the CA subsequently rendered a Decision 18 dated June 23, 2010
granting the respondent's Petition for Review and reversing the decision of the Panel of
Arbitrators. The dispositive portion of the CA decision reads, to wit:
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision,
dated 07 September 2006, and, Order, dated 24 October 2006, respectively, by the
panel of voluntary arbitrators, namely: Atty. Mateo A. Valenzuela, Atty. Inocencio
Fener, Jr., and Gloria Aniola, of the NCMB. Regional Branch No. 6, Iloilo City, are
REVERSED and SET ASIDE. A NEW judgment is rendered ORDERING CCBPI to:

1. COMPLY with the CBA provisions respecting its normal work week, that is, from
Monday to Friday for eight (8) hours a day and on Saturdays for four (4) hours;

2. ALLOW the concerned union members to render work for four (4) hours on
Saturdays; and

3. PAY the corresponding wage for the Saturdays work which were not performed
pursuant to its order to do so commencing on 02 July 2005, the date when it actually
refused the concerned union members to report tor work, until the finality of this
decision. The rate for work rendered on a Saturday is composed of the whole daily rate
(not the amount equivalent to one-half day rate) plus the corresponding premium.

No Costs.

SO ORDERED.19
CCBPI's Motion for Reconsideration was denied by the CA in a Resolution 20 dated
October 19, 2010 received on January 28, 2011. On appeal to this Court, on February
11, 2011, CCBPI filed Motion for Extension and requested for an additional period of 30
days from February 12, 2011, or until March 14, 2014, within which to file its Petition
for Certiorari, which was granted by this Court in a Resolution 21 dated February 21,
2011.

Hence, this Petition, to which the respondent filed a Comment 22 to on June 11, 2011,
the latter pleading responded to by CCBPI via Reply23 on September 6, 2011.

The Issues of the Case

A perusal of the parties' pleadings will show the following issues and points of
contention:

First, whether or not the CA erred in ruling that under the CBA between the parties,
scheduling Saturday work for CCBPI's employees is mandatory on the part of the
Company.

Second, whether scheduling Saturday work has ripened into a company practice, the
removal of which constituted a diminution of benefits, to which CCBPI is likewise liable
to the affected employees for, including the corresponding wage for the Saturday work
which was not performed pursuant to the policy of the Company to remove Saturday
work based on operational necessity.

The Arguments of the Parties

It is the contention of CCBPI that the CA erred in reversing the decision of the Panel of
Arbitrators and finding that the CBA gave the employees the right to compel CCBPI to
give work on Saturdays, that the scheduling of work on a Saturday had ripened into a
company practice, and that the subsequent withdrawal of Saturday work constituted a
prohibited diminution of wages. CCBPI states that this ruling is contrary to fact and law
and unduly prejudiced CCBPI as the company was ordered to allow the affected
employees to render work for four hours on Saturdays. CCBPI was also ordered to pay
the corresponding wage for the Saturday work which were not performed pursuant to
its order to do so, the said amount corresponding to the date when the company
actually refused the affected employees to report for work, until the finality of this
decision.24

CCBPI argues that based on the provisions of its CBA, specifically Article 10, Section 1,
in relation with, Article 11, Section 1 (c) and Section 2(c), it is clear that work on a
Saturday is optional on the part of management, 25 and constitutes a legitimate
management prerogative that is entitled to respect and enforcement in the interest of
simple fair play.26 CCBPI likewise posits that the option to schedule work necessarily
includes the prerogative not to schedule it. And, as the provisions in the CBA are
unmistakable and unambiguous, the terms therein are to be understood literary just as
they appear on the face of the contract. 27

For CCBPI, permitting the workers to suffer work on a Saturday would render the
phrase "required to work'' in Article 10, Section 1 and Article II, Section 2(c)
meaningless and superfluous, as while the scheduling of Saturday work would be
optional on the pat1of management, the workers would still be required to render
service even if no Saturday work was scheduled. 28

Aside front the clear and unambiguous provisions of the CBA, CCBPI states that the
evidence on record negates the finding that Saturday work is mandatory. 29 The
evidence shows that only some, and not all the same daily-paid employees reported for
work on a Saturday, and the number of the daily-paid employees who reported for work
on a Saturday always depended on the CCBPI's operational necessity. 30 The optional
nature of the work on the Saturday is also highlighted by the fact that, subject to the
fulfillment of certain conditions, the employees who were permitted to suffer work on
such day are compensated with a premium pay. 31 This means that work on a Saturday
is part of the normal work week, as there would be no reason why employees who
reported for work on such date should be given additional compensation or premium
pay.

CCBPI also disagrees with the CA that the scheduling of work on a Saturday had
ripened into a company practice and that the withdrawal of Saturday work constitutes a
prohibited diminution of wages.32 CCBPI maintains that work on a Saturday does not
amount to a benefit as a result of a long-established practice. CCBPI states that in
several analogous cases involving overtime work, Manila Jockey Club Employees Labor-
Union-PTGWO v. Manila Jockey Club, Inc. 33 and San Miguel Corporation v. Layoc,
Jr.,34 the Court has already ruled that the work given in excess of the regular work
hours is not a "benefit" and the previous grant thereof cannot amount to a "company
practice." CCBPI particularly cites the Layoc case which held that there is no violation of
the rule on non-diminution of benefits as.the nature of overtime work of the
supervisory employees would show that these are not freely given by the employer,
and that on the contrary, the payment of overtime pay is made as a means of
compensation for services rendered in addition to the regular hours of work. 35

CCBPI likewise cites several cases involving overtime work, there the Court ruled that
the work given in excess of the regular work hours is not a "benefit" and the previous
grant thereof cannot amount to a "company practice." 36 As a premium day, that
Saturday would have the effect of being a holiday wherein the employees are entitled
to receive their pay whether they reported for work or not. 37

For CCBPI, the previous grant of Saturday work cannot amount to a benefit that cannot
be withdrawn by the Company. Contrary to the nature of "benefits" under the law,
CCBPI did not freely give payment for Saturday work, instead paying the employees the
corresponding wage and premium pay as compensation for services rendered in
addition to the regular work of eight (8) hours per day from Mondays to Fridays. 38

On the other hand, the respondents argue that CCBPI failed to regard the express
provision of the CBA which delineates CCBPI's normal work-week which consists of five
(5) consecutive days (Monday to Friday) or eight (8) hours each and one (1) day
(Saturday) of four (4) hours.39 The highlighted provision reads as follows:
ARTICLE 10
HOURS OF WORK

SECTION 1. Work Week. For daily paid workers the nom1al work week shall consist of
five (5) consecutive days (Monday to Friday) of eight (8) hours each find one (1) day
(Saturday) of four (4) hours. Provided, however, that any worker required to work on
Saturday must complete the scheduled shift tor the day and shall be entitled to the
premium pay provided in Article IX hereof.
As such, the respondent advocates that the various stipulations of a contract shall be
interpreted together, and that assuming there is any ambiruity in the CBA, this
ambiguity should not prejudice respondents under the principle that any doubt in all
labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer.40 According to the respondent, Article 11, Section 1(c)
merely grants to CCBPI the option to schedule work on Saturdays on the basis of
operational necessity, and by contrast nothing in the CBA allegedly allows or grants
CCBPI the right or prerogative to unilaterally amend the duly established work week by
eliminating Saturday work.41

Respondent also alleges that CCBPI was obliged to provide work on Saturday, not only
due to the apparent .mandate in the CBA, but also as the same ripened into an
established company practice, as CCBPI's practice of providing Saturday work had been
observed for several years.42 Respondent thus contends that the unilateral abrogation
of the same would squarely tantamount to diminution of benefits, especially as the CBA
itself expressly provides that Saturday is part of CCBPI's normal work week, hence the
same cannot be unilaterally eliminated by CCBPI, 43 and that the option granted by the
CBA to CCBPI is merely to schedule Saturday work, not eliminate it entirely. Thus, to
eliminate the Saturday work allegedly would amount to diminution of benefits because
the affected employees are ultimately deprived of their supposed salaries or income for
that day.44

In its Reply45 to the counter-arguments posited by the respondent in its Comment,

CCBPI alleges that if indeed Saturday work is mandatory under the CBA and all the
workers are obliged to render work on a Saturday, then the phrase "required to work"
under Article 10, Section 1 and Article 11, Section 2(c) would be meaningless and
superfluous.46 Also, CCBPI takes stock in the fact that the compensation for work on
Saturday is not freely given. Under the scheme followed by the parties under the
CBA, i.e., if the daily-paid employees were permitted to suffer work on a Saturday, they
are given additional compensation or premium pay amounting to 50% of their hourly
rate for the first eight (8) hours, and 75% of their hourly rate for the work rendered in
excess thereof under Article 11, Section 2(c) of the CBA. 47

Ruling of the Court

The petition is impressed with merit..

As to whether or not the CBA between the parties mandates that CCBII schedule
Saturday work for its employees.

A 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. 48 It incorporates the agreement reached after
negotiations between the employer and the bargaining agent with respect to terms and
conditions of employment.49

It is axiomatic that the CBA comprises the law between the contracting parties, and
compliance therewith is mandated by the express policy of the law. 50 The literal
meaning of the stipulations of the CBA, as with every other contract, control if they are
clear and leave no doubt upon the intention of the contracting parties. 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. 51 Moreover, it is a familiar rule
in interpretation of contracts that the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from
all of them taken jointly.52

Consequently, in this case, recourse to the CBA between CCBPI and the respondent as
regards the hours of work is essential. In Article 10 of the CBA, the company work
week is elaborated while also defining how a Saturday is treated and in fact delineating
the same from the other days of the work week:
ARTICLE 10
Hours of Work

SECTION 1. Work Week. For daily paid workers, the normal work week shall consist of
five (5) consecutive days (Monday to Friday) of eight (8) hours and each and one (1)
day (Saturday) of four (4) hours, provided, however, that any worker required to work
on Saturday must complete the scheduled shift for the day and shall be entitled to the
premium pay provided in Article IX hereof.

xxxx

(c) Saturdays. Saturday is a premium day but shall not be considered as a rest day or
equivalent to a Sunday. It is further agreed that management has the option to
schedule work on Saturdays on the basis of operational necessity.
Section 5 of Article 9 of the CBA, explicitly referred to in Article 10 states:
SECTION 5. Special Bonus. When a regular employee goes out on his route on a
Saturday, Sunday, or Legal Holiday, either because he is so required by District Sale
Supervisor or because, after securing approval from the District Sales Supervisor. he
voluntarily chooses to do so. he shall be entitled to a special bonus of P280.00.
In making its decision, the CA reasoned that had it really been the intention that
Saturday work, by itself, is optional on CCBPI's part, then there would have been no
need to state under the CBA that Saturday is part of the, normal work week together
with the Monday to Friday schedule, and that if Saturday work is indeed optional, then
it would have expressly stipulated the same.53 According to the CA's interpretation, the
provision wherein CCBPI had the option to schedule work on Saturdays on the basis of
operational necessity, simply meant that CCBPI could schedule the mandated four (4)
hours work any time within the 24-hour period on that day, but not remove the hours
entirely.54

For the CA, to interpret the phrase "option to schedule'' as limited merely to scheduling
the time of work on Saturdays and not the option to allow or disallow or to grant or not
to grant the Saturday work itself, is more consistent with the idea candidly stated in the
CBA regarding the work week which is comprised of five (5) consecutive days (Monday
to Friday) of eight (8) hours each and one (1) day (Saturday) of four (4) hours. The
foregoing interpretation, as held by the CA, is in harmony with the context and the
established practice in which the CBA is negotiated, 55 and that, based on the foregoing,
CCBPI should comply with the provisions respecting its normal work week, that is, from
Monday to Friday of eight (8) hours a day and on Saturdays for four (4) hours. CCBPI
thus should allow the concerned union members to render work for four (4) hours on
Saturday.56

The Court disagrees with the interpretation of the CA. In the perusal of the same, the
Court finds that a more logical and harmonious interpretation of the CBA provisions
wherein Saturday work is optional and not mandatory keeps more with the agreement
between the parties.

To note, the CBA under Article 11, Section 1(c), clearly provides that CCBPI has the
option to schedule work on Saturdays based on operational necessity. There is no
ambiguity to the provision, and no other interpretation of the word "work" other than
the work itself and not the working hours. If the parties had truly intended that the
option would be to change only the working hours, then it would have so specified that
whole term "working hours" be used, as was done in other provisions of the CBA. By
comparison, there is a provision in Article 10 that states:
SECTION 2. Changes in Work Schedule. The present regular working hours shall be
maintained for the duration of this Agreement. However, it is hereby agreed that the
COMPANY may change the prevailing working hours, if in its judgment, it shall find such
change or changes advisable or necessary either as a permanent or temporary
measure, provided at least twelve (12) hours notice in advance is given of such change
or changes, and provided, further, that they are in accordance with law.
Here, hours are specified as that which can be changed regarding the work schedule.
The Court compares this to Article 11, where it is expressly stated' that management
has the option to schedule work on Saturdays on the basis of operational necessity. To
emphasize, if it is only the hours that management may amend, then it would have
been so stated, with that specific term used instead of just merely "work," a more
general term.

Also, as correctly pointed out by CCBPI, if Saturday work is indeed mandatory under
the CBA, the phrase "required to work on a Saturday" in Article 10, Section 1 would be
superfluous. The same phrase is also found in Article 11, Section 2(c) which provides
that "a worker paid on daily basis required to work on a Saturday shall be paid his basic
hourly rate plus fifty (50%) percent thereof."

For the Court, the phrase "schedule work on Saturdays based on operational necessity,"
by itself, is union recognition that there are times when exigencies of the business will
arise requiring a manning complement to suffer work for four additional hours per
week. Necessarily, when no such exigencies exist, the additional hours of work need
not be rendered.

As such, the provisions' tenor and plain meaning give company management the right
to compel its employees to suffer work on Saturdays. This necessarily includes the
prerogative not to schedule work. Whether or not work will be scheduled on a given
Saturday is made to depend on operational necessity. The CBA therefore gives CCBPI
the management prerogative to provide its employees with Saturday work depending
on the exigencies of the business.

This reading of the CBA is made even more apparent by the fact that workers who are
required to work on Saturdays are paid a premium for such work. Notably, in the
section on Premium Pay, it is stated:
(c) Saturdays. Even though Saturday is not his rest day - A worker paid on daily basis
required to work on a Saturday shall be paid his basic hourly rate plus fifty (50%)
percent thereof for each hour worked not in excess of eight hours; if he is required to
work more than eight (8) hours, he shall be paid his basic hourly rate plus seventy-five
(75%) thereof for each hour worked in excess of eight (8) hours.
If Saturday was part of the regular work week and not dependent on management's
decision to schedule work, there would be no need to give additional compensation to
employees who report to work on that day. The CA erred in taking into account that
employees required to work on that day but who would fai1 to report, would be marked
down as having gone on leave.57 The Court agrees with CCBPI that such conclusion
is non sequitur and that the markings merely indicated the fact that they did not report
for work (even if required) and the reasons for their absence, whether legitimate or
not.58 This understanding is bolstered by the fact that not all daily-paid workers were
required to report for work, which and if indeed Saturday was to be considered a
regular work day, all the3e employees should have been required to report for work. 59

In sum, by not taking these provisions into account, the CA ignored the well-settled
rule that the various stipulations of a contract must be interpreted together. The Court
finds that relying on the interpretation of the CA would result in the patent absurdity
that the company would have to look for work for the employees to do even if there is
none, on the Saturday as stated. Even if one were to downplay the lack of logic with
this assertion, as mentioned the CBA provisions are clear and unambiguous, leaving no
need for a separate interpretation of the same.

As to whether scheduling Saturday work has ripened into a company practice, the
removal of which constituted a diminution of benefits.

In the decision of the CA, it was held that the fact that CCBPI had been providing work
to its employees every Saturday for several years, a circumstance that proved Saturday
was part of the regular work week, made the grant of Saturday work ripen into
company practice.
In asking the Court to reverse the ruling of the CA, CCBPI argues that work on a
Saturday is akin to overtime work because employees who are required to perform
such work are given additional compensation or premium in the
CBA.60 Citing Layoc,61 CCBPI stresses that since overtime work does not fall within the
definition of benefits, the same is not protected by Article 100 of the Labor Code which
proscribes the diminution of benefits. To wit:
First. respondents assert that Article 100 of the Labor Code prohibits the elimination or
diminution of benefits. However, contrary to the nature of benefits, petitioners did not
freely give the payment for overtime work to respondents. Petitioners paid respondents
overtime pay as compensation for services rendered in addition to the regular work
hours. Respondents rendered overtime work only when their services were needed after
their regular working hours and only upon the instructions of their superiors.
Respondents even differ as to the amount of overtime pay received on account of the
difference in the additional hours of services rendered.

xxxx

Aside from their allegations, respondents were not able to present anything to prove
that petitioners were obliged to permit respondents to render overtime work and give
them the corresponding overtime pay. Even if petitioners did not institute a "no time
card policy," respondents could not demand overtime pay from petitioners if
respondents did not render overtime work. The requirement of rendering additional
service differentiates overtime pay from benefits such as thirteenth month pay or yearly
merit increase. These benefits do not require any additional service from their
beneficiaries. Thus, overtime pay does not fall within the definition of benefits under
Article 100 of the Labor Code.62
The Court does not agree with the argument of CCBPI. CCBPI overlooks the fact that
the term overtime work has an established and technical meaning under our labor laws,
to wit:
Article 87. Overtime work. Work may be performed beyond eight (8) hours a day
provided that the employee is paid for the overtime work, an additional compensation
equivalent to his regular wage plus at least twenty-five percent (25%) thereof. Work
performed beyond eight hours on a holiday or rest day shall be paid an additional
compensation equivalent to the rate of the first eight hours on a holiday or rest day
plus at least thirty percent (30%) thereof.
It can be deduced from the foregoing provision that overtime work is work exceeding
eight hours within the worker's 24-hour workday. 63 What is involved in this case is work
undertaken within the normal hours of work on Saturdays and not work performed
beyond eight hours in one day. Under Article 83 of the Labor Code:
Article. 83. Normal hours of work. The normal hours of work of any employee shall not
exceed eight (8) hours a day.
Despite the mistaken notion of CCBPI that Saturday work is synonymous to overtime
work, the Court still disagrees with the CA ruling that the previous practice of instituting
Saturday work by CCBPI had ripened into a company practice covered by Article 100 of
the Labor Code.

To note, it is not Saturday work per se which constitutes a benefit to the company's

employees. Rather, the benefit involved in this case is the premium which the company
pays its employees above and beyond the minimum requirements set by law. The CBA
between CCBPI and the respondent guarantees the employees that they will be paid
their regular wage plus an additional 50% thereof for the first eight (8) hours of work
performed on Saturdays. Therefore, the benefit, if ever there is one, is the premium
pay given by reason of Saturday work, and not the grant of Saturday work itself.

In Royal Plant Workers Union v. Coca-Cola Bottlers Philippines, Inc.-Cebu Plant,64 the

Court had the occasion to rule that the term "benefits" mentioned in the non-diminution
rule refers to monetary benefits or privileges given to the employee with monetary
equivalents. Stated otherwise, the employee benefits contemplated by Article 100 are
those which are capable of being measured in terms of money. Thus, it can be readily
concluded from past jurisprudential pronouncements that these privileges constituted
money in themselves or were convertible into monetary equivalents. 65

In order for there to be proscribed diminution of benefits that prejudiced the affected
employees, CCBPI should have unilaterally withdrawn the 50% premium pay without
abolishing Saturday work. These are not the facts of the case at bar. CCBPI withdrew
the Saturday work itself, pursuant, as already held, to its management prerogative. In
fact, this management prerogative highlights the fact that the scheduling of the
Saturday work was actually made subject to a condition, i.e., the prerogative to provide
the company's employees with Saturday work based on the existence of operational
necessity.

In Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees

Union,66 the company therein allegedly postponed the payment of the 14 th , 15th , and
16th month bonuses contained in the CBA, and unilaterally made the payment subject to
availability of funds. Because of its severe financial condition, the company refused to
pay the subject bonuses. The Court, in holding that such act violated the proscription
against diminution of benefits, observed that the CBA provided for the subject bonuses
without qualification-their grant was not made to depend on the existence o,f profits.
Since no conditions were specified in the CBA for the grant of the subject benefits, the
company could not use its dire financial straits to justify the omission.

As compared to the factual milieu in the Eastern Telecommunications case, the CBA

between CCBPI and the respondent has no analogous provision which grants that the
50% premium pay would have to be paid regardless of the occurrence of Saturday
work. Thus, the non-payment of the same would not constitute a violation of the
diminution of benefits rule.

Also, even assuming arguendo that the Saturday work involved in this case falls within
the definition of a "benefit" protected by law, the fact that it was made subject to a
condition (i.e., the existence of operational necessity) negates the application of Article
100 pursuant to the established doctrine that when the grant of a benefit is made
subject to a condition and such condition prevails, the rule on non-diminution finds no
application. Otherwise stated, if Saturday work and its corresponding premium pay
were granted to CCBPI's employees without qualification, then the company's policy of
permitting its employees to suffer work on Saturdays could have perhaps ripened into
company practice protected by the non-diminution rule.

Lastly, the Court agrees with the assertion of CCBPI that since the affected employees
are daily-paid employees, they should be given their wages and corresponding
premiums for Saturday work only if they are permitted to suffer work. Invoking the
time-honored rule of "a fair day's work for a fair day's pay," the CCBPI argues that the
CA's ruling that such unworked Saturdays should be compensated is contrary to law
and the evidence on record.

The CA, for its part, ruled that the principle of "a fair day's work for a fair day's pay"
was irrelevant to the instant case. According to the appellate court, since CCBPI's
employees are daily-paid workers, they should be paid their whole daily rate plus the
corresponding premium pay in the absence of a specific CBA provision that directed
wages to be paid on a different rate on Saturdays. This was notwithstanding the fact
that the duration of Saturday work lasted only for four hours or half the time spent on
other workdays.

The CA erred in this pronouncement. The age-old rule governing the relation between
labor and capital, or management and employee, of a "fair day's,wage for a fair day's
labor" remains the basic factor in determining employees' wages. 67 If there is no work
performed by the employee, there can be no wage. 68 In cases where the employee's
failure to work was occasioned neither by his abandonment nor by termination, the
burden of economic loss is not rightfully shifted to the employer; each party must bear
his own loss.69 In other words, where the employee is willing and able to work and is
not illegally prevented from doing so, no wage is due to him. To hold otherwise would
be to grant to the employee that which he did not earn at the prejudice of the
employer.
In the case at bar, CCBPI's employees were not illegally prevented from working on
Saturdays. The company was simply exercising its option not to schedule work pursuant
to the CBA provision which gave it the prerogative to do so. It therefore follows that the
principle of "no work, no pay" finds application in the instant case.

Having disposed of the issue on wages for unworked Saturdays in consonance with the
well-settled rule of "no work, no pay," this Court deems it unnecessary to belabor on
the CA ruling that the concerned employees should be paid their whole daily rate, and
not the amount equivalent to one-half day's wage, plus corresponding premium.

On a final note, the Court cannot emphasize enough that its primary role as the
vanguard of constitutional guaranties charges it with the solemn duty of affording full
protection to labor.70 It is, in fact, well-entrenched in the deluge of our jurisprudence on
labor law and social legislation that the scales of justice usually tilt in favor of the
workingman.71 Such favoritism, however, has not blinded the Court to the rule that
justice is, in every case for the deserving, to be dispensed in the light of the established
facts and applicable law and doctrine.72 The law does not authorize the oppression or
self-destruction of the employer.73 Management also has its own rights, which, as such,
are entitled to respect and enforcement in the interest of simple fair play. 74 After all,
social justice is, in the eloquent words of Associate Justice Jose P. Laurel, "the
humanization of laws and the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may at least be
approximated."75

WHEREFORE, the Decision of the Court of Appeals dated June 23, 2010, and the
Resolution dated October 19, 2010 are REVERSED and SET ASIDE. The Decision of
the National Conciliation and Mediation Board, Regional Branch No. 6, Iloilo City dated
September 7, 2006, in Case No. PAC-613-RB6-02-01-06-2006 is AFFIRMED.

SO ORDERED.

G.R. No. 185665               February 8, 2012

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,

vs.
EASTERN TELECOMS EMPLOYEES UNION, Respondent.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008
Decision of the Court of Appeals (CA) and its December 12, 2008 Resolution, in CA-G.R. SP No.
1  2 

91974, annulling the April 28, 2005 Resolution of the National Labor Relations
3 

Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled "In the Matter of the Labor Dispute in

Eastern Telecommunications, Philippines, Inc."

The Facts

As synthesized by the NLRC, the facts of the case are as follows, viz:

Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of

providing telecommunications facilities, particularly leasing international date lines or circuits, regular
landlines, internet and data services, employing approximately 400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the
company’s rank and file employees with a strong following of 147 regular members. It has an
existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side
Agreement signed on September 3, 2001.

In essence, the labor dispute was a spin-off of the company’s plan to defer payment of the 2003
14th, 15th and 16th month bonuses sometime in April 2004. The company’s main ground in
postponing the payment of bonuses is due to allege continuing deterioration of company’s financial
position which started in the year 2000. However, ETPI while postponing payment of bonuses
sometime in April 2004, such payment would also be subject to availability of funds.

Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-
2004 between ETPI and ETEU which stated as follows:

"4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month
bonuses (other than 13th month pay) are granted."

The union strongly opposed the deferment in payment of the bonuses by filing a preventive
mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine
the date when the bonus should be paid.

In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would
only be made in April 2004 to which date of payment, the union agreed. Thus, considering the
agreement forged between the parties, the said agreement was reduced to a Memorandum of
Agreement. The union requested that the President of the company should be made a signatory to
the agreement, however, the latter refused to sign. In addition to such a refusal, the company made
a sudden turnaround in its position by declaring that they will no longer pay the bonuses until the
issue is resolved through compulsory arbitration.

The company’s change in position was contained in a letter dated April 14, 2004 written to the union
by Mr. Sonny Javier, Vice-President for Human Resources and Administration, stating that "the
deferred release of bonuses had been superseded and voided due to the union’s filing of the issue
to the NCMB on July 18, 2003." He declared that "until the matter is resolved in a compulsory
arbitration, the company cannot and will not pay any ‘bonuses’ to any and all union members."

Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for
failure of ETPI to pay the bonuses in gross violation of the economic provision of the existing CBA.

On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in
an industry considered vital to the economy and any work disruption thereat will adversely affect not
only its operation but also that of the other business relying on its services, certified the labor dispute
for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended.

Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties have
submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14th, 15th
and 16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were directed to
submit their respective position papers and evidence in support thereof after which submission, they
agreed to have the case considered submitted for decision. 4

In its position paper, the Eastern Telecoms Employees Union (ETEU) claimed that Eastern
5 

Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out 14th
month bonus during the month of April, and 15th and 16th month bonuses every December of each
year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any net
profits. ETEU posited that by reason of its long and regular concession, the payment of these
monetary benefits had ripened into a company practice which could no longer be unilaterally
withdrawn by ETPI. ETEU added that this long-standing company practice had been expressly
confirmed in the Side Agreements of the 1998-2001 and 2001-2004 Collective Bargaining
Agreements (CBA) which provided for the continuous grant of these bonuses in no uncertain terms.
ETEU theorized that the grant of the subject bonuses is not only a company practice but also a
contractual obligation of ETPI to the union members.

ETEU contended that the unjustified and malicious refusal of the company to pay the subject
bonuses was a clear violation of the economic provision of the CBA and constitutes unfair labor
practice (ULP). According to ETEU, such refusal was nothing but a ploy to spite the union for
bringing the matter of delay in the payment of the subject bonuses to the National Conciliation and
Mediation Board (NCMB). It prayed for the award of moral and exemplary damages as well as
attorney’s fees for the unfair labor practice allegedly committed by the company.

On the other hand, ETPI in its position paper, questioned the authority of the NLRC to take
6 

cognizance of the case contending that it had no jurisdiction over the issue which merely involved
the interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it
maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and
14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject
bonuses were not part of the legally demandable wage and the grant thereof to its employees was
an act of pure gratuity and generosity on its part, involving the exercise of management prerogative
and always dependent on the financial performance and realization of profits. It posited that it
resorted to the discontinuance of payment of the bonuses due to the unabated huge losses that the
company had continuously experienced. It claimed that it had been suffering serious business losses
since 2000 and to require the company to pay the subject bonuses during its dire financial straits
would in effect penalize it for its past generosity. It alleged that the non-payment of the subject
bonuses was neither flagrant nor malicious and, hence, would not amount to unfair labor practice.

Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere
affirmation that the distribution of bonuses was discretionary to the company, premised and
conditioned on the success of the business and availability of cash. It submitted that said bonus
provision partook of the nature of a "one-time" grant which the employees may demand only during
the year when the Side Agreement was executed and was never intended to cover the entire term of
the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to
its employees, the drastic decline in its financial condition had already legally released it therefrom
pursuant to Article 1267 of the Civil Code.

On April 28, 2005, the NLRC issued its Resolution dismissing ETEU’s complaint and held that ETPI
could not be forced to pay the union members the 14th, 15th and 16th month bonuses for the year
2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these additional
benefits was basically a management prerogative, being an act of generosity and munificence on the
part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI
may not be obliged to pay these extra compensations in view of the substantial decline in its
financial condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating
that no sufficient and substantial evidence was adduced to attribute malice to the company for its
refusal to pay the subject bonuses. The dispositive portion of the resolution reads:

WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of merit.

SO ORDERED. 7

Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its
Resolution dated August 31, 2005.

Aggrieved, ETEU filed a petition for certiorari before the CA ascribing grave abuse of discretion on
8 

the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were
part of the union members’ wages, salaries or compensations. In addition, ETEU asserted that the
NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give
said bonuses to the union members.

In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and
2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees
without qualification or condition. It also found that the grant of said bonuses has already ripened
into a company practice and their denial would amount to diminution of the employees’ benefits. It
held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision
would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the
contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC
finding that the allegation of ULP was devoid of merit. The dispositive portion of the questioned
decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the
National Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE.
Respondent Eastern Telecommunications Philippines, Inc. is ordered to pay the members of
petitioner their 14th, 15th and 16th month bonuses for the year 2003 and 14th month  for the year
2004. The complaint for unfair labor practice against said respondent is DISMISSED.

SO ORDERED. 9

ISSUES

Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly
committed by the CA, to wit:

I.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED

AND SET ASIDE THE R E S O L U T I O NS OF THE NLRC DISREGARDING THE WELL
SETTLED RULE THAT A WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION.

II.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT

DISREGARDED THE RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES
ARE ACCORDED FINALITY IF THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE
CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED ON
SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS.

III.

IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER

THAT THE BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS
NOT DEPENDENT ON THE REALIZATION OF PROFITS.

IV.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT

DISREGARDED THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS
SUFFERING FROM TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN
COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE FINANCIAL
DISTRESS OF EASTERN COMMUNICATIONS.

V.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED

AT THE CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN
COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED INTO A COMPANY
PRACTICE. 10

A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that
this case revolves around the following core issues:

1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for the
year 2003 and 14th month bonus for the year 2004 to the members of respondent union; and

2. Whether or not the CA erred in not dismissing outright ETEU’s petition for certiorari.

ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the
year 2003 and 14th month bonus for the year 2004 contending that they are not part of the
demandable wage or salary and that their grant is conditional based on successful business
performance and the availability of company profits from which to source the same. To thwart
ETEU’s monetary claims, it insists that the distribution of the subject bonuses falls well within the
company’s prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold
the grant thereof especially since it is currently plagued with economic difficulties and financial
losses. It alleges that the company’s fiscal situation greatly declined due to tremendous and
extraordinary losses it sustained beginning the year 2000. It claims that it cannot be compelled to act
liberally and confer upon its employees additional benefits over and above those mandated by law
when it cannot afford to do so. It posits that so long as the giving of bonuses will result in the
financial ruin of an already distressed company, the employer cannot be forced to grant the same.

ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice
arguing that it has always been a contingent one dependent on the realization of profits and, hence,
the workers are not entitled to bonuses if the company does not make profits for a given year. It
asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a
vested property right to a perennial payment of the bonuses. It opines that the bonus provision in the
Side Agreement allows the giving of benefits only at the time of its execution. For this reason, it
cannot be said that the grant has ripened into a company practice. In addition, it argues that even if
such traditional company practice exists, the CA should have applied Article 1267 of the Civil Code
which releases the obligor from the performance of an obligation when it has become so difficult to
fulfill the same.

It is the petitioner’s stance that the CA should have dismissed outright the respondent union’s
petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but,
instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were
based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that
the CA court should have refrained from tackling issues of fact and, instead, limited itself on issues
of jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.

The Court’s Ruling

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not
normally embark on a re-examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the CA are conclusive and binding on the
Court. The rule, however, admits of several exceptions, one of which is when the findings of the
appellate court are contrary to those of the trial court or the lower administrative body, as the case
may be. Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds
11 

Itself obliged to resolve it.

The pivotal question determinative of this controversy is whether the members of ETEU are entitled
to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for
year 2004.

After an assiduous assessment of the record, the Court finds no merit in the petition.

From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has
no right to demand as a matter of right. The grant of a bonus is basically a management prerogative
12 

which cannot be forced upon the employer who may not be obliged to assume the onerous burden
of granting bonuses or other benefits aside from the employee’s basic salaries or wages. 13

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the
wage or salary or compensation of the employee. Particularly instructive is the ruling of the Court
14 

in Metro Transit Organization, Inc. v. National Labor Relations Commission, where it was written:
15 

Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its
payment. If it is additional compensation which the employer promised and agreed to give without
any conditions imposed for its payment, such as success of business or greater production or
output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but
only to some employees and only when their labor becomes more efficient or more productive, it is
only an inducement for efficiency, a prize therefore, not a part of the wage.

The consequential question that needs to be settled, therefore, is whether the subject bonuses are
demandable or not. Stated differently, can these bonuses be considered part of the wage, salary or
compensation making them enforceable obligations?

The Court believes so.

In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for
the grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement, as well as
16 

in the 2001-2004 CBA Side Agreement, which was signed on September 3, 2001. The provision,
17 

which was similarly worded, states:

Employment-Related Bonuses

The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay)
are granted.

A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th
month bonuses without qualification. The wording of the provision does not allow any other
interpretation. There were no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by
the company. Terse and clear, the said provision does not state that the subject bonuses shall be
made to depend on the ETPI’s financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no profits, no bonuses are to
be given to the employees. In fine, the payment of these bonuses was not related to the profitability
of business operations.

The records are also bereft of any showing that the ETPI made it clear before or during the
execution of the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI
and ETEU intended that the subject bonuses would be dependent on the company earnings, such
intention should have been expressly declared in the Side Agreements or the bonus provision
should have been deleted altogether. In the absence of any proof that ETPI’s consent was vitiated
by fraud, mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it
had full knowledge of the contents thereof and that it was aware of its commitment under the
contract. Verily, by virtue of its incorporation in the CBA Side Agreements, the grant of 14th, 15th
and 16th month bonuses has become more than just an act of generosity on the part of ETPI but a
contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI
to the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its
argument that the giving of the subject bonuses is a management prerogative.

From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that although it incurred business losses of ₱ 149,068,063.00 in
the year 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year.
Notwithstanding such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on
September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no uncertain
terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002 in the amounts
of ₱ 348,783,013.00 and ₱ 315,474,444.00, respectively. Still and all, this did not deter it from
honoring the bonus provision in the Side Agreement as it continued to give the subject bonuses to
each of the union members in 2001 and 2002 despite its alleged precarious financial condition.
Parenthetically, it must be emphasized that ETPI even agreed to the payment of the 14th, 15th and
16th month bonuses for 2003 although it opted to defer the actual grant in April 2004. All given,
business losses could not be cited as grounds for ETPI to repudiate its obligation under the 2001-
2004 CBA Side Agreement.

The Court finds no merit in ETPI’s contention that the bonus provision confirms the grant of the
subject bonuses only on a single instance because if this is so, the parties should have included
such limitation in the agreement. Nowhere in the Side Agreement does it say that the subject
bonuses shall be conferred once during the year the Side Agreement was signed. The Court quotes
with approval the observation of the CA in this regard:

ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA
entitles the union members to the subject bonuses, it is merely in the nature of a "one-time" grant
and not intended to cover the entire term of the CBA. The contention is untenable. The bonus
provision in question is exactly the same as that contained in the Side Agreement of the 1998-2001
CBA and there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of
those years. Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the
2001-2004 CBA is only a "one-time" grant. 18

ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU
members under the Side Agreements, its current financial difficulties should have released it from
the obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:
Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation
of the parties, the obligor may also be released therefrom, in whole or in part.

The Court is not persuaded.

The parties to the contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity
demands assistance for the debtor. In the case at bench, the Court determines that ETPI’s claimed
19 

depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side
Agreement.

ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-
2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business
losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said
that the difficulty in complying with its obligation under the Side Agreement was "manifestly beyond
the contemplation of the parties." Besides, as held in Central Bank of the Philippines v. Court of
Appeals, mere pecuniary inability to fulfill an engagement does not discharge a contractual
20 

obligation. Contracts, once perfected, are binding between the contracting parties. Obligations
arising therefrom have the force of law and should be complied with in good faith. ETPI cannot
renege from the obligation it has freely assumed when it signed the 2001-2004 CBA Side
Agreement.

Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give
the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an
established company practice such that it has virtually become part of the employees’ salary or
wage. A bonus may be granted on equitable consideration when the giving of such bonus has been
the company’s long and regular practice. In Philippine Appliance Corporation v. Court of Appeals, it 21 

was pronounced:

To be considered a "regular practice," however, the giving of the bonus should have been done over
a long period of time, and must be shown to have been consistent and deliberate. The test or
rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.

The records show that ETPI, aside from complying with the regular 13th month bonus, has been
further giving its employees 14th month bonus every April as well as 15th and 16th month bonuses
every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits
or not. The considerable length of time ETPI has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such
act was not required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the
employees. 1âwphi1

The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article
100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.

The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.
22

Interestingly, ETPI never presented countervailing evidence to refute ETEU’s claim that the
company has been continuously paying bonuses since 1975 up to 2002 regardless of its financial
state. Its failure to controvert the allegation, when it had the opportunity and resources to do so,
works in favor of ETEU. Time and again, it has been held that should doubts exist between the
evidence presented by the employer and the employee, the scales of justice must be tilted in favor of
the latter.
23
WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its
December 12, 2008 Resolution are AFFIRMED.

SO ORDERE.