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SECOND DIVISION

January 21, 2019

G.R. No. 235873

ENRIQUE MARCO G. YULO, Petitioner

vs.
CONCENTRIX DAKSH SERVICES PHILIPPINES, INC., Respondent
*

DECISION
PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari are the Decision dated August 17, 2017 and the Resolution dated November 29,
1 2 3

2017 of the Court of Appeals (CA) in CA-G.R. SP No. 146840, which reversed and set aside the Decision dated March 30, 2016
4

and the Resolution dated May 30, 2016 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 02-000614-16
5

declaring petitioner Enrique Marco G. Yulo (petitioner) to have been illegally dismissed, and thereby, ordering respondent
Concentrix Daksh Services Philippines, Inc. (respondent) to reinstate petitioner to his former position without loss of seniority
rights and to pay him backwages in the amount of ₱133,862.11, 13th month pay in the amount of ₱2,742.75, as well as moral
and exemplary damages in the amount of ₱40,000.00 and ten percent (10%) attorney's fees in the sum of ₱17,660.48.

The Facts

Petitioner alleged that he was engaged by respondent on March 26, 2014 as a Customer Care Specialist-Operations, with a
6

basic monthly salary of P12,190.00 and guaranteed allowance of ₱3,125.00. Thereafter, he was assigned to the account of
7

Amazon.com, Inc. (Amazon).

8 9

On February 17, 2015, petitioner received a letter from respondent informing him that Amazon intended to "right size the
10

headcount of the account due to business exigencies/requirements" and thus, he would be temporarily placed in the company's
redeployment pool effective February 20, 2015. This notwithstanding, respondent promised petitioner that it would endeavor to
deploy him in other accounts based on his skill set, with a caveat, however, that should he fail to get into a new account by
March 22, 2015, he would be served with a notice of redundancy. 11

As it turned out, petitioner was not re-assigned to other accounts as of the said date, and consequently, was terminated on the
ground of redundancy. This prompted him to file a complaint for constructive illegal dismissal, non-payment of salary/wages and
12

13th month pay, moral and exemplary damages, and attorney's fees with prayer for backwages and other benefits, before the
NLRC, docketed as NLRC Case No. 06-07585-15. 13

For its part, respondent contended theit petitioner was legally terminated on the ground of redundancy, claiming compliance with
the termination requirements provided in Article 283 of the Labor Code. It claimed to have notified petitioner of the
14

implementation of the redundancy program on February 17, 2015 and subsequently submitted an establishment termination
report on February 20, 2015 with the Department of Labor and Employment (DOLE), attaching thereto a list of affected
employees. Further, it asserted that petitioner was among those selected to be redundated on March 22, 2015 due to his low
15

performance and high negative response rate. 16

The Labor Arbiter's (LA) Ruling

In a Decision dated November 24, 2015, the LA found that respondent failed to comply with all the requisites for a valid
17

redundancy program, which therefore rendered petitioner's dismissal illegal. Accordingly, the LA ordered respondent to reinstate
18

petitioner to his former position without loss of seniority rights, and to pay him the amount of ₱133,862.11 representing his
backwages and ₱2,742.75 as his proportionate 13th month pay, as well as moral and exemplary damages in the amount of
₱40,000.00 and ten percent (10%) attorney's fees in the amount of ₱17,660.48. 19

Aggrieved, respondent appealed to the NLRC.

20

The NLRC Ruling

In a Decision dated March 30, 2016, the NLRC affirmed the LA's conclusion that respondent was illegally dismissed. While the
21 22

NLRC found that respondent did comply with the notice requirements of: (1) informing petitioner of his termination based on
redundancy; and (2) sending a notice-report to the DOLE of the employees to be redundated within thirty (30) days prior to the
effectivity of redundancy, petitioner nonetheless failed to: (a) pay petitioner's separation pay; (b) exhibit good faith in terminating
23

petitioner's employment; and (c) competently prove its criteria in ascertaining the redundant positions. 24

Dissatisfied, respondent moved for reconsideration but the same was denied in a Resolution dated May 30, 2016. Hence,
25 26

respondent elevated the matter to the CA via a petition for certiorari.27

The CA Ruling

In a Decision dated August 17, 2017, the CA granted respondent's petition and set aside the ruling of the NLRC. It ruled that
28 29

petitioner's dismissal was legal since respondent strictly complied with the procedural requirements in the implementation of a
valid redundancy program, and that the same was implemented in good faith since respondent endeavored to fit petitioner to
other positions but unfortunately failed to qualify for any other position in any other account. In addition, the CA noted that based
on the company's records, petitioner's performance was below par, his attendance record was low, and he even had a high
negative response rate; thus, his dismissal was justified.
30

Petitioner moved for reconsideration but the same was denied in a Resolution dated November 29, 2017; hence, this petition.
31 32

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA correctly ruled that petitioner was legally dismissed on the ground of
redundancy. 1âшphi1
 The Court's Ruling

The petition is meritorious.

Under Article 298 (formerly 283) of the Labor Code, redundancy is recognized as an authorized cause for dismissal, viz.:

Article 298 [283]. Closure of Establishment and Reduction of Personnel. - The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year. (Emphasis supplied)

Essentially, redundancy exists when an employee's position is superfluous, or an employee's services are in excess of what
would reasonably be demanded by the actual requirements of the enterprise. Redundancy could be the result of a number of
factors, such as the overhiring of workers, a decrease in the volume of business, or the dropping of a particular line or service
previously manufactured or undertaken by the enterprise. In this relation, jurisprudence explains that the characterization of an
33

employee's services as redundant, and therefore, properly terminable, is an exercise of management prerogative, considering
34

that an employer has no legal obligation to keep more employees than are necessary for the operation of its business. 35

Nevertheless, case law qualifies that the exercise of such prerogative "must not be in violation of the law, and must not be
arbitrary or malicious." Thus, following Article 298 of the Labor Code as above cited, the law requires the employer to
36

prove, inter alia, its good faith in abolishing the redundant positions, and further, the existence of fair and reasonable
criteria in ascertaining what positions are to be declared redundant and accordingly abolished.

"To exhibit its good faith and that there was a fair and reasonable criteria in ascertaining redundant positions, a company
claiming to be over manned must produce adequate proof of the same." 37

Thus, the Court has ruled that it is not enough for a company to merely declare that it has become overmanned. Rather, it must
produce adequate proof of such redundancy to justify the dismissal of the affected employees, such as but not limited to the new
staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the
management of the restructuring. 38

Meanwhile, in Golden Thread Knitting Industries, Inc. v. NLRC, the Court explained that fair and reasonable criteria may include
39

but are not limited to the following: "(a) less preferred status (e.g., temporary employee); (b) efficiency; and (c) seniority. The
presence of these criteria used by the employer shows good faith on its part and is evidence that the implementation of
redundancy was painstakingly done by the employer in order to properly justify the termination from the service of its
employees." 40

In this case, the Court upholds the findings of the labor tribunals that respondent was not able to present adequate proof to show
that it exhibited good faith, as well as employed fair and reasonable criteria in terminating petitioner's employment based on
redundancy.

Particularly, respondent attempted to justify its purported redundancy program by claiming that on December 18, 2014, it
received an e-mail from Amazon informing it of the latter's plans to "right size the headcount of the account due to business
exigencies/requirements." However, such e-mail -much less, any sufficient corroborative evidence tending to substantiate its
41

contents - was never presented in the proceedings a quo. At most, respondent submitted, in its motion for reconsideration before
the NLRC, an internal document, which supposedly explained Amazon's redundancy plans. However, the Court finds that this
42

one (1)-page document hardly demonstrates respondent's good faith not only because it lacks adequate data to justify a
declaration of redundancy, but more so, because it is clearly self-serving since it was prepared by one Vivek Tiku, the
requestor/business unit head of respondent, and not by any employee/representative coming from Amazon itself. Notably,
parallel to the entry "Narrative of the current situation of the business unit, what triggered the downsizing[,] and what is the
preferred outcome," the requestor merely stated that "[w]e have just finished our seasonal ramp and would need to decrease our
headcount due to low call volume based on the long term forecast by the client (Dec-Feb EOM LTF)." However, outside of this
general conclusion, no evidence was presented to substantiate the alleged low call volume and the forecast from which it is
based on so as to truly exhibit the business exigency of downsizing the business unit assigned to Amazon.

Aside from the lack of evidence to show respondent's good faith, respondent likewise failed to prove that it employed fair and
reasonable criteria in its redundancy program. Respondent merely presented a screenshot of a table with names of the
employees it sought to redundate based on their alleged poor performance ratings. Indeed, while "efficiency" may be a proper
43

standard to determine who should be terminated pursuant to a program of redundancy, said document does not convincingly
show that fair and reasonable criteria was indeed employed by respondent. To reiterate, all that the screenshot contains is a list
of employees with their concomitant performance ratings. As the LA pointed out, "[t]hough [respondent] incorporated in their
Reply a screenshot of what appears to be a table containing the names of purported employees including their respective
performance ratings, this Office cannot admit this at its face value in the absence of proof that would substantiate the same." As
44

earlier stated, the presence of these criteria is evidence that the implementation of redundancy was painstakingly done by
the employer in order to properly justify the termination from the service of its employees. The aforesaid screenshot
barely shows respondent's actual compliance with this standard.

Finally, it may not be amiss to point out that while respondent had duly notified petitioner that it was terminating him on the
ground of redundancy, records are bereft of any showing that he was paid his separation pay, which is also a requisite to
properly terminate an employee based on this ground. As Article 298 states, "[i]n case of termination due to xxx redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher."

In sum, the CA erred in ascribing grave abuse of discretion on the part of the NLRC. As the latter correctly ruled, respondent
failed to validly terminate petitioner's employment in accordance with the requirements of Article 298 on redundancy; as such, he
was illegally dismissed.

WHEREFORE, the petition is GRANTED. The Decision dated August 17, 2017 and the Resolution dated November 29, 2017 of
the Court of Appeals in CA-G.R. SP No. 146840 are hereby REVERSED and SET ASIDE. The Decision dated March 30, 2016
and the Resolution dated May 30, 2016 of the National Labor Relations Commission in NLRC LAC No. 02-000614-16
are REINSTATED.

SO ORDERED.

Carpio, Senior Associate Justice, (Chairperson), Caguioa, J. Reyes, Jr., and Hernando, JJ., concur.
**

Footnotes

*
Formerly "IBM Daksh Business Process Services Philippines, Inc."

**
Designated Additional Member per Special Order Nos. 2629 and 2630 dated December 18, 2018.

1
Dated January 22, 2018. Rollo, pp. 12-34.

2
Id. at 36-44. Penned by Associate Justice Leoncia Real-Dimagiba with Associate Justices Apolinario D.
Bruselas, Jr. and Henri Jean Paul B. Inting, concurring.

3
Id. at 46-47. Penned by Associate Justice Leoncia Real-Dimagiba with Acting Chairman and Associate Justice
Rodil V. Zalameda and Asssociate Justice Henri Jean Paul B. Inting, concurring.

4
Id. at 103-113. Penned by Presiding Commissioner Grace M. Venus with Commissioners Bernardino B. Julve
and Leonard Vinz O. Ignacio, concurring.

5
Id. at 129-131.

6
See Appointment Letter dated March 26, 2014; id. at 54-61.

7
See Compensation Sheet; id. at 60.

8
Referred to as "Amazon" in the rollo.

9
See id. at 37.

10
Id. at 64.

11
See id.

12
Dated June 26, 2015. Id. at 66-67.

13
See id. at 37-38.

Now Article 298, as renumbered pursuant to Section 5 of Republic. Act No. (RA) 10151, entitled "AN ACT
14

ALLOWING THE EMPLOYMENT OF NIGHT WORKERS, THEREBY REPEALING ARTICLES 130 AND 131 OF
PRESIDENTIAL DECREE NUMBER FOUR HUNDRED FORTY-TWO, AS AMENDED, OTHERWISE KNOWN
AS THE LABOR CODE OF THE PHILIPPINES," approved on June 21, 2011. See also Department Advisory No.
01, Series of 2015 of the Department of Labor and Employment entitled "RENUMBERING OF THE LABOR
CODE OF THE PHILIPPINES, AS AMENDED." The provision reads:

Article 298 [283]. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the
 intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy,
the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever
is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

15
See rollo, pp. 37-38.

16
See id. at 74.

17
Id. at 70-80. Penned by Labor Arbiter Pablo A. Gajardo, Jr.

18
For the implementation of a redundancy program to be valid, the employer must comply with the following
requisites: (1) written notice served on both the employees and the [DOLE] at least one month prior to the
intended date of retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least one
month pay for every year of service, whichever is higher; (3) good faith in abolishing the redundant positions; and
(4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and'
accordingly .abolished. (See Manggagawa ng Komunikasyon sa Pilipinas v. PLDT Company Incorporated, G.R.
No. 190389-90, April 19, 2017, citing Asian Alcohol Corporation v. NLRC, 364 Phil. 912, 930 [1999].)

19
Rollo, p. 79.

20
See Notice of Appeal and Memorandum on Appeal dated January 12, 2016; id. at 81-92.

21
Id. at 103-113.

22
Citing General Milling Corp. v. Viajar, 702 Phil. 532, 545 (2013), the NLRC held that "while [respondent] had
been harping that it was on a 'reduction mode' of its employees, it has not presented any evidence (such as new
staffing pattern, feasibility studies or proposal, viability of newly created positions, job description and the
approval of the management of the restructuring, audited financial documents like balance sheets, annual income
tax returns and others) which could readily show, that the company's declaration of redundant positions was
justified. Such proofs, if presented, would suffice to show the good faith on the part of the employer or that this
business prerogative was not whimsically exercised in terminating [petitioner]'s employment on the ground of
redundancy." (Rollo, p. 109).

23
See id. at 109-111.

24
See id. at 110-111.

25
See motion for reconsideration dated April 28, 2016; id. at 114-125.

26
Id. at 129-131

27
Dated July 28, 2016. Id. at 132-147.

28
Id. at 36-44.

29
Id. at 44.

30
See id. at 42-43.

31
See undated motion for reconsideration; id. at 160-171.

32
Id. at 46-47.

33
See PNB v. Dalmacio, G.R. No. 202308, July 5, 2017.

34
See General Milling Corporation v. Viajar, supra note 21, at 543; citation omitted.

35
See Morales v. Metropolitan Bank and Trust Company, 699 Phil. 129, 140 (2012); citations omitted.

36
General Milling Corporation v. Viajar, supra note 21.

37
Id.

38
See id. at 543-544.
39
364 Phil. 215(1999).

40
Arabit v. Jardine Pacific Finance, Inc. (Formerly MB Finance), 733 Phil. 41, 58-59 (2014).

41
See rollo, p. 64. See also Affidavit of respondent's Redeployment Lead, Sharon D. Mozo; id. at 177-178.

42
Id. at 127. The text of the document is fully reproduced as follows:

CRM
Tower
Domain/ Account Amazon
Requestor/ BU Head Vivek Tiku
Target Effective Date 5-Jan-15
Business Case
Narrative of the current situation of We have just finished our seasonal ramp
the business unit, what triggered and would need to decrease our
the downsizing and what is the headcount due to low call volume based
preferred outcome. Include artifact on the long term forecast provided by the
(e.g. email trails indicating reduced client (Dec - Feb EOM LTF)
headcount from the client,
approvals of proposed org chart
changes, etc[.)]
Business Case (Qualitative)
Indicate the current headcount and Current HC - 148
target headcount[ ]which should
correlate to the demands/volume of Required HC - 112
work
Required HC is based the number of
agents needed to handle 110% of the LTF
Criteria for Ranking/ Selection
Indicate measurable criteria like NRR Performance (CSAT metric)
 Service Years, SLA, Attendance,
QA Result, PBC result, etc.
43
See id. at 78 and 111.

44
Id. at 78.

The Lawphil Project - Arellano Law Foundation

Today is Wednesday, December 27, 2023

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Republic of the Philippines

SUPREME COURT
Manila
 THIRD DIVISION

G.R. No. 165594 April 23, 2007

FRANCISCO SORIANO, JR., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
INCORPORATED, Respondents.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioner Francisco Soriano Jr. seeks to set aside
the Decision dated 29 April 20042 and Resolution dated 4 October 20043 of the Court of Appeals in CA-G.R. SP No. 75152,
affirming the Decision and Resolution of the National Labor Relations Commission (NLRC) dated 20 August 2002 4 and 28
October 2002,5 respectively, in NLRC-CA No. 024050-2000. In its Decision and Resolution, the NLRC affirmed the Decision of
Labor Arbiter Joel S. Lustria (Labor Arbiter Lustria) dated 23 March 2000 in NLRC-NCR Case No. 00-08-05259-96 6 dismissing
the petitioner’s complaint for illegal dismissal against respondent Philippine Long Distance Telephone Company, Incorporated.

The factual antecedents of the petition at bar are as follows:

In 1980, petitioner and certain individuals namely Sergio Benjamin (Benjamin), Maximino Gonzales (Gonzales), and Noel Apostol
(Apostol) were employed by the respondent as Switchman Helpers in its Tondo Exchange Office (TEO). After participating in
several trainings and seminars, petitioner, Benjamin, and Gonzales were promoted as Switchmen. Apostol, on the other hand,
was elevated to the position of Frameman. One of their duties as Switchmen and Frameman was the manual operation and
maintenance of the Electronic Mechanical Device (EMD) of the TEO. 7

In November 1995, respondent PLDT implemented a company-wide redundancy program. 8 In its "Notice of Separation Due to
Redundancy" dated 27 November 1995 to the Director of the Department of Labor and Employment, National Capital Region
(DOLE-NCR),9 respondent PLDT cited the following reasons for the aforesaid redundancy program:

a) Technological changes where new technologies necessitate reduction in workforce, e.g., conversion of electro-
mechanical switches; outmoded electronic switches to modern digital switches.
 b) Position declared redundant due to collapsing/merging of functions where the required number of personnel
became less, i.e. rehoming of toll centers or centralization of toll centers.

c) Non-replacement of function upon retirement of executive where attached staffs with the executive are no
longer needed – Staff Assistant, Secretary, Clerk.

d) Process Improvements and Automation of functions which render the positions as redundant since the new
process or Automation require less personnel.

e) Functions or positions which are affected adversely by market forces, thereby necessitating reduction of
current workforce to match the reduction of workload, i.e., Traffic – due to decreasing number of handled calls.

Subsequently, the respondent PLDT gave separate letters dated 15 July 1996 to petitioner, Benjamin, Gonzales, and Apostol
informing them that their respective positions were deemed redundant due to the above-cited reasons and that their services will
be terminated on 16 August 1996.10 They requested the respondent PLDT for transfer to some vacant positions but their requests
were denied since all positions were already filled up. Hence, on 16 August 1996, respondent PLDT dismissed the four from
employment.11

On 20 August 1996, Benjamin received an amount of ₱315,435.04 from the respondent PLDT as separation pay, 12 while Apostol
and Gonzales received on 2 September 1996 their separation pay from the respondent PLDT in the amounts of ₱486,484.95 and
₱472,897.08, respectively.13 Likewise, petitioner received on 21 October 1996 an amount of ₱644,194.64 from the respondent
PLDT as his separation pay.14 All four of them executed a document entitled, "Receipt, Release and Quitclaim" in favor of the
respondent PLDT;15 they, however, placed a note of "Under Protest" beside their signatures in the said document. 16

Thereafter, petitioner, Benjamin, Gonzales, and Apostol filed a joint complaint for illegal dismissal against respondent PLDT. 17 On
23 March 2000, Labor Arbiter Lustria rendered his Decision dismissing the complaint for lack of merit. He stated that the
respondent PLDT legitimately exercised its management prerogative in terminating the services of petitioner, Benjamin,
Gonzales, and Apostol, on the ground of a valid redundancy program. He was also convinced that the respondent PLDT
complied with the requirements for dismissing an employee for redundancy under Article 283 of the Labor Code. 18

Further, Labor Arbiter Lustria opined that respondent PLDT’s redundancy program was effected in good faith as the reduction of
the latter’s employees was brought about by its adoption of the latest communication technology equipment which can be
operated by computers alone. This undertaking was also done pursuant to the demand of the public for clearer signal, faster
service and digital features. He found no ill-motive or bad faith on the part of the respondent PLDT in implementing the
redundancy program and noted that petitioner, Benjamin, Gonzales and Apostol had already received their respective separation
pay and had executed release and quitclaim in favor of respondent PLDT. In conclusion, Labor Arbiter Lustria held:

Finally, we have often stressed that it has always been an avowed policy of this Arbitration Branch that in carrying out and
interpreting the provisions of the Labor Code and its Implementing Rules and Regulations, the working man’s welfare should be
the paramount and primordial consideration. In protecting the working class, however, we could not simply close our eyes 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. This, is so, for while we favor the cause of the working class in his conflict with management, we likewise have to
consider the rights and interest of the employers, which are equally entitled to legal protection.

WHEREFORE, foregoing premises considered, judgment is hereby rendered dismissing the instant complaint for lack of merit. 19

Petitioner, Benjamin, Gonzales, and Apostol appealed to the NLRC. On 20 August 2002, the NLRC promulgated its Decision
dismissing the appeal and affirming in toto the decision of Labor Arbiter Lustria. It ruled that the findings, conclusions and legal
bases of Labor Arbiter Lustria were supported by the evidence on record. In parting, it ruled:

Needless to state, not having been illegally dismissed, as comprehensively discussed above, Complainants-Appellants are
therefore not entitled to reinstatement to their former positions without loss of seniority right and privileges and to payment of full
back wages.

WHEREFORE, premises considered, the Appeal is hereby DISMISSED for lack of merit. Accordingly, the Decision appealed
from is sustained in toto.20

Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for Reconsideration of the NLRC Decision but the same was denied
for lack of compelling reason in the Resolution dated 28 October 2002.

Thereafter, the four dismissed employees assailed the NLRC Decision and Resolution, dated 20 August 2002 and 28 October
2002, respectively, via a Petition for Certiorari to the Court of Appeals. On 29 April 2004, the Court of Appeals dismissed the
Petition and found no grave abuse of discretion on the part of the NLRC in rendering its assailed Decision and Resolution.
Pertinent portions of the said decision read:

At any rate, grave abuse of discretion, the ground invoked to support the petition at bench, has been defined as "such capricious
and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, x x x where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. It is not in fact sufficient
that a tribunal, in the exercise of its power, abused its discretion; (the) abuse must be grave.
Noting that no such abuse of discretion as defined attended the assailed resolutions, We have no choice but to dismiss the
petition.

WHEREFORE, the petition for certiorari is DISMISSED.21

Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for Reconsideration but the same was denied by the Court of Appeals
in its Resolution dated 4 October 2004.

On 24 November 2004, petitioner, Benjamin, Gonzales, and Apostol filed before this Court a Petition for Review on Certiorari of
the Court of Appeals Decision and Resolution, dated 29 April 2004 and 4 October 2004, respectively. In our Resolution dated 24
January 2005, we denied the Petition for failure of Benjamin, Gonzales, and Apostol to sign the attached verification and
certificate of non-forum shopping, thus:

In accordance with Rule 45 and other related provisions of the 1997 Rules of Civil Procedure, as amended, governing appeals by
certiorari to the Supreme Court, only petitions which are accompanied by or comply strictly with the requirements specified
therein shall be entertained. On the basis thereof, the Court Resolves to DENY the petition for review on certiorari dated 24
November 2004 assailing the decision and resolution of the Court of Appeals for petitioners’ failure to submit a valid certification
of non-forum shopping in accordance with Section 4 (e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule 42, and
Sections 4 and 5 (d), Rule 56, the attached verification and certification of non-forum shopping having been signed by only one
(1) of four (4) petitioners.22

On 28 February 2004, petitioner filed a Motion for Reconsideration alleging therein that:

Since the cause of action of each petitioner is independent of the other three, petitioner SORIANO, JR. could validly proceed with
his own petition for review on certiorari without the intervention of his co-petitioners. Consequently, he should not be prejudiced
by the failure of his co-petitioners to verify the petition and submit a valid certification of non-forum shopping.

Petitioner SORIANO, JR. signed the verification and certificate of non-forum shopping in the petition for review on certiorari.
Hence, as far as he is concerned, his petition has complied with Section 4 (e), Rule 45 in relation to Section 5, Rule 7, Section 2,
Rule 42, and Sections 4 and 5 (d), Rule 56 of the 1997 Rules of Civil Procedure. The petition in regard to him should not have
been dismissed by this Honorable Court.23

Hence, we reinstated the Petition but excluded Benjamin, Gonzales, and Apostol as petitioners. 24
Petitioner raises the following issues for our consideration:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS RULED CONTRARY TO LAW AND EXISTING
JURISPRUDENCE IN REFUSING TO REVIEW THE FACTUAL FINDINGS OF THE NLRC.

II.

WHETHER OR NOT THE FINDING OF THE NLRC THAT PETITIONER WAS LAWFULLY TERMINATED FROM
EMPLOYMENT IS SUPPORTED BY SUBSTANTIAL EVIDENCE.

III.

WHETHER OR NOT PETITIONER’S ACCEPTANCE OF SEPARATION BENEFITS AMOUNTS TO A WAIVER OF HIS RIGHT
TO QUESTION THE VALIDITY OF HIS DISMISSAL.25

Apropos the first issue, petitioner argues that the Court of Appeals may review the findings of fact of the NLRC in a petition for
certiorari under Rule 65 even if the factual findings of the Labor Arbiter and the NLRC do not conflict with each other; that the
reliance of the Court of Appeals on the case of Gonzales v. National Labor Relations Commission 26 was contrary to law and
jurisprudence; that our ruling in Gonzales v. National Labor Relations Commission, to wit: "Only when the factual findings and
conclusion of the Labor Arbiter and NLRC are clearly in conflict with each other is this Court behooved to give utmost attention to
and thoroughly scrutinize the records of the case, more particularly the evidence presented, to arrive at a correct decision," is not
absolute; that the aforecited ruling is only a general rule and is only binding if the factual findings of the Labor Arbiter and the
NLRC are supported by substantial evidence; and that in the case of Maya Farms Employees Organization v. National Labor
Relations Commission,27 this Court held that findings of fact of the NLRC, even though these do not conflict with the findings of
the Labor Arbiter, may be reviewed on certiorari when these findings are made in disregard of the evidence on record. 28

We reject these contentions.

As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not assess and weigh
the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their conclusion. The query in this proceeding is
limited to the determination of whether or not the NLRC acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering its decision. However, as an exception, the appellate court may examine and measure the factual findings
of the NLRC if the same are not supported by substantial evidence. 29

In the case at bar, the Court of Appeals was correct in limiting its determination to the issue of whether there was grave abuse of
discretion on the part of the NLRC, and in refusing to review the factual findings of the said administrative body, since its factual
findings and conclusions are anchored on substantial evidence.

The Labor Arbiter, the NLRC, and the Court of Appeals all found that substantial evidence supports the absence of illegal
dismissal in the present case.

Article 283 of the Labor Code provides that an employer may dismiss from work an employee by reason of redundancy. The
same provision also states the procedural requirements for the validity of the dismissal, viz:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. – The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the worker and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the
worker affected thereof shall be entitled to a separation pay equivalent to at least his one month pay or to at least one (1) month
pay for every year of service, whichever is higher. (Emphases supplied.)

In upholding the legality of petitioner’s dismissal from work, the NLRC relied on the documents submitted by the respondent
PLDT showing compliance with the requirements abovestated, to wit: 1) a letter notifying the Director of the DOLE-NCR of the
impending termination from work of the petitioner by reason of redundancy and stating the grounds/reasons for the
implementation of the redundancy program;30 2) a letter apprising the petitioner of his dismissal from employment due to
redundancy;31 3) a receipt certifying that the petitioner had already received his separation pay from the respondent PLDT; 32 4) a
release/waiver/quitclaim executed by the petitioner in favor of the respondent PLDT; 33 and 5) affidavits executed by the officers of
the respondent PLDT explaining the reasons and necessities for the implementation of the redundancy program. 34 Petitioner
failed to question, impeach or refute the existence, genuineness, and validity of these documents.

It is clear that the foregoing documentary evidence constituted substantial evidence to support the findings of Labor Arbiter
Lustria and the NLRC that petitioner’s employment was terminated by respondent PLDT due to a valid or legal redundancy
program since substantial evidence merely refers to that amount of evidence which a reasonable mind might accept as adequate
to support a conclusion.35

With regard to petitioner’s allegation that the NLRC committed grave abuse of discretion in affirming the validity of his dismissal
from work, it should be borne in mind that an act of a court or tribunal may constitute grave abuse of discretion when the same is
performed in a capricious or whimsical exercise of judgment amounting to lack of jurisdiction. The abuse of discretion must be so
patent and gross as to amount to an evasion of positive duty, or to a virtual refusal to perform a duty enjoined by law, as where
the power is exercised in an arbitrary and despotic manner because of passion or personal hostility. 36

As earlier discussed, the ruling of the NLRC was premised on substantial evidence comprising of documentary proofs submitted
by the respondent PLDT showing compliance with the requirements of law for terminating petitioner’s employment due to
redundancy. This obviously negates any capriciousness or arbitrariness in the exercise of judgment of the NLRC. Thus, no grave
abuse of discretion can be ascribed to the NLRC for promulgating its Decision dated 20 August 2002.

Petitioner’s reliance on the case of Maya Farms Employees Organization v. National Labor Relations Commission 37 is misplaced.
We did not make a categorical statement in the said case that the Court of Appeals may review the findings of fact of the NLRC
in a petition for certiorari under Rule 65 of the Rules of Court even if the factual findings of the Labor Arbiter and the NLRC do not
conflict with each other. What we stated therein was that findings of fact of administrative agencies and quasi-judicial bodies
which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect
but even finality and are binding upon this Court unless there is a showing of grave abuse of discretion, or where it is clearly
shown that they were arrived at arbitrarily or in disregard of the evidence on record. 38

In Maya Farms, this Court deemed it necessary to look into the factual findings of the NLRC to determine whether there was
grave abuse of discretion on the part of the latter. Even then, we found substantial evidence to support the NLRC decision and,
thus, we held that there was no grave abuse of discretion on the part of the latter.

Moreover, the circumstances in Maya Farms are different from the instant case. The facts and issues of Maya Farms were
initially referred to the Secretary of the DOLE which, subsequently, endorsed these to the NLRC. Thereafter, the said case was
immediately elevated to this Court by a petition for certiorari under Rule 65 of the Rules of Court. On the other hand, the present
case was initially referred to the Labor Arbiter, whose findings were affirmed by the NLRC. From the NLRC, the instant case was
appealed to the Court of Appeals through a petition for certiorari under Rule 65 of the Rules of Court. Finding that the NLRC did
not commit grave abuse of discretion, the Court of Appeals denied the petition. Thereafter, this case was brought before this
Court by way of Petition for Review on Certiorari under Rule 45 of the Rules of Court.

The jurisdiction of this Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors
of law, not of fact.39 Nevertheless, this Court may review the facts where: (1) the findings and conclusions of the Labor Arbiter, on
one hand, and the NLRC and the Court of Appeals, on the other, are inconsistent on material and substantial points; (2) the
findings of the NLRC and the Court of Appeals are capricious and arbitrary; and (3) the Court of Appeals’ findings that are
premised on a supposed absence of evidence are in fact contradicted by the evidence on record. 40 None of the foregoing
exceptions to our limited power to review the facts is present in the case at bar.
was qualified; that he timely applied for transfer to these positions; and that the respondent PLDT denied his applications without
showing any evidence that the said positions were already filled up.42
Anent the second issue, petitioner contends that there was no substantial evidence showing that the position of Switchman had
become redundant; that the affidavits of the respondent PLDT’s officers have no probative value and should not have been
Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands
considered by the NLRC because the said officers are not competent to testify on the technical aspects and effects of
of the business enterprise. A position is redundant where it is superfluous, and superfluity of a position or positions may be the
respondent PLDT’s adoption of new technology; that the existence of redundancy was belied by the respondent PLDT’s acts of
outcome of a number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product
employing outside plant personnel as Switchmen and Framemen, and of hiring contractual employees to perform the functions of
line or service activity previously manufactured or undertaken by the enterprise. 43
Switchmen; and that the respondent PLDT did not present proof of the method and criteria it used in determining the Switchman
to be terminated from work.41
The records show that respondent PLDT had sufficiently established the existence of redundancy in the position of Switchman.
In his affidavit dated 27 September 1999, Roberto D. Lazam (Lazam), Senior Manager of GMM Network Surveillance Division of
respondent PLDT, explained:

17. The work, on the other hand, of all the complainants as switchmen is to MAINTAIN ALL the strowger switches in an
exchange. The exchange is the center of an area’s telephone network. PLDT, thus, have a Sta. Mesa Exchange that houses the
switchtrains servicing the Sta. Mesa, Manila and its neighboring areas while it has exchanges in other areas like the Quezon City
exchange, Parañaque, etc., that house the switchtrains of the telephones in the said respective territories.

18. To maintain a single strowger switch, the following are performed according to a regular schedule:

a. Spring Gauging – it is the adjusting of stationary springs to ensure that they open enough to break circuits
when they should, and so "stationary" springs, "follow" moving springs to exert pressure in break contracts when
the relay is unoperated, and makes contact when operated.

b. Margining – it is the measuring of moving spring tension by checking response of the armature and specific
electrical limits. It measures the total mechanical resistance to the operation of the armature due to the tension of
the springs.

c. Stroke – is the normal armature air gap and is adjusted by bending the armature backstop.

d. Routine – it is a periodic check of the functioning of telephone apparatus to detect faults.

The foregoing are some of the duties and work of a switchman. Considering the number of strowger switches in a single
switchtrain and considering further the number of switchtrains in an exchange (bearing in mind the ratio of 30 switchtrains is to
200 subsribers), certainly, the use of a step-by-step automatic telephone system necessitates intensive maintenance costs and
procedures, not to mention the big number of people needed to perform the maintenance work.

19. With the advent, however, of new technology that is, feature for feature, more advanced than the step-by-step
automatic telephone system, the company decided to upgrade its system and abandon the use of the old system.

20. One of the features of the digital technology is that it does not make use of switches every step of connection.
Instead, a single card studded with microchips is issued for each telephone number so that if a caller wishes to
call another, the microchips in the assigned card do all the work and in a speed of light gets in contact with the
microchips of the called party’s card. These "cards" are stored in a "bookshelf like" structure and practically
requires zero maintenance because if a card or a chip in the card is defective, a computer that monitors the entire
exchange will automatically inform the computer operator of a defect, the card involved, its exact location and the
specific "bookshelf." All the computer operator has to do then is to rise up from his chair, proceed to the computer
identified bookshelf, locate the card, pull out the card from the "bookshelf", throw it in the waste-can, and put in a
new card programmed of course with the telephone number. Programming a card, upon the other hand, is a fairly
simple procedure that it is almost similar to the programming of the PIN number of an ATM card.

21. With the utter simplicity of the above system, albeit ultimately hi-tech, a lot of tedious tasks have been done
away with. Where before a big number of switchmen were required to keep the system in shape and where
before every strowger switch was scrutinized and measured, the new system requires only one human being to
ensure that an exchange servicing a million subscribers is in tip top shape. To illustrate, consider an exchange
serving 50,000 subscribers. Such an exchange, using the old system, would need 100 personnel working in 3 8-
hour shifts to perform preventive and corrective switch maintenance. On the other hand, an exchange using the
new system would need only one man working from 8 a.m. to 5 p.m. to take care of switch maintenance.

22. In addition to the simplicity of maintenance another advantage of the digital technology is the added services
never before known by ordinary Filipinos. These are to name a few:

(a) The call waiting feature

(b) Terminal Portability

(c) Direct dialing long distance features (International and Domestic)

(d) Do not disturb feature

(e) Automatic Recall

(f) Redial gadgets

 (g) Call forwarding facilities

(h) Conference call capacity

23. The new technology simply rendered the position of switchmen redundant. And since there is no other
position available and suited for their qualifications, the company had no other option but to terminate their
employment under a redundancy program.

24. With the features of the new system, it certainly cannot be said that the company’s decision and
implementation of the redundancy program was arbitrary or whimsical.44

It is evident from the foregoing facts that respondent PLDT’s utilization of high technology equipment in its operation such as
computers and digital switches necessarily resulted in the reduction of the demand for the services of a Switchman since
computers and digital switches can aptly perform the function of several Switchmen. Indubitably, the position of Switchman has
become redundant.

As to whether Lazam was competent to testify on the effects of respondent PLDT’s adoption of new technology vis-à-vis the
petitioner’s position of Switchman, the records show that Lazam was highly qualified to do so. He is a licensed electrical engineer
and has been employed by the respondent PLDT since 1971. He was a Senior Manager for Switching Division in several offices
of the respondent PLDT, and had attended multiple training programs on Electronic Switching Systems in progressive countries.
He was also a training instructor of Switchmen in the respondent’s office. 45

The fact that respondent PLDT hired contractual employees after implementing its redundancy program does not necessarily
negate the existence of redundancy. As amply stated by the respondent PLDT, such hiring was intended solely for winding up
operations using the old system.

The respondent PLDT, as employer, has the recognized right and prerogative to select the persons to be hired and to designate
the work as well as the employee or employees to perform it.46 This includes the right of the respondent PLDT to determine the
employees to be retained or discharged and who among the applicants are qualified and competent for a vacant position. The
rationale for this principle is that respondent PLDT is in the best position to ascertain what is proper for the advancement of its
interest. Thus, this Court cannot interfere in the wisdom and soundness of the respondent PLDT’s decision as to who among the
Switchmen should be retained or discharged or who should be transferred to vacant positions, as long as such was made in
good faith and not for the purpose of curbing the rights of an employee. 47 Since the respondent PLDT determined that petitioner’s
services are no longer necessary either as a Switchman or in any other position, and such determination was made in good faith
and in furtherance of its business interest, the petitioner’s contention that he should be the last switchman to be laid-off by reason
of his qualifications and outstanding work must fail.
Coming now to the third issue, petitioner asseverates that his acceptance of separation pay from the respondent PLDT does not
bar the filing of his complaint for illegal dismissal against the latter, nor does it imply that he had already waived his right to
question the validity of his dismissal; that he accepted the separation pay only after the lapse of two months from the time he
filed an illegal dismissal case against respondent PLDT; that he had no intention of accepting the separation pay; that he was
only forced to accept the separation pay when his parent fell ill and, thus, needed a large amount of money to cover the
expenses for treatment; and that he was compelled to execute a quitclaim in favor of respondent PLDT since this was the only
way he could avail himself of the necessary amount for the treatment of his parent. 48

Generally, deeds of release, waiver or quitclaims cannot bar employees from demanding benefits to which they are legally
entitled or from contesting the legality of their dismissal since quitclaims are looked upon with disfavor and are frowned upon as
contrary to public policy.49 Where, however, the person making the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid
and binding undertaking.50

The requisites for a valid quitclaim are: 1) that there was no fraud or deceit on the part of any of the parties; 2) that the
consideration for the quitclaim is credible and reasonable; and 3) that the contract is not contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right recognized by law. 51

It cannot be gainfully said that the petitioner did not fully understand the consequences of signing the "Receipt, Release, and
Quitclaim" dated 15 August 1996. Petitioner is not an illiterate person who needs special protection. He held responsible
positions in the office of the respondent PLDT and had attended and passed various training courses for his position. It is thus
assumed that he comprehended the contents of the "Receipt, Release, and Quitclaim" which he signed on 15 August 1996.
There is also no showing that the execution thereof was tainted with deceit or coercion. By his own admission, petitioner signed
the quitclaim voluntarily, compelled by personal circumstances, rather than by respondent PLDT. He had received his separation
pay and benefited therefrom. Certainly, it would result in unjust enrichment on the part of the petitioner if he is allowed to
question the legality of his dismissal from work.

Further, the petitioner received separation pay from the respondent PLDT, the amount of which was more than the amount
required under Article 283 of the Labor Code.52 Indeed, there was a credible and reasonable consideration for his separation from
work.

Given the foregoing circumstances, the "Receipt, Release, and Quitclaim" dated 15 August 1996 should be considered as legal
and binding on petitioner. It is settled that a legitimate waiver which represents a voluntary and reasonable settlement of a
worker’s claim should be respected as the law between the parties.53 Thus, the petitioner is bound by the "Receipt, Release and
Quitclaim" dated 15 August 1996 and, as such, he is already precluded from assailing the validity of his dismissal.
Finally, it should be noted that the ruling of Labor Arbiter Lustria sustaining the validity of petitioner’s dismissal from work by
reason of a valid redundancy program was affirmed by the NLRC and the Court of Appeals. As heretofore discussed, their
findings were predicated on the evidence on records and prevailing jurisprudence. It is well-established that the findings of the
Labor Arbiter, the NLRC and the Court of Appeals, when in absolute agreement, are accorded not only respect but even finality
as long as they are supported by substantial evidence.54 We find no compelling reason to depart from this principle.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 75152 dated 29
April 2004 and 4 October 2004, respectively, are hereby AFFIRMED. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Asscociate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman’s Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the
Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1
Rollo, pp. 9-25.

2
Penned by Associate Justice Vicente S.E. Veloso with Associate Justices Rodrigo V. Cosico and Amelita G.
Tolentino, concurring; id. at 29-36.

3
Id. at 37-38.

4
Penned by Commissioner Tito F. Genilo with Presiding Commissioner Lourdes C. Javier and Commissioner
Ireneo B. Bernardo , concurring; id. at 92-110.

5
Id. at 117-118.

6
Id. at 67-78.

7
Id. at 11-13.

8
Id. at 143-144.

9
Id. at 195-196.

10
Id. at 199-202.

11
Id. at 49-62.
12
Id. at 203-205.

13
Id. at 206-211.

14
Id. at 212-214.

15
Id. at 203, 206, 209 and 212.

16
Id.

17
NLRC records, pp. 1-4.

18
ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. – The employer may also
terminate the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
worker and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor saving devices or redundancy, the worker affected thereof shall
be entitled to a separation pay equivalent to at least his one month pay or to at least one (1) month pay for every
year of service, whichever is higher. (Emphases supplied.)

19
Rollo, p. 78.

20
Id. at 109-110.

21
Id. at 35-36.

22
Id. at 131.

23
Id. at 133.

24
Id. at 138.

25
Id. at 358.
26
G.R. No. 131653, 26 March 2001, 355 SCRA 195, 204.

27
G.R. No. 106256, 28 December 1994, 239 SCRA 508, 512.

28
Rollo, pp. 359-360.

29
Danzas Intercontinental, Inc. v. Daguman, G.R. No. 154368, 15 April 2005, 456 SCRA 382, 395-396.

30
Rollo, pp. 195-196.

31
Id. at 202.

32
Id. at 213-214.

33
Id. at 212.

34
Id. at 252-262.

35
Philtread Tire and Rubber Corporation v. Vicente, G.R. No. 142759, 10 November 2004, 441 SCRA 574, 581.

36
Angeles v. Secretary of Justice, G.R. No. 142612, 29 July 2005, 465 SCRA 106, 113-114.

37
Supra note 27.

38
Id. at 512.

39
Usero v. Court of Appeals, G.R. No. 152115, 26 January 2005, 449 SCRA 352, 358.

40
Equitable PCIBank v. Caguioa, G.R. No. 159170, 12 August 2005, 466 SCRA 686, 693.

41
Rollo, pp. 360-362.

42
Id. at 363-367.
 San Miguel Corporation v. Del Rosario, G.R. Nos. 168194 and 168603, 13 December 2005, 477 SCRA 604,
43

614.

44
Id. at 254-256.

45
Id. at 252-253.

San Miguel Brewery Sales Force Union (PTGWO) v. Ople, G.R. No. 53515, 8 February 1989, 170 SCRA 25,
46

27.

Id. at 28; See also Asufrin, Jr. v. San Miguel Corporation, G.R. No. 156658, 10 March 2004, 425 SCRA 270,
47

274.

48
Rollo, pp. 367-368.

Great Southern Maritime Services Corporation v. Acuña, G.R. No. 140189, 28 February 2005, 452 SCRA 422,
49

439.

Wack Wack Golf and Country Club v. National Labor Relations Commission, G.R. No. 149793, 15 April 2005,
50

456 SCRA 280, 295.

51
Danzas Intercontinental, Inc. v. Daguman, supra note 29 at 397.

52
Rollo, p. 212.

53
Mendoza, Jr. v. San Miguel Foods, Inc., G.R. No. 158684, 16 May 2005, 458 SCRA 664, 680.

Domondon v. National Labor Relations Commission, G.R. No. 154376, 30 September 2005, 471 SCRA 559,
54

566.

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Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 131405 July 20, 1999

LEILANI MENDOZA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ASIAN LAND STRATEGIES CORPORATION, respondents.

PANGANIBAN, J.:

The Case

The Petition for Certiorari before us seeks to set aside the Decision dated February 19, 1997, promulgated by the National Labor
Relations Commission in NLRC CA No. 011082-96, which reversed that of the labor arbiter granting petitioner's Complaint for
illegal dismissal. In his Decision dated May 17, 1996, Labor Arbiter Dominador B. Saludares disposed as follows:1

WHEREFORE, premises considered, judgment is hereby entered in favor of the complainant and against the
respondent, ordering the latter, as follows:

1. To pay the sum of P8,000.00 as one (1) month separation pay of the complainant in lieu of reinstatement;

2. To pay the sum of P92,000.00 as back wages of complainant from June 16, 1995 up to this writing;

3. To pay complainant moral damages in the sum of P50,000,00; and

4. To pay attorney's fees in the sum of P15,000.00.

Reversing the above disposition, the National Labor Relations Commission (NLRC) ruled:
2

WHEREFORE, premises considered, the appealed decision is hereby REVERSED AND SET ASIDE, and the
instant case is hereby dismissed for lack of merit.
3

Reconsideration was denied in the Resolution dated September 19,

1997. 4

The Facts
Respondent Commission narrates the facts in this wise: 5

[Petitioner] started working with the [private] respondent during the latter part of April 1994. Shortly thereafter, she
was appointed as [f]inance [m]anager of the [private] respondent and her tasks [included], among others, . . .
custody of and disbursement of company funds.

On June 9, 1995, [petitioner] claims that she was summoned by Ms. Ma. Angela Celeridad, the company's [v]ice-
[p]resident, who informed her that management had decided to terminate her employment Hence, she was told
either to resign or face dismissal. Later that day at around 7:00 o'clock in the evening, [petitioner] alleged that the
[p]resident of the company, Johnny P. Lee, announced that her employment was already terminated. On June 23,
1995, [petitioner] lodged her complaint against the company for illegal dismissal. 1âwphi1.nêt

[Private] [r]espondent, however, paints a different scenario of the circumstances surroundings [petitioner]'s
cessation from her employment. [Private] [r]espondent denies having dismissed the [petitioner] as no
memorandum or letter of dismissal was issued to the [petitioner]. [Private] [r]espondent asserts that on May 20,
1995, it received a complaint from several of its marketing and sales agents accusing [petitioner] of committing
deliberate delays in the payment of their commission in violation of company policy. They alleged that she
refused to release their commissions despite payment of the price of the properties they ha[d] brokered unless
she [was] given a certain amount [as her cut]. These individual complainants include[d] Amado Roa, [a]cting
[v]ice-[p]resident for marketing and all [d]ivision [h]eads of the Sales Department of the company, namely:
Leonora Punongbayan, Elma Mendoza, Nestor Pamintuan and Melly Rubid. The company, through its
[p]resident, furnished [petitioner] with a copy of the complaint and gave her time to answer the same. Despite
having been given an extension to file a reply to the charges against her, [petitioner] failed to submit the same.
Instead, on June 10, 1995, she stopped reporting for work.

In addition, [private] respondent claims that on June 15, 1995, another employee of the company, a certain
Rufino Pahati, lodged a separate complaint against [petitioner] regarding his application for cash advance. Mr.
Pahati claim[ed] that [petitioner] made him apply for cash advance but it was she who took the money. She
promised to pay him back but failed. Allegedly, the company sent a letter to Mendoza dated June 24, 1995
demanding her to explain all [the] irregularities imputed [to] her. Hearing no response from her, the company was
constrained to conduct an investigation in her absence. [Petitioner] was found to have committed the above-
mentioned anomalies imputed [to] her. On June 28, 1995, the [private] respondent notified [petitioner] that as of
June 15, 1995, she was considered resigned from her job.

On June 23, 1995 the instant complaint was filed seeking . . . reinstatement, backwages, damages and seeking
attorney's fees.
 Ruling of Respondent Commission

As finance manager, petitioner held a sensitive position which depended largely on her employer's continued trust and
confidence in her. Respondent Commission found that she had committed acts that were of such nature as to be sufficient to
cause the loss of such trust and confidence.

The dismissal of the criminal charges against petitioner did not prove the absence of a valid ground for her dismissal. Conviction
in a criminal case is not indispensable to the dismissal of an employee, and the findings of a public prosecutor are not binding
upon a labor tribunal.

Respondent Commission also faulted petitioner for the failure of private respondent to conduct a hearing regarding the
complaints against her. Allegedly, she refused to report for work to avoid and prevent an investigation by the company. Thus, the
accusations against her stood unrebutted, and private respondent had no recourse but to consider her services ended.

Hence, this Petition. 6

The Issues

Petitioner does not pinpoint the issues, but Respondent Commission poses the following question: 7

Whether or not Respondent NLRC acted with grave abuse of discretion in reversing the decision of the labor
arbiter end in declaring that petitioner was not illegally dismissed.
8

To fully ventilate the foregoing question, the Court resolved to subdivide the discussion into three issues: (1) Should this Court
review the factual findings of the labor tribunals below? (2) Did petitioner abandon her post? (3) May petitioner be validly
dismissed on the ground of breach of trust and loss of confidence?

The Court's Ruling

The Petition is partly meritorious.

First Issue:

Review of Factual Findings

The factual findings of the labor arbiter, when sufficiently supported by the evidence on record, should as a rule be given great
respect by appellate tribunals. Pursuant to this doctrine, petitioner insists that private respondent adduced no "scintilla of
9

evidence" to establish that she abandoned her job or committed serious irregularities constituting a breach of trust and loss of
confidence. Hence, the NLRC abused its discretion in reversing the labor arbiter's factual findings.

On the other hand, Respondent Commission ruled that "there [was] sufficient cause for respondent terminate complainant after
she failed to report back to work without justifiable cause." The NLRC and private respondent argue that the labor arbiter failed to
take into account important pieces of relevant evidence showing that petitioner was guilty of a serious breach of trust. Thus,
Respondent Commission invokes the similarly entrenched rule that its findings should be respected because they are grounded
on substantial
evidence. 10

Since the factual findings of the NLRC are inconsistent with those of labor arbiter, this Court — as an exception to the rule that
only questions of law may be raised in certiorari proceedings — resolved to conduct a full review of the records before us in order
to determine the facts of this case,
11

In St. Martin Funeral Home v. National Labor Relations Commission, we held that petitions for certiorari challenging NLRC
12

decisions should be remanded to or filed directly with the Court of Appeals, which has concurrent jurisdiction over such cases.
However, since the Memoranda of the parties have already been filed in this Court prior to the finality of St. Martin, we shall
dispose of this case once and for all, rather than remand it to the appellate court.

Second Issue:

Abandonment Must Be Proven

Petitioner prays that we should reinstate the labor arbiter's Decision, which ruled out abandonment in this wise:

Anent the defense of alleged abandonment, [the labor arbiter] also find[s] the same to be incredible if not highly
unthinkable because [petitioner] is a mother and at the same time the head of the family having been separated
from her husband. She is the only breadwinner of the family and her job is her only means of livelihood.
Abandonment of position is a matter of intention and cannot be lightly inferred, much less legally presumed from
certain equivocal acts. For abandonment to arise, there must be concurrence of the intention to abandon and
some overt acts from which it can be inferred that the employee concerned has no more interest to work. On the
contrary, she immediately filed her complaint for illegal dismissal with prayer for reinstatement.13

Respondent Commission found the foregoing reasoning weak. It held that petitioner abandoned her work to avoid the
investigation of the complaints filed against her, viz.:

. . . Admittedly, there was a . . . [falling] out between [petitioner] and [private] respondent which was triggered by
the complaint filed by several company agents against complainant. This, however, [did] not justify complainant's
absence for an indefinite period. There was no reason for her to abandon her work beginning June 10, 1995. In
fact, she was supposed to confront her accusers on that day. The absence of any memorandum or order
directing her dismissal, which complainant herself kept . . . harping [on] to prove illegal dismissal, all the more
strengthens the theory that she was expected by the company to report for work on June 10, 1995 and on the
following days. With her actuation, the company was left with no choice but to consider her as resigned. 14

We cannot concur with the NLRC. The unflinching rule in illegal dismissal cases is that the employer bears the burden of
proof. To establish a case of abandonment, the employer must prove the employee's deliberate and unjustified refusal to
15

resume employment without any intention of returning. Specifically, the employer has to show the concurrence of the following:
(1) the employee's intention to abandon employment and (2) overt acts from which such intention may be inferred — as when the
employee shows no desire to resume works. The private respondent failed to establish any of these.
16

The employer herein argues that the lack of a notice of termination is proof that petitioner abandoned her job. We disagree. Mere
absence from work, especially where the employee has been verbally told not to report, cannot by itself constitute abandonment.
To repeat, the employer has the burden of proving overt acts on the employee's part which demonstrate a desire or an intention
to abandon her work. It failed to discharge this burden.

Furthermore, the filing of a complaint for illegal dismissal within a reasonable period negates abandonment. In the present
17

case, the Complaint was filed about two weeks after petitioner has been dismissed or had been deemed resigned.

Third Issue:

Loss of Trust and Breach of Confidence

Petitioner insist that the complaints against her were "afterthoughts" concocted by the private respondent to gain leverage in the
Complaint for illegal dismissal that she had filed. As proof, she cites the city fiscal's dismissal of the criminal Complaints for
estafa brought against her by her employer.

Respondent Commission correctly held that the dismissal of the said Complainants by the city prosecutor did not bar the private
respondent from considering them in evaluating petitioner's trustworthiness. Proof beyond reasonable doubt of an employee's
misconduct is not required to establish loss of trust and confidence. It is enough for the employer to present substantial
18

evidence — such amount of evidence as to induce a belief that the employee is responsible a misconduct, and participation
therein renders that employee unworthy of the trust and confidence demanded by the job. 19

Complaints and Notices

Petitioner questions the NLRC's admission in evidence of the letter-complaint of Roa and the other division heads of the Sales
Department of the company. She alleges that these complaints were concocted by the private respondent, as she never
20

received any copy of these; and that they were made known to her only after she had filed the Complaint for illegal dismissal.

We disagree. The notices served on her sufficiently apprised her of the existence and the nature of the accusations against her.
The company president's letter of June 2, 1995 informed her that there was a complaint from Amado Roa and the other division
21

heads of the Sales Department for her "alleged deliberate withholding or delaying of the release and payment of the
commissions . . ., unless and until given a certain amount in consideration [of] the expeditious release of the said commissions."
Celeridad's letter of June 24, 1995 reiterated the same gripe. That she did not receive a copy of these Complaints does not
22

show that they were mere fabrications of the private respondent. Procedural due process only requires employers to furnish their
errant employees written notices stating the particular acts or omissions constituting the grounds for their dismissal, and to hear
their side of the story. Obviously, the employer complied with these. It was, therefore, incumbent upon petitioner to exercise her
23

right by asking the management for copies of the letters.

She also alleges that the notices were fabricated since the private respondent presented them only during the appeal before the
NLRC. Again, we disagree. Under its rules, the NLRC is allowed to receive evidence and to weigh its probative
value Furthermore, contrary to petitioner's claims, the private respondent did not have to send these notices via registered mail,
24

because the recipient could have been served such documents in the very office where she was working. 25

Accusations Must Be Substantiated

All in all, we believe the petitioner was sufficiently notified of the charges against her. Nonetheless, such belief does not
necessarily ripen into a holding that her dismissal was justified, because the employer failed to substantiate the accusations,
which are as follows:

1. The division heads, led by acting Vice President Amado Roa, complained that (a) several occasions petitioner
intentionally delayed the release of commission, unless the sales agents agreed to give her grease money; and
(b) she solicited "contributions" for various "causes" in exchange for the release of said commissions.

2. Elma Mendoza grumbled that, to encash her disbursement voucher, she had to give the petitioner P1,000.

3. Carolyn "Bam" Gonzales, one of the firm's accredited brokers, protested that although the company's book of
 accounts showed a disbursement of P6,712.32 representing her commission for closing a sale, she did not
receive such amount.

4. Rufino Pahati complained that petitioner made him sign a cash advance voucher for money given to another
employee.

After hearing the testimonies of Roa, Mendoza and Pahati, the labor arbiter disbelieved these accusations, because "the alleged
serious irregularities surfaced for the first time only after this complaint [for illegal dismissal] was filed." The labor arbiter
rationalized that, if there was any truth to petitioner's involvement in any serious irregularities, "she should have been informed
and furnished . . . a written notice stating the particular acts or omission constituting the grounds for her dismissal," but that
private respondent failed to show evidence that it had complied with the notice and hearing requirements.

To rectify the oversight, private respondent submitted before the NLRC two notices requiring petitioner to respond to the
accusations leveled against her. On this basis, Respondent Commission reversed the labor arbiter, holding that there was
26

sufficient basis for private respondent to lose trust and confidence in petitioner. It held:

. . . Based on evidence submitted, the allegations in the complaint of Mr. Roa and several other employees stood
unrebutted and the company had no recourse but to hold her responsible for the accusations leveled against her,
or [at] least, to find her unfit to continue holding such sensitive and fiduciary position as finance manager.

xxx xxx xxx

As finance manager, complainant's relationship with the company [was] one of trust and confidence. After
complainant refused to answer the charges of anomalies imputed [to] her by several sales agents despite being
afforded the opportunity to be heard and to defend herself, the respondent cannot be faulted for losing its trust
and confidence [i]n her as financ[e] manager. Under the circumstances, it would be most unfair to compel the
company to continue employing complainant. 27

We fail to see how the NLRC could have arrived at such a conclusion. Reviewing the evidence on record, we find that the
relevant evidence for the private respondent consisted only of the following: (a) Gonzales' commission voucher (Exh. 3); (b) the
28

letter-complaint signed by the division heads of the Sales Department (Exh. 2); (c) Pahatis letter-complaint (Exh. 1); (d) the
29 30

affidavits of Celeridad, Gonzales and Mendoza (Exhs. 4-A, 4-B & 5); (e) Lee's letter-notice dated June 2, 1995 (Annex 6);) (f)
31 32

Celeridad's letter-notice dated June 24, 1995 (Annex 8); and (g) several cash disbursement vouchers including those of
33

Mendoza and Gonzales (Annexes 9-18). 34

While the cash disbursement voucher and Gonzales' affidavit support the claim that her commission was released to another
person, they do not show that petitioner was responsible for such irregularity. As finance manager, she approved disbursement
of the company's funds, but the actual payment of cash was usually the function of the company cashier. Petitioner insists that
she had no participation in the preparation of said documents. 35

The flimsiness of private respondent's evidence is obvious. In its Memorandum on Appeal, it claims that petitioner had "effective
control not only over the processing of said application [referring to Pahati's cash advance] but also the subsequent salary
deduction." From such premise, private respondent concludes that petitioner was guilty of the accusations of Roa and
36

company, viz.:

In the light of the actuations of [petitioner] in the foregoing transaction, the accusations of the sale[s] agents and
managers regarding her motives behind the delay in the payment of their commission income become credible. . .
. [This] betrays a tendency on her part to circumvent [c]ompany procedures and to employ irregular means
without qualms for her personal benefit, especially in pecuniary matters. She likewise exhibited a propensity to
capitalize on her superior position to exert undue influence over her peers and subordinates for purposes inimical
to the interest of the [c]ompany. Such mental attitude and psychological make-up of [petitioner] renders her unfit
to assume a position as sensitive as that of the [f]inance [m]anager. 37

Labor tribunals should be cautioned against confusing conjecture with evidence. The absence of petitioner, who failed to contest
the charges against her in the investigation conducted by private respondent, did not mean admission of the accusations.

Although admissible in evidence, affidavits being self-serving must be received with caution, even if presented only on appeal
before the NLRC This is because the adverse party is not afforded any opportunity to test their veracity. While Roa, Mendoza
38 39

and Pahati testified for the private respondent before the labor arbiter, stenographic notes of the proceedings were not taken.
Since their testimonies were not retaken during the appeal before Respondent Commission, the NLRC had no basis to reverse
the labor arbiter's assessment of their credibility. Their affidavits, standing alone, cannot be considered as substantial evidence
By themselves, generalized and pro forma affidavits cannot constitute relevant evidence which a reasonable mind may accept as
adequate. 40

True, employers cannot be compelled to retain in their service employees who are guilty of acts inimical to the interest of the
former. True also, management has the right to dismiss erring employees as a measure of self-protection. In the case of
managerial employees, employers are allowed a wider latitude of discretion in terminating their employment because they
perform functions which by their nature require the full trust and confidence of the company. 41

However, loss of trust and confidence has never been intended to afford an occasion for abuse. 42
It cannot be used arbitrarily,
whimsically or capriciously; it must be supported with substantial evidence. 43
Unsubstantiated suspicions, accusations and conclusions of employers do not provide legal justifications for dismissing
employees. In case of doubt, such cases should be resolved in favor of labor, pursuant to the social justice policy of our labor
laws and the Constitution The act of extorting money from sales agents in exchange for releasing their commissions is a
44

serious accusation, but allegation is not proof. We reiterate that the employer has the burden of proof. As already pointed out, it
failed to present sufficient evidence that petitioner was responsible for such abnormality.

An employee who has been illegally dismissed is entitled to reinstatement and full back wages. However, as held by the labor
45

arbiter, conflict and antagonism have strained the relations between the parties; hence, reinstatement is no longer viable or
advisable. Instead, petitioners should be awarded separation pay in lieu of reinstatement. 46

Moral damages are recoverable only where the dismissal of an employee is attended by bad faith, fraud, or an act oppressive to
labor; or if it is done in a manner contrary to morals, good customs or public policy. The adverse result of an action does
47

not per se subject the actor to the payment of moral

damages. Neither attoney's fees nor litigation expenses should be awarded, absent a showing of any of the grounds provided
48 49

under the civil Code. Where the award of moral damages is eliminated, so must the award for attorney's
50

fees.51

WHEREFORE, the Petition is hereby GRANTED. The assailed Decision and Resolution are hereby SET ASIDE. The labor
arbiter's Decision is REINSTATED with MODIFICATION, as follows: (1) private respondent is hereby ORDERED to pay
petitioner (a) back wages from June 16, 1995 up to the finality of this judgment without any deduction or qualification and (b)
separation pay in the sum of P8,000; and (2) the award for moral damages and attorney's fees is DELETED. No costs. 1âwphi1.nêt

SO ORDERED.

Romero, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.

Footnotes

1 Labor Arbiter's Decision, p. 9; rollo, p. 56.

2 Third Division, composed of Comms. Joaquin A. Tanodra, ponente; Lourdes C. Javier, presiding commissioner; and
Ireneo B. Bernardo, member.

3 NLRC Decision, p. 24; rollo, p. 83.

4 Resolution, pp. 1-2; rollo, pp. 85-86.

5 NLRC Decision, pp. 2-7; rollo, pp. 62-67.

6 This case was deemed submitted for resolution upon the Court's receipt of the Memorandum for the private respondent
on October 9, 1998.

7 Memorandum for Public Respondent, p. 4; rollo, p. 180.

8 The private respondent posed a similarly worded issue: "Whether or not the Public Respondent NLRC committed grave
abuse of discretion when it ruled that petitioner was validly dismissed for cause." See Private Respondent's
Memorandum, p. 5; rollo, p. 231.

9 CDCP Tollways Operation Employees and Workers Union v. National Labor Relations Commission, 211 SCRA 58, 63,
June 3, 1993; Maranaw Hotels & Resort Corporation v. Court of Appeals, 215 SCRA 501, 504-505, November 6, 1992;
Philippine Telegraph & Telephone Corporation v. National Labor Relations Commission, 183 SCRA 451, 455, March 21,
1990; and Mary Johnston Hospital v. National Labor Relations Commission, 165 SCRA 110, 116, August 30, 1988.

10 Palomado v. National Labor Relations Commission, 257 SCRA 680, 690, June 28, 1996; Reyes & Lim Company, Inc.
v. National Labor Relations Commission, 201 SCRA 772, 776, September 25, 1991; and PNOC-Energy Development
Corp. v. National Labor Relations Commission, 201 SCRA 487, 494, September 11, 1991.

11 Manila Mandarin Employees Union v. National Labor Relations Commission, 264 SCRA 320, 335, November 19,
1996; and Pantranco North Express, Inc. v. National Labor Relations Commission, 239 SCRA 272, 282, December 16,
1994.

12 G.R. No. 130866, September 16, 1998, p. 16, per Regaldo, J.

13 Labor Arbiter's Decision, pp. 6-7; rollo, pp. 53-54.

14 NLRC Decision, pp. 19-20; rollo, pp. 79-80.

15 Gonpu Services Corporation v. National Labor Relations Commission, 266 SCRA 657; Reformist Union of R.B. Liner,
Inc. v. National Labor Relations Commission, 266 SCRA 713; De la Cruz v. National Labor Relations Commission, 268
SCRA 458; Reahs Corporation v. National Labor Relations Commission, 271 SCRA 247; Pascua v. National Labor
Relations Commission & Tiongsan Super Bazaar, G.R. No. 123518, March 13, 1998; Paguio Transport Corp. v. National
Labor Relations Commission, G.R. No. 119500, August 28, 1998; Vinta Maritime Co., Inc., et al. v. National Labor
Relations Commission et al., G.R. No. 113911, January 23, 1998; Anino et al. v. National Labor Relations Commission et
al., G.R. No. 123226, May 21, 1998.

16 Sentinel Security Agency Inc. v. National Labor Relations Commission, G.R. Nos. 122468 & 122716, September 3,
1998, pp. 10-11; Escobin v. National Labor Relations Commission 289 SCRA 49, April 15, 1998; Fernandez v. National
Labor Relation Commission, et al., 285 SCRA 149, January 28, 1998.

17 Pampanga Sugar Development Company, Inc. v. National Labor Relations Commission, 272 SCRA 737, 747, May 29,
1997; Fernandez et al., v. National Labor Relations Commission, et al., supra.

18 MGG Marine Services, Inc. v. National Labor Relations Commission, 259 SCRA 664, 677, July 29, 1996.

19 Riker v. Ople, 155 SCRA 85, 92, October 27 1987; Cruz. v. Medina, 177 SCRA 565, 571, September 15, 1989;
Vergara v. National Labor Relations Commission, G.R. No. 117196, December 5, 1997, p. 13; ComSavings Bank v.
National Labor Relations Commission, 257 SCRA 307, 316, June 14, 1996; Cocoland Development Corporation v.
National Labor Relations Commission, 259 SCRA 51, 61, July 17, 1996.

20 Exh. 2, NLRC Records, p. 80.

21 Annex 6, NLRC Records, pp. 82-86.

22 Annex 8, ibid., p. 290.

23 Secs. 2(d)(ii) & (iii), Rule I, and Sec. 2(1, a & c), Rule XXIII of Book V of the Rules and Regulations Implementing the
Labor Code (1998 ed).

24 Panlilio v. National Labor Relations Commission, 281 SCRA 53, 57, October 17, 1997; Philippine Telegraph &
Telephone Corporation v. National Labor Relations Commission, 183 SCRA 451, 457, March 21, 1990; and Bristol
Laboratories Employees Association v. National Labor Relations Commission, 187 SCRA 118, 121 July 2, 1990.

25 NLRC, Records, p. 194.

26 The first notice, dated June 2, 1995, was from the company president, Johnny P. Lee; and the second, dated June 24,
1995, was from Celeridad.

27 NLRC Decision, pp. 22-23; rollo, p. 82. The certified true copy of the NLRC Decision lacks p. 23.

28 NLRC Records, p. 78.

29 Ibid., p. 80.

30 Id., p. 79.

31 Id., pp. 82-86.

32 Id., p. 288.

33 Id., p. 290.

34 Id., pp. 291-300.

35 NLRC Records, p. 36.

36 Id., p. 149. Pahati's application for cash advance is not, however, found in the records.

37 Id., p. 150.

38 Panlilio v. NLRC, supra; PT&T v. NLRC, supra; and Bristol Laboratories Employees Association v. NLRC, supra.

39 Midas Touch Food Corporation v. National Labor Relations Commission, 259 SCRA 652, 661, July 29, 1996; Molina
v. People, 259 SCRA 138, 159-160, July 24, 1996 Osias v. Court of Appeals, 256 SCRA 101, 118, April 10, 1996; People
v. Matildo, 230 SCRA 635, 636, March 2, 1994.

40 Cf. Madlos v. National Labor Relations Commission, 254 SCRA 248, 257, March 4, 1996.

41 Manila Midtown v. NUWHRAIN, supra; Cruz v. Medina, supra.

42 Ranises v. National Labor Relations Commission, 262 SCRA 371, 379, September 24, 1996.

43 Madlos v. NLRC, supra.

44 Samillano v. National Labor Relations Commission, 265 SCRA 788, 797, December 23, 1996.

45 Ibid., p. 798; Fernandez v. National Labor Relations Commission, G.R. No. 105892, January 28, 1998; and
Bustamante v. National Labor Relations Commission, 265 SCRA 61, 71, November 28, 1996. The Court in Bustamante
held that in accordance with RA 6715, illegally dismissed employees are entitled to their full back wages from the time
their actual compensation was withheld until the finality of the Decision (supra).

46 Belaunzaran v. National Labor Relation Commission, 265 SCRA 800, 808-809, December 23, 1996; Caliguia v.
National Labor Relations Commission, 264 SCRA 110, 123-124, November 13, 1996; Tumbiga v. National Labor
Relations Commission, 274 SCRA 338, 348, June 19, 1997; and Banana Growers Collective at Puyod Farms v. National
Labor Relations Commission, 276 SCRA 544, 557, July 31, 1997.

47 Ford Philippines, Inc. v. Court of Appeals, 267 SCRA 320, 329, February 3, 1997; Cosico Jr. v. National Labor
Relations Commission, 272 SCRA 583, 595, May 23, 1997; Equitable Banking Corporation v. National Labor Relations
Commission, 273 SCRA 352, 379, June 13, 1997; Cocoland Development Corp. v. NLRC, supra, p. 63; Tumbiga v.
NLRC, supra, p.·349.

48 Barreto v. Arevalo, 99 Phil 771, 780, August 27, 1956; and Castillo v. Castillo, 95 SCRA 40, 68, January 22, 1980.

49 Tumbiga v. NLRC, supra; Special Police Workmen Association (PLUM) Federation v. National Labor Relations
Commission, 278 SCRA 828, 835, September 5, 1997; Ramos v. Ramos, 61 SCRA 284, 306, December 3, 1974; Salao
v. Salao, 70 SCRA 65, 86, March 16, 1976; and Rizal Surety & Insurance Co., Inc. v. Court of Appeals, 20 SCRA 61, 66-
67, May 16, 1967.

50 Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
recovered except:

1. When exemplary damages are awarded

2. When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
 expenses to protect his or her interest

3 In criminal cases of malicious prosecution against the plaintiff

4 In case of a clearly unfounded civil action or proceeding against the plaintiff

5. Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim

6. In actions for legal support

7. In actions for the recovery of wages of household helpers, laborers and skilled workers

8. In actions for indemnity under workmen's compensation and employer's liability laws

9. In a separate civil action to recover civil liability arising from a crime

10. When at least double judicial costs are awarded

11. In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered

In all cases, the attorney's fees and expenses of litigation must be reasonable.

51 Bernardo v. Court of Appeals (Special Sixth Division), 275 SCRA 413, 432, July 14, 1997; Philippine Air Lines v.
Miano, 242 SCRA 235, 240, March 8, 1995; and LBC v. Court of Appeals, 236 SCRA 602, September 21, 1994.

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Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 162017 April 23, 2010

CALTEX (PHILIPPINES), INC., WILLIAM P. TIFFANY, E.C. CAVESTANY, and E.M. CRUZ, Petitioners,
vs.
HERMIE G. AGAD and CALTEX UNITED SUPERVISORS' ASSOCIATION, Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review on certiorari1 assailing the Decision2 dated 22 May 2003 and Resolution3 dated 27
January 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 74199, which reversed the Decision 4 dated 6 June 2001 and
Resolution5 dated 24 September 2002 of the National Labor and Relations Commission (NLRC) in NLRC NCR CA No. 018872-
99.

The Facts

On 1 September 1983, petitioner Caltex Philippines, Inc. (Caltex) employed respondent Hermie G. Agad (Agad) as Depot
Superintendent-A on a probationary basis for six months. On 28 February 1984, Agad became a regular employee with a
monthly salary of ₱2,560 and cost of living assistance of ₱380.

For the next eleven years, Agad obtained various commendations6 and held the positions of Depot Superintendent-A, Field
Engineer, Senior Superintendent, and Bulk Depot Superintendent until his dismissal on 8 August 1994. Agad received a monthly
gross salary of ₱31,000, a mid-year bonus equivalent to one month’s salary and 13th month pay at the time of his termination.

After Agad had served for two years since 1990 as Superintendent of the Tacloban Bulk Depot (Depot) in Leyte, Caltex
transferred Agad to Bauan Bulk Depot in Batangas effective 16 May 1992. 7

To transfer his belongings from Leyte to Batangas, Agad secured the carpentry services of Alfredo Delda (Delda), the owner of
A.A. Delda Engineering Services (Delda Services) for the construction of two crates. Agad paid Delda ₱15,500, evidenced by
Official Receipt No. 09708 dated 12 May 1992. Agad submitted the receipt sometime in August 1992 and Caltex reimbursed him
the said amount.

On 13 April 1993, Caltex conducted its regular audit of employees’ account and expenses as of 31 December 1992. 9 The
company auditor of Caltex verified the crating expense incurred by Agad with Delda. Delda, through an Affidavit dated 5 May
1993,10 disclosed that Delda Services did not perform any crating service for Agad or receive the amount of ₱15,500 as stated in
the official receipt. Delda alleged that he was forced by Agad to issue the official receipt in order to get a favorable
recommendation from the incoming superintendent of the Depot.

Further investigations revealed that Arsenio Asperas (Asperas), a carpenter from Tacloban, was commissioned by Agad to build
two wooden crates on 12 May 1992. Asperas attested that Agad paid him the amount of ₱400 and he completed the work in 2 ½
days beside the quarters of Agad inside the Depot.11 Basilia Villalino (Villalino), a household staff of the Depot Staff House,
corroborated Asperas’ statement in a Sworn Testimony dated 24 May 1993 that Agad did hire Asperas to make two wooden
crates inside the Depot before he left for his next post.12

In another audit report dated 12 May 1993,13 the company auditor declared that 190 pieces of 11 kg. liquefied petroleum gas
(LPG) cylinders from the Depot were allegedly withdrawn for scrap and repair purposes without proper documentation on 8
February 1991 when Agad was still depot superintendent. Isidro B. Millanes (Millanes), the depot’s LPG cylinder
repair/reconditioning contractor and owner of IBM Enterprises, claimed that the LPG cylinders were hauled to his compound and
allegedly later sold, upon the express instructions of Agad, to Leyte Development Corporation and Ernesto Mercado, a service
station dealer.

On 5 July 1993, petitioner E.C. Cavestany (Cavestany), the Regional Manager of Caltex, issued a Memorandum 14 to Agad
directing him to explain the following audit review findings: (1) the questionable reimbursement of crating expense; and (2) the
alleged unauthorized withdrawal and sale of 190 pieces of LPG cylinders.

On 29 July 1993, Agad sent his reply15 answering all the charges against him. Agad stated: (1) that Delda Services constructed
the two crates worth ₱15,500 as evidenced by an official receipt issued by Delda; and (2) that the withdrawal of the scrap LPG
cylinders formed part of his housekeeping duties as depot superintendent. The scrap materials consisting of tanks, pumps and
pipelines of Gebarin, a logging account of Caltex located in Marabut, Samar, were bidded out to a certain Rogelio "Boy" H. Bato
on an "as is, where is" basis.16 However, the scrap materials went missing and Boy Bato demanded that such be replaced with
equivalent materials. The scrap LPG cylinders were released instead after Agad secured the approval of his superiors as
evidenced in a Memorandum dated 12 February 1992.17 After the approval, Boy Bato’s buyer, a certain Mr. Ang, allegedly
acquired the scrap cylinders from IBM Enterprises.

Caltex created an investigating panel chaired by Cavestany to look into the offenses allegedly committed. On 17 August 1993,
the investigating panel held its first formal inquiry.18 The transcript of the investigation was dated 2 September 1993.19

On 29 April 1994, Caltex placed Agad under preventive suspension. On 26 May 1994 or almost 10 months after the first formal
inquiry, the investigating panel conducted another hearing.20 Two other hearings were held on 14 June and 6 July 1994.

In a Confidential Memorandum dated 8 August 1994,21 Cavestany informed Agad of his dismissal on the grounds of serious
misconduct and loss of trust and confidence, both just causes for termination of employment. Agad received the memorandum
on 25 August 1994.

On 1 September 1994, respondents Agad and Caltex United Supervisors’ Association filed a complaint 22 with the Labor Arbiter
(LA) for illegal dismissal, illegal suspension with prayer for full backwages of ₱31,000 per month from 25 August 1994 until
reinstatement, moral damages of ₱5,000,000, exemplary damages of ₱5,000,000 and 10% of the total monetary award as
attorney’s fees against petitioners Caltex and its officers – William P. Tiffany, President and Chief Executive Officer; E.M. Cruz,
General Manager for Distribution; and Cavestany.

On 16 November 1998, the LA rendered a decision in favor of Agad.23 The LA held that there were no just causes for Agad’s
termination of employment. On the charge of fraudulent reimbursement of crating expense, the LA found no basis for this since
Delda issued an official receipt which served as best evidence that the crating expense was actually incurred. According to the
LA, Delda’s claim that he was only forced by Agad to issue the receipt for fear of losing his job as a contractor does not appear to
be credible. In the administrative inquiry held on 26 May 1994, it was clearly established that Delda held a grudge against Agad
since Agad did not recommend him to be a contractor of Caltex for failure to meet the minimum capital required of aspiring
contractors. Also, the LA did not give any weight to the testimonies of Asperas and Villalino since they were not presented for
cross-examination during the investigation.

As to the charge of unauthorized withdrawal and sale of the LPG cylinders, the LA ruled that Agad was denied the right to
present his witnesses and other evidence in support of his defense which constitutes a denial of due process. Thus, the LA ruled
that Agad had been illegally dismissed by Caltex. The dispositive portion of the LA’s decision states:

Since there was no just cause for termination of the services of the complainant; and since the complainant was not given due
process in the proceedings to terminate his services; and since he was illegally placed under preventive suspension, we
therefore rule that the complainant is entitled to the twin remedies of reinstatement, with full backwages, from the time of his
dismissal until his reinstatement to his former position as Depot Superintendent of the Bauan Bulk Depot, or to a similar position,
without any loss of seniority rights.

By reason of the arbitrary nature of the termination of the service of the complainant, and the denial of due process in the denial
of his right to present evidence in his defense in the administrative inquiry prior to the termination of his services, we hold further
the respondents liable to the complainant for moral damages, in the sum of ₱5,000,000.00; exemplary damages in the sum of
₱5,000,000.00; and attorney’s fees in the sum of ten (10%) percent of the total monetary awards.

SO ORDERED.24

Caltex filed an appeal with the NLRC.

 The Ruling of the NLRC

On 6 June 2001, the NLRC reversed the decision of the LA. The NLRC held that there existed just causes which justified Agad’s
dismissal. With regard to the first allegation, the NLRC ruled that the amount of crating expense reimbursed by Agad was
fictitious. The fact that a receipt was issued by Delda does not conclusively prove that the crating service was performed by
Delda. At the most, the existence of the receipt only proves its execution. The NLRC declared that Delda’s testimony, made
under oath, enjoys the presumption of regularity and good faith. Corroborated by two other witnesses, Asperas and Villalino,
Delda’s testimony clearly established that Agad was dishonest in his dealings. The NLRC added that even if the amount involved
was only worth ₱15,500, the same was of no moment since what was involved was Agad’s propensity to commit dishonesty
against the company. As a supervisor, a greater degree of diligence, honesty and trust was expected of him. The NLRC further
stated that Caltex had no bad motive to pick on Agad and tell lies about him if indeed he was trustworthy since Agad was given
awards and commendations before the discovery of the questioned acts.

On the second allegation, the NLRC ruled that Agad had no authority to withdraw the LPG cylinders from the Depot. The NLRC
declared that Agad did not observe existing company rules and regulations in procuring the required forms, in the submission of
periodic LPG cylinders inventory and in selling the LPG cylinders without the requisite bidding. Thus, the NLRC concluded that
Caltex validly dismissed Agad. The dispositive portion of the NLRC’s decision states:

WHEREFORE, finding sufficient reasons/grounds to warrant reversal of the findings of the Arbiter a quo, the assailed decision is
hereby SET ASIDE and a new one entered ordering the DISMISSAL of the complaint for lack of basis both in fact and in law.

SO ORDERED.25

Agad filed a Motion for Reconsideration which was denied in a Resolution dated 24 September 2002.

Agad then filed a petition for certiorari under Rule 65 with the CA. Agad sought the nullification of the decision of the NLRC.

The Ruling of the Court of Appeals

On 22 May 2003, the CA modified the judgment of the NLRC and ruled in favor of Agad. On the issue of fraudulent
reimbursement of crating expense, the CA concurred with the LA. According to the CA, the regularity of the official receipt
remained untarnished since the only other proof relied upon by petitioners, Delda’s affidavit, failed to substantiate his allegations.
Delda never assailed the due execution of the receipt and even admitted that he actually issued the receipt. The supporting
affidavits of Asperas and Villalino, since they were not cross-examined, must be rejected for being hearsay. Thus, no sufficient
evidence was presented to prove that the amount in the receipt was fictitious. Further, the CA indicated that Caltex did not make
any limitations to the crating expense to be reimbursed such that Agad was entitled to move his personal and household effects
at reasonable costs.

On the second issue of unauthorized withdrawal and sale of LPG cylinders, the CA agreed with the NLRC that Agad did not
comply with company rules and regulations. Nonetheless, the CA held that the penalty of dismissal imposed upon Agad was too
harsh considering that this was his first infraction and that Agad had been awarded several commendations in the past and had
worked for Caltex for more than 10 years. The dispositive portion of the CA’s decision states:

WHEREFORE, premises considered, the petition is hereby GRANTED, and the judgment of the NLRC is hereby MODIFIED.
Accordingly, finding no just cause for the termination of employment of the petitioner Hermie G. Agad, we therefore rule that the
petitioner was illegally dismissed; he should be entitled to reinstatement, with full backwages, from the time of his illegal
dismissal until his reinstatement to his former position as Depot Superintendent of the Bauan Bulk Depot, or to a similar position
without any loss of seniority rights.

SO ORDERED.26

Caltex filed a Motion for Reconsideration which was denied in a Resolution dated 27 January 2004.

Hence, the instant petition.

The Issue

The main issue is whether Caltex legally terminated Agad’s employment on just causes: (1) acts tantamount to serious
misconduct and willful violation of company rules and regulations; and (2) willful breach of trust and confidence as Depot
Superintendent.

The Court’s Ruling

Article 282 of the Labor Code states:

ART. 282. TERMINATION BY EMPLOYER. – An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work;
 (b) Gross and habitual neglect by the employee of his duties;

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

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

(e) Other causes analogous to the foregoing.

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. When there is no
showing of a clear, valid, and legal cause for the termination of employment, the law considers the matter a case of illegal
dismissal and the burden is on the employer to prove that the termination was for a valid or authorized cause. 27

The quantum of proof which the employer must discharge is substantial evidence. An employee’s dismissal due to serious
misconduct and loss of trust and confidence must be supported by substantial evidence. Substantial evidence is that amount of
relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally
reasonable, might conceivably opine otherwise.28

In the present case, petitioners terminated Agad’s employment based on these acts: (1) Agad’s submission of a fictitious crating
expense amounting to ₱15,1500; and (2) the unauthorized withdrawal and sale of 190 pieces of 11 kg. LPG cylinders for his
personal gain and profit.

Crating expense is reasonable

Petitioners insist that the CA erred in ruling that the crating expense of ₱15,500 was justifiable without however stating the basis
for such a ruling. According to petitioners, the records prove that there were more than ample evidence to show that the crating
expense was fictitious. Petitioners reiterate the sworn testimonies of Delda, Esperas, and Villalino, and that of Augusto Cabugao,
the Regional Audit Manager of Caltex, who testified that the crating expense of ₱15,500 was unreasonably high considering that
depot houses of Caltex were fully furnished and expenses incurred in transferring personal effects were usually very small.

Respondents, on the other hand, maintain that the crating expense was necessary and reasonable under the
circumstances. First, Caltex readily approved the reimbursement claim when Agad submitted the official receipt. It was only a
year later, during a regular audit, when Caltex sought Delda’s affidavit of denial when the company questioned the authenticity
and reasonableness of the amount of the crating expense. Second, of the first three witnesses for the petitioners, only Delda was
presented for cross-examination during the administrative investigation. Thus, the affidavits of Esperas and Villalino remain
hearsay and deserve scant consideration. Last, George Taberrah, the former Manager for Distribution of Caltex, testified on 26
February 1996 that the amount of ₱15,500 for crating expense was reasonable. Even Roger San Jose, the former auditor of
Caltex, testified on the necessity and reasonableness of said amount.

In R & E Transport, Inc. v. Latag,29 we held that factual issues may be reviewed by the CA when the findings of fact of the NLRC
conflict with those of the LA. By the same token, this Court may review factual conclusions of the CA when they are contrary to
those of the NLRC or of the LA.

In the present case, the evidence of the parties with respect to the crating expense reimbursed by Agad finds discord on the
official receipt issued by Delda vis-a-vis Delda’s sworn testimony denying that he received the amount stated in the receipt or
rendered any crating service for Agad. The petitioners presented the affidavits of Asperas and Villalino to corroborate Delda’s
testimony while Agad relied on the official receipt as the best evidence that he contracted Delda’s services and that Delda indeed
issued said receipt. The decisions of the CA and NLRC produced different factual conclusions on this issue.

After a careful review of the records, we find no cogent reason to disturb the findings of the CA.

First, the official receipt submitted by Agad serves as the best evidence of payment and is presumed regular on its face
absent any showing to the contrary.

Second, records show that the reimbursement of the crating expense was approved by Agad’s superior upon
presentment of the receipt. At the time, Agad’s superior did not mention that the amount of the crating expense incurred
was unreasonable.

Third, Delda, in his affidavit, disclosed that he was forced to issue the receipt in order to get a favorable recommendation
from the incoming superintendent who would replace Agad in the Depot. However, in the same affidavit, Delda
mentioned that he had been a standby worker at the Depot from 1956 to 1982 and a piece-worker from 1982 up to 1993,
the date he executed the affidavit. It appears then that Delda had established a name for himself and his business with
Caltex. Any favorable recommendation from Agad, as the outgoing superintendent, would not provide much impact
compared to the reputation he had built all those years.

Fourth, the testimonies of the two corroborating witnesses, Esperas and Villalino, cannot be given credence since Agad
was not given an opportunity to cross-examine them. Their testimonies are considered as hearsay evidence.

Last, petitioners did not present any other evidence to show that Agad violated company policy dealing with crating
expenses to be limited to a certain amount. Reasonableness was the only criterion given by the employer.

Thus, all these taken into consideration, we conclude that petitioners were not able to fully substantiate the alleged fictitious
reimbursement of the crating expense. Delda’s testimony alone, without any corroborating evidence to prove otherwise, is
insufficient to overcome the presumption of regularity in the issuance of his own official receipt which he gave to Agad.

Withdrawal and sale of 190 pieces of LPG cylinders is unauthorized

Petitioners assert that Agad committed serious violation of internal control procedures and company policies due to the following:
(1) no Records of Materials Received/Delivered (RMRD) were issued to cover the withdrawal of the empty cylinders for repair
purposes; (2) the testimony of Millanes demonstrates that the cylinders were initially stored at his premises on 8 February 1991
and later sold as good units without bidding, upon the instructions of Agad, to Leyte Development and Ernesto Mercado; (3) no
evidence was submitted to show that the sales proceeds were turned over to Caltex and petitioners surmise that the total
prevailing price of the LPG cylinders would have been from a low of ₱95,000 to a high of ₱133,000; (4) the periodic report of
inventory of the LPG cylinders, considered part of storehouse materials, to Head Office Accounting was not submitted by the
depot; and (5) the depot clerk acted beyond his authority when he approved the gate passes for the withdrawal of the
cylinders.30
1avvphi1

Respondents, on the other hand, maintain the following: (1) that as depot superintendent, Agad had the authority to transfer
materials, including

scrap, from one place to another; (2) Agad had specific authority, per Memorandum dated 12 February 1992, to withdraw the
scrap materials as replacement for the missing scrap tanks, pumps and pipelines earlier sold to Boy Bato; (3) the withdrawal of
the LPG cylinders was covered by gate passes 8499 and 8500, negating any fraudulent intent on Agad’s part; and (4) petitioners’
own witness, Millanes, testified that the LPG cylinders withdrawn were actually junk or scrap materials and of no accounting
value. In addition, even assuming that the withdrawal of the LPG cylinders was unauthorized, the penalty of dismissal is too
harsh a penalty.

We agree with petitioners.

The findings of the CA in the present case revealed:

With regard to the second issue, the petitioner contends that the withdrawal/sale of 190 LPG cylinders in the Tacloban Bulk
Depot was well within his authority as a Depot Superintendent and covered by an authority stated in an instrument, as a
consequence of a contract of sale with Mr. Bato. Furthermore, such cylinders were already considered as scrap or without
monetary value. Therefore, its withdrawal/sale could not constitute just cause for dismissal.

The contention is without merit. Although his position as Depot Superintendent includes such authority, as part of his
housekeeping duties, it does not automatically justify his acts which were contrary to company rules and regulations. The
company rules required the issuance of RMRDs for any company properties with value to be withdrawn from the Bulk Depot.
Petitioner failed to comply with this rule. Furthermore, he ordered the sale of the cylinders without bidding, and there were no
evidence that the proceeds of such sale were turned over to the company. Mere existence of authority does not justify his acts,
he must show that he properly exercised such authority as contemplated in the company rules and regulations, especially when
the act is not within his discretion.

His contention that such withdrawal mas merely a part of a contract of sale between the company and Mr. Bato, is likewise
erroneous. The instrument never mentioned of any LPG cylinders, what was mentioned therein was 3,000 B.I. plates. And even if
the contract involved LPG cylinders, still, its withdrawal must be accounted for.

The petitioners’ assumption that the subject LPG cylinders were merely scrap materials is likewise erroneous. The cylinders,
although declared as scraps, still has monetary value because it can still be sold even as scrap materials. Moreover, even if such
cylinders were merely scrap, the petitioner cannot just appropriate them without the company’s consent. Being company
property, its disposal is still within the discretion and prerogative of the company. 31

In the same manner, the NLRC, in its Decision dated 6 June 2001, held:

x x x It was sufficiently established that complainant Agad had no authority to withdraw the LPG cylinders from the Tacloban Bulk
Depot. Complainant Agad’s claim that he merely withdrew the LPG cylinders in view of the loss of certain scrap materials earlier
sold to Mr. Boy Bato is belied by the fact that the alleged loss was not established. On the other hand, the records show that
complainant Agad’s request for the withdrawal of scrap materials only covered 3,000 kilograms of B.I. plates. This request,
however, did not include the LPG cylinders, numbering 190, which were withdrawn from the Tacloban Depot.

Complainant Agad also did not observe the existing company rules and regulations on the withdrawal of LPG cylinders from the
Tacloban Bulk Depot. According to the Audit Report, which was not controverted by complainant Agad, no Records of Materials
Received/Delivered were issued to cover the withdrawal of the cylinders. Also, the periodic inventory of the LPG cylinders was
not submitted by complainant Agad to the accounting department. Further, the LPG cylinders were not sold through bidding,
which was corroborated by the statement of Mr. Isidro B. Millanes, who testified that the subject LPG cylinders were first stored
at his premises and later sold without bidding upon the express instructions of complainant Agad.

In this regards, it cannot be validly claimed that the LPG cylinders in question were mere scrap materials, i.e. they had no
monetary value anymore and therefore not subject to the strict requirement laid down by the company rules and regulations. As
testified to by Mr. Cabugao, and by no less than complainant Agad himself and his own witnesses, Mr. George Taberrah, and Mr.
Roger San Jose, Jr., the LPG containers have monetary value as they can still be sold even as scrap. 32
The findings of the CA and NLRC establish the following: (1) Agad’s request for withdrawal of the 190 pieces of LPG cylinders as
stated in a Memorandum dated 12 February 1992 cannot be given credence since the Memorandum pertains to the replacement
of the scrap materials due to Boy Bato consisting of 3,000 kilograms of black iron plates and not to the subject LPG cylinders; (2)
Agad did not observe Caltex’s rules and regulations when he transferred the said cylinders to Millanes’ compound without the
RMRD form as required under Caltex’s Field Accounting Manual; (3) Agad gave specific instructions to Millanes to sell the
cylinders without bidding to third parties in violation of company rules; (4) Agad failed to submit the periodic inventory report of
the LPG cylinders to the accounting department; (5) Agad did not remit the proceeds of the sale of the LPG cylinders; and (6)
even if considered as scrap materials, the LPG cylinders still had monetary value which Agad cannot appropriate for himself
without Caltex’s consent.

Considering these findings, it is clear that Agad committed a serious infraction amounting to theft of company property. This act
is akin to a serious misconduct or willful disobedience by the employee of the lawful orders of his employer in connection with his
work, a just cause for termination of employment recognized under Article 282(a) of the Labor Code.

Misconduct has been defined as 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 be serious, the misconduct must be of
such grave and aggravated character.33

Further, Agad’s conduct constitutes willful breach of the trust reposed in him, another just cause for termination of employment
recognized under Article 282(c) of the Labor Code. Loss of trust and confidence, as a just cause for termination of employment,
is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence. The employee must
be invested with confidence on delicate matters, such as the custody, handling, care and protection of the employer’s property
and funds.34

As a superintendent, Agad occupied a position tasked to perform key and sensitive functions which necessarily involved the
custody and protection of Caltex’s properties. Consequently, Agad comes within the purview of the trust and confidence rule.

In Sagales v. Rustan’s Commercial Corporation,35 we held that in loss of trust and confidence, as a just cause for dismissal, it is
sufficient that there must only be some basis for the loss of trust and confidence or that there is reasonable ground to believe, if
not to entertain the moral conviction, that the employee concerned is responsible for the misconduct and that his participation in
the misconduct rendered him absolutely unworthy of trust and confidence.

In sum, even if Agad did not commit the alleged charge of fictitious reimbursement of crating expense, he was found to have
acted without authority, a serious infraction amounting to theft of company property, in the withdrawal and sale of the 190 pieces
of LPG cylinders owned by the company. Caltex, as the employer, has discharged the burden of proof necessary in terminating
the services of Agad, who was ascertained to have blatantly abused his position and authority. Thus, Agad’s dismissal from
employment based on (1) acts tantamount to serious misconduct or willful violation of company rules and regulations; and (2)
willful breach of trust and confidence as Depot Superintendent was lawful and valid under the circumstances as mandated by
Article 282 (a) and (c) of the Labor Code.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 22 May 2003 and Resolution dated 27 January 2004
of the Court of Appeals in CA-G.R. SP No. 74199. We DECLARE as valid the termination from employment of respondent
Hermie G. Agad for just causes prescribed under the law.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusion in
the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

REYNATO S. PUNO

Chief Justice

Footnotes

1
Under Rule 45 of the 1997 Revised Rules of Civil Procedure.

2
Rollo, pp. 33-44. Penned by Justice Bienvenido L. Reyes with Justices Salvador J. Valdez, Jr. and Danilo B. Pine,
concurring.

3
Id. at 65-66.

4
CA rollo, pp. 45-53. Penned by Commissioner Alberto R. Quimpo with Commissioner Roy V. Señeres, concurring.
Commissioner Vicente S.E. Veloso inhibited from the case.

5
Id. at 54-55.

6
Id. at 72-73 and 130-136.

7
Id. at 129.

8
Id. at 114.

9
Id. at 112-113.

10
Id. at 115.
11
Rollo, p. 14.

12
Id. at 15.

13
CA rollo, p. 116.

14
Id. at 144.

15
Id. at 146-147.

16
Id. at 208-209. Deed of Sale with Waiver executed by Caltex and Rogelio Bato on 8 January 1992.

17
Id. at 210.

18
Id. at 75.

19
Id. at 162-166.

20
Id. at 167-173.

21
Id. at 152.

22
Id. at 66-67. Docketed as NLRC NCR Case No. 00-09-06449-94.

23
Id. at 57-65.

24
Id. at 64.

25
Id. at 52.

26
Rollo, p. 43.

AMA Computer College-East Rizal v. Ignacio, G.R. No. 178520, 23 June 2009, citing Cosep v. National Labor
27

Relations Commission, 353 Phil. 148, 157-158 (1998).

 28
Id., citing Philippine Commercial Industrial Bank v. Cabrera, G.R. No. 160368, 30 March 2005, 454 SCRA 792, 803.

29
467 Phil. 355 (2004).

30
Based on the Audit Review Report dated 12 May 1993. Supra note 13.

31
Rollo, p. 40.

32
CA rollo, pp. 49-50.

33
Colegio de San Juan de Letran-Calamba v. Villas, 447 Phil. 692 (2003).

34
Cruz v. Coca-Cola Bottlers, Phils., Inc., G.R. No. 165586, 15 June 2005, 460 SCRA 340.

G.R. No. 166554, 27 November 2008, 572 SCRA 89, citing Central Pangasinan Electric Cooperative, Inc. v.
35

Macaraeg, G.R. No. 145800, 22 January 2003, 395 SCRA 720 and Gonzales v. NLRC, G.R. No. 131653, 26 March
2001, 355 SCRA 195.

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June 2013 - Philippine Supreme Court Decisions/Resolutions

Philippine Supreme Court Jurisprudence

Philippine Supreme Court Jurisprudence > Year 2013 > June 2013 Decisions > G.R. No.187722, June 10, 2013 -
SURIGAO DEL NORTE ELECTRIC COOPERATIVE, INC. AND/OR DANNY Z. ESCALANTE, Petitioners, v. TEOFILO GONZAGA,
Respondent.:

G.R. No.187722, June 10, 2013 - SURIGAO DEL NORTE ELECTRIC COOPERATIVE, INC. AND/OR DANNY Z. ESCALANTE,
Petitioners, v. TEOFILO GONZAGA, Respondent.

SECOND DIVISION

G.R. No.187722, June 10, 2013

SURIGAO DEL NORTE ELECTRIC COOPERATIVE, INC. AND/OR DANNY Z. ESCALANTE, Petitioners, v. TEOFILO
GONZAGA, Respondent.

DECISION

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the May 29, 2008 Decision2 and March 30, 2009 Resolution3 of the
Cagayan de Oro City Court of Appeals (CA) in CA G.R. SP. No. 00267 which nullified the August 31, 2004 4 and February 1,
20055 Resolutions of the National Labor Relations Commission (NLRC) in NLRC Case No. M-007354-2003 and instead,
reinstated with modification the November 28, 2002 Decision 6 of Executive Labor Arbiter Rogelio P. Legaspi (LA) in NLRC
Case No. RAB-13-01-00016-2002, finding respondent Teofilo Gonzaga (Gonzaga) to have been illegally dismissed.

The Facts

On October 13, 1993, petitioner Surigao Del Norte Electric Cooperative, Inc. (SURNECO) hired Gonzaga as its lineman.
On February 15, 2000, he was assigned as Temporary Teller at SURNECO�s sub-office in Gigaquit, Surigao Del Norte. 7

On June 26, 2001, petitioner Danny Escalante (Escalante), General Manager of SURNECO, issued Memorandum Order No.
34, series of 2001 (Memorandum 34-01), with attached report of SURNECO�s Internal Auditor, Pedro Denolos
(Collection Report) and two (2) sets of summaries of collections and remittances (Summaries), 8 seeking an explanation
from Gonzaga regarding his remittance shortages in the total amount of P314,252.23, covering the period from February
2000 to May 2001.9

On July 16, 2001, Gonzaga asked for an extension of three (3) weeks within which to submit his explanation since he
needed to go over the voluminous receipts of collections and remittances with the assistance of an accountant. On the
same day, he sent another letter, denying any unremitted amount on his part and thereby, requesting that the charges
against him be lifted.10 Attached to the same letter is an Audit Opinion11 prepared by one Leonides Laluna (Laluna), a
certified public accountant (CPA), stating that the Internal Auditor�s Report cannot accurately establish any remittance
shortage on Gonzaga�s part since the amount of collections stated in the Summaries was not supported by any bills or
official receipts.
In the meantime, SURNECO formed an Investigation Committee (Committee) to investigate Gonzaga�s alleged
remittance shortages. On July 30, 2001, the Committee sent Gonzaga an invitation to attend the investigation
proceedings, in which he participated.12 Pending investigation, Gonzaga was placed under preventive suspension from
July 31 to August 29, 2001.13

On August 9, 2001, the Committee tendered its report, finding Gonzaga guilty of (a) gross and habitual neglect of duty
under Section 5.2.15 of the Code of Ethics and Discipline for Rural Electric Cooperative (REC) Employees (Code of Ethics);
(b) misappropriation of REC funds under Section 7.2.1 of the Code of Ethics; and (c) failure to remit collections/monies
under Section 7.2.2 of the Code of Ethics. Thereafter, a notice of termination was served on Gonzaga on September 13,
2001. Gonzaga sought reconsideration before SURNECO�s Board of Directors but the latter denied the same after he
presented his case.14 On October 25, 2001, another notice of termination (Final Notice of Termination) was served on
Gonzaga. Consequently, he was dismissed from the service on November 26, 2001. 15

In view of the foregoing incidents, Gonzaga filed a complaint with the NLRC Regional Arbitration Branch No. XIII - Butuan
City for illegal dismissal with payment of backwages including damages and attorney�s fees, claiming that he was
denied due process and dismissed without just cause. He alleged that while he was asked in Memorandum 34-01 to
explain the P314,252.23 remittance shortage, he was nonetheless denied due process since the actual grounds for his
dismissal, i.e., gross and habitual neglect of duties and responsibilities, misappropriation of REC funds and failure to remit
collections/monies, were not indicated in the said memorandum. 16 He also claimed that petitioners� evidence failed to
show any missing collection since (a) the attached Summary of Collections and Remittances dated June 7, 2001 17 did not
bear any receipt numbers, both with respect to collections and remittances and (b) the other Summary of Collections and
Remittances18 only contained receipt numbers for the remittances and none for the collections. 19

In defense, petitioners maintained that Gonzaga�s dismissal was attended with due process and founded on a just and
valid cause. They maintained that Gonzaga�s remittance shortages accumulated to the amount of
P314,252.23,20 stressing that the so-called Collection Report was prepared by Gonzaga himself. Petitioners further argued
that Gonzaga was given enough opportunity to defend himself during the investigation. Likewise, he was properly
informed of the accusation against him since the charge of cash shortage has a direct and logical relation to the findings
of gross and habitual neglect of duties and responsibilities, misappropriation of REC funds and failure to remit
collections/monies.� In this regard, there was no conflict between the charge stated in Memorandum 34-01 and the
grounds cited in the Final Notice of Termination.21

In reply, Gonzaga insisted that, contrary to petitioners� claim, the Summaries were prepared by SURNECO�s internal
auditor. He also added that the cooperative�s proper procedure for the conduct of investigation, as outlined in Section
16.5 of the Code of Ethics was not followed; hence, he was denied due process. 22

The LA�s Ruling

On November 28, 2002, the LA rendered a Decision,23 finding that petitioners were unable to show that Gonzaga�s
dismissal was just and valid and thus, ordered that the latter be reinstated to his former position without loss of seniority
rights and with payment of full backwages, moral and exemplary damages, and attorney�s fees. 24

The LA found that the alleged shortages in Gonzaga�s remittances were not proved since the actual receipts were not
presented in evidence. The Summaries were not even signed by the preparer and neither did they reflect the receipt
numbers of actual collection. Considering these deficiencies, there was no way of verifying whether the total amount
remitted, as shown in the receipts, would tally with the amount actually collected. 25 Further, the LA held that Gonzaga
was not afforded due process because the mandatory procedure for the conduct of investigation, pursuant to Section 16.5
of the Code of Ethics, was not followed.26
Aggrieved, petitioners elevated the matter to the NLRC. On September 22, 2003, pending appeal, they submitted a
Manifestation,27 with annexed Audit Report dated September 15, 200328 (September 15, 2003 Audit Report) prepared by
a certain Daphne Fetalvero-Awit, an independent CPA, as additional evidence to corroborate the Collection Report of
SURNECO�s internal auditor. The Cash Flow Summary attached to the September 15, 2003 Audit Report reflected a
shortage of P328,974.02 in Gonzaga�s remittances as of May 31, 2001. 29

The NLRC�s Ruling

In a Resolution dated August 31, 2004,30 the NLRC vacated the ruling of the LA, finding Gonzaga to have been dismissed
for a just and valid cause.

It observed that Gonzaga, by his admission, failed to subscribe to the company policy of remitting cash collections daily,
claiming that the distance and cost of doing so made it impractical. 31 With respect to the imputed cash shortages, it did
not give credence to Gonzaga�s position in view of his general denial. In this light, the NLRC faulted Gonzaga for not
demanding the production and examination of the collection receipts during the investigation proceedings, noting that the
said omission meant that the collection receipts would confirm the shortage. 32 Moreover, it ruled that the procedure laid
down in the Code of Ethics is not mandatory. It is sufficient that Gonzaga, with the assistance of an accountant and a
legal counsel, was given an ample opportunity to explain his side and also participate in the investigation proceedings. 33

Gonzaga moved for reconsideration but the same was denied in a Resolution dated February 1, 2005. 34

The CA�s Ruling

In a Decision dated May 29, 2008,35 the CA reversed and set aside the NLRC�s ruling and, instead, reinstated the
LA�s decision with modification, deleting the award of moral and exemplary damages. 36
It held that it is petitioners� duty to present substantial evidence to show that the dismissal was due to a just and valid
cause which they, however, failed to do. Petitioners� evidence did not prove the imputed shortage in Gonzaga�s
collection since the numbers of the collection receipts were not indicated so as to compare them with the remittance
receipts. Moreover, the CA did not give weight to the September 15, 2003 Audit Report, which was submitted for the first
time before the NLRC, because Gonzaga was not given an opportunity to submit any counter-evidence in order to rebut
the same. For insufficiency of evidence, it therefore ruled that the dismissal was illegal. 37

Nonetheless, it found improper the award of moral and exemplary damages for lack of showing that petitioners acted in
bad faith. Gonzaga was given ample opportunity to explain the alleged cash shortages, and an investigation, though
informal, was actually conducted by SURNECO to determine his liability. As such, petitioners did not act in bad faith. 38

Petitioners filed a motion for reconsideration which was, however, denied in a Resolution dated March 30, 2009. 39

In the said resolution, the CA held that the Summaries presented by petitioners remained insufficient as they failed to
establish the voluminous character of the official receipts evidencing the amount of Gonzaga�s collections and
remittances as to render them admissible under Section 3(c), Rule 130 40 of the Rules of Court.41 It also observed that
apart from the fact that the September 15, 2003 Audit Report was belatedly filed with the NLRC eight (8) months after
Gonzaga had filed his Comment to the Memorandum of Appeal, the said report was hearsay since the accountant who
prepared the said report was not presented to testify on its veracity. 42

Hence, the instant petition.

The Issue
The crux of the present controversy revolves around the propriety of Gonzaga�s dismissal.

The Court�s Ruling

The petition is meritorious.

At the outset, it must be pointed out that the main issue in this case involves a question of fact. In this light, it is an
established rule that the jurisdiction of the Court in cases brought before it from the CA via a petition for review
on certiorari under Rule 45 of the Rules of Court is generally limited to reviewing errors of law as the former is not a trier
of facts. In the Court�s exercise of its power of review, thus, the findings of fact of the CA are conclusive and binding
as it is not the former�s function to analyze or weigh evidence all over again. 43

However, one of the recognized exceptions to this rule is when there resides a conflict between the findings of facts of the
NLRC and of the CA. In such instance, there is a need to review the records to determine which of them should be
preferred as more conformable to the evidentiary facts, 44 as in this case. Accordingly, the Court proceeds to examine the
cause and procedure attendant to the termination of Gonzaga�s employment.

A. Cause of termination.

In termination cases, the burden of proof rests on the employer to show that the dismissal is for a valid cause. Failing in
which, the law considers the matter a case of illegal dismissal. 45 In this relation, the quantum of proof which the employer
must discharge is substantial evidence which, as defined in case law, means that amount of relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise.46
Applying the foregoing principles to this case, the Court finds that petitioners were able to prove, by substantial evidence,
that there lies a valid cause to terminate Gonzaga�s employment.

The Court concurs with the NLRC�s finding that petitioners� evidence � which consists of the Collection Report, the
Summaries, and the September 15, 2003 Audit Report with attached Cash Flow Summary � adequately supports the
conclusion that Gonzaga misappropriated the funds of the cooperative. The data indicated therein show gaping
discrepancies between Gonzaga�s collections and remittances, of which he was accountable for. In this accord, the
burden of evidence shifted to Gonzaga to prove that the reflected shortage was not attributable to him. However, despite
being allowed to peruse the bills and receipts on record together with the assistance of an accountant and a counsel
during the investigation proceedings, Gonzaga could not reconcile the amounts of his collections and remittances and,
instead, merely interposed bare and general denials.

To note, petitioners could not be faulted for not presenting each and every bill or receipt due to their voluminous
character. Corollarily, the Court takes judicial notice of the fact that documents of such nature could indeed consist of
multiple pages; likewise, it is clear that petitioners only sought to establish a general result from the whole, i.e., the total
cash shortage. In this regard, the requirement that the offeror first establish the voluminous nature of the evidence
sought to be presented, as discussed in the CA�s March 30, 2009 Resolution, is dispensed with. Besides, technical rules
of evidence are not strictly followed in labor cases 47 and thus, their liberal application relaxes the same.

Neither does the lack of collection receipt numbers, as Gonzaga alleges, suffice to exculpate him from the dismissal
charges. This is because the said numbers had already been supplied by petitioners through their eventual submission of
the Cash Flow Summary which was attached to the September 15, 2003 Audit Report. On this score, the Court observes
that the CA should have considered the foregoing documents as they corroborate the evidence presented by the
petitioners before the LA. Verily, labor tribunals, such as the NLRC, are not precluded from receiving evidence submitted
on appeal as technical rules are not binding in cases submitted before them. 48� In fact, labor officials should use every
and reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law
or procedure, all in the interest of due process. 49

Also, it cannot be said that with the admission of the said evidence, Gonzaga would be denied due process. Records show
that he was furnished a copy of the Manifestation with the attached audit report on September 23, 2003 and the NLRC
only rendered a decision on August 31, 2004. This interim period gave him ample time to rebut the same; however, he
failed to do so.

Finally, the records are bereft of any showing that SURNECO�s internal auditor was ill-motivated when he audited
Gonzaga. Thus, there lies no reason for the Court not to afford full faith and credit to his report.

All told, considering the totality of circumstances in this case, the Court finds the evidence presented by the petitioners,
as opposed to the bare denial of Gonzaga, sufficient to constitute substantial evidence to prove that he committed serious
misconduct and gross and habitual neglect of duty to warrant his dismissal from employment. Such are just causes for
termination which are explicitly enumerated under Article 296 of the Labor Code, as amended: 50

Article 296. Termination by Employer. � An employer may terminate an employment for any of the following causes: cralavvonlinelawlibrary

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

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

At any rate, Gonzaga had admitted that he failed to remit his collections daily in violation of SURNECO�s company
policy, rendering such fact conclusive and binding upon him. Therefore, for his equal violation of Section 7.2.2 of the Code
of Ethics (failure to remit collections/monies), his dismissal is justified altogether.

B. Termination procedure; statutory compliance.

The statutory procedure for terminating an employee is found in Section 2 (III), Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code (Omnibus Rules) which states: cralavvonlinelawlibrary

SEC. 2. Standards of due process: requirements of notice. � In all cases of termination of employment, the following
standards of due process shall be substantially observed: cralavvonlinelawlibrary

For termination of employment based on just causes as defined in Article 282 of the Labor Code: 51

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

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

(iii) A written notice of termination served on the employee, indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.
Succinctly put, the foregoing procedure consists of (a) a first written notice stating the intended grounds for termination;
(b) a hearing or conference where the employee is given the opportunity to explain his side; and (c) a second written
notice informing the employee of his termination and the grounds therefor. Records disclose that petitioners were able to
prove that they sufficiently complied with these procedural requirements: cralavvonlinelawlibrary

First, petitioners have furnished Gonzaga a written first notice specifying the grounds on which his termination was
sought.

In particular, Memorandum 34-01, which was issued on June 26, 2001, reads: 52

Attached is a report of Mr. Pedro A. Denolos, Internal Auditor, alleging that you incurred shortages as Teller of Sub-Office
I which accumulated to THREE HUNDRED FOURTEEN THOUSAND TWO HUNDRED FIFTY TWO PESOS AND TWENTY THREE
CENTAVOS (P314,252.23).

In this regard, please submit a written explanation within seventy two (72) hours from receipt of this memorandum why
no disciplinary action shall be taken against you on this matter.

xxxx

As may be gleaned from the foregoing, not only was Gonzaga effectively notified of the charge of cash shortage against
him, he was also given an ample opportunity to answer the same through written explanation. Notably, attached to
Memorandum 34-01 are the Summaries which particularly detail the discrepancies in Gonzaga�s collections vis-�-vis
his remittances. As it turned out, Gonzaga submitted a letter to management on July 16, 2001, attaching therewith an
Audit Opinion prepared by Gonzaga�s accountant, Laluna, in order to preliminarily answer the charges against him.
While the actual grounds of Gonzaga�s dismissal, i.e., gross and habitual neglect of duties and responsibilities,
misappropriation of REC funds and failure to remit collections/monies, were not explicitly stated in Memorandum 34-01,
these infractions are, however, implicit in the charge of cash shortage. Due to the direct and logical relation between
these grounds, Gonzaga could not have been misled to proffer any mistaken defense or contrive any weakened position.
Rather, precisely because of the substantial identity of these grounds, any defense to the charge of cash shortage equally
constitutes an adequate defense to the charges of gross and habitual neglect of duties and responsibilities,
misappropriation of REC funds and failure to remit collections/monies. It stands to reason that the core of all these
infractions is similar � that is, the loss of money to which Gonzaga was accountable � such that by reconciling the
amounts purportedly missing, Gonzaga would have been exculpated from all these charges. Therefore, based on these
considerations, the Court finds that the first notice requirement had been properly met.

Second, petitioners have conducted an informal inquiry in order to allow Gonzaga to explain his side. To this end,
SURNECO formed an investigation committee to investigate Gonzaga�s alleged remittance shortages. After its
formation, an invitation was sent to Gonzaga to attend the investigation proceedings, in which he participated. 53 Apropos
to state, Gonzaga never denied his participation during the said proceedings. Perforce, the second requirement had been
equally complied with.

Third, a second written notice was sent to Gonzaga informing him of the company�s decision to relieve him from
employment, as well as the grounds therefor.

Records indicate that the Committee tendered its report on August 9, 2001, finding Gonzaga guilty of gross and habitual
neglect of duties and responsibilities, misappropriation of REC funds and failure to remit collections/monies.
Subsequently, a notice of termination was served on Gonzaga on September 13, 2001, stating the aforesaid grounds.
Thereafter, Gonzaga tried to appeal his dismissal before SURNECO�s Board of Directors which was, however, denied
after again being given an adequate opportunity to present his case. 54 On October 25, 2001, a Final Notice of Termination
was served on Gonzaga which read as follows: cralavvonlinelawlibrary

For violation of the Code of Ethics and Discipline for REC Employees, specifically Sections 5.2.15, 7.2.1 and 7.2.2 you are
hereby notified of the termination of your employment with this cooperative effective at the close of business hours on
November 26, 2001.55

Based on the foregoing, it cannot be gainsaid that Gonzaga had been properly informed of the company�s decision to
dismiss him, as well as the grounds for the same. As such, the second notice requirement had been finally observed.

At this juncture, it must be pointed out that while petitioners have complied with the procedure laid down in the Omnibus
Rules, they, however, failed to show that the established company policy in investigating employees was adhered to. In
this regard, SURNECO�s breach of its company procedure necessitates the payment of nominal damages as will be
discussed below.

C. Company procedure; consequences of breach.�

Jurisprudence dictates that it is not enough that the employee is given an �ample opportunity to be heard� if
company rules or practices require a formal hearing or conference. In such instance, the requirement of a formal hearing
and conference becomes mandatory. In Perez v. Philippine Telegraph and Telephone Company,56 the Court laid down the
following principles in dismissing employees: cralavvonlinelawlibrary

(a) �ample opportunity to be heard� means any meaningful opportunity (verbal or written) given to the employee to
answer the charges against him and submit evidence in support of his defense, whether in a hearing, conference or some
other fair, just and reasonable way.

(b) a formal hearing or conference becomes mandatory only when requested by the employee in writing or
substantial evidentiary disputes exists or a company rule or practice requires it, or when similar circumstances justify
it.

(c) the �ample opportunity to be heard� standard in the Labor Code prevails over the �hearing and conference�
requirement in the implementing rules and regulations. [emphases and underscoring supplied]

The rationale behind this mandatory characterization is premised on the fact that company rules and regulations which
regulate the procedure and requirements for termination, are generally binding on the employer. Thus, as pronounced
in Suico v. NLRC, et al.:57

Company policies or practices are binding on the parties. Some can ripen into an obligation on the part of the
employer, such as those which confer benefits on employees or regulate the procedures and requirements for
their termination. [emphases supplied; citations omitted]

Records reveal that while Gonzaga was given an ample opportunity to be heard within the purview of the foregoing
principles, SURNECO, however, failed to show that it followed its own rules which mandate that the employee who is
sought to be terminated be afforded a formal hearing or conference. As above-discussed, SURNECO remains bound by
� and hence, must faithfully observe � its company policy embodied in Section 16.5 of its own Code of Ethics which
reads: cralavvonlinelawlibrary

16.5. Investigation Proper. The conduct of investigation shall be open to the public. If there is no answer from the
respondent, as prescribed, he shall be declared in default.
Direct examination of witnesses shall be dispensed with in the IAC. In lieu thereof, the IAC shall require the complainant
and his witnesses to submit their testimonies in affidavit form duly sworn to subject to the right of the respondent or his
counsel/s to cross-examine the complainant or his witnesses. Cross examination shall be confined only to material and
relevant matter. Prolonged argumentation and other dilatory tactics shall not be entertained.

Accordingly, since only an informal inquiry58 was conducted in investigating Gonzaga�s alleged cash shortages,
SURNECO failed to comply with its own company policy, violating the proper termination procedure altogether.

In this relation, case law states that an employer who terminates an employee for a valid cause but does so through
invalid procedure is liable to pay the latter nominal damages.

In Agabon v. NLRC (Agabon),59 the Court pronounced that where the dismissal is for a just cause, the lack of statutory
due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify
the employee for the violation of his statutory rights. 60 Thus, in Agabon, the employer was ordered to pay the employee
nominal damages in the amount of P30,000.00.61

By analogy, the Court finds that the same principle should apply to the case at bar for the reason that an employer�s
breach of its own company procedure is equally violative of the laborer�s rights, albeit not statutory in source. Hence,
although the dismissal stands, the Court deems it appropriate to award Gonzaga nominal damages in the amount of
P30,000.00.

To clarify, Escalante, the general manager of SURNECO, does not stand to be solidarily liable with the company for the
same since records are bereft of any indication that he either (a) assented to a patently unlawful act of the corporation or
(b) is guilty of bad faith or gross negligence in directing its affairs. 62

WHEREFORE, the petition is GRANTED. The May 29, 2008 Decision and March 30, 2009 Resolution of the Court of
Appeals are hereby SET ASIDE. The .August 31, 2004 and February 1, 2005 Resolutions of the National Labor Relations
Commission in NLRC Case No. M-007354-2003 are hereby REINSTATED with the MODIFICATION that petitioner
Surigao del Norte Electric Cooperative, Inc. be ORDERED to pay respondent Teofilo Gonzaga nominal damages in the
amount of Thirty Thousand Pesos (P30,000.00) on account of its breach of company procedure.

SO ORDERED.

Del Castillo, Perez, and Leonen,** JJ., concur.

Brion, (Acting Chairperson),*J., see: separate opinion.

Endnotes:

*
Designated Acting Chairperson in lieu of Justice Antonio T. Carpio per Special Order No. 1460 dated May 19, 2013. cralawlibrary

**
Designated Acting Member per Special Order No. 1461 dated May 19, 2013. cralawlibrary

1
Rollo, pp. 16-53. cralawlibrary

2
Id. at 11-17. Penned by Associate Justice Michael P. Elbinias, with Associate Justices Rodrigo F. Lim, Jr. and Edgardo T.
Lloren, concurring. cralawlibrary
3
Id. at 20-23. cralawlibrary

4
Id. at 132-138. Penned by Presiding Commissioner Salic B. Dumarpa, with Commissioners Proculo T. Sarmen and Jovito
C. Cagaanan, concurring. cralawlibrary

5
Id. at 144-145. cralawlibrary

6
Id. at 68-76. cralawlibrary

7
Id. at 68, 132. cralawlibrary

8
Id. at 214-240. cralawlibrary

9
Id. at 132. cralawlibrary

10
Id. at 133. cralawlibrary

11
Id. at 243-244. cralawlibrary

12
Id. at 133. cralawlibrary

13
Id. at 71, 75. cralawlibrary
14
Id. at 133. cralawlibrary

15
Id. cralawlibrary

16
Id. at 69-70. cralawlibrary

17
Id. at 223-240. cralawlibrary

18
Id. at 214-222. cralawlibrary

19
Id. at 70. cralawlibrary

20
Id. at 71. cralawlibrary

21
Id. at 71-72. cralawlibrary

22
Id. at 72-73. cralawlibrary

23
Id. at 68-76. cralawlibrary

24
Id. at 75-76. cralawlibrary

25
Id. at 73-74. cralawlibrary
26
Id. at 74-75. cralawlibrary

27
Id. at 109-114. cralawlibrary

28
Id. at 115-130. cralawlibrary

29
Id. at 130. cralawlibrary

30
Id. at 132-138. cralawlibrary

31
Id. at 136. cralawlibrary

32
Id. at 136-137. cralawlibrary

33
Id. at 137. cralawlibrary

34
Id. at 144-145. cralawlibrary

35
Id. at 11-17. cralawlibrary

36
Id. at 16-17. cralawlibrary

37
Id. at 14-16. cralawlibrary
38
Id. at 16-17. cralawlibrary

39
Id. at 20-23. cralawlibrary

40
SEC. 3. Original document must be produced; exceptions. � When the subject of inquiry is the contents of a
document, no evidence shall be admissible other than the original document itself, except in the following cases: cralavvonlinelawlibrary

xxxx

(c) When the original consists of numerous accounts or other documents which cannot be examined in court without
great loss of time and the fact sought to be established from them is only the general result of the whole; x x x x

41
Rollo, pp. 20-21. cralawlibrary

42
Id. at 22. cralawlibrary

43
Sugue v. Triumph International (Phils.), Inc., G.R. No.164804 and G.R. No. 164784, January 30, 2009, 577 SCRA 323,
331-332, citing Gabriel v. Mabanta, G.R. No. 142403, March 26, 2003, 399 SCRA 573, 579-580. cralawlibrary

44
Dimagan v. Dacworks United, Incorporated and/or Cancino, G.R. No. 191053, November 28, 2011, 661 SCRA 438, 445-
446. cralawlibrary

45
Caltex Philippines, Inc. v. Agad, G.R. No. 162017, April 23, 2010, 619 SCRA 196, 207, citing AMA Computer College-
East Rizal v. Ignacio, G.R. No. 178520, June 23, 2009, 590 SCRA 633. cralawlibrary

46
Id., citing Philippine Commercial Industrial Bank v. Cabrera, G.R. No. 160368, March 30, 2005, 454 SCRA 792, 803. cralawlibrary
47
Article 221 of the Labor Code reads: cralavvonlinelawlibrary

ART 221. Technical Rules Not Binding and Prior Resort to Amicable Settlement. � In any proceeding before the
Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling
and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every
and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities
of law or procedure, all in the interest of due process. In any proceeding before the Commission or any Labor Arbiter, the
parties may be represented by legal counsel but it shall be the duty of the Chairman, any Presiding Commissioner or
Commissioner or any Labor Arbiter to exercise complete control of the proceedings at all stages.

48
Misamis Oriental II Electric Service Cooperative v. Cagalawan, G.R. No. 175170, September 5, 2012, 680 SCRA 127,
139 citing Iran v. NLRC, 352 Phil. 261, 274 (1998). cralawlibrary

49
Philippine Telegraph and Telephone Corporation v. NLRC and Toribiano, 262 Phil. 491, 498-499 (1990). (citations
omitted)

50
Previously Article 282 of the Labor Code; renumbered by Republic Act No. 10151. cralawlibrary

51
Now Article 296 of the Labor Code, as amended; renumbered by Republic Act No. 10151. cralawlibrary

52
Rollo, p. 132. cralawlibrary

53
Id. at 133. cralawlibrary

54
Ibid. cralawlibrary
55
Id. cralawlibrary

56
G.R. No. 152048, April 7, 2009, 584 SCRA 110, 127. cralawlibrary

57
G.R. Nos. 146762, 153584 and 163793, January 30, 2007, 513 SCRA 325, 343. cralawlibrary

58
Rollo, p. 16. cralawlibrary

59
G.R. No. 158693, November 17, 2004, 442 SCRA 573. cralawlibrary

60
Id. at 616, citing Reta v. NLRC, G.R. No. 112100, May 27, 1994, 232 SCRA 613, 618. cralawlibrary

61
Id. at 620. cralawlibrary

62
Carag v. NLRC, G.R. No. 147590, April 2, 2007, 520 SCRA 28, 52, citing McLeod v. NLRC, G.R. No. 146667, January 23,
2007, 512 SCRA 222, 249; and Spouses Santos v. NLRC, G.R. No. 120944, 354 Phil. 918 (1998).

SEPARATE CONCURRING OPINION

 BRION, J.:

I concur in the result. I write this opinion to put in the proper perspective the Court's treatment of labor cases elevated
to us through a petition for review on certiorari under Rule 45 of the Rules of Court, from a decision of the Court of
Appeals on petition for certiorari under Rule 65 of the Rules of Court.

Pursuant to the established rules and jurisprudence, a labor case is generally elevated to this Court through a petition for
review on certiorari under Rule 45 of the Rules of Court, after it has been resolved by the CA through a petition
for certiorari under Rule 65 of the Rules of Court. The object of a Rule 45 petition is to determine the correctness of the
assailed decision, i.e., whether the respondent court committed a reversible legal error in resolving the case.� In
contrast, the object of a Rule 65 petition is to determine jurisdictional error on the part of the respondent court, i.e..
whether the respondent court committed grave abuse of discretion amounting to lack or excess of jurisdiction. In light of
this review process, the Court takes on a unique approach in reviewing a CA decision on a labor case in
that "we...examine the CA decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the [National Labor Relations Commission] decision before it, not on
the basis of whether the NLRC decision 011 the merits of the case was correct." 1 Hence, the question to ask is
whether theCA correctly determined whether the NLRC committed grave abuse of discretion in ruling in this case. In this
particular case, I believe that the CA erred in ascribing grave abuse of discretion on the part of the NLRC.

The CA ruled that the petitioners' evidence was insufficient to establish that the respondent Teofilo Gonzaga's dismissal as
due to a just and valid cause. The CA ruled that "the petitioners' evidence did not prove the imputed shortage in
Gonzaga's collection since the numbers of the collection receipts were not indicated so as to compare them with the
remittance receipts."2� But as pointed out by the ponencia, it was unnecessary to present the collection receipts due to
their voluminous character.3� Moreover, the petitioners have presented other documentary evidence, i.e., the Collection
Report, the Summaries, and the September 15, 2003 Audit Report, that sufficiently established the shortage of funds in
Gonzaga's custody. In light of this evidence and Gonzaga's general denial, there was sufficient and reasonable basis for
the NLRC to conclude that Gonzaga was liable for misappropriation; the NLRC's factual findings and legal conclusion are
fully supported by the evidence and records of the case. It was, therefore, erroneous for the CA to ascribe grave abuse of
discretion on the NLRC.

Gonzaga's misappropriation of the funds under his custody constitutes a just and valid cause for his dismissal.
Nonetheless, as the ponencia found, Gonzaga was not afforded the procedural due process for failure of the petitioners to
observe their own established policy in investigating erring employees. As ruled in Agabon v. National Labor Relations
Commission,4 "[w]here the dismissal is for a just cause, as in the instant case, the lack of statutory due process should
not nullify the dismissal, or render it illegal, or ineffectual.� However, the employer should indemnify the employee for
the violation of his statutory rights..." Hence, the employer should be required to pay the employee nominal damages,
which has been set by jurisprudence at P30,000.00.

In light of these considerations, I concur m the result with the ponencia.

Endnotes:

1
Alontoya v. Transmed Manila Corporation, G.R. No. 183329, August 27. 2009. 597 SCRA 334, 343. cralawlibrary

2
Ponencia, p. 5. cralawlibrary
3
Ponencia, p.7. cralawlibrary

4
G.R. No. 158693, November 17, 2004, 442 SCRA 573.

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 June-2013 Jurisprudence

 A.C. No. 7944, June 03, 2013 - REX POLINAR DAGOHOY, Complainant, v. ATTY. ARTEMIO V. SAN JUAN, Respondents.
 A.C. No. 4191, June 10, 2013 - ANITA C. PENA, Complainant, v. ATTY. CHRISTINA C. PATERNO, Respondent.

 G.R. NO. 157020, June 19, 2013 - REINIER PACIFIC INTERNATIONAL SHIPPING, INC. AND NEPTUNE SHIP
MANAGEMENT SVCS., PTE., LTD., Petitioners, v. CAPTAIN FRANCISCO B. GUEVARRA, SUBSTITUTED BY HIS HEIRS,
Respondents.
 A.C. No. 9537 [Formerly CBD Case No. 09-2489], June 10, 2013 - DR. TERESITA LEE, Complainant, v. ATTY. AMADOR
L. SIMANDO, Respondent.

 G.R. NO. 169214, June 19, 2013 - SPOUSES MANUEL SY AND VICTORIA SY, Petitioners, v. GENALYN D. YOUNG,
Respondent.

 G.R. NO. 173829, June 10, 2013 - VALBUECO, INC., Petitioner, v. PROVINCE OF BATAAN, REPRESENTED BY ITS
PROVINCIAL GOVERNOR ANTONIO ROMAN;1 EMMANUEL M. AQUINO,2 IN HIS OFFICIAL CAPACITY AS REGISTRAR OF
THE REGISTER OF DEEDS OF BALANGA, BATAAN; AND PASTOR P. VICHUACO,3 IN HIS OFFICIAL CAPACITY AS
PROVINCIAL TREASURER OF BALANGA, BATAAN, Respondents.

 G.R. No.171692, June 03, 2013 - SPOUSES DELFIN O. TUMIBAY AND AURORA T. TUMIBAY-DECEASED; GRACE JULIE
ANN TUMIBAY MANUEL, LEGAL REPRESENTATIVE, Petitioners, v. SPOUSES MELVIN A. LOPEZ AND ROWENA GAY T.
VISITACION LOPEZ, Respondents.

 G.R. NO. 175773, June 17, 2013 - MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU),
Petitioner, v. MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.

 G.R. NO. 177103, June 03, 2013 - ORIENTAL SHIPMANAGEMENT CO., INC., ROSENDO C. HERRERA, AND BENNET
SHIPPING SA LIBERIA, Petitioners, v. RAINERIO N. NAZAL, Respondent.

 G.R. NO. 177812, June 19, 2013 - CONCRETE SOLUTIONS, INC./PRIMARY STRUCTURES CORPORATION,
REPRESENTED BY ANASTACIO G. ARDIENTE, JR., Petitioners, v. ARTHUR CABUSAS, Respondent.

 G.R. NO. 179492, June 05, 2013 - REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ABUSAMA M. ALID, OFFICER-
IN-CHARGE, DEPARTMENT OF AGRICULTURE-REGIONAL-FIELD UNIT XII (DA-RFU XII), Petitioner, v. ABDULWAHAB A.
BAYAO, OSME�A I. MONTA�ER, RAKMA B. BUISAN, HELEN M. ALVARES, NEILA P. LIMBA, ELIZABETH B. PUSTA, ANNA
MAE A.. SIDENO, UDTOG B. TABONG, JOHN S. KAMENZA, DELIA R. SUBALDO, DAYANG W. MACMOD, FLORENCE S.
 TAYUAN, IN THEIR OWN BEHALF AND IN BEHALF OF THE OTHER OFFICIALS AND EMPLOYEES OF DA-RFU XII,
Respondents.

 G.R. NO. 179643, June 03, 2013 - ERNESTO L. NATIVIDAD, Petitioner, v. FERNANDO MARIANO, ANDRES MARIANO
AND DOROTEO GARCIA, Respondents.

 G.R. NO. 181195, June 10, 2013 - FREDERICK JAMES C. ORAIS, Petitioner, v. DR. AMELIA C. ALMIRANTE,
Respondent.

 G.R. NO. 182963, June 03, 2013 - SPOUSES DEO AGNER AND MARICON AGNER, Petitioners, v. BPI FAMILY SAVINGS
BANK, INC., Respondent.

 G.R. NO. 188716, June 10, 2013 - MELINDA L. OCAMPO, Petitioner, v. COMMISSION ON AUDIT, Respondent.

 G.R. NO. 189297, June 03, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. GUILLERMO LOMAQUE,
Accused-Appellant.

 G.R. NO. 191730, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MYLENE TORRES Y CRUZ,
Accused-Appellant.

 G.R. NO. 191877, June 18, 2013 - PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR), Petitioner, v.
ARIEL R. MARQUEZ, Respondent.; [G.R. NO. 192287] - IRENEO M. VERDILLO, Petitioner, v. PHILIPPINE AMUSEMENT AND
GAMING CORPORATION (PAGCOR), Respondent.

 G.R. NO. 192893, June 05, 2013 - MANILA ELECTRIC COMPANY, Petitioner, v. HEIRS OF SPOUSES DIONISIO DELOY
AND PRAXEDES MARTONITO, REPRESENTED BY POLICARPIO DELOY, Respondents.

 G.R. NO. 193453, June 05, 2013 - SPOUSES RUBIN AND PORTIA HOJAS, Petitioners, v. PHILIPPINE AMANAH BANK
AND RAMON KUE, Respondents.
 G.R. NO. 195523, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Appellee, v. ERNESTO GANI Y TUPAS, Appellant.

 G.R. NO. 195842, June 18, 2013 - ROBERTO B. REBLORA, Petitioner, v. ARMED FORCES OF THE PHILIPPINES,
Respondent.

 G.R. NO. 197039, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appelle, v. ARIEL CALARA Y ABALOS,
Accused-Appellant.

 G.R. NO. 201675, June 19, 2013 - JUANITO ANG, FOR AND IN BEHALF OF SUNRISE MARKETING (BACOLOD), INC.,
Petitioner, v. SPOUSES ROBERTO AND RACHEL ANG, Respondents.

 G.R. NO. 198755, June 05, 2013 - ALBERTO PAT-OG, SR., Petitioner, v. CIVIL SERVICE COMMISSION, Respondent.

 G.R. NO. 202079, June 10, 2013 - FIL-ESTATE GOLF AND DEVELOPMENT, INC. AND FIL�-ESTATE LAND, INC.,
Petitioners, v. VERTEX SALES AND TRADING, INC., Respondent.

 G.R. NO. 202247, June 19, 2013 - SIME DARBY PILIPINAS, INC., Petitioner, v. JESUS B. MENDOZA, Respondent.

 G.R. NO. 202690, June 05, 2013 - HENRY L. SY, Petitioner, v. LOCAL GOVERNMENT OF QUEZON CITY, Respondent.

 G.R. NO. 202791, June 10, 2013 - PHILIPPINE TRANSMARINE CARRIERS, INC., Petitioner, v. LEANDRO LEGASPI,
Respondent.

 A.M. NO. P-10-2741, June 04, 2013 - JUDGE ANTONIO C. REYES, Complainant, v. EDWIN FANGONIL, PROCESS
SERVER, REGIONAL TRIAL COURT, BRANCH 61 OF BAGUIO CITY, Respondent.

 A.M. NO. P-06-2223 [Formerly A.M. NO. 06-7-226-MTC), June 10, 2013 - OFFICE OF THE COURT ADMINISTRATOR,
Complainant, v. LORENZA M. MARTINEZ, CLERK OF COURT, MUNICIPAL TRIAL COURT, CANDELARIA, QUEZON.
Respondent.
  A.M. NO. P-10-2879 (Formerly A.M. OCA I.P.I. No. 09-3048-P), June 03, 2013 - AUXENCIO JOSEPH B. CLEMENTE,
CLERK OF COURT, METROPOLITAN TRIAL COURT, BRANCH 48, PASAY CITY, Complainant, v. ERWIN E. BAUTISTA, CLERK
III, METROPOLITAN TRIAL COURT, BRANCH 48, PASAY CITY, Respondent.

 A.M. NO. P-12-3048 (formerly A.M. NO. 11-3-29-MCTC), June 05, 2013 - OFFICE OF THE COURT ADMINISTRATOR,
Complainant, v. NELSON P. MAGBANUA, PROCESS SERVER, 3RD MUNICIPAL CIRCUIT TRIAL COURT, PATNONGON,
ANTIQUE, Respondent.

 A.M. NO. P-13-3115 (Formerly A.M. NO. 13-3-41-RTC], June 04, 2013 - RE: DROPPING FROM THE ROLLS OF JOYLYN
R. DUPAYA, Court Stenographer III, Regional Trial Court, Branch 10, Aparri, Cagayan.

 G.R. No. L-44, September 13, 1945 - LILY RAQUIZA, ET AL. v. J. BRADFORD, ET AL. - 075 Phil 50

 G.R. No. 156759, June 05, 2013 - ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY REYES,
JANET BAY, JESUS R. GALANG, AND RANDY HAGOS, Petitioners, v. FRANCISCO R. CO, JR., Respondent.

 G.R. No. 159691, June 13, 2013 - HEIRS OF MARCELO SOTTO, REPRESENTED BY: LOLIBETH SOTTO NOBLE, DANILO
C. SOTTO, CRISTINA C. SOTTO, EMMANUEL C. SOTTO AND FILEMON C. SOTTO; AND SALVACION BARCELONA, AS HEIR
OF DECEASED MIGUEL BARCELONA, Petitioners, v. MATILDE S. PALICTE, Respondent.

 G.R. No. 160786, June 17, 2013 - SIMPLICIA O. ABRIGO AND DEMETRIO ABRIGO, Petitioners, v. JIMMY F. FLORES,
EDNA F. FLORES, DANILO FLORES, BELINDA FLORES, HECTOR FLORES, MARITES FLORES, HEIRS OF MARIA F. FLORES,
JACINTO FAYLONA, ELISA FAYLONA MAGPANTAY, MARIETTA FAYLONA CARTACIANO, AND HEIRS OF TOMASA BANZUELA
VDA. DE FAYLONA, Respondents.

 G.R. No. 160982, June 26, 2013 - MANILA JOCKEY CLUB, INC., Petitioner,v. AIMEE O. TRAJANO, Respondent.

 G.R. No. 161878, June 05, 2013 - PHILWORTH ASIAS, INC., SPOUSES LUISITO AND ELIZABETH MACTAL, AND
SPOUSES LUIS AND ELOISA REYES, Petitioners, v. PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondent.
  G. R. No. 163061, June 26, 2013 - ALFONSO L. FIANZA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION), BINGA HYDROELECTRIC PLANT, INC., ANTHONY C. ESCOLAR, ROLAND M. LAUTCHANG,
Respondents.

 G.R. No. 172334, June 05, 2013 - DR. ZENAIDA P. PIA, Petitioner, v. HON. MARGARITO P. GERVACIO, JR., OVERALL
DEPUTY OMBUDSMAN, FORMERLY ACTING OMBUDSMAN, OFFICE OF THE OMBUDSMAN, DR. OFELIA M. CARAGUE,
FORMERLY PUP PRESIDENT, DR. ROMAN R. DANNUG, FORMERLY DEAN, COLLEGE OF ECONOMICS, FINANCE AND
POLITICS (CEFP), NOW ASSOCIATE PROFESSOR, CEFP POLYTECHNIC UNIVERSITY OF THE PHILIPPINES (PUP), STA.
MESA, MANILA, Respondents.

 G.R. No. 172892, June 13, 2013 - PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, v. BUREAU OF
INTERNAL REVENUE, Respondent.

 G.R. No. 173330, June 17, 2013 - LUCILLE DOMINGO, Petitioner, v. MERLINDA COLINA, Respondent.

 G.R. No. 173946, June 19, 2013 - BOSTON EQUITY RESOURCES, INC., Petitioner, v. COURT OF APPEALS AND LOLITA
G. TOLEDO, Respondents.

 G.R. No. 174908, June 17, 2013 - DARMA MASLAG, Petitioner, v. AND ELIZABETH MONZON, WILLIAM GESTON,
REGISTRY OF DEEDS OF BENGUET, Respondents.

 G.R. Nos. 175279-80, June 05, 2013 - SUSAN LIM-LUA, Petitioner, v. DANILO Y. LUA, Respondent.

 G.R. No. 175542 and 183205, June 05, 2013 - GREEN ACRES HOLDINGS, INC., Petitioner, v. VICTORIA P. CABRAL,
SPS. ENRIQUE T. MORAGA and VICTORIA SORIANO, FILCON READY MIXED, INC., DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD (DARAB), and REGISTRY OF DEEDS OF BULACAN, MEYCAUAYAN BRANCH, Respondents.;
VICTORIA P. CABRAL, Petitioner, v. PROVINCIAL ADJUDICATOR, JOSEPH NOEL C. LONGBOAN / OFFICE OF THE AGRARIAN
 REFORM ADJUDICATOR, GREEN ACRES HOLDINGS, INC., SPOUSES ENRIQUE T. MORAGA and VICTORIA SORIANO and
FILCON READY MIXED, INC., Respondents.

 G.R. No. 175900, June 10, 2013 - KAPISANANG PANGKAUNLARAN NG KABABAIHANG POTRERO, INC. AND MILAGROS
H. REYES, Petitioners, v. REMEDIOS BARRENO, LILIBETH AMETIN, DRANREV F. NONAY, FREDERICK D. DIONISIO AND
MARITES CASIO, Respondents.

 G.R. No. 176425, June 05, 2013 - HEIRS OF MANUEL UY EK LIONG, REPRESENTED BY BELEN LIM VDA. DE UY,
Petitioners, v. MAURICIA MEER CASTILLO, HEIRS OF BUENAFLOR C. UMALI, REPRESENTED BY NANCY UMALI, VICTORIA
H. CASTILLO, BERTILLA C. RADA, MARIETTA C. CAVANEZ, LEOVINA C. JALBUENA AND PHILIP M. CASTILLO, Respondents.

 G.R. No. 176838, June 13, 2013 - DEPARTMENT OF AGRARIAN REFORM, AS REPRESENTED BY FRITZI C. PANTOJA, IN
HER CAPACITY AS THE PROVINCIAL AGRARIAN REFORM OFFICER, DAR-LAGUNA, Petitioner, v. PARAMOUNT HOLDINGS
EQUITIES, INC., JIMMY CHUA, ROJAS CHUA, BENJAMIN SIM, SANTOS C. TAN, WILLIAM C. LEE AND STEWART C. LIM,
Respondents.

 G.R. No. 178947, June 26, 2013 - VIRGINIA DE LOS SANTOS�DIO, AS AUTHORIZED REPRESENTATIVE OF H.S.
EQUITIES, LTD., AND WESTDALE ASSETS, LTD., Petitioner, v. THE HONORABLE COURT OF APPEALS, JUDGE RAMON S.
CAGUIOA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 74, REGIONAL. TRIAL COURT, OLONGAPO CITY, AND
TIMOTHY J. DESMOND, Respondents. - R E S O L U T I O N; G.R. No. 179079 - June 26, 2013 - PEOPLE OF PHILIPPINES,
The Petitioner, v. TIMOTHY J. DESMOND, Respondent.

 G.R. No. 179448, June 26, 2013 - CARLOS L. TANENGGEE, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

 G.R. No. 179685, June 19, 2013 - CONRADA O. ALMAGRO, Petitioner, v. SPS. MANUEL AMAYA, SR. AND LUCILA
MERCADO, JESUS MERCADO, SR., AND RICARDO MERCADO, Respondents.
  G.R. No. 179736, June 26, 2013 - SPOUSES BILL AND VICTORIA HING, Petitioners, v. ALEXANDER CHOACHUY, SR.
AND ALLAN CHOACHUY, Respondents.

 G.R. No. 179267, June 25, 2013 - JESUS C. GARCIA, Petitioner, v. THE HONORABLE RAY ALAN T. DRILON, PRESIDING
JUDGE, REGIONAL TRIAL COURT-BRANCH 41, BACOLOD CITY, AND ROSALIE JAYPE-GARCIA, FOR HERSELF IN BEHALF OF
MINOR CHILDREN, NAMELY: JO-ANN, JOSEPH AND EDUARD, JESSE ANTHONE, ALL SURNAMED GARCIA, Respondents.

 G.R. No. 180476, June 26, 2013 - RAYMUNDO CODERIAS, AS REPRESENTED BY HIS ATTORNEY-IN-FACT, MARLON M.
CODERIAS, Petitioner, v. ESTATE OF JUAN CHIOCO, REPRESENTED BY ITS ADMINISTRATOR, DR. RAUL R. CARAG,
Respondent.

 G.R. No. 182072, June 28, 2013 - UNIVAC DEVELOPMENT, INC., Petitioner, v. WILLIAM M. SORIANO, Respondent.

 G.R. No. 182130, June 19, 2013 - IRIS KRISTINE BALOIS ALBERTO AND BENJAMIN D. BALOIS, Petitioners, v. THE
HON. COURT OF APPEALS, ATTY. RODRIGO A. I REYNA, ARTURO S. CALIANGA, GIL ANTHONY M. CALIANGA, JESSEBEL
CALIANGA, AND GRACE. EVANGELISTA, Respondents. - G.R. NO. 182132, June 19, 2013 - THE SECRETARY OF JUSTICE,
THE CITY PROSECUTOR OF MUNTINLUPA, THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF MUNTINLUPA
CITY, BENJAMIN D. BALOIS, AND IRIS KRISTINE BALOIS, ALBERTO, Petitioners, v. ATTY. RODRIGO A. REYNA, ARTURO S.
CALIANGA, GIL ANTHONY M. CALIANGA, JESSEBEL CALIANGA, AND GRACE EVANGELISTA, Respondents.

 G.R. No. 182295, June 26, 2013 - 7K CORPORATION, Petitioner, v. EDDIE ALBARICO, Respondent.

 G.R. No. 182855, June 05, 2013 - MR. ALEXANDER �LEX� ADONIS, REPRESENTED BY THE CENTER FOR MEDIA
FREEDOM AND RESPONSIBILITY (CMFR), THROUGH ITS EXECUTIVE DIRECTOR, MRS. MELINDA QUINTOS-DE JESUS;
AND THE NATIONAL UNION OF JOURNALISTS OF THE PHILIPPINES (NUJP), THROUGH ITS CHAIRPERSON, MR. JOSE
TORRES, JR., Petitioners, v. SUPERINTENDENT VENANCIO TESORO, DIRECTOR, DAVAO PRISONS AND PENAL FARM,
PANABO CITY, DIGOS, DAVAO DEL NORTE, Respondent.
  G.R. No. 182957, June 13, 2013 - ST. JOSEPH ACADEMY OF VALENZUELA FACULTY ASSOCIATION (SJAVFA)-FUR
CHAPTER-TUCP, Petitioner, v. ST. JOSEPH ACADEMY OF VALENZUELA AND DAMASO D. LOPEZ, Respondents.

 G.R. No. 183091, June 19, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. BERNESTO DE LA CRUZ @
BERNING, Accused-Appellant.

 G.R. No. 184116, June 19, 2013 - CENTURY IRON WORKS, INC. AND BENITO CHUA, Petitioners, v. ELETO B.
BA�AS, Respondent.

 G.R. No. 184589, June 13, 2013 - DEOGENES O. RODRIGUEZ, Petitioner, v. HON. COURT OF APPEALS AND
PHILIPPINE CHINESE CHARITABLE ASSOCIATION, INC., Respondents.

 G.R. No. 185129, June 17, 2013 - ABELARDO JANDUSAY, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

 G.R. No. 185604, June 13, 2013 - REPUBLIC OF THE PHILIPPINES, Petitioner, v. EDWARD M. CAMACHO, Respondent.

 G.R. No. 185719, June 17, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MARCELINO COLLADO Y
CUNANAN, MYRA COLLADO Y SENICA, MARK CIPRIANO Y ROCERO, SAMUEL SHERWIN LATARIO Y ENRIQUE,* AND
REYNALDO RANADA Y ALAS,** Accused-Appellants.

 G.R. Nos. 185729-32, June 26, 2013 - PEOPLE OF THE PHILIPPINES, Petitioner, v. THE HONORABLE SANDIGANBAYAN
(FOURTH DIVISION), ANTONIO P. BELICENA, ULDARICO P. ANDUTAN, JR., RAUL C. DE VERA, ROSANNA P. DIALA AND
JOSEPH A. CABOTAJE, Respondents.

 G.R. No. 185830, June 05, 2013 - ECOLE DE CUISINE MANILLE (CORDON BLEU OF THE PHILIPPINES), INC.,
Petitioner, v. RENAUIL COINTREAU & CIE AND LE CORDON BLEU INT'L., B.V., Respondents.

 G.R. No. 185821, June 13, 2013 - LAND BANK OF THE PHILIPPINES, Petitioner, v. ATTY. RICARDO D. GONZALEZ,
Respondent.
 G.R. No. 186014, June 26, 2013 - ALI AKANG, Petitioner, v. MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE,
REPRESENTED BY ITS MUNICIPAL MAYOR AND MUNICIPAL VICE MAYOR AND MUNICIPAL COUNCILORS/KAGAWADS,
Respondent.

 G.R. No. 185891, June 26, 2013 - CATHAY PACIFIC AIRWAYS, Petitioner, v. JUANITA REYES, WILFI EDO REYES,
MICHAEL ROY REYES, SIXTA LAPUZ, AND SAMPAGUITA TRAVEL CORP., Respondents.

 G.R. No. 186475, June 26, 2013 - POSEIDON INTERNATIONAL MARITIME SERVICES, INC., Petitioner, v. TITO R.
TAMALA, FELIPE S. SAURIN, JR., ARTEMIO A. BO-OC AND JOEL S. FERNANDEZ, Respondents.

 G.R. No. 186137, June 26, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. DATU NOT ABDUL, Defendant-
Appellant.

 G. R. No. 186732, June 13, 2013 - ALPS TRANSPORTATION AND/OR ALFREDO E. PEREZ, Petitioners, v. ELPIDIO M.
RODRIGUEZ, Respondent.

 G. R. No. 187587, June 05, 2013 - NAGKAKAISANG MARALITA NG SITIO MASIGASIG, INC., Petitioner, v. MILITARY
SHRINE SERVICES � PHILIPPINE VETERANS AFFAIRS OFFICE, DEPARTMENT OF NATIONAL DEFENSE, Respondent.; G.
R. NO. 187654, June 05, 2013 - WESTERN BICUTAN LOT OWNERS ASSOCIATION, INC., REPRESENTED BY ITS BOARD OF
DIRECTORS, Petitioner, v. MILITARY SHRINE SERVICES � PHILIPPINE VETERANS AFFAIRS OFFICE, DEPARTMENT OF
NATIONAL DEFENSE, Respondent.

 G.R. No.187722, June 10, 2013 - SURIGAO DEL NORTE ELECTRIC COOPERATIVE, INC. AND/OR DANNY Z.
ESCALANTE, Petitioners, v. TEOFILO GONZAGA, Respondent.

 G.R. Nos. 187896-97, June 10, 2013 - AMANDO P. CORTES, Petitioner, v. OFFICE OF THE OMBUDSMAN (VISAYAS),
VICTORY M. FERNANDEZ, JULIO E. SUCGANG AND NILO IGTANLOC, Respondents.
  G.R. No. 188024, June 05, 2013 - RODRIGO RONTOS Y DELA TORRE, Petitioner, v. PEOPLE OF THE PHILIPPINES,
Respondent.

 G.R. No. 188310, June 13, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MERCIDITA T. RESURRECCION,
Accused-Appellant.

 G.R. No. 189836, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. ROMEO BUSTAMANTE Y
ALIGANGA, Accused-Appellant.

 G.R. No. 189846, June 26, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. RAMIL MORES, Accused-
Appellant.

 G.R. No. 190818, June 05, 2013 - METRO MANILA SHOPPING MECCA CORP., SHOEMART, INC., SM PRIME HOLDINGS,
INC., STAR APPLIANCES CENTER, SUPER VALUE, INC., ACE HARDWARE PHILIPPINES, INC., HEALTH AND BEAUTY, INC.,
JOLLIMART PHILS. CORP., and SURPLUS MARKETING CORPORATION, Petitioners, v. MS. LIBERTY M. TOLEDO, in her
official capacity as the City Treasurer of Manila, and THE CITY OF MANILA, Respondents.

 G. R. No. 190957, June 05, 2013 - PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, v. APAC
MARKETING CORPORATION, REPRESENTED BY CESAR M. ONG, JR., Respondents.

 G.R. No. 191267, June 26, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MONICA MENDOZA Y TRINIDAD,
Accused-Appellant.

 G.R. No. 191391, June 19, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. BENEDICT HOMAKY LUCIO,
Accused-Appellant.

 G.R. No. 191752, June 10, 2013 - PEOPLE OF THE PHILIPPINES, Appellee, v. JOSE ARMANDO CERVANTES CACHUELA
AND BENJAMIN JULIAN CRUZ IBA�EZ, Accused. BENJAMIN JULIAN CRUZ IBA�EZ, Accused-Appellant.
  G.R. No. 191903, June 19, 2013 - MAGSAYSAY MARITIME CORPORATION AND/OR WESTFAL-LARSEN AND CO., A/S,
Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, FIRST DIVISION, AND WILSON G. CAPOY, Respondents.

 G.R. No. 192239, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. RICARDO PAMINTUAN Y
SAHAGUN, Accused-Appellant.

 G.R. No. 192601, June 03, 2013 - PHILIPPINE JOURNALISTS, INC., Petitioner, v. JOURNAL EMPLOYEES UNION (JEU),
FOR ITS UNION MEMBER, MICHAEL ALFANTE, Respondents.

 G.R. No. 192890, June 17, 2013 - LAND BANK OF THE PHILIPPINES, Petitioner, v. VIRGINIA PALMARES, LERMA P.
AVELINO, MELILIA P. VILLA, NINIAN P. CATEQUISTA, LUIS PALMARES, JR., SALVE P. VALENZUELA, GEORGE P. PALMARES,
AND DENCEL P. PALMARES HEREIN REPRESENTED BY THEIR ATTORNEY-IN-FACT, LERMA P. AVELINO, Respondents.

 G.R. No. 193314, June 25, 2013 - SVETLANA P. JALOSJOS, Petitioner, v. COMMISSION ON ELECTIONS, EDWIN ELIM
TUPAG AND RODOLFO Y. ESTRELLADA, Respondents.

 G.R. No. 192913, June 13, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. JOEL REBOTAZO Y ALEJANDRIA,
Accused-Appellant.

 G.R. No. 193453, June 05, 2013 - SPOUSES RUBIN AND PORTIA HOJAS, Petitioners, v. PHILIPPINE AMANAH BANK
AND RAMON KUE, Respondents.

 G.R. No. 193747, June 05, 2013 - JOSELITO C. BORROMEO, Petitioner, v. JUAN T. MINA, Respondent.

 G.R. No. 194062, June 17, 2013 - REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY, ORLANDO
REYES, FERRER SUAZO AND ALVIN U. TY, Petitioners, v. PETRON CORPORATION, PILIPINAS SHELL PETROLEUM
CORPORATION, AND SHELL INTERNATIONAL PETROLEUM COMPANY LIMITED, Respondents.

 G.R. No. 194247, June 19, 2013 - BASES CONVERSION DEVELOPMENT AUTHORITY, Petitioner, v. ROSA REYES,
CENANDO, REYES AND CARLOS REYES, Respondents.
 G.R. No. 194362, June 26, 2013 - PHILIPPINE HAMMONIA SHIP AGENCY, INC. (NOW KNOWN AS BSM CREW SERVICE
CENTRE PHILIPPINES, INC.) AND DORCHESTER MARINE LTD., Petitioners, v. EULOGIO V. DUMADAG, Respondent.

 G.R. No. 194382, June 10, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. GLORIA CALUMBRES Y
AUDITOR, Accused-Appellant.

 G. R. No. 194384, June 13, 2013 - JOSELITO RAMOS, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

 G.R. No. 194846, June 28, 2013 - HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO, MANUEL D. ROSAROSO,
ALGERICA D. ROSAROSO, AND CLEOFE R. LABINDAO, Petitioners, v. LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN
AND **LAILA SOLUTAN, AND MERIDIAN REALTY CORPORATION, Respondents.

 G.R. No. 195777, June 19, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. FERDINAND CASTRO Y LAPENA,
Accused-Appellant.

 G.R. No. 196049, June 26, 2013 - MINORU FUJIKI, Petitioner, v. MARIA PAZ GALELA MARINAY, SHINICHI MAEKARA,
LOCAL CIVIL REGISTRAR OF QUEZON CITY, AND THE ADMINISTRATOR AND CIVIL REGISTRAR GENERAL OF THE
NATIONAL STATISTICS OFFICE, Respondents.

 G.R. No. 197363, June 26, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. ROMAN ZAFRA Y SERRANO,
Accused-Appellant.

 G.R. No. 197861, June 05, 2013 - SPOUSES FLORENTINO T. MALLARI AND AUREA V. MALLARI, Petitioners, v.
PRUDENTIAL BANK (NOW BANK OF THE PHILIPPINE ISLANDS), Respondent.

 G.R. No. 197049, June 10, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MARIA JENNY REA Y GUEVARRA
AND ESTRELLITA TENDENILLA, Accused-Appellants.

 G.R. No. 198732, June 10, 2013 - CHRISTIAN CABALLO, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.
  G.R. No. 198789, June 03, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. REGGIE BERNARDO, Accused-
Appellant.

 G.R. No. 199354, June 26, 2013 - WILSON T. GO, Petitioner, v. BPI FINANCE CORPORATION, Respondent.

 G.R. No. 199650, June 26, 2013 - J PLUS ASIA DEVELOPMENT CORPORATION, Petitioner, v. UTILITY ASSURANCE
CORPORATION, Respondent.

 G.R. No. 200094, June 10, 2013 - BENIGNO M. VIGILLA, ALFONSO M. BONGOT, ROBERTO CALLESA, LINDA C. CALLO,
NILO B. CAMARA, ADELIA T. CAMARA, ADOLFO G. PINON, JOHN A. FERNANDEZ, FEDERICO A. CALLO, MAXIMA P.
ARELLANO, JULITO B. COSTALES, SAMSON F. BACHAR, EDWIN P. DAMO, RENATO E. FERNANDEZ, GENARO F. CALLO,
JIMMY C. ALETA, AND EUGENIO SALINAS, Petitioners, v. PHILIPPINE COLLEGE OF CRIMINOLOGY INC. AND/OR GREGORY
ALAN F. BAUTISTA, Respondents.

 G.R. No. 200329, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. RICARDO PIOSANG, Accused-
Appellant.

 G.R. No. 200402, June 13, 2013 - PRIVATIZATION AND MANAGEMENT OFFICE, Petitioner, v. STRATEGIC ALLIANCE
DEVELOPMENT CORPORATION AND/OR PHILIPPINE ESTATE CORPORATION, Respondent.

 G.R. No. 200507, June 26, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. PETER LINDA Y GEROLAGA,
Accused-Appellant.

 G.R. No. 200837, June 05, 2013 - MAERSK FILIPINAS CREWING INC./MAERSK SERVICES LTD., AND/OR MR. JEROME
DELOS ANGELES, Petitioners, v. NELSON E. MESINA, Respondent.

 G.R. No. 200882, June 13, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. ABEL DIAZ, Accused-Appellant.

 G.R. No. 201251, June 26, 2013 - INTER-ORIENT MARITIME, INCORPORATED AND/OR TANKOIL CARRIERS, LIMITED,
Petitioners, v. CRISTINA CANDAVA, Respondent.
  G.R. No. 201701, June 03, 2013 - UNILEVER PHILIPPINES, INC., Petitioner, v. MARIA RUBY M. RIVERA, Respondent.

 G.R. No. 201723, June 13, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. PERCIVAL DELA ROSA Y BAYER,
Accused-Appellant.

 G.R. No. 203041, June 05, 2013 - PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MOISES CAOILE, Accused-
Appellant.

 G.R. No. 205033, June 18, 2013 - ROMEO G. JALOSJOS, Petitioner, v. THE COMMISSION ON ELECTIONS, MARIA
ISABELLE G. CLIMACO-SALAZAR, ROEL B. NATIVIDAD, ARTURO N. ONRUBIA, AHMAD NARZAD K. SAMPANG, JOSE L.
LOBREGAT, ADELANTE ZAMBOANGA PARTY, AND ELBERT C. ATILANO, Respondents.

 G.R. No. 207264, June 25, 2013 - REGINA ONGSIAKO REYES, Petitioner, v. COMMISSION ON ELECTIONS AND JOSEPH
SOCORRO B. TAN, Respondents.

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REYES, JJ. JUDGE LIZABETH GUTIERREZ-TORRES, Respondent.

 A.M. No. P-01-1448 (FORMERLY OCA IPI NO. 99-664-P), June 23, 2013 - RODOLFO C. SABIDONG, Complainant, v.
NICOLASITO S. SOLAS (CLERK OF COURT IV), Respondent.

 A.M. No. P-08-2439 (Formerly OCA IPI No. 08-2733-P), June 25, 2013 - JUDGE MA. MONINA S. MISAJON, MUNICIPAL
TRIAL COURT (MTC), SAN JOSE, ANTIQUE, Complainant, v. JERENCE P. HIPONIA, CLERK II, ELIZABETH B. ESCANILLAS,
STENOGRAPHER I, WILLIAM M. YGLESIAS, PROCESS SERVER, AND CONRADO A. RAFOLS, JR., UTILITY AIDE, ALL OF THE
SAME COURT, Respondents.

 A.M. No. P-11-2980 (Formerly OCA I.P.I. No. 08-3016-P), June 10, 2013 - LETICIA A. ARIENDA, Complainant, v.
EVELYN A. MONILLA, COURT STENOGRAPHEIL III, REGIONAL TRIAL COURT, BRANCH 4, LEGAZPI CITY, Respondent.
 A.M. No. RTJ-09-2181 [Formerly A.M. No. 09-4-174-RTJ], June 25, 2013 - OFFICE OF THE COURT ADMINISTRATOR,
Complainant, v. RETIRED JUDGE GUILLERMO R. ANDAYA, Respondent.

 A.M. NO. SCC-08-11-P, June 18, 2013 - CIVIL SERVICE COMMISSION, Complainant, v. ISMAEL A. HADJI ALI, COURT
STENOGRAPHER I, SHARI'A CIRCUIT COURT, TUBOD, LANAO DEL NORTE [FORMERLY A.M. NO. 04-9-03-SCC] (RE:
FORMAL CHARGE BY THE CIVIL SERVICE COMMISSION VS. ISMAEL A. HADJI ALI, COURT STENOGRAPHER I, SHARI'A
CIRCUIT COURT, TUBOD, LANAO DEL NORTE), Respondent.

 A.M. SB -13-20-P [Formerly A.M. No. 12-29-SB-P], June 26, 2013 - RIA PAMELA B. ABULENCIA AND BLESSIE M.
BURGONIO, COMPLAINANTS, v. REGINO R. HERMOSISIMA, SECURITY GUARD II, SHERIFF AND SECURITY DIVISION,
SANDIGANBAYAN, Respondent.

 Adm. Case No. 7332, June 18, 2013 - EDUARDO A. ABELLA, Complainant, v. RICARDO G. BARRIOS, JR., Respondent.
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G.R. NO. 159738 - UNION MOTOR CORPORATION V. NATIONAL LABOR RELATIONS COMMISSION, ET AL.

G.R. No. 159738 - UNION MOTOR CORPORATION v. NATIONAL LABOR RELATIONS COMMISSION, ET AL.

SECOND DIVISION

[G.R. NO. 159738 : December 9, 2004]

UNION MOTOR CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and ALEJANDRO A. ETIS, Respondents.
 DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari filed by petitioner Union Motor Corporation of the April 10, 2003 Decision 1 of the Court of Appeals
(CA) in CA-G.R. SP No. 73602 which affirmed the decision of the National Labor Relations Commission (NLRC) holding that respondent
Alejandro A. Etis was illegally dismissed from his employment.

On October 23, 1993, the respondent was hired by the petitioner as an automotive mechanic at the service department in the latter's Paco
Branch. In 1994, he was transferred to the Caloocan City Branch, where his latest monthly salary was P6,330.00. During his employment, he
was awarded the "Top Technician" for the month of May in 1995 and Technician of the Year (1995). He also became a member of the
Exclusive P40,000.00 Club and received the Model Employee Award in the same year.

On September 22, 1997, the respondent made a phone call to Rosita dela Cruz, the company nurse, and informed her that he had to take a
sick leave as he had a painful and unbearable toothache. The next day, he again phoned Dela Cruz and told her that he could not report for
work because he still had to consult a doctor. Finding that the respondent's ailment was due to a tooth inflammation, the doctor referred him
to a dentist for further management.2 Dr. Rodolfo Pamor, a dentist, then scheduled the respondent's tooth extraction on September 27, 1997,
hoping that, by that time, the inflammation would have subsided. Upon instructions from the management, Mr. Dumagan, a company security
guard, visited the respondent in his house on September 24, 1997 and confirmed that the latter was ill.

On September 27, 1997, Dr. Pamor rescheduled the respondent's tooth extraction on October 4, 1997 because the inflammation had not yet
subsided and recommended that he rest. Thus, the respondent was not able to report for work due to the painful and unbearable toothache.

On October 2, 1997, the petitioner issued an Inter Office Memorandum 3 through Angelo B. Nicolas, the manager of its Human Resources
Department, terminating the services of the respondent for having incurred more than five (5) consecutive absences without proper
notification. The petitioner considered the consecutive absences of the respondent as abandonment of office under Section 6.1.1, Article III of
the Company Rules.

On October 4, 1997, Dr. Pamor successfully extracted the respondent's tooth. As soon as he had recovered, the respondent reported for
work, but was denied entry into the company's premises. He was also informed that his employment had already been terminated. The
respondent sought help from the union which, in turn, included his grievance in the arbitration before the National Conciliation and Mediation
Board (NCMB). Pending the resolution thereof, the respondent wrote to the petitioner asking for the reconsideration of his dismissal, 4 which
was denied. Sometime thereafter, the union's complaints were dismissed by the NCMB.

Left with no other recourse, the respondent filed, on May 18, 1999, a complaint for illegal dismissal before the arbitration branch of the NLRC
against the petitioner and/or Benito Cua, docketed as NLRC-NCR Case No. 00-05-05691-99. 5

The respondent alleged that he was dismissed from his employment without just and legal basis. For its part, the petitioner averred that his
dismissal was justified by his ten (10) unauthorized absences. It posited that, under Article 282 of the Labor Code, an employee's gross and
habitual neglect of his duties is a just cause for termination. It further alleged that the respondent's repetitive and habitual acts of being
absent without notification constituted nothing less than abandonment, which is a form of neglect of duties. 6
On October 19, 2000, the Labor Arbiter rendered a Decision dismissing the complaint. The Labor Arbiter ruled that the respondent's failure to
report for work for ten (10) days without an approved leave of absence was equivalent to gross neglect of duty, and that his claim that he
had been absent due to severe toothache leading to a tooth extraction was unsubstantiated. The Labor Arbiter stressed that "unnotarized
medical certificates were self-serving and had no probative weight."

Aggrieved, the respondent appealed the decision to the NLRC, docketed as NLRC NCR CA No. 027002-01. He alleged therein that -

THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE COMPLAINT.

II

THERE ARE SERIOUS ERRORS IN THE FINDINGS OF FACTS WHICH WOULD CAUSE GRAVE OR IRREPARABLE DAMAGE OR INJURY TO HEREIN

COMPLAINANT.7

On November 29, 2001, the NLRC issued a Resolution reversing the decision of the Labor Arbiter. The dispositive portion of the resolution
reads:

WHEREFORE, the assailed decision dated October 19, 2000 is SET ASIDE and REVERSED. Accordingly, the respondent-appellee is hereby

ordered to immediately reinstate complainant to his former position without loss of seniority rights and other benefits and payment of his full

backwages from the time of his actual dismissal up to the time of his reinstatement.

All other claims are dismissed for lack of merit.8

The NLRC upheld the claim of the respondent that his successive absences due to severe toothache was known to management. It ruled that
the medical certificates issued by the doctor and dentist who attended to the respondent substantiated the latter's medical problem. It also
declared that the lack of notarization of the said certificates was not a valid justification for their rejection as evidence. The NLRC declared
that the respondent's absence for ten (10) consecutive days could not be classified as gross and habitual neglect of duty under Article 282 of
the Labor Code.

The NLRC resolved to deny the motion for reconsideration of the petitioner, per its Resolution 9 dated August 26, 2002.

The petitioner, thereafter, filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, docketed as CA-G.R. SP No. 73602.
It raised the following issues:
Whether or not the public respondent gravely abused it[s] discretion, amounting to lack or excess of jurisdiction in reversing the decision of

the labor arbiter a quo and finding that private respondent Alejandro A. Etis was illegally dismissed.

Whether or not public respondent gravely abused its discretion in reinstating private respondent Alejandro A. Etis to his former position

without loss of seniority rights and awarding him full backwages. 10

In its Decision11 dated April 10, 2003, the CA affirmed in toto the November 29, 2001 Resolution of the NLRC.

The CA agreed with the ruling of the NLRC that medical certificates need not be notarized in order to be admitted in evidence and accorded
full probative weight. It held that the medical certificates which bore the names and licenses of the doctor and the dentist who attended to
the respondent adequately substantiated the latter's illness, as well as the tooth extraction procedure performed on him by the dentist. The
CA concluded that since the respondent's absences were substantiated, the petitioner's termination of his employment was without legal and
factual basis.

The CA similarly pointed out that even if the ten-day absence of the respondent was unauthorized, the same was not equivalent to gross and
habitual neglect of duty. The CA took into consideration the respondent's unblemished service, from 1993 up to the time of his dismissal, and
the latter's proven dedication to his job evidenced by no less than the following awards: Top Technician of the Year (1995), Member of the
Exclusive P40,000.00 Club, and Model Employee of the Year (1995).

The motion for reconsideration of the petitioner was denied by the appellate court. Hence, the petition at bar.

The petitioner raises the following issues for the Court's resolution:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN GIVING MUCH EVIDENTIARY WEIGHT TO THE

MEDICAL CERTIFICATES SUBMITTED BY THE PRIVATE RESPONDENT.

II

WHETHER OR NOT THE HONORABLE LABOR ARBITER COMMITTED A REVERSIBLE ERROR IN RULING THAT PRIVATE RESPONDENT WAS

ILLEGALLY DISMISSED.12
As had been enunciated in numerous cases, the issues that can be delved with in a Petition for Review under Rule 45 are limited to questions
of law. The Court is not tasked to calibrate and assess the probative weight of evidence adduced by the parties during trial all over
again.13 Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if
supported by substantial evidence.14 However, if, as in this case, the findings of the Labor Arbiter clash with those of the NLRC and CA, this
Court is compelled to go over the records of the case, as well as the submissions of the parties, and resolve the factual issues.

The petitioner avers that the respondent's absences were unauthorized, and that the latter failed to notify the petitioner in writing of such
absences, the reasons therefor, and his (respondent's) whereabouts as prescribed by the company rules. The petitioner avers that its security
guard caught the respondent at home, fit to work. The petitioner further asserts that it was justified in dismissing the respondent under
Section 6.1.1, Article III of the Company Rules which reads:

An employee who commits unauthorized absences continuously for five (5) consecutive working days without notice shall be considered as

having abandoned his job and shall be terminated for cause with applicable laws.

The petitioner contends that the respondent's dismissal was also justified under Article 282(b) of the Labor Code, which provides that an
employer may dismiss an employee due to gross and habitual neglect of his duties.

The contention of the petitioner has no merit.

The NLRC ruled that the respondent notified the petitioner of his illness through the company nurse, and that the petitioner even dispatched a
security guard to the respondent's house to ascertain the reason of his absences, thus:

The termination by respondent-appellee of complainant's service despite knowledge of complainant's ailment, as shown by the telephone calls

made by the latter to the company nurse and the actual confirmation made by respondent's company guard, who personally visited

complainant's residence, clearly establishes the illegality of complainant's dismissal. The documentary testimonies of the nurse, Miss Rosita

dela Cruz, regarding complainant's telephone calls and the confirmation made by respondent's security guard, Mr. Dumagan, are evidentiary

matters which are relevant and material and must be considered to the fullest by the Labor Arbiter a quo. These circumstantial facts were

miserably set aside by the Labor Arbiter a quo wherein he concluded that complainant committed gross neglect of duty on alleged continued

absences is to our mind, not fully substantiated and ought not be given credence by this Commission. Time and again, this Tribunal impresses

that, in labor proceedings, in case of doubt, the doubt must be reasonably in favor of labor. Maybe doubts hang in this case but these doubts

must be resolved in favor of labor as mandated by law and our jurisprudence. From the facts of this case, it is only but reasonable to conclude

that complainant's service was, indeed, terminated without legal or valid cause. Where the law protects the right of employer to validly
exercise management prerogative such as to terminate the services of an employee, such exercise must be with legal cause as enumerated in

Article 282 of the Labor Code or by authorized cause as defined in Article 283 of the Labor Code. 15

The CA affirmed the findings of facts of the NLRC.

We agree with the rulings of the NLRC and the CA. We note that the company rules do not require that the notice of an employee's absence
and the reasons therefor be in writing and for such notice to be given to any specific office and/or employee of the petitioner. Hence, the
notice may be verbal; it is enough then that an officer or employee of the petitioner, competent and responsible enough to receive such
notice for and in behalf of the petitioner, was informed of such absence and the corresponding reason.

The evidence on record shows that the respondent informed the petitioner of his illness through the company nurse. The security guard who
was dispatched by the petitioner to verify the information received by the company nurse, confirmed the respondent's illness. We find and so
hold that the respondent complied with the requisite of giving notice of his illness and the reason for his absences to the petitioner.

We reject the petitioner's contention that the medical certificates adduced in evidence by the respondent to prove (a) his illness, the nature
and the duration of the procedures performed by the dentist on him; and (b) the period during which he was incapacitated to work are
inadmissible in evidence and barren of probative weight simply because they were not notarized, and the medical certificate dated September
23, 1997 was not written on paper bearing the dentist's letterhead. Neither do we agree with the petitioner's argument that even assuming
that the respondent was ill and had been advised by his dentist to rest, the same does not appear on the medical certificate dated September
23, 1997; hence, it behooved the respondent to report for work on September 23, 1997. The ruling of the Court in Maligsa v. Atty.
Cabanting16 is not applicable in this case.

It bears stressing that the petitioner made the same arguments in the NLRC and the CA, and both tribunals ruled as follows:

First, We concur with the ratiocination of respondent NLRC when it ruled that a medical certificate need not be notarized, to quote:

xxx. He was dismissed by reason of the fact that the Medical Certificate submitted by the complainant should not be given credence for not

being notarized and that no affidavit was submitted by the nurse to prove that the complainant, indeed, called the respondent's office by

telephone.

After full scrutiny and judicious evaluation of the records of this case, We find the appeal to be meritorious. Regrettably, the Labor Arbiter a

quo clearly failed to appreciate complainant's pieces of evidence. Nowhere in our jurisprudence requires that all medical certificates be

notarized to be accepted as a valid evidence. In this case, there is [neither] difficulty nor an obstacle to claim that the medical certificates

presented by complainant are genuine and authentic. Indeed, the physician and the dentist who examined the complainant, aside from their
respective letterheads, had written their respective license numbers below their names and signatures. These facts have not been impugned

nor rebutted by respondent-appellee throughout the proceedings of his case. Common sense dictates that an ordinary worker does not need

to have these medical certificates to be notarized for proper presentation to his company to prove his ailment; hence, the Labor Arbiter a quo,

in cognizance with the liberality and the appreciation on the rules on evidence, must not negate the acceptance of these medical certificates

as valid pieces of evidence.

We believe, as we ought to hold, that the medical certificates can prove clearly and convincingly the complainant's allegation that he

consulted a physician because of tooth inflammation on September 23, 1997 and a dentist who later advised him to rest and, thus, clinically

extended his tooth extraction due to severe pain and inflammation. Admittingly, it was only on October 4, 1997 that complainant's tooth was

finally extracted.

From these disquisitions, it is clear that the absences of private respondent are justifiable. 17

We agree with the NLRC and the appellate court. In light of the findings of facts of the NLRC and the CA, the petitioner cannot find solace in
the ruling of this Court in Maligsa v. Atty. Cabantnig. 18

While the records do not reveal that the respondent filed the required leave of absence for the period during which he suffered from a
toothache, he immediately reported for work upon recovery, armed with medical certificates to attest to the cause of his absence. The
respondent could not have anticipated the cause of his illness, thus, to require prior approval would be unreasonable. 19 While it is true that the
petitioner had objected to the veracity of the medical certificates because of lack of notarization, it has been said that verification of
documents is not necessary in order that the said documents could be considered as substantial evidence. 20 The medical certificates were
properly signed by the physicians; hence, they bear all the earmarks of regularity in their issuance and are entitled to full probative weight. 21

The petitioner, likewise, failed to prove the factual basis for its dismissal of the respondent on the ground of gross and habitual negligence
under Article 282(b) of the Labor Code of the Philippines, or even under Section 6.1.1, Rule III of the Company Rules.

Dismissal is the ultimate penalty that can be meted to an employee. Thus, it must be based on just cause and must be supported by clear
and convincing evidence.22 To effect a valid dismissal, the law requires not only that there be just and valid cause for termination; it, likewise,
enjoins the employer to afford the employee the opportunity to be heard and to defend himself. 23 Article 282 of the Labor Code enumerates
the just causes for the termination of employment by the employer:

ART. 282. TERMINATION BY EMPLOYER

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

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

work;

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

To warrant removal from service, the negligence should not merely be gross but also habitual. Gross negligence implies a want or absence of
or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without
exerting any effort to avoid them.24 The petitioner has not sufficiently shown that the respondent had willfully disobeyed the company rules
and regulation. The petitioner also failed to prove that the respondent abandoned his job. The bare fact that the respondent incurred
excusable and unavoidable absences does not amount to an abandonment of his employment.

The petitioner's claim of gross and habitual neglect of duty pales in comparison to the respondent's unblemished record. The respondent did
not incur any intermittent absences. His only recorded absence was the consecutive ten-day unauthorized absence, albeit due to painful and
unbearable toothache. The petitioner's claim that the respondent had manifested poor work attitude was belied by its own recognition of the
respondent's dedication to his job as evidenced by the latter's awards: Top Technician of the Year (1995), Member of the
Exclusive P40,000.00 Club, and Model Employee of the Year (1995).

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. The Decision of the Court of Appeals in CA-G.R. SP No. 73602 is
AFFIRMED.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

1
Penned by Associate Justice Andres B. Reyes, Jr., with Associate Justices Eugenio S. Labitoria and Regalado E. Maambong, concurring.

2
Rollo, p. 133.

3
CA Rollo, p. 41.
4
Rollo, p. 135.

5
Id. at 148.

6
CA Rollo, p. 35.

7
Id. at 52.

8
Id. at 22.

9
Id. at 24.

10
Id. at 7.

11
Rollo, pp. 19-27.

12
Id. at 9.

13
Suprelines Transportation Company, Inc. and Manolet Lavides v. ICC Leasing and Financing Corporation, 398 SCRA 508 (2003).

14
San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579 (2003).

15
CA Rollo, pp. 21-22.

16
272 SCRA 408 (1997).

17
Rollo, pp. 24-25.

18
Supra.
19
Stellar Industrial Services, Inc. v. NLRC, 252 SCRA 323 (1996).

20
Bambalan v. Workmen's Compensation Commission, 153 SCRA 166 (1987).

21
See note 19.

22
Nagusara v. NLRC, 290 SCRA 245 (1998).

23
Santos v. San Miguel Corporation, 399 SCRA 172 (2003).

24
Philippine Aeolus Automotive United Corporation v. NLRC, 331 SCRA 237 (2000).

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Guidelines in implementing redundancy

We recognize that management has the prerogative to characterize an employee’s services as no longer necessary or sustainable, and
therefore properly terminable. 54

The CA also correctly cited De Ocampo, et al., v. NLRC when it discussed that Jardine’s decision to hire contractual employees as
55

replacements is a management prerogative which the company has the right to undertake to implement a more economic and efficient
operation of its business. 56
In De Ocampo, this Court held that, in the absence of proof that the management abused its discretion or acted in a malicious or arbitrary
manner in replacing dismissed employees with contractual ones, judicial intervention should not be made in the company’s exercise of its
management prerogative. 57

The employer’s exercise of its management prerogative, however, is not an unbridled right that cannot be subjected to this Court’s scrutiny.
The exercise of management prerogative is subject to the caveat that it should not performed in violation of any law and that it is not tainted
by any arbitrary or malicious motive on the part of the employer. 58

This Court, in several cases, sufficiently explained that the employer must follow certain guidelines to dismiss employees due to
redundancy. These guidelines aim to ensure that the dismissal is not implemented arbitrarily and is not tainted with bad faith against the
dismissed employees.

In Golden Thread Knitting Industries, Inc. v. NLRC, this Court laid down the principle that the employer must use fair and reasonable
59

criteria in the selection of employees who will be dismissed from employment due to redundancy. Such fair and reasonable criteria may
include the following, but are not limited to: (a) less preferred status (e.g. temporary employee); (b) efficiency; and (c) seniority. The
presence of these criteria used by the employer shows good faith on its part and is evidence that the implementation of redundancy was
painstakingly done by the employer in order to properly justify the termination from the service of its employees. 60

As the petitioners pointed out, the records are bereft of indications that Jardine employed clear criteria when it decided who among its
employees, who held similar positions as the petitioners, should be removed from their posts because of redundancy. Jardine never
bothered to explain how and why the petitioners were the ones dismissed. Jardine’s acts became more suspect given that the petitioners
were all union officers and some of them were panel members in the scheduled CBA negotiations between Jardine and the Union.

Aside from the guidelines for the selection of employees who will be terminated, the Court, in Asian Alcohol Corp. v. NLRC, also laid down
61

guidelines for redundancy to be characterized as validly undertaken by the employer. The Court ruled:

For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1) written notice
served on both the employees and the Department of Labor and Employment at least one month prior to the intended date of
retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service,
whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what positions
are to be declared redundant and accordingly abolished. 62

Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine informed the Department of Labor and
Employment of the petitioners’ separation from the service due to redundancy on April 30, 1999, one month before their termination’s
effectivity. Also, the petitioners were given their individual separation packages, composed of their severance pay, plus their grossed up
transportation allowance.
Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines are interrelated to ensure good faith in
abolishing redundant positions; the employer must clearly show that it used fair and reasonable criteria in ascertaining what positions are to
be declared redundant.

In this cited case, the employer took pains to discuss and elaborate on the reasons why the position of the private respondent was the one
chosen by the employer to be abolished. We quote the Court’s ruling:

In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was terminated. Also, the water from the
wells had become salty due to extensive prawn farming nearby and could no longer be used by Asian Alcohol for its purpose. The wells
1awp++i1

had to be closed and needless to say, the services of Carias, Martinez and Sendon had to be terminated on the twin grounds of
redundancy and retrenchment.

xxxx

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site. At their current production
level, the new management found that it was more cost efficient to maintain only nine (9) mechanics. In choosing whom to separate among
the ten (10) mechanics, the management examined employment records and reports to determine the least efficient among them. It was
private respondent Amacio who appeared the least efficient because of his poor health condition. 63

Jardine never undertook what the employer in Asian Alcohol did. Jardine was never able to explain in any of its pleadings why the
1âwphi1

petitioners’ positions were redundant. It never even attempted to discuss the attendant facts and circumstances that led to the conclusion
that the petitioners’ positions had become superfluous and unnecessary to Jardine’s business requirements. Thus, we can only speculate
on what actually happened.

As the LA correctly found, Jardine lumped together the seven petitioners into one group whose positions had become redundant. This
move was despite the fact that not all of them occupied the same positions and performed the same functions. Under the circumstances of
64

the case, Jardine’s move was thus illegal. We affirm the LA’s ruling that fair play and good faith require that where one employee will be
chosen over the others, the employer must be able to clearly explain the merit of the choice it has taken. 65

To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian Alcohol, we find that at two levels, Jardine
failed to set the required fair and reasonable criteria in the termination of the petitioners’ employment, leading to the conclusion that the
termination from the service was arbitrary and in bad faith.

The first level, based on Asian Alcohol, is broader as the case recognized distinctions on a per position basis. At this level, Jardine failed to
explain why among all of the existing positions in its organization, Jardine chose the petitioners’ posts as the ones which have already
become redundant and terminable. 1âwphi1
The second level, derived from Golden Thread, is more specific. Here the distinction narrows down to the particular employees occupying
the same positions which were already declared to be redundant. At this level, Jardine’s lapse is shown by its failure to explain why among
all of its employees whose positions were determined to be redundant, the petitioners were the ones selected to be dismissed from the
service.

Notably, the LA and the NLRC also arrived at the same conclusion that the redundancy program was not valid because Jardine hired
contractual employees as replacements, thus, contradicting underlying reasons of redundancy. The CA significantly chose to disregard
these coherent labor findings without fully justifying its move. At the very least, this was an indicator that something was wrong somewhere
in these dismissals. It was clear legal error for the CA to recognize grave abuse of discretion when none occurred.

WHEREFORE, we hereby GRANT the petition. We REVERSE the decision dated March 23, 2007 and the resolution dated February 11,
2008 of the Court of Appeals in CA G.R. SP No. 91952, and uphold the decision dated December 1, 2004 and the resolution dated July 21,
2005 of the National Labor Relations Commission which affirmed in its entirety the September 29, 2000 decision of the Labor Arbiter.

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Republic of the Philippines

SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 181719 April 21, 2014

EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C. FUNTANOZ, GERARDO F. PUNZALAN, FREDDIE M.

MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB FINANCE EMPLOYEES ASSOCIATION FFW CHAPTER
(FEDERATION OF FREE WORKERS), Petitioners,
vs.
JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE), Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari the challenge to the March 23, 2007 decision and the February 11, 2008
1 2

resolution of the Court of Appeals (CA) in CA G.R. SP No. 91952. These assailed CA rulings annulled and set aside the
3

December 1, 2004 decision and the July 21, 2005 resolution of the National Labor Relations Commission (NLRC) in NLRC NCR
4 5

CA No. 029753-01 (NLRC NCR Case No. 06-06112-99). The NLRC rulings, in turn, fully affirmed the September 29, 2000
decision of Labor Arbiter (LA) Jovencio LL Mayor, Jr. The LA's decision ordered the petitioners Eugene S. Arabit, Edgardo C.
6

Sadsad, Lowell C. Funtanoz, Gerardo F. Punzalan, Freddie M. Mendoza, Emilio B. Belen and Violeta C. Diumano’s
reinstatement to their former positions without loss of seniority rights and the payment of full backwages, computed from the time
of their dismissal on May 30, 1999.

Factual Antecedents

Petitioners were former regular employees of respondent Jardine Pacific Finance, Inc. (formerly MB Finance) (Jardine). The
petitioners were also officers and members of MB Finance Employees Association-FFW Chapter (the Union), a legitimate labor
union and the sole exclusive bargaining agent of the employees of Jardine. The table below shows the petitioners’ previously
occupied positions, as well as their total length of service with Jardine before their dismissal from employment.

Petitioner Position Number of

Years of
Service

Eugene S. Arabit Field Collector 20 years

Edgardo C. Sadsad Field Collector 3 years

Lowell C. Funtanoz Field Collector 7 years

Gerardo F. Punzalan Field Collector 16 years

Freddie M. Mendoza Field Collector 20 years

Emilio B. Belen Senior Credit Investigator/Field 18 years

Collector- San Pablo Branch

Violeta C. Diumano Senior Accounting 19 years

Clerk/Documentation Clerk-San Pablo Branch

On the claim of financial losses, Jardine decided to reorganize and implement a redundancy program among its employees. The
petitioners were among those affected by the redundancy program. Jardine thereafter hired contractual employees to undertake
the functions these employees used to perform.

The Union filed a notice of strike with the National Conciliation and Mediation Board (NCMB), questioning the termination of
employment of the petitioners who were also union officers. The Union alleged unfair labor practice on the part of Jardine, as well
as discrimination in the dismissal of its officers and members.

Negotiations ensued between the Union and Jardine under the auspices of the NCMB, and both parties eventually reached an
amicable settlement. In the settlement, the petitioners accepted their redundancy pay without prejudice to their right to question
the legality of their dismissal with the NLRC. Jardine paid the petitioners a separation package composed of their severance pay,
plus their grossed up transportation allowance. 7

On June 1, 1999, the petitioners and the Union filed a complaint against Jardine with the NLRC for illegal dismissal and unfair
labor practice.

The Labor Arbitration Rulings

Before the LA, the parties decided to limit the issues to two, namely: (a) whether the separation of the petitioners was valid or
not; and (b) whether Jardine committed an unfair labor practice against the Union.

The petitioners alleged before the LA that their dismissal was illegal and was tainted with bad faith as their positions were not
superfluous. They argued that if their positions had really been redundant, then Jardine should have not hired contractual
workers to replace them. 8

The petitioners also argued that Jardine was guilty of unfair labor practice for contracting out services that the petitioners
previously held. Unfair labor practice took place under Article 248 of the Labor Code as the petitioners were union officers. 9

The petitioners likewise claimed that Jardine’s act of hiring contractual employees as replacements was a restraint on the
Union’s right to self-organization. The petitioners also pointed out that they were Union officers and panel members in the
scheduled collective bargaining agreement (CBA) negotiations between Jardine and the Union. The petitioners particularly found
the company action objectionable as their employment was terminated when their CBA negotiations were about to commence. 10

Jardine argued in its defense that the company had been incurring substantial business losses from 1996 to 1998. According to
Jardine, its audited financial statements reflect that for 1996, it suffered a net loss of ₱5,538,960.00; for 1997, a net loss in the
11

amount of ₱57,274,018.00; and a net loss of ₱95,529,527.00 for 1998.

12 13

Because of these serious business losses, Jardine asserted that it had to lay-off some of its employees and reorganize its ranks
to eliminate positions that were in excess of what its business required. 14

Jardine, however, admitted that it hired contractual employees to replace petitioners in their previous posts. Jardine reasoned out
that no bad faith took place since the hiring of contractual employees was a valid exercise of its management
prerogative. Jardine argued that the distinction between redundancy and retrenchment is not material; an employer resorts to
15

retrenchment or redundancy for the same reason, namely the economics of business. Since Jardine successfully established
16

that it incurred serious business losses, then termination of employment of the petitioners was valid for all intents and purposes. 17
In reply to the petitioners’ allegation of unfair labor practice, Jardine argued that had it intended to commit union busting, then it
should not have merely dismissed the seven petitioners; it should have also dismissed other employees who were union officers
and members. According to Jardine, the termination of the petitioners’ services did not interfere with the Union and its remaining
18

members’ right to self-organization since Jardine continuously dealt with the Union and recognized it as the sole and exclusive
bargaining representative of its rank-and-file employees. 19

The LA ruled in the petitioners’ favor. In its decision dated September 29, 2000, the LA held that the hiring of contractual
20

employees to replace the petitioners directly contradicts the concept of redundancy which involves the trimming down of the
workforce because a task is being carried out by too many people. The LA explained that the company’s action was a
21

circumvention of the right of the petitioners to security of tenure. 22

The LA further held that it was not enough for Jardine to simply focus on its losses. According to the LA, it was error for Jardine
to simply lump together the seven petitioners as employees whose positions have become redundant without explaining why
their respective positions became superfluous in relation to the other positions and employees of the company. 23

On the petitioners’ allegation of unfair labor practice, the LA held that not enough evidence was presented to prove the claim
against Jardine.

Both parties appealed the LA’s decision to the NLRC. In its decision dated December 1, 2004, the NLRC dismissed the appeals
24

and affirmed the LA’s decision in its entirety.

25

Jardine moved for the reconsideration of the NLRC’s decision, which motion the NLRC also denied in its resolution of July 21,
26

2005. Jardine thereafter sought recourse with the CA via a petition for certiorari under Rule 65. 27

The CA’s Ruling

In its decision dated March 23, 2007, the CA reversed the LA’s and the NLRC’s rulings, and granted Jardine’s petition for
28

certiorari.

The CA found that Jardine’s act of hiring contractual employees in replacement of the petitioners does not run counter to the
argument that their positions are already superfluous. According to the CA, the hiring of contractual employees is a
29

management prerogative that Jardine has the right to exercise. In the absence of any showing of malice or arbitrariness on the
30

part of Jardine in implementing its redundancy program, the courts must not interfere with the company’s exercise of a bona fide
management decision. The CA cited for this purpose the case of De Ocampo v. National Labor Relations Commission which
31 32

explains:
The reduction of the number of workers in a company made necessary by the introduction of the services of Gemac Machineries
in the maintenance and repair of its industrial machinery is justified. There can be no question as to the right of the company to
contract the services of Gemac Machineries to replace the services rendered by the terminated mechanics with a view to
effecting more economic and efficient methods of production.

In the same case, We ruled that "(t)he characterization of (petitioners’) services as no longer necessary or sustainable, and
therefore properly terminable, was an exercise of business judgment on the part of (private respondent) company. The wisdom
or soundness of such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of
the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown" (ibid, p. 673).

In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the services rendered by the
mechanics became redundant and superfluous, and therefore properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any proof that the management abused its discretion or acted in a
malicious or arbitrary manner, the court will not interfere with the exercise of such prerogative. 33

The CA further held that Jardine successfully established that for the years 1996 to 1998, the company incurred serious
losses. The appellate court also observed that the reduction in the number of workers, made necessary by the introduction of
34

the services of an independent contractor, is justified when undertaken to implement more economic and efficient methods of
production. 35

These justifications led to the CA’s ruling which annulled and set aside the December 1, 2004 decision and the July 21, 2005
resolution of the NLRC and to its own ruling that the petitioners had not been illegally dismissed.

The CA denied the petitioners’ subsequent motion for reconsideration. The petitioners are now before this Court on a petition for
review on certiorari under Rule 45 of the Rules of Court.

The Petition

In their petition, the petitioners maintain that the CA gravely abused its discretion and that its ruling is not in conformity with the
law and jurisprudence.

The petitioners argue that there is a difference between financial loss and decline of earnings. They posit that what Jardine
actually experienced was a decline in capital and not substantial financial losses for the years 1996 to 1998. 36

The petitioners also assert that Jardine did not take any remedial measure before it implemented its redundancy program. It
simply hastily terminated the petitioners from the service. In support of this argument, the petitioners cited the case of Golden
37
Thread Knitting Industries, Inc. v. NLRC where the Court laid down guidelines to be considered in selecting employees who
38

would be dismissed from the service in case of redundancy. The petitioners contend that the records show that Jardine did not
39

lay down any basis or criteria in choosing the petitioners for inclusion in the program. 40

According to the petitioners, they are all regular employees whose years of service range from three (3) to twenty (20) years.
Since Jardine immediately terminated their services without evaluating their performance in relation with those of the other
employees and without considering other relevant factors, then Jardine’s decision was arbitrary and in disregard of the guidelines
set by this Court in Golden Thread. 41

Finally, the petitioners also reiterate the findings of the LA and of the NLRC that Jardine’s act of hiring contractual employees as
their replacements is contrary to Jardine’s claim that there was redundancy. They also contend that the hiring of new employees
42

negates Jardine’s argument that it was suffering from substantial losses. Based on these premises, the petitioners posit that the
43

CA erred in annulling and setting aside the NLRC’s decision, and pray instead for its reinstatement.

The Court’s Ruling

We resolve to GRANT the petition.

Procedural consideration: the nature
of a Rule 45 petition

We emphasize at the outset that the current petition was brought under Rule 45 of the Rules of Court. As a rule, only questions
of law may be raised on appeal under this remedy. This is in contrast with a petition for certiorari brought under Rule 65 where
44

the review centers on the jurisdictional errors the lower court or tribunal may have committed. 45

We thus limit our review to errors of law which the CA might have committed. A question of law arises when there is doubt as to
what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the
alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence
presented by the litigants or any of them. 46

"In ruling for legal correctness, we have to view the CA decision in the same context that the petition for certiorari it ruled upon
was presented to it; we have to examine the CA decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the
merits of the case was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review
on appeal, of the NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA
ruling in a labor case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC committed
grave abuse of discretion in ruling on the case?" 47
In this context, the primary question we confront is: did the CA correctly rule that the NLRC committed grave abuse of discretion
when it found that Jardine validly terminated the petitioners’ employment because of redundancy?

Redundancy in contrast with retrenchment

Jardine, in its petition for certiorari with the CA, posited that the distinction between redundancy and retrenchment is not
material. It contended that employers resort to these causes of dismissal for purely economic considerations. Jardine further
48 49

argued that the immateriality of the distinction between these two just causes for dismissal is shown by the fact that redundancy
and retrenchment are found and lumped together in just one single provision of the Labor Code (Article 283 thereof).

We cannot accept Jardine’s shallow understanding of the concepts of redundancy and retrenchment in determining the validity of
the severance of an employer-employee relationship. The fact that they are found together in just one provision does not
necessarily give rise to the conclusion that the difference between them is immaterial. This Court has already ruled before that
retrenchment and redundancy are two different concepts; they are not synonymous; thus, they should not be used
interchangeably. The clear distinction between these two concepts was discussed in Andrada, et al., v. NLRC, citing the case
50 51

of Sebuguero v. NLRC, where this Court clarified:

52

Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements
of the enterprise. A position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of
a number of factors, such as over hiring of workers, decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of employment initiated by
the employer through no fault of the employee’s and without prejudice to the latter, resorted to by management during periods of
business recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery,
or of automation. Simply put, it is an act of the employer of dismissing employees because of losses in the operation of a
business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by
this Court.

These rulings appropriately clarify that redundancy does not need to be always triggered by a decline in the business. Primarily,
employers resort to redundancy when the functions of an employee have already become superfluous or in excess of what the
business requires. Thus, even if a business is doing well, an employer can still validly dismiss an employee from the service due
to redundancy if that employee’s position has already become in excess of what the employer’s enterprise requires.

From this perspective, it is illogical for Jardine to terminate the petitioners’ employment and replace them with contractual
employees. The replacement effectively belies Jardine’s claim that the petitioners’ positions were abolished due to superfluity.
Redundancy could have been justified if the functions of the petitioners were transferred to other existing employees of the
company.

To dismiss the petitioners and hire new contractual employees as replacements necessarily give rise to the sound conclusion
that the petitioners’ services have not really become in excess of what Jardine’s business requires. To replace the petitioners
who were all regular employees with contractual ones would amount to a violation of their right to security of tenure. For this, we
affirm the NLRC’s ruling, citing the LA’s decision, when it ruled:

In the case at bench, respondents did not dispute that after laying-off complainants herein, they engaged the services of an
agency to perform the tasks use (sic) to be done by complainants. This is [in direct] contradiction to the concept of redundancy
which precisely requires the trimming down of the [workforce] because a task is being carried out by just too many people. The
subsequent contracting out to an agency the functions or duties that used to be the domain of individual complainants herein is a
circumvention of their constitutional rights to security of tenure, and therefore illegal.
53

Guidelines in implementing redundancy

We recognize that management has the prerogative to characterize an employee’s services as no longer necessary or
sustainable, and therefore properly terminable. 54

The CA also correctly cited De Ocampo, et al., v. NLRC when it discussed that Jardine’s decision to hire contractual employees
55

as replacements is a management prerogative which the company has the right to undertake to implement a more economic and
efficient operation of its business.
56

In De Ocampo, this Court held that, in the absence of proof that the management abused its discretion or acted in a malicious or
arbitrary manner in replacing dismissed employees with contractual ones, judicial intervention should not be made in the
company’s exercise of its management prerogative. 57

The employer’s exercise of its management prerogative, however, is not an unbridled right that cannot be subjected to this
Court’s scrutiny. The exercise of management prerogative is subject to the caveat that it should not performed in violation of any
law and that it is not tainted by any arbitrary or malicious motive on the part of the employer.
58

This Court, in several cases, sufficiently explained that the employer must follow certain guidelines to dismiss employees due to
redundancy. These guidelines aim to ensure that the dismissal is not implemented arbitrarily and is not tainted with bad faith
against the dismissed employees.
In Golden Thread Knitting Industries, Inc. v. NLRC, this Court laid down the principle that the employer must use fair and
59

reasonable criteria in the selection of employees who will be dismissed from employment due to redundancy. Such fair and
reasonable criteria may include the following, but are not limited to: (a) less preferred status (e.g. temporary employee); (b)
efficiency; and (c) seniority. The presence of these criteria used by the employer shows good faith on its part and is evidence that
the implementation of redundancy was painstakingly done by the employer in order to properly justify the termination from the
service of its employees.60

As the petitioners pointed out, the records are bereft of indications that Jardine employed clear criteria when it decided who
among its employees, who held similar positions as the petitioners, should be removed from their posts because of redundancy.
Jardine never bothered to explain how and why the petitioners were the ones dismissed. Jardine’s acts became more suspect
given that the petitioners were all union officers and some of them were panel members in the scheduled CBA negotiations
between Jardine and the Union.

Aside from the guidelines for the selection of employees who will be terminated, the Court, in Asian Alcohol Corp. v. NLRC, also
61

laid down guidelines for redundancy to be characterized as validly undertaken by the employer. The Court ruled:

For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1) written
notice served on both the employees and the Department of Labor and Employment at least one month prior to the intended date
of retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of
service, whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished. 62

Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine informed the Department of
Labor and Employment of the petitioners’ separation from the service due to redundancy on April 30, 1999, one month before
their termination’s effectivity. Also, the petitioners were given their individual separation packages, composed of their severance
pay, plus their grossed up transportation allowance.

Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines are interrelated to ensure good
faith in abolishing redundant positions; the employer must clearly show that it used fair and reasonable criteria in ascertaining
what positions are to be declared redundant.

In this cited case, the employer took pains to discuss and elaborate on the reasons why the position of the private respondent
was the one chosen by the employer to be abolished. We quote the Court’s ruling:

In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was terminated. Also, the water
from the wells had become salty due to extensive prawn farming nearby and could no longer be used by Asian Alcohol for its
purpose. The wells had to be closed and needless to say, the services of Carias, Martinez and Sendon had to be terminated on
1awp++i1

the twin grounds of redundancy and retrenchment.

xxxx

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site. At their current
production level, the new management found that it was more cost efficient to maintain only nine (9) mechanics. In choosing
whom to separate among the ten (10) mechanics, the management examined employment records and reports to determine the
least efficient among them. It was private respondent Amacio who appeared the least efficient because of his poor health
condition. 63

Jardine never undertook what the employer in Asian Alcohol did. Jardine was never able to explain in any of its pleadings why
1âwphi1

the petitioners’ positions were redundant. It never even attempted to discuss the attendant facts and circumstances that led to
the conclusion that the petitioners’ positions had become superfluous and unnecessary to Jardine’s business requirements.
Thus, we can only speculate on what actually happened.

As the LA correctly found, Jardine lumped together the seven petitioners into one group whose positions had become redundant.
This move was despite the fact that not all of them occupied the same positions and performed the same functions. Under the
64

circumstances of the case, Jardine’s move was thus illegal. We affirm the LA’s ruling that fair play and good faith require that
where one employee will be chosen over the others, the employer must be able to clearly explain the merit of the choice it has
taken.65

To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian Alcohol, we find that at two levels,
Jardine failed to set the required fair and reasonable criteria in the termination of the petitioners’ employment, leading to the
conclusion that the termination from the service was arbitrary and in bad faith.

The first level, based on Asian Alcohol, is broader as the case recognized distinctions on a per position basis. At this level,
Jardine failed to explain why among all of the existing positions in its organization, Jardine chose the petitioners’ posts as the
ones which have already become redundant and terminable. 1âwphi1

The second level, derived from Golden Thread, is more specific. Here the distinction narrows down to the particular employees
occupying the same positions which were already declared to be redundant. At this level, Jardine’s lapse is shown by its failure
to explain why among all of its employees whose positions were determined to be redundant, the petitioners were the ones
selected to be dismissed from the service.

Notably, the LA and the NLRC also arrived at the same conclusion that the redundancy program was not valid because Jardine
hired contractual employees as replacements, thus, contradicting underlying reasons of redundancy. The CA significantly chose
to disregard these coherent labor findings without fully justifying its move. At the very least, this was an indicator that something
was wrong somewhere in these dismissals. It was clear legal error for the CA to recognize grave abuse of discretion when none
occurred.

WHEREFORE, we hereby GRANT the petition. We REVERSE the decision dated March 23, 2007 and the resolution dated
February 11, 2008 of the Court of Appeals in CA G.R. SP No. 91952, and uphold the decision dated December 1, 2004 and the
resolution dated July 21, 2005 of the National Labor Relations Commission which affirmed in its entirety the September 29, 2000
decision of the Labor Arbiter.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

LUCAS P. BERSAMIN* JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
 CERTIFICATION

Pursuant .to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's
Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

* In lieu of Associate Justice Mariano C. de! Ca:5tillo per Raffie dated October 1, 2012.

1
Rollo, pp. 3-28.

2
Penned by Associate Justice Lucenito N. Tagle, and concurred in by Presiding Justice Ruben T. Reyes (now a retired
member of this Court) and Associate Justice Amelita G. Tolentino; id. at 30-42.

3
Id. at 45.

4
Id. at 70-80.

5
Id. at 97-99.

6
Id. at 300-322.

7
Id. at 74.

8
Id. at 181.

9
Article 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the following unfair
labor practice:
 1. To interfere with, restrain or coerce employees in the exercise of their right to self-organization;

xxxx

3. To contract out services or functions being performed by union members when such will interfere with, restrain
or coerce employees in the exercise of their rights to self-organization;

xxxx

5. To discriminate in regard to wages, hours of work and other terms and conditions of employment in order to
encourage or discourage membership in any labor organization. [emphases ours]

10
Rollo, p. 183.

11
Id. at 103.

12
Ibid.

13
Id. at 110.

14
Id. at 119.

15
Id. at 59.

16
Id. at 120.

17
Id. at 121.

18
Id. at 122.

19
Id. at 123.

20
Supra note 6.
21
Rollo, p. 316.

22
Id. at 317.

23
Id. at 318-319.

24
Supra note 4.

25
Rollo, p. 79.

26
Supra note 5.

27
Rollo, pp. 46-A-67.

28
Supra note 2.

29
Rollo, p. 38.

30
Ibid.

31
Id. at 39.

32
G.R. No. 101539, September 4, 1992, 213 SCRA 652, 662; emphases ours, italics supplied.

33
Rollo, p. 39.

34
Id. at 40.

35
Id. at 41.

36
Id. at 13.

37
Id. at 15.
38
364 Phil. 215 (1999).

39
Id. at 228.

40
Rollo, p. 16.

41
Id. at 16-17.

42
Id. at 17-19.

43
Id. at 19.

44
Career Philippines Shipmanagement, Inc. v. Serna, G.R. No. 172086, December 3, 2012, 686 SCRA 676, 683.

45
Id. at 684.

Tongonan Holdings and Development Corporation v. Escaño, Jr., G.R. No. 190994, September 7, 2011, 657 SCRA
46

306, 314.

47
Montoya v. Transmed Manila Corporation, supra note 46, 343; citation omitted, italics supplied.

48
Rollo, p. 61.

49
Id. at 60.

50
Andrada v. National Labor Relations Commission, G.R. No. 173231, December 28, 2007, 565 SCRA 821, 842.

51
Id. at 842-843; emphases ours.

52
G.R. No. 115394, September 27, 1995, 248 SCRA 532, 542.

53
Rollo, p. 74; emphasis ours.
 54
Golden Thread Knitting Industries, Inc. v. NLRC, supra note 38, at 228.

55
Supra note 32.

56
Rollo, p. 39.

57
De Ocampo v. National Labor Relations Commission, supra note 32, at 662.

58
Golden Thread Knitting Industries, Inc. v. NLRC, supra note 38, at 228.

59
Ibid.

60
Ibid.

61
364 Phil. 912 (1999).

62
Id. at 930; citations omitted, emphasis ours.

63
Id. at 931; emphases ours.

64
Rollo, p. 318.

65
Id. at 319.

The Lawphil Project - Arellano Law Foundation

Management Prerogative
Updated onNovember 2, 2023

Management prerogative is the inherent right of the employer to regulate all aspects of employment. There are two limitations to
management prerogative: (a) good faith, and (b) employee rights.

1. Concept
“Management prerogative” – refers to the employer’s bundle of rights in relation to all aspects of employment, from pre-employment
to post-employment, and everything in between.

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. (Rural Bank of
Cantilan, Inc. v. Julve, G.R. No. 169750, 27 February 2007)

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. (Peckson v. Robinsons Supermarket Corporation, G.R. No. 198534, 03 July 2013)

Management prerogative 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.
(SCA Hygiene Products Corporation Employees Association-FFW v. SCA Hygiene Products Corporation, G.R. No. 182877, 09
August 2010)

a. Business judgment rule

The Supreme Court “is mindful that every business strives to keep afloat during these times when prevailing economic situations turns
such endeavor into a near struggle. With as much latitude as our laws would allow, the Court has always respected a company’s
exercise of its prerogative to devise means to improve its operations. Thus, we have 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, lay off of workers and discipline, dismissal and recall of workers. Further, management retains the prerogative, whenever
exigencies of the service so require, to change the working hours of its employees.” (Unicorn Safety Glass, Inc. v. Basarte, G.R No.
154689, 25 November 2004)

Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with an employer’s
judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate business decisions of
employers. The law must protect not only the welfare of employees, but also the right of employers. (Endico v. Quantum Foods
Distribution Center, G.R. No. 161615, 39 January 2009)

It is a well-settled rule that labor laws do not authorize interference with the employer’s judgment in the conduct of its business. The
Labor Code and its implementing rules do not vest managerial authority in the labor arbiters or in the different divisions of the
National Labor Relations Commission or in the courts. (SCA Hygiene Products Corporation Employees Association-FFW v. SCA
Hygiene Products Corporation, G.R. No. 182877, 09 August 2010)

In this light, courts often decline to interfere in legitimate business decisions of employers. In fact, labor laws discourage interference
in employers’ judgment concerning the conduct of their business. (St. Luke’s Medical Center, Inc. v. Sanchez, G.R. No. 212054, 11
March 2015)

The Supreme 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 (the Supreme 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.” (Peckson v. Robinsons Supermarket Corporation, G.R. No. 198534, 03 July 2013)

Indeed, labor laws discourage interference in employers’ judgments concerning the conduct of their business. The law must protect
not only the welfare of employees, but also the right of employers. (Mendoza v. Rural Bank of Lucban, G.R. No. 155421, 07 July
2004)

b. Framework
Accordingly, the proper framework for human resource management should be to understand that management prerogative is the
general rule and labor laws/rules are the exceptions/limitations.
This crucial knowledge is empowering to employers who understand the significance of mastering management prerogative. Whereas
many have it backwards placing labor laws/rules as the general rule. As a result, these employers end up losing their wide freedom to
regulate all aspects of employment incorrectly thinking that they have to find a legal basis for their actions in labor laws and
regulations.

The purpose of labor laws and rules are to provide for the minimum standards to be observed and complied by the employer. For
example, just cause termination requires the observance of at least 2 notices (1st and 2nd written notices) and an ample opportunity to
be heard in favor of the employee (written reply or administrative hearing). These are the minimum required by law.

To put into context the framework, the general rule is: an employer may dismiss an employee for just cause. The exception/limitation
is: due process should be observed.

Given that the minimum required is to observe the 2 notices and an opportunity to be heard in favor of the employee, the Company
may – in the exercise of its management prerogatives – choose to add more thereto in favor of the employees, such as observing 3 or 4
notices or requiring both written reply and then an administrative hearing.

Conversely, the employer should not go below the minimum required by law as it will be prejudicial to the employees. For example,
the employer should not just issue a termination notice – as it will violate the 2-notice rule. If it does, then the employer may be held
liable for non-compliance with labor laws.

https://www.youtube.com/watch?v=yMcQNgq1UbI

2. Scope of Management Prerogative

Management prerogative is a bundle of rights by the employer, which covers pre-employment to post-employment, such as:

1) Hiring;

2) Work assignments;

3) Working methods;

4) The time, place and manner of work;

5) Work supervision;

6) Transfer of employees;

7) Lay-off of workers;

8) Discipline and dismissal, and

9) Recall.

The above-enumerated ist is not exhaustive and only a sample. So long as it involves regulating any aspect of employment, it is
covered by management prerogative.

a. Hiring
As to who will be hired in a pool of candidates, the employer has the complete discretion to choose among them and offer a contract
of employment.

Read more: Selection and hiring

b. Work assignments
In terms of giving out work assignments, the employer has the right and prerogative which among the employees would be best suited
to do the work.

Read more: Work assignments

c. Working methods
The employer determines what steps, processes, or methodology that would be observed in doing a particular work. As the owner of
the business, the employer is expected to have the necessary knowledge, skills, and competence to assess the best way to perform
work.
Read more: Working methods

d. The time, place and manner of work

As to when and where work will be done, as well as by what manner, the employer has the right to decide to ensure that work is done
productively and efficiently. Still, the employer should ensure that these should be communicated to applicants who intend to be
employed to be properly appraised of work hours and work days, place of assignment, and what skills may be necessary to accomplish
the work.

Read more: Time, place, and manner of work

e. Work supervision
The employer has the right and prerogative to supervise the work being done by its employees. This is rightly so since the employer is
responsible for any damage or loss caused by employees while in the performance of their work by virtue of vicarious liability. Hence,
the employer has the duty or responsibility to ensure that work is being correctly and/or proper precautions are being observed, such as
wearing protective personal equipment.

Read more: Work supervision

f. Transfer of employees
If there is legitimate business reasons for doing so, an employer may transfer employees from one unit/department to another, as well
as deploy/re-locate an employee from one workplace to another. While it is the right of an employer to transfer employees, such right
is subject to certain limitations such as good faith on the part of the employer.

Read more: Transfer of employees

g. Lay-off and recall of workers
When circumstances justify or warrant it, the employer may put the business under temporary work suspension which may result in
employees being temporarily laid off. Once the establishment recovers, the employer may recall workers to return to work and
continue with their employment.

However, if the situation aggravates such that the establishment is experiencing serious financial losses or even an anticipation
thereof, then the employer may exercise retrenchment or permanently lay-off certain employees.

Read more: Lay-off and recall of employees

h. Discipline and dismissal

The employer has the right to discipline erring employees who have been proven to commit violations provided that due process is
observed. If the infractions are grave and serious that would amount to a just cause for termination of employment, the employer has
the right to dismiss them.

Read more: Discipline and dismissal of employees

3. Limitations
Management prerogative are “not magic words uttered by an employer to bring him to a realm where our labor laws cannot reach.”
(SPI Technologies, Inc. v. Mapua, G.R. No. 191154, 07 April 2014)

The exercise of management prerogative is not absolute. By its very nature, encompassing as it could be, management prerogative
must be exercised in good faith and with due regard to the rights of labor—verily, with the principles of fair play at heart and justice in
mind. While we concede that management would best know its operational needs, the exercise of management prerogative cannot be
utilized as an implement to circumvent our laws and oppress employees. The prerogative accorded management cannot defeat the very
purpose for which our labor laws exist: to balance the conflicting interests of labor and management, not to tilt the scale in favor of
one over the other, but to guaranty that labor and management stand on equal footing when bargaining in good faith with each other.”
(Unicorn Safety Glass, Inc. v. Basarte, G.R No. 154689, 25 November 2004)
While the law recognizes and safeguards this right of an employer to exercise what are clearly management prerogatives, such right
should not be abused and used as a tool of oppression against labor. The company’s prerogatives must be exercised in good faith and
with due regard to the rights of labor. A priori, they are not absolute prerogatives but are subject to legal limits, collective bargaining
agreements and the general principles of fair play and justice. (The Orchard Golf and Country Club v. Francisco, G.R. No. 178125, 18
March 2013)

It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad discretion includes the
implementation of company rules and regulations and the imposition of disciplinary measures on its employees. But the exercise of a
management prerogative like this is not limitless, but hemmed in by good faith and a due consideration of the rights of the worker. In
this light, the management prerogative will be upheld for as long as it is not wielded as an implement to circumvent the laws and
oppress labor. (Dongon v. Rapid Movers and Forwarders Co., Inc., G.R. No. 163431, 28 August 2013)

Management prerogative is evidently quite a powerful right by the employer. As such, jurisprudence has provided limitations for the
exercise of such right. These limitations temper the exercise of such right and ensure that the rights of the employees are considered.

There are thus main limitations to management prerogative:

1) Good faith, and,

2) Employee rights.

Hence, for management prerogative to be validly exercised, these two limitations should be observed. If they are not complied, then
there may be a finding of a labor law violation.

a. Good Faith
First, management prerogative should be exercised in good faith. While the employer has the right to regulate all aspects of
employment, it should be done in good faith. For example, an employer is justified in dismissing an employee who refuses to be
transferred to a different branch if such is a business necessity (e.g. the employee’s skills and expertise is needed in the other branch).
The just cause termination would be based on willful disobedience. Conversely, if there is no such justification, an employer may be
held liable for illegal dismissal.
In a case, the dismissal of a utility man, who was separated from service due to his refusal to transfer, was held valid after it was
established that the company was acting in good faith when it implemented a reorganization plan to address financial difficulties and
after due process was observed.

#Case Law: Pantoja v. SCA Hygiene Products Corporation,G.R. No. 163554, 23 April 2010

In this case, the abolishment of Paper Mill No. 4 was undoubtedly a business judgment arrived at in the face of the low demand for the
production of industrial paper at the time. Despite an apparent reason to implement a retrenchment program as a cost-cutting measure,
respondent, however, did not outrightly dismiss the workers affected by the closure of Paper Mill No. 4 but gave them an option to be
transferred to posts of equal rank and pay. As can be seen, retrenchment was utilized by respondent only as an available option in case
the affected employee would not want to be transferred. Respondent did not proceed directly to retrench. This, to our mind, is an
indication of good faith on respondent’s part as it exhausted other possible measures other than retrenchment. Besides, the employer’s
prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means
have been tried and found wanting. Giving the workers an option to be transferred without any diminution in rank and pay specifically
belie petitioner’s allegation that the alleged streamlining scheme was implemented as a ploy to ease out employees, thus, the absence
of bad faith. Apparently, respondent implemented its streamlining or reorganization plan with good faith, not in an arbitrary manner
and without prejudicing the tenurial rights of its employees. #

On the other hand, the dismissal of an account executive prior to the end of his probationary employment on the ground of failure to
“non-satisfactory performance”, was held to be illegal due to lack of good faith in designing the sales quota and failure to comply with
due process.

# Case Law: Aliling v. Feliciano, G.R. No. 185829, 24 April 2012

In fine, an employee’s failure to meet sales or work quotas falls under the concept of gross inefficiency, which in turn is analogous to
gross neglect of duty that is a just cause for dismissal under Article 282 of the Code. However, in order for the quota imposed to be
considered a valid productivity standard and thereby validate a dismissal, management’s prerogative of fixing the quota must be
exercised in good faith for the advancement of its interest. The duty to prove good faith, however, rests with WWWEC as part of its
burden to show that the dismissal was for a just cause. WWWEC must show that such quota was imposed in good faith. This
WWWEC failed to do, perceptibly because it could not. The fact of the matter is that the alleged imposition of the quota was a
desperate attempt to lend a semblance of validity to Aliling’s illegal dismissal. It must be stressed that even WWWEC’s sales
manager, Eve Amador (Amador), in an internal e-mail to San Mateo, hedged on whether petitioner performed below or above
expectation… #
b. Employee Rights
Second, management prerogative should be exercised with due regard to the rights of labor. Otherwise stated, the employer should
ensure that labor laws – which provides for the rights of the employees – should be observed.

For instance, an employer cannot validly terminate a rank-and-file employee who refuses to render overtime work if there is no
ground for compulsory overtime work. Unknown to many, DOLE rules prohibit overtime work for rank-and-file as a general rule;
however, exceptions are allowed under the rule on compulsory overtime work. Thus, a rank-and-file employee has a right to refuse
overtime work where none of the grounds are present. (See Last paragraph, Section 10, Rule I, Book III, Omnibus Rules
Implementing the Labor Code)

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles
of fair play and justice. (Endico v. Quantum Foods Distribution Center, G.R. No. 161615, 39 January 2009)

Otherwise stated, the employee’s bundle of rights consists of those provided for by law, contract, company policies, collective
bargaining agreement, other employment agreements, and general principles of fair play and justice. (Ibid.)

For instance, the managerial prerogative to transfer personnel must be exercised without grave abuse of discretion. It must always bear
in mind the basic elements of justice and fair play. Having the right must not be confused with the manner that right is exercised.
Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. (Globe Telecom, Inc. v. Lazaro, G.R.
No. 150092, 27 September 2002)

Where chief bakers were transferred to utility/security personnel after they filed a labor complaint for monetary claims, the employer
was held liable for unlawful transfer.

#Case Law: Julie’s Bakeshop v. Arnaiz, G.R. No. 173882, 15 February 2012

In the case at bench, [the Employer] failed to justify [the Employees’] transfer from the position of chief bakers to utility/security
personnel. We find that the threat being alluded to by [the Employer] – that [the Employees] might introduce harmful foreign
substances in baking bread – is imaginary and not real. We recall that what triggered [the Employees’] reassignment was the filing of
their complaints against [the Employer] in the NLRC. [The Employees] were not even given an opportunity to refute the reason for the
transfer. The drastic change in [the Employees’] nature of work unquestionably resulted in, as rightly perceived by them, a demeaning
and humiliating work condition. The transfer was a demotion in rank, beyond doubt. There is demotion when an employee is
transferred from a position of dignity to a servile or menial job. One does not need to stretch the imagination to distinguish the work of
a chief baker to that of a security cum utility man… We agree with the CA in ruling that the transfer of [the Employees] amounted to a
demotion. Although there was no diminution in pay, there was undoubtedly a demotion in titular rank. One cannot deny the disparity
between the duties and functions of a chief baker to that of a utility/security personnel tasked to clean and manage the orderliness of
the outside premises of the bakeshop. [The Employees] were even prohibited from entering the bakeshop. The change in the nature of
their work undeniably resulted to a demeaning and humiliating work condition. #

References
⦁ Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

Related
⦁ Management Prerogative

⦁ Cases: Management Prerogative

⦁ FAQ: Management Prerogative

/Updated: February 15, 2023

Post Tags:#employer#employer rights
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 THIRD DIVISION

[ G.R. No. 212082. November 24, 2021 ]

ASIAN MARINE TRANSPORT CORPORATION, PETITIONER, VS. ALLEN P. CASERES, EMILYN O. TUDIO, JESSIE LADICA,

AND VERMELYN PALOMARES, RESPONDENTS.

DECISION

LEONEN, J.:

Management has a wide latitude to conduct its own affairs, so long as it exercises its management prerogative in good faith for the

advancement of its interest and not to defeat or circumvent employee rights under the law or valid agreements. Its management

prerogative must likewise not be used in a way that is unreasonable, inconvenient, or prejudicial to the employees involved. [1]

This Court resolves a Petition for Review on Certiorari[2] assailing the Court of Appeals Decision[3] and Resolution[4] reversing the

labor tribunals' ruling that Asian Marine Transport Corporation's (Asian Marine) transfer or reshuffle of its employees was a valid

and legitimate exercise of its management prerogative.

On May 1, 2003 and May 1, 2004, Asian Marine hired Jessie F. Ladica (Ladica) and Allen P. Caseres (Caseres) as quartermaster and

seaman, respectively. Then, on August 1, 2005 and October 12, 2006, Asian Marine hired Vermelyn B. Palomares (Palomares) and

Emilyn O. Tudio (Tudio) as ticketing clerk and purser, respectively. [5]

Ladica and Tudio were dispatched to MV Super Shuttle Ferry-1, while Palomares and Caseres were assigned to MV Super Shuttle

Ferry-6.[6]

On December 8, 2007,[7] Asian Marine transferred six employees, including Ladica, Tudio, Palomares, and Caseres (Ladica, et al.) to

other workstations effective December 17, 2007. However, Ladica, et al. refused their transfer. They claimed it would lead to

additional living expenses and a diminution of their pay, since Asian Marine would not provide them with relocation assistance

benefits.[8]

Asian Marine then dismissed Ladica, et al. on different dates due to abandonment of their duties. This prompted them to file their

respective complaints for illegal dismissal with money claims against Asian Marine. [9]

Aside from their reduced salaries due to the transfer, Ladica, et al. also claimed that the transfer was done as a retaliatory

measure against them since they: (1) joined other workers in filing a complaint against Asian Marine for violating labor standard

laws; and (2) refused to sign a compromise agreement with the company. [10]

Asian Marine, on the other hand, denied that the transfer was done in bad faith and emphasized that it was done in the ordinary

course of its business.[11] It likewise pointed out that Ladica, et al.'s money claims were pending in a separate case and that on

October 9, 2007,[12] the Department of Labor and Employment issued a Compliance Order directing Asian Marine to pay wage

differentials and benefits to 23 crew members, including Ladica, et al. [13]

On September 29, 2008,[14] Labor Arbiter Bario-Rod M. Talon dismissed Ladiaca, et al.'s complaint.

The Labor Arbiter found that the transfers were done as part of Asian Marine's management prerogative and that it was not

motivated by bad faith, since Asian Marine did it in the exercise of its legitimate business interest.

The Labor Arbiter likewise dismissed Ladica, et al.'s money claims, as they were already the subject of a pending complaint for

money claims before Department of Labor and Employment Regional Office No. 10. [15]

The dispositive portion of the Decision reads:

WHEREFORE, foregoing premises considered, judgment is rendered Dismissing the above complaint for constructive or illegal

dismissal for lack of merit.

The money claims are likewise Dismissed for reason stated above.

SO ORDERED.[16]

Ladica, et al. appealed the Labor Arbiter's Decision, but their appeal was dismissed by the National Labor Relations Commission in

its April 30, 2009 Resolution.[17]

The National Labor Relations Commission concurred with the Labor Arbiter that the transfer—which was temporary in nature and

did not involve a demotion in rank or salary diminution—was Asian Marine's customary practice and company policy, hence, it was

done in the exercise of its valid management prerogative. It held that Ladica, et al.'s willful disobedience in refusing to follow Asian

Marine's transfer order was just cause for the termination of their employment. [18]

The dispositive portion of the National Labor Relations Commission's Resolution reads:

WHEREFORE, the assailed Decision dated 29 September 2008 is AFFIRMED.

SO ORDERED.[19]

Ladica, et al. moved for a reconsideration of the National Labor Relations Commission's Resolution, but their motion was denied on

June 30, 2009.[20]

They then filed a Petition for Certiorari[21] before the Court of Appeals, which granted their petition in its June 28, 2013 Decision. [22]

The Court of Appeals held that Asian Marine, as the employer, failed to prove that the transfer "was required by the exigencies of

its business,"[23] making it tantamount to constructive dismissal.[24]

Ruling on the evidence presented, the Court of Appeals pointed out that Asian Marine's Special Permits to Navigate did not support

its claim that it implemented a regular work rotation program.[25] Additionally, the Court of Appeals stressed that since only Ladica,
 [23]
et al. were the ones transferred out of the employees who filed a complaint against Asian Marine, this substantiated their

claims of discrimination and constructive dismissal.[26]

The Court of Appeals then ruled that Ladica, et al.'s failure to report to work was caused by Asian Marine's unjust order and could

not be construed as abandonment.[27]

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, premises considered, the Decision dated 29 September 2008 of the Labor Arbiter, and the Resolution dated 30 April

2009 of public respondent National Labor Relations Commission (NLRC) are REVERSED and SET ASIDE and a new one is entered as

follows:

1. Declaring that petitioners were constructively, nay, illegally dismissed from employment;

2. Ordering private respondent to reinstate petitioners to their former positions, however, if reinstatement is no longer

feasible because of strained relations or supervening events, private respondent is ORDERED to pay each of the

petitioners 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 private respondent to pay each of the petitioners BACKWAGES computed from the time of their dismissal up to

the finality of this decision, and

4. Ordering private respondent to pay petitioners' attorney's fees amounting to 10% of the award and the cost of this suit.
For this purpose, this case is hereby REMANDED to the Labor Arbiter for the computation of the amounts due the petitioners.

SO ORDERED.[28]

Asian Marine moved for the reconsideration[29] of the Court of Appeals Decision, but its motion was denied in the Court of Appeals'

March 7, 2014 Resolution.[30]

On May 5, 2014, Asian Marine filed a Verified Petition for Review on Certiorari [31] before this Court.

Petitioner Asian Marine posits that it has long been its established practice and company policy to move or reassign its vessels,

crewmembers, and ticketing clerks from one port to another.[32] It denies that the transfer was done in bad faith, reiterating that

the reassignment of vessels naturally results in the transfer of workstations of crewmembers. It also avers that ticketing clerks

are regularly reshuffled to different ports because, from its experience and observation, employees in these positions tend to give

undue favors to their relatives and friends.[33]

Moreover, petitioner maintains that respondents Ladica, et al. were the only employees who questioned their reassignment, unlike

the other two transferred employees[34] who assumed their positions without protest.[35] Additionally, petitioner underscores that

not all of the employees who refused to sign the compromise agreement were transferred, which belies respondents' allegation

that the transfer was a retaliatory act.[36]

Finally, petitioner emphasizes that respondents admitted that it has been a long time practice in the maritime industry to transfer

and reshuffle employees, and that respondents only anchored their Petition for Certiorari before the Court of Appeals on the

transfer's invalidity on the ground of economic prejudice.[37] Thus, the Court of Appeals' finding that the transfer was not a valid

exercise of management prerogative was devoid of factual basis and contrary to respondents' admissions, thereby rendered with

grave abuse of discretion.[38]

In their Comment,[39] respondents assert that the Court of Appeals did not err in finding that their transfer or reassignment was

motivated by bad faith.[40] They likewise highlight that the Court of Appeals' conclusion that they were constructively dismissed

was supported by the requisite substantial evidence.[41]

In its Reply,[42] petitioner reiterates that the Court of Appeals failed to consider that respondents were not singled out and were not

the only ones who refused to sign the compromise agreement, yet they were the only ones among that group who were transferred.

Further, petitioner points out that the transfer happened five months after its employees were interviewed by the Labor Standards

Inspector, which again negates respondents' assertion that the transfer was a retaliatory act. [43]

Petitioner then underscores that the transferring or reshuffling of "vessels, ferryboats and/or crewmembers to different ports" was

part of the usual course of its business, and that respondents did not dispute this fact. [44]

The sole issue for this Court's resolution is whether or not the Court of Appeals erred in reversing the labor tribunals' unanimous

finding that the disputed transfer of employees was a valid and legitimate exercise of petitioner's management prerogative.
The petition must fail.

Jurisprudence recognizes the exercise of management prerogative, or a company's freedom to conduct its business as it sees

fit. San Miguel Brewery Sales Force Union v. Ubalde[45] states that management has a wide latitude to conduct its own affairs so

long as it exercises its management prerogative "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." [46]

The transfer or assignment of employees in good faith is one of the acknowledged valid exercises of management prerogative "an

will not, in and of itself, sustain a charge of constructive dismissal." [47] Tan v. National Labor Relations Commission[48] expounds:

[T]he transfer of an employee from one area of operation to another is a management prerogative and is not constitutive of

constructive dismissal, when the transfer is based on sound business judgment, unattended by demotion in rank or a diminution of

pay or bad faith. Thus, in Philippine Japan Active Carbon Corp. v. NLRC, the Court ruled:

"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."[49] (Citations omitted)

Hence, management prerogative is not absolute, and a company "cannot exercise its prerogative in a cruel, repressive, or despotic

manner."[50]

Manalo v. Ateneo de Naga University[51] instructs that in a case for constructive dismissal brought about by the transfer of

employees, this Court must decide if, given the facts of the case, the employer acted fairly in making use of its right of

management prerogative.[52] Thus:

At the core of the issue of constructive dismissal is the matter of whether an employer's action is warranted. Not every

inconvenience, disruption, difficulty, or disadvantage that an employee must endure sustains a finding of constructive dismissal. [53]

Here, the Labor Arbiter found that the transfer order was legal and that it was a valid exercise of petitioner's management

prerogative, since: (1) it would not result in a diminution in pay; and (2) its marine business' nature called for the reshuffling of

vessels and crewmembers in order to keep up with the demand in sea travel. [54]

The National Labor Relations Commission also upheld the transfer's legality, agreeing with the Labor Arbiter that it was customary

practice for a common carrier like petitioner to rotate its employees to different posts in order to adjust to the riding public's

needs. It likewise did not find the transfer to have been tainted with bad faith due to the time element, and because it did not

transfer all of those who complained, which belies respondents' claims that they were singled out for speaking against petitioner.

[55]
In reversing the labor tribunals, the Court of Appeals concurs that the assailed transfers neither involved a demotion in rank nor a

diminution in pay, yet it counters that petitioner nonetheless failed to justify the transfer as necessary in the conduct of its

business. It stressed that the "Special Permits to Navigate" granted to petitioner could not be construed to mean that it utilizes a

rotation program for its employees; hence, it found that the transfer was tainted with bad faith. [56]

Constructive dismissal arises "when continued employment is rendered impossible, unreasonable or unlikely; when there is a

demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility[,] or disdain by an employer becomes

unbearable to the employee."[57] In effect, constructive dismissal is involuntary resignation[58] due to the situation's impossibility or

unreasonableness, leaving an employee with no other option but to forego continued employment rather than trying to put up with

an unbearable working environment.[59]

A transfer is tantamount to constructive dismissal when it is "unreasonable, unlikely, inconvenient, impossible, or prejudicial to the

employee."[60] The employer has the burden of proving that the transfer was for just and valid grounds, and that it was compelled

by a genuine business necessity. Failure to overcome this burden of proof taints the transfer, making it constructive dismissal. [61]

Petitioner attached several different Special Permits to Navigate[62] from the Maritime Industry Authority to support its assertion

that it was its customary practice to reshuffle its employees to address the exigencies of its maritime travel business.

Petitioner fails to convince.

A careful review of the permits shows that the temporary permits were only for a single voyage and allowed particular vessels to

travel on a different route for no more than two days. One of the special permits attached to the Petition reads:

SPECIAL PERMIT TO NAVIGATE

PERMISSION IS HEREBY GRANTED to MV "SUPER SHUTTLE FERRY 10" owned/operated by Asian Marine Transport Corporation to

navigate during fair weather from Port of Lipata, Surigao City to Balingoan, Misamis Oriental, subject to the following conditions:

1. That the vessel shall not carry passengers;

2. That the vessel shall not load any cargo/ dangerous cargoes [sic];

3. That the vessel shall be manned, as follows:

(a) Please refer to Minimum Safe Manning Certificate

(b) xxxx

(c) xxxx

(d) xxxx

(e) xxxx

4. That in case of accident, damage or loss, the registered owner of the vessel shall assume full risk and responsibility for

all the consequences arising from such negligence, disregard or violation; and

5. That the owner of the said vessel be held answerable for any negligence, disregard or violation of conditions herein

imposed and for any consequences arising from such negligence, disregard or violation.
Issued at Cagayan de Oro City on 13th day of March 2008.

This License is valid from March 17, 2008 to March 19, 2008.

This PERMIT shall be valid for one voyage only.[63]

The other attached Permits[64] pertained to different vessels and had different issuance dates, however, they were all only valid for

one voyage and were all only good for two days. Thus, contrary to what petitioner claimed, it cannot be deduced from the permits

that there was a real need to transfer or reshuffle employees, or that these had long been established as a company practice. As

observed by the Court of Appeals:

[T]hese pieces of evidence cannot in any way be considered as competent evidence to prove that it has regular work rotation

program. These permits do not prove anything in relation to the alleged practice of reshuffling crewmembers. They merely show

that a particular vessel is authorized to navigate a certain route for a single voyage and nothing more. At best, respondent could

have at least presented previous memorandum ordering the reshuffling of its employees. [65]

In Zafra v. Court of Appeals,[66] this Court held that while Philippine Long Distance Telephone Co.'s management prerogative

includes the right to transfer employees to any branch, which their employees also agreed to in their application for employment,

the employer's right to transfer should not be taken in isolation, but rather, in conjunction with the established company practice of

notifying the employees of the transfer first before sending them abroad for training. [67]

Zafra found that it was the telecom' s company practice or standard operating procedure to "inform personnel regarding the
nature and location of their future assignments after training abroad[,]" [68] as evidenced by several inter-office memoranda which

stressed the dissemination of notice of transfer to employees before they are sent abroad for training, thereby giving their

employees an opportunity to refuse the offered training.[69]

Here, no similar evidence was presented to support the claim of a prevailing company practice of transferring employees. Instead

of submitting "previous memorandum ordering the reshuffling of its employees" [70] or analogous evidence, petitioner merely

attached several Special Permits to Navigate issued by the Maritime Industry Authority. These special temporary permits allowed

particular vessels to travel on a different route for a few days at a time, and cannot be construed, by any stretch of mind, to

support an assertion of an established company practice to transfer or reshuffle its employees.

With petitioner's failure to prove its supposed company practice of transferring employees, the transfer becomes arbitrary and is

no longer within the ambit of management prerogative.

Additionally, constructive dismissal does not always involve or is not just limited to "forthright dismissal or diminution in rank,

compensation, benefits, and privileges."[71] A transfer that is unreasonable, inconvenient, or prejudicial to employees may also be

seen as constructive dismissal if continued employment becomes unbearable and oppressive, affording the employee with no other

option but to terminate their employment.[72]

Here, respondents decried their transfer since their new assignments meant that they would be far from their families and that

they would either need to spend extra on living expenses or bring their families with them, leading to a diminution of their pay, as
petitioner would not provide them with relocation assistance benefits. [73]

Generally, an objection to a transfer grounded solely on personal inconvenience or hardship cannot be seen as a "valid reason to

disobey"[74] a transfer order, however, the assailed transfer here was arbitrary, as well as discriminatory and marked with bad faith,

as found by the Court of Appeals:

Even assuming arguendo that the reassignment of petitioners was pursuant to an existing company practice, We cannot help but

wonder why only the petitioners out of the 23 employees of the private respondent were singled out. Evidently, private

respondent's act smacks of arbitrariness and discrimination. We emphasize that constructive dismissal may exist if an act of clear

discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it could foreclose

any choice by him except to forego his continue employment.

Private respondent tries to justify its action by pointing out that petitioners' reassignment was only temporary in nature, however,

the order contained no indication at all that the transfer was indeed momentary. Furthermore, private respondent argues that the

supposed transfer of the petitioners was "to give way for their short job training in relation to their position which will be

sponsored by the company and to be held in Cebu City." That being the case, it baffles Us no end why Palomares have (sic) to be

transferred in Liloan, Leyte and Tudio to Hagnaya, Cebu if the training is indeed to be held in Cebu City? This, to Our mind, was a

mere afterthought on the part of the private respondent to justify its action.

Altogether, there is a strong basis for petitioners' allegation that their reassignment was not prompted by legitimate reasons. On

the contrary, the move was apparently motivated by an illicit or underhanded purpose – to punish petitioners. [75] (Emphasis in the
original)

Clearly, respondents' transfer cannot be said to have been a valid exercise of petitioner's management prerogative.

WHEREFORE, the Petition for Review on Certiorari is DENIED.

SO ORDERED.

Carandang, Zalameda, Rosario, and Marquez, JJ., concur.

[1]
See San Miguel Corporation v. Ubaldo, San Miguel Corporation v. Ubaldo, 291-A Phil. 317 (1993) [Per J. Campos, Jr., Second

Division]; and Philippine Industrial Security Agency Corp. v. Aguinaldo, 499 Phil. 215 (2005) (Per J. Sandoval-Gutierrez, Third

Division].

[2]
Rollo, pp. 9-33.

[3]
Id. at 224-237. The June 28, 2013 Decision in CA-G.R. SP No. 03178-MIN was penned by Associate Justice Oscar V. Badelles and

concurred in by Associate Justices Renato C. Francisco and Jhosep Y. Lopez (now a member of this Court) of the Special Twenty-
First Division, Court of Appeals, Cagayan de Oro City.

[4]
Id. at 245-247. The March 7, 2014 Resolution in CA-G.R. SP No. 03178-MIN was penned by Associate Justice Oscar V. Badelles and

concurred in by Associate Justices Renato C. Francisco and Jhosep Y. Lopez (now a member of this Court) of the Special Twenty-

First Division, Court of Appeals, Cagayan de Oro City.

[5]
Id. at 37.

[6]
Id.

[7]
Id. at 92.

[8]
Id. at 38.

[9]
Id.

[10]
Id. at 38-39.

[11]
Id. at 40.
[12]
Id. at 90-91.

[13]
Id. at 41.

[14]
Id. at 37-43. The Decision in NLRC Case Nos. RAB-10-01-00089-2008, RAB-10-01-00090-2008, RAB-10-01-00091-2008, and RAB-10-

01-00092-2008 was penned by Executive Labor Arbiter Bario Rod M. Talon.

[15]
Id. at 43.

[16]
Id.

[17]
Id. at 45-51. The National Labor Relations Commission's Resolution in NLRC Case No. MAC 12-010592-2008 (NLRC Case Nos.

RAB-10-01-00089-2008, RAB-10-01-00090-2008, RAB-10-01-00091-2008, and RAB-10-01-00092-2008) was penned by Commissioner

Dominador B. Medroso, Jr. and concurred in by Commissioners Salic B. Dumarpa and Proculo T. Sarmen of the National Labor

Relations Commission, Fifth Division, Cagayan de Oro City.

[18]
Id. at 49.

[19]
Id. at 50.
[20]
Id. at 63-64. The Resolution was penned by Commissioner Dominador B. Medroso, Jr. and concurred in by Commissioners Salic

B. Dumarpa and Proculo T. Sarmen of the National Labor Relations Commission, Fifth Division, Cagayan de Oro City.

[21]
Id. at 65-86.

[22]
Id. at 224-237.

[23]
Id. at 231.

[24]
Id.

[25]
Id. at 232.

[26]
Id. at 232-233, in relation to p. 41.

[27]
Id. at 234.

[28]
Id. at 235-236.

[29]
Id. at 238-242.
[30]
Id. at 245-247.

[31]
Id. at 9-32.

[32]
Id. at 27.

[33]
Id. at 15.

[34]
Id. The other two transferred employees were Ariel Javier and Danilo Ilut.

[35]
Id.

[36]
Id. at 25-26.

[37]
Id. at 28-29.

[38]
Id. at 30-32.

[39]
Id. at 282-285.
[40]
Id. at 282-283.

[41]
Id. at 284.

[42]
Id. at 293-297.

[43]
Id. at 293-294.

[44]
Id. at 295-296.

[45]
San Miguel Corporation v. Ubaldo, San Miguel Corporation v. Ubaldo, 291-A Phil. 317 (1993) [Per J. Campos, Jr., Second

Division].

[46]
Id. at 325.

[47]
Manalo v. Ateneo de Naga University, 772 Phil. 366, 382 (2018) [Per J. Leonen, Second Division].

[48]
359 Phil. 499 (1998) [Per J. Panganiban, First Division].
[49]
Id. at 511-512.

[50]
Andrada v. National Labor Relations Commission, 565 Phil. 821, 839 (2007) [Per J. Velasco, Jr., Second Division].

[51]
772 Phil. 366 (2015) [Per J. Leonen, Second Division].

[52]
Manalo v. Ateneo De Naga University, 772 Phil. 366, 383 (2015) [Per J. Leonen, Second Division].

[53]
Id. at 369.

[54]
Rollo, pp. 41-42.

[55]
Id. at 49-50.

[56]
Id. at 231-232.

[57]
Tan v. National Labor Relations Commission, 359 Phil. 499, 511 (1998) [Per J. Panganiban, First Division].

[58]
Philippine Industrial Security Agency Corp. v. Aguinaldo, 499 Phil. 215, 226 (2005) [Per J. Sandoval-Gutierrez, Third Division].
[59]
Manalo v. Ateneo De Naga University, 772 Phil. 366, 369 (2015) [Per J. Leonen, Second Division].

[60]
Philippine Industrial Security Agency v. Aguinaldo, 499 Phil. 215, 226 (2005) [Per J. Sandoval-Gutierrez, Third Division].

[61]
Id.

[62]
Rollo, pp. 158-163 and 168.

[63]
Id. at 158.

[64]
Id. at 159-163 and 168.

[65]
Id. at 232.

[66]
437 Phil. 766 (2002) [Per J. Quisumbing, Second Division].

[67]
Zafra v. Court of Appeals, 437 Phil. 766, 767 (2002) [Per J. Quisumbing, Second Division].

[68]
Id. at 769.
[69]
Id.

[70]
Rollo, p. 232.

[71]
Zafra v. Court of Appeals, 437 Phil. 766, 781 (2002) [Per J. Quisumbing, Second Division].

[72]
Id.

[73]
Rollo, p. 38.

[74]
Herida v. F&C Pawnshop and Jewelry Store, 603 Phil 385, 392 (2009) [Per J. Quisumbing, Second Division].

[75]
Rollo, pp. 232-233.

© Supreme Court E-Library 2019

This website was designed and developed, and is maintained, by the E-Library Technical Staff in collaboration with the Management Information
Systems Office.

Copyright © The Author(s). All Rights Reserved © GLOBAL PUBLICATION HOUSE |Int. J. Business Management | Leo Roswald Mangle Tugonon,
MM, JD, PALOMPON INSTITUTE OF TECHNOLOGY, COLLEGE OF ARTS AND SCIENCES, BUSINESS ADMINISTRATION, COLLEGE OF GRADUATE
STUDIES, email: Nikki Shane Moron Tugonon, MM, PALOMPON INSTITUTE OF TECHNOLOGY, BS HOSPITALITY MANAGEMENT DEPARTMENT,
COLLEGE OF ARTS AND SCIENCES email address: MANAGEMENT PREROGATIVES AND EMPLOYEE BENEFITS Corresponding author: A B S T R A C T
Employers and employees have rights and privileges that are guaranteed and protected by laws and for things to go well in the workplace, both
must adhere to and respect the same. This study focused on the management’s decision to discontinue the giving of summer incentive pay to the
employees. This topic is significant because of the discussion of the circumstances and experiences of the participants who have been affected by
the removal of monetary benefits they previously enjoyed. The data used is derived from completed case study.This research study is qualitative
in nature and used the doctrinal analysis method because doctrines, statutes, and jurisprudence are analyzed in relation to the factual events
that transpired. This analysis provides a solid foundation before beginning any theoretical critique of the law or empirical study about the law in
operation, and it is the researcher's responsibility to confirm the legitimacy and status of the legal doctrine being examined. Findings revealed
that the laws, and jurisprudence relating to management prerogative are consistent and clear in giving the limitations on the exercise of the
management prerogative. K E Y W O R D S Management Prerogative, Jurisprudence, Doctrinal Analysis, Employee Benefit, Philippine Supreme
Court Decision Vol. 06 Issue 08 August - 2023 Manuscript ID: #0961 e-ISSN 2795-3257 p-ISSN 2795-3236 Page 15 of 26 This work is licensed
under Creative Commons Attribution 4.0 License. 10.5281/zenodo.8195001 Leo Roswald M. Tugonon et al., (2023) Int. J. Business Management.
06(08), 15-26 ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management | INTRODUCTION In response
to recent economic crises, employers in many industrialized nations have sought greater flexibility in terms of working hours, compensation, and
employment conditions.(O’Sullivan et al., 2021). This presupposes the exercise of the employers managerial prerogative and thus become a
trend in employment relation. In foreign jurisdiction, government authorities in developed countries exercsied their legitimate power to at least
make the necessary changes to public sector pay, employee benefits and employment terms and conditions. (Bach and Bordogna, 2013; Freeman
and Han, 2012; Lewin et al., 2012). Management prerogative has become an employer practice and is exercised to keep a business competitive
and efficient, without the consent of employees, who cannot refuse these changes and may be fairly dismissed if they try to do so. However, if
the employer needs to change the terms and conditions of the employment contract, it must negotiate with the employees (Kanamugire, J. C.
(2014). In Radzi et.al, 2015, the study finds that the management prerogative principle needs to be redefined in order to give some space for
employees to be actively involved in the decision-making process in line with the current national agenda, which encourages participation from
the employer and employee and relevant representative such as trade union. Relatively, this signifies that an employer-employee relationship is
vital in this aspect particualrly in the interpretation of what is management right and how does it affect employee benefit. But very important to
take note the existence of a contract of employment as it defines employee rights and limtiations. However, in another related study, it explains
that there are many instances where a contract of employment tends to be favourable to the employer, leaning towards exploitation of the
employee, and does not depict a true contractual bargain between the parties involved (Parasuraman, 2014). Such exploitation may cause an
employee to resign and seek other opportunities (Kamal & Mir, 2013). Besides terms and condition that relate to specified details and tasks to be
carried out by the employee, employers also include such terms and conditions relating to their managerial rights, which allow employers to
decide and implement decisions taken for the benefit of their organization. This particular practice has raised queries on whether an employer
may utilise managerial prerogative powers to the extent of disregarding the rights of an employee and disrespecting the employee’s dignity in
order to ensure the efficiency of his business. This study relates to a situation that employer-employee relationship may be strained for over use
of management prerogative. Thus, changes in the structure and provisions of the employment relationship create substantial challenges for the
management community. The employer-manager's traditional prerogatives to terminate at will are being eroded in response to changing
socioeconomic values that recognize the emergence of an employee's reasonable expectations of job security (Gomez, at. Al, 1991). In the
Philippines, the doctrine of management prerogative explains that 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 (Peckson V. Robinsons, 2013).
Indeed, the way management conducts its own affairs to achieve its purpose is within the management’s discretion (Caong, Et. Al. V. Regualos,
2011). The only limitations to the exercise of this prerogative are those imposed by labor laws and the principles of equity and substantial justice.
The policies, rules, and regulations on work-related activities of the employees must always be fair 16 MANAGEMENT PREROGATIVES AND
EMPLOYEE BENEFITS ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management | and reasonable.
Simply said that the employer has the prerogative to organize his business in the way he deems fit for the purpose of the economy or
convenience provided he acts bona-fide. In MEGA MAGAZINE PUBLICATIONS, INC., V. JERRY TIU (2014), the Supreme Court enunciates that with
relevance to the grant of a bonus or special incentive, it explains that the latter being a management prerogative, is not a demandable and
enforceable obligation, except when the bonus or special incentive is made part of the wage, salary or compensation of the employee or is
promised by the employer and expressly agreed upon by the parties. By its very definition, bonus is a gratuity or act of liberality of the giver, and
cannot be considered part of an employee’s wages if it is paid only when profits are realized or a certain amount of productivity is achieved. If the
desired goal of production or actual work is not accomplished, the bonus does not accrue. In relation to the pronoucement of the court, it could
be possibly said that there may be companies nowadays that are cutting off the benefits their employees used to receive. Some are giving the
benefits for years and suddenly stopped and insist that the giving of the same is discretionary on their part disregarding the fact that the
employees had been receiving it for quite some time which could be construed as having ripened into a regular company practice. Some
management is making it an on-and-off benefit so to speak just to put a halt on the continuity of giving benefits and thus, no longer fall within
the ambit of long practice. The Labor code of the Philippines has already established guidelines on how the management should treat the
employees. It prescribed workers’ rights, management prerogative, and dialogue mechanism between labor and management. Under the Labor
Code of the Philippines, the government still recognizes management prerogative which may include hiring, firing, promotion or demotion,
laying-off, laying down policies, discipline, working hours, working structure. The management has the prerogative power to hire and fire an
employee who does not meet employment standards, promote or demote an employee who meets or does not meet the standards, terminate
employees, discipline employees and determine working hours and work structure. But in the exercise of these management prerogatives, the
management should not violate the workers’ rights. By instituting management prerogative and workers’ rights, the government balances the
power between labor and capital or the management (Jimenez, n.d). Jurisprudence, labor provisions and policies have been made as basis in the
exercised of management prerogative with consideration on the employee benefits. This study therefore, would focused on the analysis of the
principles of management prerogative and non-diminution of benefit and how it should be reconciled following the supreme court decisions,
labor law provisions and policies to that effect. This study is very significant because it will provide clear parameters on the exercise of
management prerogative. This will give inputs on how the same should be exercised without casuing injury to the rights of both employer and
employees. On the otherhand, the limitation of this study is that this would not apply to employees in the government, and other government
agencies since the terms and conditions of employment as well as the administration’s discretion is governed by the civil service law. In this
study, the researcher adapted a case scenario from a completed case study as guide in developing a research finding. The objective of which is to
analyze and understand the cicumstances affecting the teaching and non-teaching employees of a private school to arrive at a best solution
following the applicable doctrines, jurisprudence and statutes/law. Further, the study helps in 17 Leo Roswald M. Tugonon et al., (2023) Int. J.
Business Management. 06(08), 15-26 ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management |
identifying various instances which can be considered for coming up with the concrete guidelines in applying management prerogative. These
instances could also lead to the development of a more emcompasing definition of management prerogative. In the end, all top level managers,
middle managers and frotline managers including employees will benefit from this study. METHODOLOGY The method used is doctrinal analysis
method and is qualitative in nature. Doctrinal method still necessarily forms the basis for most, if not all, legal research projects. Valid research is
built on sound foundations, so before embarking on any theoretical critique of the law or empirical study about the law in operation, it is
incumbent on the researcher to verify the authority and status of the legal doctrine being examined (Hutchinson, 2013). Moreover, the method
used focuses on the letter of the law rather than the law in action. Using this method, a researcher composes a descriptive and detailed analysis
of legal rules found in primary sources (cases, statutes, or regulations). The purpose of this method is to gather, organize, and describe the law;
provide commentary on the sources used; then, identify and describe the underlying theme or system and how each source of law is connected.
(https://law.indiana.libguides.com/dissertationguide). On the other hand, since the data is taken from a completed case study, the researcher
sought the permission and consent of the author. The facts of the case were integrated in this study. The result of the study provides a clear
operational definition of management prerogative, and providing the parameters, and criteria in the exercised of the same based on the existing
doctrines, jurisprudence and pertinent laws. RESULTS AND DISCUSSIONS This study focused on the management’s decision to discontinue the
giving of summer incentive pay to the employees. This is significant because of the discussion of the circumstances and experiences of the
participants in a case study who have been affected by the removal of monetary benefits they previously enjoyed. So, the development of the
case is follows: The ABC school is operating as an academic institution offering elementary, secondary, and tertiary education. Considering that
the school does not regularly offer summer classes, the school by way of a board resolution gives the personnel a summer incentive pay (summer
pay for brevity) equivalent to 15 days of their basic salary to be released every 15th day of the month of May. The summer pay would vary
depending on the basic salary of the employees both in the teaching and nonteaching department. The employees have been receiving summer
pay for more than 10 years already and were not stopped even if there was a change of school president and/or changes in the set of officers on
the board. After more than 10 years of receiving the summer pay, the ABC employees were shocked when they were told that they will no longer
receive their summer pay. The only explanation given by the school administrator is that the board by way of a resolution, discontinued the
granting of the said summer pay. They explained that the grant of summer pay was a management prerogative and not regular pay as the
employees would want to insist. There was no earlier pronouncement by the board 18 MANAGEMENT PREROGATIVES AND EMPLOYEE BENEFITS
©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management | as to its plan to discontinue the giving of
the summer pay for the employees. The employees were first made aware of the board's decision to stop awarding summer pay after they failed
to receive the same benefit in May. For the employees, not having the summer pay, was shocking and painful because they were expecting to be
paid at least enough to cover their daily costs and subsistence. The board's action caught the ABC employees off guard, and because they needed
so much of the summer pay, it created some issues. In the meantime, the employees would want to talk to the board and raise the issue.
However, the board did not meet with the employees and the cashier was the one explaining that the board no longer give them the green light
to release the summer pay. Before that, the school administrator already explained that there was no intention on the part of the school or board
to have it as regular summer pay. However, the employees were not persuaded because they think that if it had not been their intention, the pay
would have been discontinued sooner and would not have matured into a practice that led them to believe that it was a routine because the
school had been consistently awarding the pay for more than ten years. During an interview with a few school employees, they revealed that one
of the likely causes is that the school had to spend money to cover unforeseen costs that were not related to its regular business. The school
allegedly had to pay the wages or allowances of the students who worked alongside them as summer workers during the break. The summer pay
for the workers was supposedly suspended as a result. The employees were not provided any summer pay in the succeeding summers. This led
the employees to continue to clamor and demand from the school their summer pay. Many attempts were made including informal inquiries
from other members of the board. But despite of the same, the employees were empty-handed and simply refuse to accept and understand the
reason of the school and the board. In the course of the interview, it can be said that the employees were disappointed, and they are still hoping
at least the school will have a dialogue with them and talk about the issue at hand. With this, come the issue that needs to be resolved and how
this matter should be explained to both parties. In relation to the case, this study was conducted chronologically with the related jurisprudential
support, the applicable statutes/laws and doctrines. Part of the discussion is on management prerogative in the context of the constitutional and
labor law; in the context of jurisprudence, and finally in the context of applicable doctrines. MANAGEMENT PREROGATIVE IN THE CONTEXT OF
THE CONSTITUTIONAL AND LABOR LAW The constitution is described as primarily a “document of social justice” and has not embraced fully the
concept of laissez-faire”. in the words of Sales in his book “Management Prerogative and Employees’Rights: A General Overview” , he states that
laws should be harmonized and that social and economic forces equalized. Specifically, the State shall regualte the relations berween workers
and employers recognizing the right of labor to its just share in the fruits of prouction and the right of enterprises to reasonbale returns on
investments and to expansion and growth (Article XIII, Sec. 3, 1987 Constitution of the Philippines). 19 Leo Roswald M. Tugonon et al., (2023) Int.
J. Business Management. 06(08), 15-26 ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management | As
matter of ideological statements, the State affirms labor as a primary social economic force and shall protect the rights of workers and promote
their welfare (Bernas, J. 1992). There is a state obligation to protect labor. As mandated in the Constitution, the State shall afford full protection
to labor, local and overseas, organized and unorganized. The 1935 and 1973 Constitution also had the same provision that the “State shal afford
protection to labor”. the 1987 Constitution, however, added “full protection to labor and described labor as “local and overseas” and “organized
and unorganized”. In addition, the 1987 Consitution, Article 3, Sectrion 1 states that, “No person shall be deprived of life, liberty, or property
without due process of law, nor shall any person be deprived of the equal protection of the law. To be true, there is no constitutional definition of
management prerogatives. It is more on the protection to labor. Even the Labor Code of the Philipines, does not define management
prerogatives. According to the declaration of basic policy, Article 3, the “State shall afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers. The State shall assure the
rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work.” Again, the concept is
more on protection to labor. In short there is no definite definition of management prerogatives that defined and elaborated the concept. To take
note, the Labor Code is an instrument to carry out constitutional mandate. If there should be conflict between constitutional provisions and
those of the Labor Code, the Constitution shall prevail as it is the highest law of the land. Other provisions in the Constitution that protects the
right or promote the welfare of workers include the right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged. 2) The right of self-organization shall not be denied to
government employees. No officer or employee of the civil service shall be removed or suspended except for cause provided by law. Temporary
employees of the Government shall be given such protection as may be provided by law. 3) Regular farmworkers shall have the right to own
directly or collectively the lands they till. Other farmworkers shall receive a just share of the fruits of the land they till. The State recognizes the
right of farmworkers, along with other groups, to take part in the planning, organization and management of the agrarian reform program.
Landless farmworkers may be resettled by the Government in its own agricultural estates. 4) The State shall, by law, and for the common good,
undertake, in cooperation with the private sector, a continuing program of urban land reform and housing which will make available at affordable
cost decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement areas. It shall also promote
adequate employment opportunities to such citizens. (Sec. 3, Article XIII. 2 Article III, Bill of Rights, Sec. 8. 3 Article IX-B, The Civil Service
Commission, Sec. 2[3], [5] and [6]. 4 Article XIII, Secs. 4, 5 and 6, Social Justice and Human Rights. 5 Article XIII, Sec. 9).A constitutional
commissioner has characterized the 1987 Constitution as “especially prolabor,” for the rights of workers and employees have acquired new
dimensions while some concepts have been constitutionalized (Foz, V., 1987). In sum, both the Constitution and Labor law does not provide the
legal definition of the concept of management prerogatives. 20 MANAGEMENT PREROGATIVES AND EMPLOYEE BENEFITS ©2023 Published by
GLOBAL PUBLICATION HOUSE |International Journal of Business Management | MANAGEMENT PREROGATIVES IN THE CONTEXT OF
JURISPRUDENCE The concept of management prerogative had been developed by jurisprudence. In many Supreme Court decisions, the supreme
tribunal had illustrated how management prerogatives should be understood. Accordingly, in one case, the court defined management
prerogatives as, “Except as limited by special laws, the employer is free to regualte, according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed,
work supervision, lay-off of workers, and the discipline, dismissal and recall of workers (San Miguel Brewery vs Ople, SC 1989). Table 1 represents
the related cases decided by the Supreme Court. It reveals how the Supreme Court clarified the concept of management prerogatives. Though
there were different case developments, the decisions were consistent in clarifying the applicability of the concept of management prerogatives.
Presented are randomly selected court decisions relating to management prerogatives where the court made a pronouncement and have been
consistent in dealing with the issues on management prerogatives. TABLE 1. Supreme Cour Decisions on Management Prerogatives Court
Digested Decision Year Reference WIDE LATITUDE TO REGULATE/DISCIPLINE The employer’s right to conduct the affairs of its business,according
to its own discretion and judgment, is wellrecognized. An employee has a free reign and enjoys wide latittude 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. The only criterion to guide the exercise of its management prerogative is that the policies, rules and regulations on workrelated
activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense
involved and to the degree of the infraction. 2010 Coca-Cola Export Corporation v. Gacayan, G.R. NO. 149433. December 15, 2010. RIGHT TO
TRANSFER 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. 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 maynit complain that it tantamounts to a constructive dismissal. The managerial prerogative to transfer personnel must
be exercised without grave abused of discretion, bearing in mind the basic elements of justice and fair play. 2013 Peckson V. Robinson
Supermarket Corporation, G.R. No. 198534, July 3, 2013 Philiipine Japan Active Carbon Corporation 21 Leo Roswald M. Tugonon et al., (2023) Int.
J. Business Management. 06(08), 15-26 ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management | A
machinist who had been employed with the company for 16 years was reduced to the service of transporting filling materials after the failed to
report to 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. Jarcia Machine Shop and Auto Supply, INc. V, NLRC Employee maintain that he was constructively dismissised because he did not commit
any offense that would justify his relief. He adds that his transfer was unresoanably inconvenient for him and his familyebcasue of its substantial
effecton finances and quality of family life, which would ultimately force him to quit. Court said, reasignment made by managemnt pending
investigation of violations of company policies and procedures allegedly committed by an employee fall within the ambit of management
prerogative. 2009 Endico v. Quantum foods Distribution Center, G.R.No. 161615, January 30, 2009 CONTRACTING OUT SERVICES Contarcting out
of services is an exercise of business judgment or management prerogative. Absent any proof that management acted in a malicious or abitrary
manner, the court will not interfere with the exercise of judgment by employer. 2013 Bankard, Inc. V. NLRC, BEUAWATU, G.R. No. 171664, MArch
6, 2013. GOOD FAITH Employees were dismissed after refusal to be transferred or reassigned as utility/security personnel. The employees’
transfer was an act of retaliation on the part of the employer dur to the former’s filing of complaints agaisnt them, and thus, was clearly made in
bad faith. Management prerogative must be exercised with good faith. Company arbitrarily, san any rhyme or reason peremptorily removed
employee from his post in the guise of a supposed reorganization and exercise of management prerogative. 2012 2019 Julie Bakeshop v. Arnaiz,
G.R. No. 173882, Feb. 15, 2012. Isabela-1 Electric Coop, Inc. V. Del Rosario, Jr., G.R. No. 226369, July 17, 2019. EMPLOYEES’ RIGHTS VIOLATED
Employee got pregnant out of wedlock, Married the father of the child but still dismnissed for due to pre-marital sexual relations. Court said, not
within the management prerogative. It is within the the employees’ rights. 2015 Leus v. St. Scholastica’s College Westgrove, G.R. No. 187226, Jan.
28, 2015. BONUS/GRATUITY NOT A RIGHT AND DEMANDABLE The granting of a bonus is a management prerogative, something given in addition
to what is ordinarily received by or strictly due the recipeint. Thus, a bonus is not a demandable and enforceable obligation, except when it is
made aprt of the wage, salary or compensation of the employee. It is a gratuity or act of liberality of the giver, and cannot be 2001 Producers
Bank of the Philippines v. NLRC, Producers Bank Employees Association G.R. No. 100701, march 289 2001 22 MANAGEMENT PREROGATIVES AND
EMPLOYEE BENEFITS ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management | considered part of the
employee’s wages if it is paid only when profits are realized amount of productivity is achieved. EXCEPT ON SPECIAL CICUMSTANCE Made aprt of
the wages, salary, compensation. Promised by the employer and expressly agreed upon by the parties. A company’s long and regular praactice or
has ripened into a long and regular practice. FORFEITURE OF CLAIMS NOT A MANAGEMENT PREROGATIVE They are clear that termination from
employment is without prejudice to the rights, benefits, and privileges of an employee under a contract or those under established company
policy or practice. Since Meralco failed to prove that termination from employment automatically leads to forfeiture of accrued benefits,
Argentera is entitled to all the benefits he had previously received prior to his dismissal. 2014 2012 2021 2021 MEGA Magazine Publications, Inc,
v. Defensor, G.R. No. 162021, June 16, 2014. Eastern Telecommuncations Philippines, v. Eastern Telecoms Employees Unions, G.R.No. 185665,
Feb. 8, 2012. MANILA ELECTRIC COMPANY, PETITIONER, VS. APOLINAR A. ARGENTERA, RESPONDENT. G.R. No. 224729. February 08, 2021
APOLINAR A. ARGENTERA, PETITIONER, VS. MANILA ELECTRIC COMPANY/MANNY V. PANGILINAN, RESPONDENTSG.R. No. 225049 Through the
study, it can be clearly established that the exercsie of management prerogative are required to be consistent with jurisprudence as it dictates its
validity and legality. MANAGEMENT PREROAGTIVES IN A DOCTRINAL CONTEXT Like in the previous discussion that there is no concrete definition
of management prerogative, this is substantially proven because management prerogative is actualy derived from jurisprudence. However, as a
doctrine, management prerogative states that 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 doctrine also provides limitation in the exercise
of the same by considering that the right of employer is not absolute because of these limitations which are grounded on some doctrines and
principle such as equity and substantial justice, good faith, and due process. CONCLUSIONS The study discusses the concept of management
prerogative and how it is to be defined. This is an important guide for employers/management in the exercise of which so as not to violate
existing laws, jurisprudence and principles. Based on the discussion, findings revealed that the validity of the exercise of management
prerogative would depend on the facts and circumstances of the case taking into account the different jurisprudential support. In other words,
the exercise of a management prerogative should be within the ambit of the law, jurisprudence and applicable principles. Findings also revealed
that the laws, and jurisprudence relating to management prerogative is consistent and clear in giving the limitations on the exercise of the
management prerogative. 23 Leo Roswald M. Tugonon et al., (2023) Int. J. Business Management. 06(08), 15-26 ©2023 Published by GLOBAL
PUBLICATION HOUSE |International Journal of Business Management | The paper also identifies the different claims of the employees and
management that may affect their rights and privileges. In otherwords, the invocation of management prerogative is circumstantial in nature
because it would depend on what transpired as basis for the court in determining the legality and validity of the managemnt’s exercise of the
same. Therefore, in the case integrated in this study, it can be decided based on the applicable jurisprudence, and should always consider the
applicable principles that may be applicable particualrly due process, equity and substantial justice and good faith. 24 MANAGEMENT
PREROGATIVES AND EMPLOYEE BENEFITS ©2023 Published by GLOBAL PUBLICATION HOUSE |International Journal of Business Management |
REFERENCES The heading of the References section must not be numbered. All reference items must be in 8 pt font. Please use Regular and Italic
styles to distinguish different fields as shown in the References section. Number the reference items consecutively in square brackets (e.g. [1]). 1)
Azucena, Everyone’s Labor Code, Rex Book Store, Copy Right 2021. 2) Foz, V.,“Labor Concepts in the New Constitution” in The 1987.Constitution:
Its Implications on Employment and Labor Relations [ECOP: Manila, 1987],p. 158. 3) Gomez, G. & Morgan, J.D., (1991). Managerial Prerogatives,
Employee Expectations, and Property Rights inJob Security: INstitutionalizing the “New Equity”. INternational JOurnal of Valeu-Based
Management, 4,25-43. 4) Hutchinson, T (2013). Research Methods in Law. EBook. ImprintRoutledge.Pages 27. ISBN 9780203489352. 5) Freeman
RB and Han E (2012) The war against public sector collective bargaining in the US. Journal of Industrial Relations 54(3): 386–408. 6) Jimenez,
Josephus B. The 8 secrets for success to leading and managing people through employee discipline. 2017 (3rd ed,). Q.C.: Central Book Supply
(2017) 2v. 7) Jimenez, Josephus B. Compendium on the Philippine labor relations law and jurisprudence (with compendium, analysis and
annotations) 2017 ed. Q.C.: Central Book Supply (2017) 1138pA. 8) Kamal, N. A., & Mir, A. (2013). Employment lawin Malaysia. Malaysia:
International Law Book Services. 9) Kanamugire, J. C. (2014) The Concept of Managerial Prerogative in South African. 10) Lewin, A. P., Fisher, M.,
& Weber, B. (2012). Do rainfall conditions push or pull rural migrants: Evidence from Malawi. Agricultural Economics, 43, 191– 204. 11)
O’Sullivan, M., Lavelle, J.,Turner, T., McMahon,J.,Murphy, C.,Ryan, L. and Gunnigle, P. University of Limerick, Ireland (2021). Employer-led
flexibility,working time uncertainty, and trade union responses: The case of academics, teachers and school secretaries in Ireland. Journal of
Industrial Relations 2021, Vol. 63(1) 49– 72. 12) Parasuraman, B. (2014). Employee participationin Malaysia: Theory and practices. Malaysia: UMK
PRESS. 13) Radzkii, M. & Parasuraman, B.(2015). Employer’s Managerial Prerogative Right: An Evaluation of its Relevancy to the Employer-
Employee Relationship. Pertanika Journal of Social Sciences and Humanities 23(11):2227-238. Jurisprudence APOLINAR A. ARGENTERA,
PETITIONER, VS. MANILA ELECTRIC COMPANY/MANNY V. PANGILINAN, RESPONDENTSG.R. No. 225049 Bankard, Inc. V. NLRC, BEU-AWATU, G.R.
No. 171664, MArch 6, 2013. CAONG, ET. AL. V. REGUALOSG.R. No. 179428, (2011) Coca-Cola Export Corporation v. Gacayan, G.R. NO. 149433.
December 15, 2010. DIONISIO GOMEZ, FE GOMEZ, JUAN GEALONE, LUZ GOMEZ, AQUINO GUETA, DIONISIO GOMEZ, JR., LYDIA ANGELES,
MILAGROS GOMEZ, EMILIO T. TRAILGALGAL, CESAR GEALONE, AMADA GOMEZ, RICARDO MANDANAS, ROSE GOMEZ, CONSOLACION ESPELA,
NORMA GOMEZ, and CORAZON GOMEZ, Plaintiffs-Appellees, v. MARCELO GEALONE, LUCIA G. ESBER, ZOILO ESBER, ODEN BONTIGAO,
HONORATO BONTIGAO, 25 Leo Roswald M. Tugonon et al., (2023) Int. J. Business Management. 06(08), 15-26 ©2023 Published by GLOBAL
PUBLICATION HOUSE |International Journal of Business Management | BENITO GEALONE, CESAR GEALONE, SEVERINO GERONA, TITO
GERMEDIA, AURELIO GOBRIS, NEMESIO FORTES, PONCIANO GOBRIS, FLOSERFIDA GONA, and GORGONIO BONTIGAO, [G.R. No. 58281.
November 13, 1991. Eastern Telecommuncations Philippines, v. Eastern Telecoms Employees Unions, G.R.No. 185665, Feb. 8, 2012. ENDICO vs.
QUANTUM G.R. No. 161615, (2009) JARCIA MACHINE SHOP and AUTO SUPPLY, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and
AGAPITO T. TOLENTINO,G.R. No. 118045 January 2, 1997. Julie Bakeshop v. Arnaiz, G.R. No. 173882, Feb. 15, 2012. Isabela-1 Electric Coop, Inc. V.
Del Rosario, Jr., G.R. No. 226369, July 17, 2019. Leus v. St. Scholastica’s College Westgrove, G.R. No. 187226, Jan. 28, 2015. MANILA ELECTRIC
COMPANY, PETITIONER, VS. APOLINAR A. ARGENTERA, RESPONDENT. G.R. No. 224729. February 08, 2021 MEGA Magazine Publications, Inc, v.
Defensor, G.R. No. 162021, June 16, 2014. Metropolitan and Trust Company vs NLRC, G.R. No. 152928, (2002) Pecson v Robinsos Supermarket
Corporation. G.R. No. 198534, 3 July 2013. Philiipine Japan Active Carbon Corporation. Producers Bank of the Philippines v. NLRC, Prodcuers Bank
Employees Association G.R. No. 100701, march 289 2001 SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), Petitioners, v. HON. BLAS F.
OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, vs.Lorenzo F . Miravite, Isidro D. Amoroso for New San Miguel Corp. Sales Force
Union, Siguion Reyna, Montecillo & Ongsiako G.R. No. 53515. February 8, 1989. 26

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 G.R. NO. 198967, MARCH 07, 2016 - JOSE EMMANUEL P. GUILLERMO, PETITIONER, V. CRISANTO P. USON,
RESPONDENT.

G.R. No. 198967, March 07, 2016 - JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.

THIRD DIVISION

G.R. No. 198967, March 07, 2016

JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Court of Appeals
Decision1 dated June 8, 2011 and Resolution2 dated October 7, 2011 in CA G.R. SP No. 115485, which affirmed in toto the decision of the
National Labor Relations Commission (NLRC).

The facts of the case follow.

On March 11, 1996, respondent Crisanto P. Uson (Uson) began his employment with Royal Class Venture Phils., Inc. (Royal Class Venture) as
an accounting clerk.3 Eventually, he was promoted to the position of accounting supervisor, with a salary of Php13,000.00 a month, until he
was allegedly dismissed from employment on December 20, 2000. 4

On March 2, 2001, Uson filed with the Sub-Regional Arbitration . Branch No. 1, Dagupan City, of the NLRC a Complaint for Illegal Dismissal,
with prayers for backwages, reinstatement, salaries and 13 th month pay, moral and exemplary damages and attorney's fees against Royal
Class Venture.5

Royal Class Venture did not make an appearance in the case despite its receipt of summons. 6

On May 15, 2001, Uson filed his Position Paper7 as complainant.

On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision 8 in favor of the complainant Uson and ordering therein respondent
Royal Class Venture to reinstate him to his former position and pay his backwages, 13 th month pay as well as moral and exemplary damages
and attorney's fees.

Royal Class Venture, as the losing party, did not file an appeal of the decision. 9 Consequently, upon Uson's motion, a Writ of Execution10 dated
February 15, 2002 was issued to implement the Labor Arbiter's decision.

On May 17, 2002, an Alias Writ of Execution11 was issued. But with the judgment still unsatisfied, a Second Alias Writ of Execution 12 was
issued on September 11, 2002.

Again, it was reported in the Sheriff's Return that the Second Alias Writ of Execution dated September 11, 2002 remained "unsatisfied." Thus,
on November 14, 2002, Uson filed a Motion for Alias Writ of Execution and to Hold Directors and Officers of Respondent Liable for Satisfaction
of the Decision.13 The motion quoted from a portion of the Sheriffs Return, which states:
chanRoblesvirtualLawlibrary

On September 12, 2002, the undersigned proceeded at the stated present business office address of the respondent which is at Minien East,
Sta. Barbara, Pangasinan to serve the writ of execution. Upon arrival, I found out that the establishment erected thereat is not [in] the
respondent's name but JOEL and SONS CORPORATION, a family corporation owned by the Guillermos of which, Jose Emmanuel F. Guillermo
the General Manager of the respondent, is one of the stockholders who received the writ using his nickname "Joey," [and who] concealed his
real identity and pretended that he [was] the brother of Jose, which [was] contrary to the statement of the guard-on-duty that Jose and Joey
[were] one and the same person. The former also informed the undersigned that the respondent's (sic) corporation has been dissolved.

On the succeeding day, as per [advice] by the [complainant's] counsel that the respondent has an account at the Bank of Philippine Islands
Magsaysay Branch, A.B. Fernandez Ave., Dagupan City, the undersigned immediately served a notice of garnishment, thus, the bank replied
on the same day stating that the respondent [does] not have an account with the branch. 14 ChanRoblesVirtualawlibrary

On December 26, 2002, Labor Arbiter Irenarco R. Rimando issued an Order 15 granting the motion filed by Uson. The order held that officers of
a corporation are jointly and severally liable for the obligations of the corporation to the employees and there is no denial of due process in
holding them so even if the said officers were not parties to the case when the judgment in favor of the employees was rendered. 16 Thus, the
Labor Arbiter pierced the veil of corporate fiction of Royal Class Venture and held herein petitioner Jose Emmanuel Guillermo (Guillermo), in
his personal capacity, jointly and severally liable with the corporation for the enforcement of the claims of Uson. 17

Guillermo filed, by way of special appearance, a Motion for Reconsideration/To Set Aside the Order of December 26, 2002. 18 The same,
however, was not granted as, this time, in an Order dated November 24, 2003, Labor Arbiter Niña Fe S. Lazaga-Rafols sustained the findings
of the labor arbiters before her and even castigated Guillenno for his unexplained absence in the prior proceedings despite notice, effectively
putting responsibility on Guillermo for the case's outcome against him. 19

On January 5, 2004, Guillermo filed a Motion for Reconsideration of the above Order, 20 but the same was promptly denied by the Labor Arbiter
in an Order dated January 7, 2004.21

On January 26, 2004, Uson filed a Motion for Alias Writ of Execution, 22 to which Guillermo filed a Comment and Opposition on April 2, 2004. 23
On May 18, 2004, the Labor Arbiter issued an Order 24 granting Uson's Motion for the Issuance of an Alias Writ of Execution and rejecting
Guillermo's arguments posed in his Comment and Opposition.

Guillermo elevated the matter to the NLRC by filing a Memorandum of Appeal with Prayer for a (Writ of) Preliminary Injunction dated June 10,
2004.25cralawred

In a Decision26 dated May 11, 2010, the NLRC dismissed Guillermo's appeal and denied his prayers for injunction.

On August 20, 2010, Guillermo filed a Petition for Certiorari27 before the Court of Appeals, assailing the NLRC decision.

On June 8, 2011, the Court of Appeals rendered its assailed Decision 28 which denied Guillermo's petition and upheld all the findings of the
NLRC.

The appellate court found that summons was in fact served on Guillermo as President and General Manager of Royal Class Venture, which was
how the Labor Arbiter acquired jurisdiction over the company. 29 But Guillermo subsequently refused to receive all notices of hearings and
conferences as well as the order to file Royal Class Venture's position paper. 30 Then, it was learned during execution that Royal Class Venture
had been dissolved.31 However, the Court of Appeals held that although the judgment had become final and executory, it may be modified or
altered "as when its execution becomes impossible or unjust." 32 It also noted that the motion to hold officers and directors like Guillermo
personally liable, as well as the notices to hear the same, was sent to them by registered mail, but no pleadings were submitted and no
appearances were made by anyone of them during the said motion's pendency. 33 Thus, the court held Guillermo liable, citing jurisprudence
that hold the president of the corporation liable for the latter's obligation to illegally dismissed employees. 34 Finally, the court dismissed
Guillermo's allegation that the case is an intra-corporate controversy, stating that jurisdiction is determined by the allegations in the complaint
and the character of the relief sought.35

From the above decision of the appellate court, Guillermo filed a Motion for Reconsideration 36 but the same was again denied by the said court
in the assailed Resolution37 dated October 7, 2011.

Hence, the instant petition.

Guillermo asserts that he was impleaded in the case only more than a year after its Decision had become final and executory, an act which he
claims to be unsupported in law and jurisprudence.38 He contends that the decision had become final, immutable and unalterable and that any
amendment thereto is null and void.39 Guillermo assails the so-called "piercing the veil" of corporate fiction which allegedly discriminated
against him when he alone was belatedly impleaded despite the existence of other directors and officers in Royal Class Venture. 40 He also
claims that the Labor Arbiter has no jurisdiction because the case is one of an intra-corporate controversy, with the complainant Uson also
claiming to be a stockholder and director of Royal Class Venture. 41

In his Comment,42 Uson did not introduce any new arguments but merely cited verbatim the disquisitions of the Court of Appeals to counter
Guillermo's assertions in his petition.
To resolve the case, the Court must confront the issue of whether an officer of a corporation may be included as judgment obligor in a labor
case for the first time only after the decision of the Labor Arbiter had become final and executory, and whether the twin doctrines of "piercing
the veil of corporate fiction" and personal liability of company officers in labor cases apply.

The petition is denied.

In the earlier labor cases of Claparols v. Court of Industrial Relations43 and A.C. Ransom Labor Union-CCLU v. NLRC,44 persons who were not
originally impleaded in the case were, even during execution, held to be solidarity liable with the employer corporation for the latter's unpaid
obligations to complainant-employees. These included a newly-formed corporation which was considered a mere conduit or alter ego of the
originally impleaded corporation, and/or the officers or stockholders of the latter corporation. 45 Liability attached, especially to the responsible
officers, even after final judgment and during execution, when there was a failure to collect from the employer corporation the judgment debt
awarded to its workers.46 In Naguiat v. NLRC,47 the president of the corporation was found, for the first time on appeal, to be solidarily liable to
the dismissed employees. Then, in Reynoso v. Court of Appeals,48 the veil of corporate fiction was pierced at the stage of execution, against a
corporation not previously impleaded, when it was established that such corporation had dominant control of the original party corporation,
which was a smaller company, in such a manner that the latter's closure was done by the former in order to defraud its creditors, including a
former worker.

The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since been tempered, at least in the aspects of the lifting of
the corporate veil and the assignment of personal liability to directors, trustees and officers in labor cases. The subsequent cases of McLeod v.
NLRC,49Spouses Santos v. NLRC50 and Carag v. NLRC,51 have all established, save for certain exceptions, the primacy of Section 31 52 of the
Corporation Code in the matter of assigning such liability for a corporation's debts, including judgment obligations in labor cases. According to
these cases, a corporation is still an artificial being invested by law with a personality separate and distinct from that of its stockholders and
from that of other corporations to which it may be connected. 53 It is not in every instance of inability to collect from a corporation that the veil
of corporate fiction is pierced, and the responsible officials are made liable. Personal liability attaches only when, as enumerated by the said
Section 31 of the Corporation Code, there is a wilfull and knowing assent to patently unlawful acts of the corporation, there is gross
negligence or bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in damages to the
corporation.54 Further, in another labor case, Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al.,55 the doctrine of piercing
the corporate veil is held to apply only in three (3) basic areas, namely: ( 1) defeat of public convenience as when the corporate fiction is
used as a vehicle for the evasion of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a wrong, protect
fraud, or defend a crime; or (3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a
person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate officer
liable, such corporate officer cannot be made personally liable for corporate liabilities. 56 Indeed, in Reahs Corporation v. NLRC,57 the
conferment of liability on officers for a corporation's obligations to labor is held to be an exception to the general doctrine of separate
personality of a corporation.

It also bears emphasis that in cases where personal liability attaches, not even all officers are made accountable. Rather, only the "responsible
officer," i.e., the person directly responsible for and who "acted in bad faith" in committing the illegal dismissal or any act violative of the
Labor Code, is held solidarily liable, in cases wherein the corporate veil is pierced. 58 In other instances, such as cases of so-called corporate
tort of a close corporation, it is the person "actively engaged" in the management of the corporation who is held liable. 59 In the absence of a
clearly identifiable officer(s) directly responsible for the legal infraction, the Court considers the president of the corporation as such officer. 60

The common thread running among the aforementioned cases, however, is that the veil of corporate fiction can be pierced, and responsible
corporate directors and officers or even a separate but related corporation, may be impleaded and held answerable solidarily in a labor case,
even after final judgment and on execution, so long as it is established that such persons have deliberately used the corporate vehicle to
unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing so. When the shield of a separate corporate
identity is used to commit wrongdoing and opprobriously elude responsibility, the courts and the legal authorities in a labor case have not
hesitated to step in and shatter the said shield and deny the usual protections to the offending party, even after final judgment. The key
element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does not connote bad judgment or negligence but 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.61

As the foregoing implies, there is no hard and fast rule on when corporate fiction may be disregarded; instead, each case must be evaluated
according to its peculiar circumstances.62 For the case at bar, applying the above criteria, a finding of personal and solidary liability against a
corporate officer like Guillermo must be rooted on a satisfactory showing of fraud, bad

faith or malice, or the presence of any of the justifications for disregarding the corporate fiction. As stated in McLeod,63 bad faith is a question
of fact and is evidentiary, so that the records must first bear evidence of malice before a finding of such may be made.

It is our finding that such evidence exists in the record. Like the A. C. Ransom, and Naguiat cases, the case at bar involves an apparent family
corporation. As in those two cases, the records of the present case bear allegations and evidence that Guillermo, the officer being held liable,
is the person responsible in the actual running of the company and for the malicious and illegal dismissal of the complainant; he, likewise,
was shown to have a role in dissolving the original obligor company in an obvious "scheme to avoid liability" which jurisprudence has always
looked upon with a suspicious eye in order to protect the rights of labor. 64

Part of the evidence on record is the second page of the verified Position Paper of complainant (herein respondent) Crisanto P. Uson, where it
was clearly alleged that Uson was "illegally dismissed by the President/General Manager of respondent corporation (herein petitioner) Jose
Emmanuel P. Guillermo when Uson exposed the practice of the said President/General Manager of dictating and undervaluing the shares of
stock of the corporation."65 The statement is proof that Guillermo was the responsible officer in charge of running the company as well as the
one who dismissed Uson from employment. As this sworn allegation is uncontroverted - as neither the company nor Guillermo appeared
before the Labor Arbiter despite the service of summons and notices - such stands as a fact of the case, and now functions as clear evidence
of Guillermo's bad faith in his dismissal of Uson from employment, with the motive apparently being anger at the latter's reporting of unlawful
activities.

Then, it is also clearly reflected in the records that it was Guillermo himself, as President and General Manager of the company, who received
the summons to the case, and who also subsequently and without justifiable cause refused to receive all notices and orders of the Labor
Arbiter that followed.66 This makes Guillermo responsible for his and his company's failure to participate in the entire proceedings before the
said office. The fact is clearly narrated in the Decision and Orders of the Labor Arbiter, Uson's Motions for the Issuance of Alias Writs of
Execution, as well as in the Decision of the NLRC and the assailed Decision of the Court of Appeals, 67 which Guillermo did not dispute in any of
his belated motions or pleadings, including in his petition for certiorari before the Court of Appeals and even in the petition currently before
this Court.68 Thus, again, the same now stands as a finding of fact of the said lower tribunals which binds this Court and which it has no power
to alter or revisit.69 Guillermo's knowledge of the case's filing and existence and his unexplained refusal to participate in it as the responsible
official of his company, again is an indicia of his bad faith and malicious intent to evade the judgment of the labor tribunals.

Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and helped incorporate a new firm, located in the same address
as the former, wherein he is again a stockl1older. This is borne by the Sherif11s Return which reported: that at Royal Class Venture's business
address at Minien East, Sta. Barbara, Pangasinan, there is a new establishment named "Joel and Sons Corporation," a family corporation
owned by the Guillermos in which Jose Emmanuel F. Guillermo is again one of the stockholders; that Guillermo received the writ of execution
but used the nickname "Joey" and denied being Jose Emmanuel F. Guillermo and, instead, pretended to be Jose's brother; that the guard on
duty confirmed that Jose and Joey are one and the same person; and that the respondent corporation Royal Class Venture had been
dissolved.70 Again, the facts contained in the Sheriffs Return were not disputed nor controverted by Guillermo, either in the hearings of Uson's
Motions for Issuance of Alias Writs of Execution, in subsequent motions or pleadings, or even in the petition before this Court. Essentially,
then, the facts form part of the records and now stand as further proof of Guillermo's bad faith and malicious intent to evade the judgment
obligation.

The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and frustrate the execution of the judgment award, which
this Court, in the interest of justice, will not countenance.

As for Guillermo's assertion that the case is an intra-corporate controversy, the Court sustains the finding of the appellate court that the
nature of an action and the jurisdiction of a tribunal are determined by the allegations of the complaint at the time of its filing, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. 71 Although Uson is also a stockholder and
director of Royal Class Venture, it is settled in jurisprudence that not all conflicts between a stockholder and the corporation are intra-
corporate; an examination of the complaint must be made on whether the complainant is involved in his capacity as a stockholder or director,
or as an employee.72 If the latter is found and the dispute does not meet the test of what qualities as an intra-corporate controversy, then the
case is a labor case cognizable by the NLRC and is not within the jurisdiction of any other tribunal. 73 In the case at bar, Uson's allegation was
that he was maliciously and illegally dismissed as an Accounting Supervisor by Guillermo, the Company President and General Manager, an
allegation that was not even disputed by the latter nor by Royal Class Venture. It raised no intra-corporate relationship issues between him
and the corporation or Guillermo; neither did it raise any issue regarding the regulation of the corporation. As correctly found by the appellate
court, Uson's complaint and redress sought were centered alone on his dismissal as an employee, and not upon any other relationship he had
with the company or with Guillermo. Thus, the matter is clearly a labor dispute cognizable by the labor tribunals. chanrobleslaw

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated June 8, 2011 and Resolution dated October 7, 2011 in CA G.R.
SP No. 115485 are AFFIRMED.

SO ORDERED. cralawlawlibrary

Velasco, Jr., (Chairperson), Perez, Reyes, and Jardeleza, JJ., concur. chanroblesvirtuallawlibrary
Endnotes:

1
Penned by Associate Justice Joselina Guevara-Salonga, with Associate Justices Mariflor P. Punzalan-Castillo and Franchito N. Diamante,
concurring; rollo, pp. 130-142.

The National Labor Relations Commission as well as Labor Arbiter Niña Fe S. Lazaga-Rafols were excluded as respondents by this Court in its
Resolution in this case elated January 30, 2012, id. at 159-160, citing Section 4(a), Rule 45 of the 1997 Rules of Civil Procedure.

2
Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Mariflor P. Punzalan-Castillo and Franchito Diamante
concurring; id. at 155-158.

3
Id. at 165.

4
Id.

5
Id. at 24, 167.

6
Id. at 59-61, 77, 80-81, 89-90, 137.

7
Id. at 49-54.

8
Id. at 57-64.

9
Id. at 25, 65, 168.

10
Id. at 65-66.

11
Id. at 67-68.

12
Id. at 69-70.

13
Id. at 71-74.

14
Id. at 72.

15
Id. at 75-79.
 Id. at 78.
16

Id. at 78-79.
17

Id. at 170.
18

Id. at 80-81.
19

Id. at 170-171.
20

Id. at 171 .
21

Id. at 82-83.
22

Id. at 172.
23

Id. at 84.
24
cralawred

Id. at 172-173.
25

Id. at 86-91.
26
cralawred

Id. at 92-110.
27

Id. at 130-142.
28

Id. at 137.
29

Id.
30

Id.
31

Id. at 138.
32

Id.
33

Id. at 139-140.
34
 Id. at 140.
35

Id. at 143-154.
36

Id. at 155-158.
37

Id. at 31.
38

Id. at 32-33.
39
cralawred

Id. at 36-39.
40

Id. at 40-42, 51 (Uson's Position Paper).

41

Id. at 165-178.
42

43
160 Phil. 624 (1975).

44
226 Phil. 199 (1986).

Claparols v. Court of Industrial Relations, supra; A.C. Ransom Labor Union-CCLU-NLRC, supra.
45

Id.
46

47
336 Phil. 545 (1997).

48
399 Phil. 38 (2000), citing Claparols v. CIR, supra note 43.

49
541 Phil. 214 (2007).

50
354 Phil. 918 (1998).

51
548 Phil. 581 (2007).

52
Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquire, in violation of his duty, any interest adverse to the corporation in respect of
any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf he shall
be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. (n)

McLeod v. NLRC, supra note 49, at 238.

53

Further, as added in McLeod, there is personal liability also when directors, trustees or officers consent or fail to object to the issuance of
54

watered clown stocks, despite knowledge thereof; when they agree to hold themselves personally and soliciarily liable with the corporation; or
when they are made by specific provision of IDw personally answerable for their corporate action. (Id. at 242)

55
600 Phil. 645 (2009).

Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al., supra, at 663.

56

57
337 Phil. 698 (1997).

Carag v. NLRC, supra note 51, at 606-608, citing McLeod v. NLRC, et al., supra note 49.
58

Naguiat v. NLRC, supra note 47, at 562. A "corporate tort" is described as a violation of a right given or the omission of a duty imposed by
59

law; a breach of a legal duty. Such legal duty include that spelled out in Art. 238 of the Labor Code which mandates the employer to grant
separation pay to employees in case of closure or cessation of operations not due to serious business losses or financial reverses.

Santos v. NLRC, 325 Phil. 145 (1996); Naguiat v. NLRC, supra note 47, at 560.
60

Elcee Farms, Inc. v. NLRC (Fourth Div.), 541 Phil. 576, 593 (2007).
61

Concept Builders Inc. v. NLRC, 326 Phil. 955, 965 ( 1996).

62

Supra note 49, at 242.

63

Claparols v. CIR, supra note 43, at 635-636.

64

Rollo, pp. 50-51.

65

Id. at 59-61, 77, 80-81, 89-90, 137.

66

Id.
67

Id. at 21-44, 92-109.

68
 Zuellig Freight and Cargo Systems v. NLRC, G.R. No. 157900, July 22, 2013, 701 SCRA 561.
69

Rollo, p. 72.
70

Barrazona v. Regional Trial Court, Branch 21, Baguio City, 521 Phil. 53 (2006).
71

Real v. Sangu Philippines, Inc. and/or Abe, 655 Phil. 68, 83-84 (2011).
72

Id.; Aguirre v. FQB+7, Inc., G.R. No. 170770, January 9, 2013, 688 SCRA 242, 260, quoting Speed Distribution, Inc. v. Court of Appeals,
73

469 Phil. 739, 758-759 (2004), as follows: To determine whether a case involves an intra-corporate controversy, and is to be heard and
decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the
status or relationship or the parties; and (b) the nature of the question that is the subject of their controversy.

The first clement requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and
the corporation, partnership, or association of which they are stockholders, members or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State insofar as it concerns their individual franchises. The second element requires that the dispute among
the parties be intrinsically connected with the regulation or the corporation. If the nature of the controversy involves matters that are purely
civil in character, necessarily, the case docs not involve an intra-corporate controversy. The determination of whether a contract is simulated
or not is an issue that could be resolved by applying pertinent provisions of the Civil Code.

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G.R. NO. 198967, MARCH 07, 2016 - JOSE EMMANUEL P. GUILLERMO, PETITIONER, V. CRISANTO P. USON,
RESPONDENT.

G.R. No. 198967, March 07, 2016 - JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.
 THIRD DIVISION

G.R. No. 198967, March 07, 2016

JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Court of Appeals
Decision1 dated June 8, 2011 and Resolution2 dated October 7, 2011 in CA G.R. SP No. 115485, which affirmed in toto the decision of the
National Labor Relations Commission (NLRC).

The facts of the case follow.

On March 11, 1996, respondent Crisanto P. Uson (Uson) began his employment with Royal Class Venture Phils., Inc. (Royal Class Venture) as
an accounting clerk.3 Eventually, he was promoted to the position of accounting supervisor, with a salary of Php13,000.00 a month, until he
was allegedly dismissed from employment on December 20, 2000. 4

On March 2, 2001, Uson filed with the Sub-Regional Arbitration . Branch No. 1, Dagupan City, of the NLRC a Complaint for Illegal Dismissal,
with prayers for backwages, reinstatement, salaries and 13 th month pay, moral and exemplary damages and attorney's fees against Royal
Class Venture.5

Royal Class Venture did not make an appearance in the case despite its receipt of summons. 6

On May 15, 2001, Uson filed his Position Paper7 as complainant.

On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision 8 in favor of the complainant Uson and ordering therein respondent
Royal Class Venture to reinstate him to his former position and pay his backwages, 13 th month pay as well as moral and exemplary damages
and attorney's fees.

Royal Class Venture, as the losing party, did not file an appeal of the decision. 9 Consequently, upon Uson's motion, a Writ of Execution10 dated
February 15, 2002 was issued to implement the Labor Arbiter's decision.
On May 17, 2002, an Alias Writ of Execution11 was issued. But with the judgment still unsatisfied, a Second Alias Writ of Execution 12 was
issued on September 11, 2002.

Again, it was reported in the Sheriff's Return that the Second Alias Writ of Execution dated September 11, 2002 remained "unsatisfied." Thus,
on November 14, 2002, Uson filed a Motion for Alias Writ of Execution and to Hold Directors and Officers of Respondent Liable for Satisfaction
of the Decision.13 The motion quoted from a portion of the Sheriffs Return, which states:
chanRoblesvirtualLawlibrary

On September 12, 2002, the undersigned proceeded at the stated present business office address of the respondent which is at Minien East,
Sta. Barbara, Pangasinan to serve the writ of execution. Upon arrival, I found out that the establishment erected thereat is not [in] the
respondent's name but JOEL and SONS CORPORATION, a family corporation owned by the Guillermos of which, Jose Emmanuel F. Guillermo
the General Manager of the respondent, is one of the stockholders who received the writ using his nickname "Joey," [and who] concealed his
real identity and pretended that he [was] the brother of Jose, which [was] contrary to the statement of the guard-on-duty that Jose and Joey
[were] one and the same person. The former also informed the undersigned that the respondent's (sic) corporation has been dissolved.

On the succeeding day, as per [advice] by the [complainant's] counsel that the respondent has an account at the Bank of Philippine Islands
Magsaysay Branch, A.B. Fernandez Ave., Dagupan City, the undersigned immediately served a notice of garnishment, thus, the bank replied
on the same day stating that the respondent [does] not have an account with the branch. 14 ChanRoblesVirtualawlibrary

On December 26, 2002, Labor Arbiter Irenarco R. Rimando issued an Order 15 granting the motion filed by Uson. The order held that officers of
a corporation are jointly and severally liable for the obligations of the corporation to the employees and there is no denial of due process in
holding them so even if the said officers were not parties to the case when the judgment in favor of the employees was rendered. 16 Thus, the
Labor Arbiter pierced the veil of corporate fiction of Royal Class Venture and held herein petitioner Jose Emmanuel Guillermo (Guillermo), in
his personal capacity, jointly and severally liable with the corporation for the enforcement of the claims of Uson. 17

Guillermo filed, by way of special appearance, a Motion for Reconsideration/To Set Aside the Order of December 26, 2002. 18 The same,
however, was not granted as, this time, in an Order dated November 24, 2003, Labor Arbiter Niña Fe S. Lazaga-Rafols sustained the findings
of the labor arbiters before her and even castigated Guillenno for his unexplained absence in the prior proceedings despite notice, effectively
putting responsibility on Guillermo for the case's outcome against him. 19

On January 5, 2004, Guillermo filed a Motion for Reconsideration of the above Order, 20 but the same was promptly denied by the Labor Arbiter
in an Order dated January 7, 2004.21

On January 26, 2004, Uson filed a Motion for Alias Writ of Execution, 22 to which Guillermo filed a Comment and Opposition on April 2, 2004. 23

On May 18, 2004, the Labor Arbiter issued an Order 24 granting Uson's Motion for the Issuance of an Alias Writ of Execution and rejecting
Guillermo's arguments posed in his Comment and Opposition.

Guillermo elevated the matter to the NLRC by filing a Memorandum of Appeal with Prayer for a (Writ of) Preliminary Injunction dated June 10,
2004.25 cralawred
In a Decision26 dated May 11, 2010, the NLRC dismissed Guillermo's appeal and denied his prayers for injunction.

On August 20, 2010, Guillermo filed a Petition for Certiorari27 before the Court of Appeals, assailing the NLRC decision.

On June 8, 2011, the Court of Appeals rendered its assailed Decision 28 which denied Guillermo's petition and upheld all the findings of the
NLRC.

The appellate court found that summons was in fact served on Guillermo as President and General Manager of Royal Class Venture, which was
how the Labor Arbiter acquired jurisdiction over the company. 29 But Guillermo subsequently refused to receive all notices of hearings and
conferences as well as the order to file Royal Class Venture's position paper. 30 Then, it was learned during execution that Royal Class Venture
had been dissolved.31 However, the Court of Appeals held that although the judgment had become final and executory, it may be modified or
altered "as when its execution becomes impossible or unjust." 32 It also noted that the motion to hold officers and directors like Guillermo
personally liable, as well as the notices to hear the same, was sent to them by registered mail, but no pleadings were submitted and no
appearances were made by anyone of them during the said motion's pendency. 33 Thus, the court held Guillermo liable, citing jurisprudence
that hold the president of the corporation liable for the latter's obligation to illegally dismissed employees. 34 Finally, the court dismissed
Guillermo's allegation that the case is an intra-corporate controversy, stating that jurisdiction is determined by the allegations in the complaint
and the character of the relief sought.35

From the above decision of the appellate court, Guillermo filed a Motion for Reconsideration 36 but the same was again denied by the said court
in the assailed Resolution37 dated October 7, 2011.

Hence, the instant petition.

Guillermo asserts that he was impleaded in the case only more than a year after its Decision had become final and executory, an act which he
claims to be unsupported in law and jurisprudence.38 He contends that the decision had become final, immutable and unalterable and that any
amendment thereto is null and void.39 Guillermo assails the so-called "piercing the veil" of corporate fiction which allegedly discriminated
against him when he alone was belatedly impleaded despite the existence of other directors and officers in Royal Class Venture. 40 He also
claims that the Labor Arbiter has no jurisdiction because the case is one of an intra-corporate controversy, with the complainant Uson also
claiming to be a stockholder and director of Royal Class Venture. 41

In his Comment,42 Uson did not introduce any new arguments but merely cited verbatim the disquisitions of the Court of Appeals to counter
Guillermo's assertions in his petition.

To resolve the case, the Court must confront the issue of whether an officer of a corporation may be included as judgment obligor in a labor
case for the first time only after the decision of the Labor Arbiter had become final and executory, and whether the twin doctrines of "piercing
the veil of corporate fiction" and personal liability of company officers in labor cases apply.

The petition is denied.

In the earlier labor cases of Claparols v. Court of Industrial Relations43 and A.C. Ransom Labor Union-CCLU v. NLRC,44 persons who were not
originally impleaded in the case were, even during execution, held to be solidarity liable with the employer corporation for the latter's unpaid
obligations to complainant-employees. These included a newly-formed corporation which was considered a mere conduit or alter ego of the
originally impleaded corporation, and/or the officers or stockholders of the latter corporation. 45 Liability attached, especially to the responsible
officers, even after final judgment and during execution, when there was a failure to collect from the employer corporation the judgment debt
awarded to its workers.46 In Naguiat v. NLRC,47 the president of the corporation was found, for the first time on appeal, to be solidarily liable to
the dismissed employees. Then, in Reynoso v. Court of Appeals,48 the veil of corporate fiction was pierced at the stage of execution, against a
corporation not previously impleaded, when it was established that such corporation had dominant control of the original party corporation,
which was a smaller company, in such a manner that the latter's closure was done by the former in order to defraud its creditors, including a
former worker.

The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since been tempered, at least in the aspects of the lifting of
the corporate veil and the assignment of personal liability to directors, trustees and officers in labor cases. The subsequent cases of McLeod v.
NLRC,49Spouses Santos v. NLRC50 and Carag v. NLRC,51 have all established, save for certain exceptions, the primacy of Section 31 52 of the
Corporation Code in the matter of assigning such liability for a corporation's debts, including judgment obligations in labor cases. According to
these cases, a corporation is still an artificial being invested by law with a personality separate and distinct from that of its stockholders and
from that of other corporations to which it may be connected. 53 It is not in every instance of inability to collect from a corporation that the veil
of corporate fiction is pierced, and the responsible officials are made liable. Personal liability attaches only when, as enumerated by the said
Section 31 of the Corporation Code, there is a wilfull and knowing assent to patently unlawful acts of the corporation, there is gross
negligence or bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in damages to the
corporation.54 Further, in another labor case, Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al.,55 the doctrine of piercing
the corporate veil is held to apply only in three (3) basic areas, namely: ( 1) defeat of public convenience as when the corporate fiction is
used as a vehicle for the evasion of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a wrong, protect
fraud, or defend a crime; or (3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a
person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate officer
liable, such corporate officer cannot be made personally liable for corporate liabilities. 56 Indeed, in Reahs Corporation v. NLRC,57 the
conferment of liability on officers for a corporation's obligations to labor is held to be an exception to the general doctrine of separate
personality of a corporation.

It also bears emphasis that in cases where personal liability attaches, not even all officers are made accountable. Rather, only the "responsible
officer," i.e., the person directly responsible for and who "acted in bad faith" in committing the illegal dismissal or any act violative of the
Labor Code, is held solidarily liable, in cases wherein the corporate veil is pierced. 58 In other instances, such as cases of so-called corporate
tort of a close corporation, it is the person "actively engaged" in the management of the corporation who is held liable. 59 In the absence of a
clearly identifiable officer(s) directly responsible for the legal infraction, the Court considers the president of the corporation as such officer. 60

The common thread running among the aforementioned cases, however, is that the veil of corporate fiction can be pierced, and responsible
corporate directors and officers or even a separate but related corporation, may be impleaded and held answerable solidarily in a labor case,
even after final judgment and on execution, so long as it is established that such persons have deliberately used the corporate vehicle to
unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing so. When the shield of a separate corporate
identity is used to commit wrongdoing and opprobriously elude responsibility, the courts and the legal authorities in a labor case have not
hesitated to step in and shatter the said shield and deny the usual protections to the offending party, even after final judgment. The key
element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does not connote bad judgment or negligence but 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.61

As the foregoing implies, there is no hard and fast rule on when corporate fiction may be disregarded; instead, each case must be evaluated
according to its peculiar circumstances.62 For the case at bar, applying the above criteria, a finding of personal and solidary liability against a
corporate officer like Guillermo must be rooted on a satisfactory showing of fraud, bad

faith or malice, or the presence of any of the justifications for disregarding the corporate fiction. As stated in McLeod,63 bad faith is a question
of fact and is evidentiary, so that the records must first bear evidence of malice before a finding of such may be made.

It is our finding that such evidence exists in the record. Like the A. C. Ransom, and Naguiat cases, the case at bar involves an apparent family
corporation. As in those two cases, the records of the present case bear allegations and evidence that Guillermo, the officer being held liable,
is the person responsible in the actual running of the company and for the malicious and illegal dismissal of the complainant; he, likewise,
was shown to have a role in dissolving the original obligor company in an obvious "scheme to avoid liability" which jurisprudence has always
looked upon with a suspicious eye in order to protect the rights of labor. 64

Part of the evidence on record is the second page of the verified Position Paper of complainant (herein respondent) Crisanto P. Uson, where it
was clearly alleged that Uson was "illegally dismissed by the President/General Manager of respondent corporation (herein petitioner) Jose
Emmanuel P. Guillermo when Uson exposed the practice of the said President/General Manager of dictating and undervaluing the shares of
stock of the corporation."65 The statement is proof that Guillermo was the responsible officer in charge of running the company as well as the
one who dismissed Uson from employment. As this sworn allegation is uncontroverted - as neither the company nor Guillermo appeared
before the Labor Arbiter despite the service of summons and notices - such stands as a fact of the case, and now functions as clear evidence
of Guillermo's bad faith in his dismissal of Uson from employment, with the motive apparently being anger at the latter's reporting of unlawful
activities.

Then, it is also clearly reflected in the records that it was Guillermo himself, as President and General Manager of the company, who received
the summons to the case, and who also subsequently and without justifiable cause refused to receive all notices and orders of the Labor
Arbiter that followed.66 This makes Guillermo responsible for his and his company's failure to participate in the entire proceedings before the
said office. The fact is clearly narrated in the Decision and Orders of the Labor Arbiter, Uson's Motions for the Issuance of Alias Writs of
Execution, as well as in the Decision of the NLRC and the assailed Decision of the Court of Appeals, 67 which Guillermo did not dispute in any of
his belated motions or pleadings, including in his petition for certiorari before the Court of Appeals and even in the petition currently before
this Court.68 Thus, again, the same now stands as a finding of fact of the said lower tribunals which binds this Court and which it has no power
to alter or revisit.69 Guillermo's knowledge of the case's filing and existence and his unexplained refusal to participate in it as the responsible
official of his company, again is an indicia of his bad faith and malicious intent to evade the judgment of the labor tribunals.
Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and helped incorporate a new firm, located in the same address
as the former, wherein he is again a stockl1older. This is borne by the Sherif11s Return which reported: that at Royal Class Venture's business
address at Minien East, Sta. Barbara, Pangasinan, there is a new establishment named "Joel and Sons Corporation," a family corporation
owned by the Guillermos in which Jose Emmanuel F. Guillermo is again one of the stockholders; that Guillermo received the writ of execution
but used the nickname "Joey" and denied being Jose Emmanuel F. Guillermo and, instead, pretended to be Jose's brother; that the guard on
duty confirmed that Jose and Joey are one and the same person; and that the respondent corporation Royal Class Venture had been
dissolved.70 Again, the facts contained in the Sheriffs Return were not disputed nor controverted by Guillermo, either in the hearings of Uson's
Motions for Issuance of Alias Writs of Execution, in subsequent motions or pleadings, or even in the petition before this Court. Essentially,
then, the facts form part of the records and now stand as further proof of Guillermo's bad faith and malicious intent to evade the judgment
obligation.

The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and frustrate the execution of the judgment award, which
this Court, in the interest of justice, will not countenance.

As for Guillermo's assertion that the case is an intra-corporate controversy, the Court sustains the finding of the appellate court that the
nature of an action and the jurisdiction of a tribunal are determined by the allegations of the complaint at the time of its filing, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. 71 Although Uson is also a stockholder and
director of Royal Class Venture, it is settled in jurisprudence that not all conflicts between a stockholder and the corporation are intra-
corporate; an examination of the complaint must be made on whether the complainant is involved in his capacity as a stockholder or director,
or as an employee.72 If the latter is found and the dispute does not meet the test of what qualities as an intra-corporate controversy, then the
case is a labor case cognizable by the NLRC and is not within the jurisdiction of any other tribunal. 73 In the case at bar, Uson's allegation was
that he was maliciously and illegally dismissed as an Accounting Supervisor by Guillermo, the Company President and General Manager, an
allegation that was not even disputed by the latter nor by Royal Class Venture. It raised no intra-corporate relationship issues between him
and the corporation or Guillermo; neither did it raise any issue regarding the regulation of the corporation. As correctly found by the appellate
court, Uson's complaint and redress sought were centered alone on his dismissal as an employee, and not upon any other relationship he had
with the company or with Guillermo. Thus, the matter is clearly a labor dispute cognizable by the labor tribunals. chanrobleslaw

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated June 8, 2011 and Resolution dated October 7, 2011 in CA G.R.
SP No. 115485 are AFFIRMED.

SO ORDERED. cralawlawlibrary

Velasco, Jr., (Chairperson), Perez, Reyes, and Jardeleza, JJ., concur. chanroblesvirtuallawlibrary

Endnotes:
1
Penned by Associate Justice Joselina Guevara-Salonga, with Associate Justices Mariflor P. Punzalan-Castillo and Franchito N. Diamante,
concurring; rollo, pp. 130-142.

The National Labor Relations Commission as well as Labor Arbiter Niña Fe S. Lazaga-Rafols were excluded as respondents by this Court in its
Resolution in this case elated January 30, 2012, id. at 159-160, citing Section 4(a), Rule 45 of the 1997 Rules of Civil Procedure.

2
Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Mariflor P. Punzalan-Castillo and Franchito Diamante
concurring; id. at 155-158.

3
Id. at 165.

4
Id.

5
Id. at 24, 167.

6
Id. at 59-61, 77, 80-81, 89-90, 137.

7
Id. at 49-54.

8
Id. at 57-64.

9
Id. at 25, 65, 168.

10
Id. at 65-66.

11
Id. at 67-68.

12
Id. at 69-70.

13
Id. at 71-74.

14
Id. at 72.

15
Id. at 75-79.

16
Id. at 78.

17
Id. at 78-79.
 Id. at 170.
18

Id. at 80-81.
19

Id. at 170-171.
20

Id. at 171 .
21

Id. at 82-83.
22

Id. at 172.
23

Id. at 84.
24
cralawred

Id. at 172-173.
25

Id. at 86-91.
26
cralawred

Id. at 92-110.
27

Id. at 130-142.
28

Id. at 137.
29

Id.
30

Id.
31

Id. at 138.
32

Id.
33

Id. at 139-140.
34

Id. at 140.
35

Id. at 143-154.
36

Id. at 155-158.
37
 Id. at 31.
38

Id. at 32-33.
39
cralawred

Id. at 36-39.
40

Id. at 40-42, 51 (Uson's Position Paper).

41

Id. at 165-178.
42

43
160 Phil. 624 (1975).

44
226 Phil. 199 (1986).

Claparols v. Court of Industrial Relations, supra; A.C. Ransom Labor Union-CCLU-NLRC, supra.
45

Id.
46

47
336 Phil. 545 (1997).

48
399 Phil. 38 (2000), citing Claparols v. CIR, supra note 43.

49
541 Phil. 214 (2007).

50
354 Phil. 918 (1998).

51
548 Phil. 581 (2007).

52
Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquire, in violation of his duty, any interest adverse to the corporation in respect of
any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf he shall
be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. (n)

McLeod v. NLRC, supra note 49, at 238.

53
 Further, as added in McLeod, there is personal liability also when directors, trustees or officers consent or fail to object to the issuance of
54

watered clown stocks, despite knowledge thereof; when they agree to hold themselves personally and soliciarily liable with the corporation; or
when they are made by specific provision of IDw personally answerable for their corporate action. (Id. at 242)

55
600 Phil. 645 (2009).

Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al., supra, at 663.

56

57
337 Phil. 698 (1997).

Carag v. NLRC, supra note 51, at 606-608, citing McLeod v. NLRC, et al., supra note 49.
58

Naguiat v. NLRC, supra note 47, at 562. A "corporate tort" is described as a violation of a right given or the omission of a duty imposed by
59

law; a breach of a legal duty. Such legal duty include that spelled out in Art. 238 of the Labor Code which mandates the employer to grant
separation pay to employees in case of closure or cessation of operations not due to serious business losses or financial reverses.

Santos v. NLRC, 325 Phil. 145 (1996); Naguiat v. NLRC, supra note 47, at 560.
60

Elcee Farms, Inc. v. NLRC (Fourth Div.), 541 Phil. 576, 593 (2007).
61

Concept Builders Inc. v. NLRC, 326 Phil. 955, 965 ( 1996).

62

Supra note 49, at 242.

63

Claparols v. CIR, supra note 43, at 635-636.

64

Rollo, pp. 50-51.

65

Id. at 59-61, 77, 80-81, 89-90, 137.

66

Id.
67

Id. at 21-44, 92-109.

68

Zuellig Freight and Cargo Systems v. NLRC, G.R. No. 157900, July 22, 2013, 701 SCRA 561.
69

Rollo, p. 72.
70
 Barrazona v. Regional Trial Court, Branch 21, Baguio City, 521 Phil. 53 (2006).
71

Real v. Sangu Philippines, Inc. and/or Abe, 655 Phil. 68, 83-84 (2011).
72

Id.; Aguirre v. FQB+7, Inc., G.R. No. 170770, January 9, 2013, 688 SCRA 242, 260, quoting Speed Distribution, Inc. v. Court of Appeals,
73

469 Phil. 739, 758-759 (2004), as follows: To determine whether a case involves an intra-corporate controversy, and is to be heard and
decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the
status or relationship or the parties; and (b) the nature of the question that is the subject of their controversy.

The first clement requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and
the corporation, partnership, or association of which they are stockholders, members or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State insofar as it concerns their individual franchises. The second element requires that the dispute among
the parties be intrinsically connected with the regulation or the corporation. If the nature of the controversy involves matters that are purely
civil in character, necessarily, the case docs not involve an intra-corporate controversy. The determination of whether a contract is simulated
or not is an issue that could be resolved by applying pertinent provisions of the Civil Code.

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SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 194795 June 13, 2012

EVER ELECTRICAL MANUFACTURING, INC., (EEMI) and VICENTE GO, Petitioners,

vs.
SAMAHANG MANGGAGAWA NG EVER ELECTRICAL/ NAMAWU LOCAL 224 Represented by Felimon
Panganiban, Respondents.
 DECISION

MENDOZA, J.:

This petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assails the August 31, 2010 Decision and
1 2

the December 16, 2010 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 108978.
3

Petitioner Ever Electrical Manufacturing, Inc. (EEMI) is a corporation engaged in the business of manufacturing electrical parts
and supplies. On the other hand, the respondents are members of Samahang Manggagawa ng Ever Electrical/NAMAWU Local
224 (respondents) headed by Felimon Panganiban.

The controversy started when EEMI closed its business operations on October 11, 2006 resulting in the termination of the
services of its employees. Aggrieved, respondents filed a complaint for illegal dismissal with prayer for payment of 13th month
pay, separation pay, damages, and attorney’s fees. Respondents alleged that the closure was made without any warning, notice
or memorandum and in full disregard of the requirements of the Labor Code.

In its defense, EEMI explained that it had closed the business due to various factors. In 1995, it invested in Orient Commercial
Banking Corporation (Orient Bank) the sum of ₱500,000,000.00 and during the Asian Currency crises, various economies in the
South East Asian Region were hurt badly. EEMI was one of those who suffered huge losses. In November 1996, it obtained a
loan in the amount of ₱121,400,000.00 from United Coconut Planters Bank (UCPB). As security for the loan, EEMI’s land and its
improvements, including the factory, were mortgaged to UCPB.

EEMI’s business suffered further losses due to the continued entry of cheaper goods from China and other Asian countries.
Adding to EEMI’s financial woes was the closure of Orient Bank where most of its resources were invested. As a result, EEMI
was not able to meet its loan obligations with UCPB.

In an attempt to save the company, EEMI entered into a dacion en pago arrangement with UCPB which, in effect, transferred
ownership of the company’s property to UCPB as reflected in TCT No. 429159. Originally, EEMI wanted to lease the premises to
continue its business operation but under UCPB’s policy, a previous debtor who failed to settle its loan obligation was not eligible
to lease its acquired assets. Thus, UCPB agreed to lease it to an affiliate corporation, EGO Electrical Supply Co, Inc. (EGO), for
and in behalf of EEMI. On February 2, 2002, a lease agreement was entered into between UCPB and EGO. The said lease
4

came to a halt when UCPB instituted an unlawful detainer suit against EGO before the Metropolitan Trial Court, Branch 5, Makati
City (MeTC) docketed as Civil Case No. 88602. On August 11, 2006, the MeTC ruled in favor of UCPB and ordered EGO to
vacate the leased premises and pay rentals to UCPB in the amount of ₱21,473,843.65. On September 19, 2006, a writ of
5

execution was issued. Consequently, on October 11, 2006, the Sheriff implemented the writ by closing the premises and, as a
6
result, EEMI’s employees were prevented from entering the factory.

On April 25, 2007, the Labor Arbiter (LA) ruled that respondents were not illegally dismissed. It, however, ordered EEMI and its
President, Vicente Go (Go), to pay their employees separation pay and 13th month pay respectively. The decretal portion of the
7

LA decision, reads:

CONFORMABLY WITH THE FOREGOING, Judgment is hereby rendered ordering the respondent[s] in solidum to pay the
complainants their separation pay, 13th month pay of the three (3) workers and the balance of their 13th month pay as computed
which computation is made a part of this disposition.

On September 15, 2008, the NLRC reversed and set aside the decision of the LA. The NLRC dismissed the complaint for lack of
merit and ruled that since EEMI’s cessation of business operation was due to serious business losses, the employees were not
entitled to separation pay.
8

Respondents moved for reconsideration of the NLRC decision, but the NLRC denied the motion in its March 23, 2009
Resolution.9

Unperturbed, respondents elevated the case before the CA via a petition for certiorari under Rule 65. 10

On August 31, 2010, the CA granted the petition. It nullified the decision of the NLRC and reinstated the LA decision. The
11

dispositive portion of the CA decision reads:

ACCORDINGLY, the petition is GRANTED. The Decision dated September 15, 2008 and Resolution dated March 23, 2009 of
the National Labor Relations Commission are NULLIFIED and the Decision dated April 25, 2007 of Labor Arbiter Melquiades Sol
Del Rosario, REINSTATED.

The CA held that respondents were entitled to separation pay and 13th month pay because the closure of EEMI’s business
operation was effected by the enforcement of a writ of execution and not by reason of business losses. The CA,
citing Restaurante Las Conchas v. Lydia Llego, upheld the solidary liability of EEMI and Go, declaring that "when the employer
12

corporation is no longer existing and unable to satisfy the judgment in favor of the employees, the officers should be held liable
for acting on behalf of the corporation."
13

EEMI and Go filed a motion for reconsideration but it was denied in the CA Resolution dated December 16, 2010. 14
Hence, this petition. 15

Issues:

1. Whether the CA erred in finding that the closure of EEMI’s operation was not due to business losses; and

2. Whether the CA erred in finding Vicente Go solidarily liable with EEMI.

The petition is partly meritorious.

Article 283 of the Labor Code provides:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any
employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or under taking not due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.

Article 283 of the Labor Code identifies closure or cessation of operation of the establishment as an authorized cause for
terminating an employee. Similarly, the said provision mandates that employees who are laid off from work due to closures that
are not due to business insolvency should be paid separation pay equivalent to one-month pay or to at least one-half month pay
for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year.

Although business reverses or losses are recognized by law as an authorized cause, it is still essential that the alleged losses in
the business operations be proven convincingly; otherwise, this ground for termination of employment would be susceptible to
abuse by conniving employers, who might be merely feigning business losses or reverses in their business ventures in order to
ease out employees. 16

In this case, EEMI failed to establish that the main reason for its closure was business reverses. As aptly observed by the CA,
the cessation of EEMI’s business was not directly brought about by serious business losses or financial reverses, but by reason
of the enforcement of a judgment against it. Thus, EEMI should be required to pay separation pay to its affected employees.
As to whether or not Go should be held solidarily liable with EEMI, the Court agrees with the petitioner.

As a general rule, corporate officers should not be held solidarily liable with the corporation for separation pay for it is settled that
a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from
that of any other legal entity to which it may be related. Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.
17

The LA was of the view that Go, as President of the corporation, actively participated in the management of EEMI’s corporate
obligations, and, accordingly, rendered judgment ordering EEMI and Go "in solidum to pay the complainants" their due. He
18

explained that "[r]espondent Go’s negligence in not paying the lease rental of the plant in behalf of the lessee EGO Electrical
Supply, Inc., where EEMI was operating and reimburse expenses of UCPB for real estate taxes and the like, prompted the bank
to file an unlawful detainer case against the lessee, EGO Electrical Supply Co. This evasion of an existing obligation, made
respondent Go as liable as respondent EEMI, for complainants’ money awards." Added the LA, "being the President and the one
19

actively representing respondent EEMI, in major contracts i.e. Real Estate Mortgage, loans, dacion en pago, respondent Go has
to be liable in the case." As earlier stated, the CA affirmed the LA decision citing the case of Restaurante Las Conchas v.
20

Llego, where it was held that "when the employer corporation is no longer existing and unable to satisfy the judgment in favor of
21

the employees, the officers should be held liable for acting on behalf of the corporation." 22

A study of Restaurante Las Conchas case, however, bares that it was an application of the exception rather than the general
rule. As stated in the said case, "as a rule, the officers and members of a corporation are not personally liable for acts done in the
performance of their duties." The Court therein explained that it applied the exception because of the peculiar circumstances of
23

the case. If the rule would be applied, the employees would end up in an empty victory because as the restaurant had been
closed for lack of venue, there would be no one to pay its liability as the respondents therein claimed that the restaurant was
owned by a different entity, not a party in the case.24

In two subsequent cases, the Court’s ruling in Restaurante Las Conchas was invoked but the Court refused to consider it
reasoning out that it was the exception rather than the rule. The two cases were Mandaue Dinghow Dimsum House, Co., Inc.
and/or Henry Uytengsu v. National Labor Relations Commission and Pantranco Employees Association (PEA-PTGWO) v.
25

National Labor Relations Commission. 26

In Mandaue Dinghow Dimsum House, Co., Inc., the Court declined to apply the ruling in Restaurante Las Conchas because
there was no evidence that the respondent therein, Henry Uytrengsu, acted in bad faith or in excess of his authority. It stressed
that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as
from that of any other legal entity to which it may be related. For said reason, the doctrine of piercing the veil of corporate fiction
must be exercised with caution. Citing Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos, the Court
27 28

explained that corporate directors and officers are solidarily liable with the corporation for the termination of employees done with
malice or bad faith. It stressed that bad 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.

In Pantranco Employees Association, the Court also rejected the invocation of Restaurante Las Conchas and refused to pierce
the veil of corporate fiction. It explained:

As between PNB and PNEI, petitioners want us to disregard their separate personalities, and insist that because the company,
PNEI, has already ceased operations and there is no other way by which the judgment in favor of the employees can be
satisfied, corporate officers can be held jointly and severally liable with the company. Petitioners rely on the pronouncement of
this Court in A.C. Ransom Labor Union-CCLU v. NLRC and subsequent cases.

This reliance fails to persuade. We find the aforesaid decisions inapplicable to the instant case.

For one, in the said cases, the persons made liable after the company’s cessation of operations were the officers and agents of
the corporation. The rationale is that, since the corporation is an artificial person, it must have an officer who can be presumed to
be the employer, being the person acting in the interest of the employer. The corporation, only in the technical sense, is the
employer. In the instant case, what is being made liable is another corporation (PNB) which acquired the debtor corporation
(PNEI).

Moreover, in the recent cases Carag v. National Labor Relations Commission and McLeod v. National Labor Relations
Commission, the Court explained the doctrine laid down in AC Ransom relative to the personal liability of the officers and agents
of the employer for the debts of the latter. In AC Ransom, the Court imputed liability to the officers of the corporation on the
strength of the definition of an employer in Article 212(c) (now Article 212[e]) of the Labor Code. Under the said provision,
employer includes any person acting in the interest of an employer, directly or indirectly, but does not include any labor
organization or any of its officers or agents except when acting as employer. It was clarified in Carag and McLeod that Article
212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. It added
that the governing law on personal liability of directors or officers for debts of the corporation is still Section 31 of the Corporation
Code.

More importantly, as aptly observed by this Court in AC Ransom, it appears that Ransom, foreseeing the possibility or probability
of payment of backwages to its employees, organized Rosario to replace Ransom, with the latter to be eventually phased out if
the strikers win their case. The execution could not be implemented against Ransom because of the disposition posthaste of its
leviable assets evidently in order to evade its just and due obligations. Hence, the Court sustained the piercing of the corporate
veil and made the officers of Ransom personally liable for the debts of the latter.
Clearly, what can be inferred from the earlier cases is that the doctrine of piercing the corporate veil applies only in three (3)
basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3)
alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made personally liable for corporate liabilities. [Emphasis supplied]
29

Similarly, in the case at bench, the records do not warrant an application of the exception. The rule, which requires the presence
1âwphi1

of malice or bad faith, must still prevail. In the recent case of Wensha Spa Center and/or Xu Zhi Jie v. Yung, the Court absolved
30

the corporation’s president from liability in the absence of bad faith or malice. In the said case, the Court stated:

In labor cases, corporate directors and officers may be held solidarily liable with the corporation for the termination of
employment only if done with malice or in bad faith. Bad faith does not connote bad judgment or negligence; it imports a
31

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.
32

In the present case, Go may have acted in behalf of EEMI but the company’s failure to operate cannot be equated to bad faith.
Cessation of business operation is brought about by various causes like mismanagement, lack of demand, negligence, or lack of
business foresight. Unless it can be shown that the closure was deliberate, malicious and in bad faith, the Court must apply the
general rule that a corporation has, by law, a personality separate and distinct from that of its owners. As there is no evidence
that Go, as EEMI’s President, acted maliciously or in bad faith in handling their business affairs and in eventually implementing
the closure of its business, he cannot be held jointly and solidarily liable with EEMI.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 31, 2010 Decision of the Court of Appeals
is AFFIRMED with MODIFICATION that Vicente Go is not solidarily liable with Ever Electrical Manufacturing, Inc.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

DIOSDADO M. PERALTA*
Associate Justice
 Acting Chairperson

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.**

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

DIOSDADO M. PERALTA
Associate Justice
Acting Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. No. 296, The Judiciary Act of 1948, as amended)

Footnotes

* Per Special Order No. 1228 dated June 6, 2012.

** Designated Acting Member in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order No. 1229 dated
June 6, 2012.

1
Rollo, pp. 9-40.

2
Id. at 356-366.

3
Id. at 368.

4
Id. at 158-191.

5
Id. at 195-200.

6
Id. at 202-203.

7
Id. at 242-261.

8
Id. at 291-300.

9
Id. at 303-304.

10
Id. at 305-328.

Id. at 356-366. Penned by Justice Amy C. Lazaro-Javier and concurred in by Associate Justice Rebecca De Guia-
11

Salvador and Associate Justice Sesinando E. Villon.

12
372 Phil. 697, 707 (1999).

Rollo, p. 365. Citing Restaurante Las Conchas v. Lydia Llego, 372 Phil. 697, 707 (1999), Gudez v. NLRC, 262 Phil. 703,
13

710 (1990).

14
Rollo, p. 368.

15
Id. at 9-40.
16
J.A.T. General Services v. National Labor Relations Commission, 465 Phil. 785, 795 (2004).

17
Sunio v. National Labor Relations Commission, 212 Phil. 355, 362-363 (1984).

18
Rollo, pp. 242-261.

19
Id. at 288.

20
Id. at 259.

21
Supra note 12.

22
Supra note 13.

23
Supra note 12.

24
"Records reveal that the Restaurant Services Corporation was not a party respondent in the complaint filed before the
Labor Arbiter. The complaint was filed only against the Restaurante Las Conchas and the spouses David Gonzales and
Elizabeth Anne Gonzales as owner, manager and president. The Restaurant Services Corporation was mentioned for the
first time in the Motion to Dismiss filed by petitioners David Gonzales and Elizabeth Anne Gonzales who did not even
bother to adduce any evidence to show that the Restaurant Services Corporation was really the owner of the Restaurante
Las Conchas. On the other hand, if indeed, the Restaurant Services Corporation was the owner of the Restaurante Las
Conchas and the employer of private respondents, it should have filed a motion to intervene 15 in the case. The records,
however, show that no such motion to intervene was ever filed by the said corporation. The only conclusion that can be
derived is that the Restaurant Services Corporation, if it still exists, has no legal interest in the controversy. Notably, the
corporation was only included in the decision of the Labor Arbiter and the NLRC as respondent because of the mere
allegation of petitioners David Gonzales and Elizabeth Gonzales, albeit without proof, that it is the owner of the
Restaurante Las Conchas. Thus, petitioners David Gonzales and Elizabeth Anne Gonzales cannot rightfully claim that it
is the corporation which should be made liable for the claims of private respondents.

Assuming that indeed, the Restaurant Services Corporation was the owner of the Restaurante Las Conchas and
the employer of private respondents, this will not absolve petitioners David Gonzales and Elizabeth Anne
Gonzales from their liability as corporate officers. Although as a rule, the officers and members of a corporation
are not personally liable for acts done in the performance of their duties, this rule admits of exceptions, one of
which is when the employer corporation is no longer existing and is unable to satisfy the judgment in favor of the
employee, the officers should be held liable for acting on behalf of the corporation. Here, the corporation does not
 appear to exist anymore."

25
G.R. No. 161134, March 3, 2008, 547 SCRA 402.

26
G.R. Nos. 170689 and 170705, March 17, 2009, 581 SCRA 598.

27
Mandaue Dinghow Dimsum House, Inc. v. NLRC, 4th Division, G.R. No. 161134, March 3, 2008, 547 SCRA 402, 414.

28
409 Phil. 75, 83 (2001).

Pantranco Employees Association (PEA-PTGWO) v. NLRC, G.R. Nos. 170689 & 170705, March 17, 2009, 581 SCRA
29

598, 614, 616.

30
G.R. No. 185122, August 16, 2010, 628 SCRA 311, 326.

31
Petron Corporation v. NLRC, G. R. No. 154532, October 27, 2006, 505 SCRA 596, 614.

32
Elcee Farms v. NLRC, G.R. No. 126428, January 25, 2007, 512 SCRA 602, 616-617.

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Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 198656 September 8, 2014

NANCY S. MONTINOLA, Petitioner,

vs.
PHILIPPINE AIRLINES, Respondnet.

DECISION
LEONEN, J.:

Illegally suspended employees, similar to illegally dismissed employees, are entitled to moral damages when their suspension
was attended by bad faith or fraud, oppressive to labor, or done in a manner contrary to morals, good customs, or public policy.

Petitioner Nancy S. Montinola (Montinola) comes to this court via a petition for review on certiorari under Rule 45 of the Rules of
Court. She assails the decision of the Court of Appeals dated June 28, 2011 and its resolution dated September 20, 2011 in
1 2 3

Philippine Airlines v. National Labor Relations Commission and Nancy S. Montinola. The Court of Appeals affirmed the finding of
4

the National Labor Relations Commission that petitioner was suspended illegally but deleted the award of moral and exemplary
damages and attorney’s fees. 5

The deletion of the award of attorney’s fees and moral and exemplary damages is the subject of this petition.

Montinola was employed as a flightattendant of Philippine Airlines (PAL) since 1996. On January 29, 2008, Montinola and other
6

flight crew members were subjected to custom searches in Honolulu, Hawaii, USA. Items from the airline were recovered from
the flight crew by customs officials. Nancy Graham (Graham), US Customs and Border Protection Supervisor, sent an email to
PAL regarding the search. The email contained a list of PAL flight crewmembers involved in the search:
7

FP CHUIDIAN, JUAN DE GUZMAN

FS CARTAGENA, REGINALD

FS NAVA, PETER DE GUZMAN

FS PADILLA, ANGELITO

FA CRUZ, MARIA FA MONTINOLA, NANCY

FA VICTA, ROSE ANN (Emphasis supplied)

Another email enumerated the list of items taken from the crew members:
8

Katie,
Here is the list.

Flight Crew Blitz in gate area 10 crew. Seven of the 10 crew members had items removed from the aircraft on their possession.
Two additional bags were found on jet-way after blitz. No bonded items were found but crew removed food items as listed:

18 bags Doritos

15 bags Banana Chips

5 pkg instant chocolate

5 bars Granola

18 bars Kit Kat

34 Chocolate flavored Goldilocks

16 Regular Goldilocks cakes

9 1st class Bulgari Kits

2 magazines

6 rolls toilet paper

9 cans soda

16 bottles of water

1 yogurt

12 small ice creams

2 jars salsa

2 bottles Orange Juice

1 bottle Cranberry Juice

1 bottle smoothie

All items returned to Philippine Airlines.

Nancy I. Graham

Supervisory CBPO

A-TCET Air

Honolulu Hi

PAL conducted an investigation. Montinola was among those implicated because she was mentioned in Graham’s email. On 9

February 1, 2008, PAL’s Cabin Services Sub-Department required Montinola to comment on the incident. She gave a
10

handwritten explanation three days after, stating that she did not take anything from the aircraft. She also committed to give her
full cooperation should there be any further inquiries on the matter.
11

On February 22, 2008, PAL’s International Cabin Crew Division Manager, Jaime Roberto A. Narciso (Narciso), furnished
Montinola the emails from the Honolulu customs official. This was followed by a notice of administrative charge which Narciso
12 13

gave Montinola on March 25, 2008. On April 12, 2008, there was a clarificatory hearing. The clarificatory hearing was conducted
14

by a panel of PAL’s Administrative Personnel, namely, Senior Labor Counsel Atty. Crisanto U. Pascual (Atty. Pascual), Narciso,
Salvador Cacho, June Mangahas,Lina Mejias, Carolina Victorino, and Ruby Manzano. 15

Montinola alleged that her counselobjected during the clarificatory hearing regarding PAL’s failure to specify her participation in
the alleged pilferage. Atty. Pascual threatened Montinola that a request for clarification would result in a waiver of the
16

clarificatory hearing. This matter was not reflected in the transcript of the hearing. Despite her counsel’s objections, Montinola
17 18

allowed the clarificatory hearings to proceed because she "wanted to extend her full cooperation [in] the investigation[s]."19

During the hearing, Montinola admitted that in Honolulu, US customs personnel conducted a search of her person. At that time,
she had in her possession only the following food items: cooked camote, 3-in-1 coffee packs, and Cadbury hot chocolate. 20

PAL, through Senior Assistant Vice President for Cabin Services Sub- Department Sylvia C.Hermosisima, found Montinola guilty
of 11 Violations of the company’s Code ofDiscipline and Government Regulation. She was meted with suspension for one (1)
21

year without pay. Montinola asked for a reconsideration. Hermosisima, however, denied her motion for reconsideration a month
22 23

after.
24

Montinola brought the matter before the Labor Arbiter. The Labor Arbiter found her suspension illegal, finding that PAL never
25 26 27

presented evidence that showed Montinola as the one responsible for any of the illegally taken airline items. The Labor Arbiter
28

ordered Montinola’s reinstatement with backwages, inclusive of allowances and benefits amounting to ₱378,630.00. 29

In addition, the Labor Arbiter awarded moral damagesin the amount of ₱100,000.00 and exemplary damages amounting to
₱100,000.00 for the following reasons:30

This Office observes that the records are replete with substantial evidence that the circumstances leading to complainant’s one-
year suspension without pay are characterized by arbitrariness and bad faith on the part of respondents. The totality
ofrespondents’ acts clearly shows that complainant had been treated unfairly and capriciously, for which complainant should be
awarded moral damages in the amount of One Hundred Thousand Pesos (₱100,000.00) and exemplary damages also in the
amount of One Hundred Thousand Pesos (₱100,000.00). 31

The Labor Arbiter also awarded attorney’s feesto Montinola because she was "forced to litigate and incur expenses to protect
[her] rights."
32

PAL appealed the Labor Arbiter’sdecision to the National Labor Relations Commission (NLRC). During the pendency of the
33

appeal, PAL submitted new evidence consisting of an affidavit executed by Nancy Graham, the Customs and Border Protection
Supervisor who witnessed the January 29, 2008 search in Honolulu. This affidavit enumerated the names of the flight crew
34

members searchedby the Honolulu customs officials. However, the National Labor RelationsCommission observed that "it was
categorically admitted in the said declaration that Ms. Graham did not know which items were attributable to eachof the seven
crew members whom she identified and there was no individual inventories (sic)." 35

Through the resolution dated June 9, 2009,the National Labor Relations Commission affirmed the decision of the Labor Arbiter.
36 37

PAL appealed the Commission’s decision to the Court of Appeals through a petition for certiorari. 38

The Court of Appeals affirmed the decisions of the Labor Arbiter and National Labor Relations Commission in finding the
suspension illegal. However, the Court of Appeals modified the award:
39
WHEREFORE, premises considered, the petition is DENIED. Respondent NLRC’s Decision in NLRC LAC No. 01000263-09
(NLRC NCR CN 08-11137-08), dated June 9, 2009, is AFFIRMED with MODIFICATION in that the award of moral and
exemplary damages and attorney’s fees to private respondent are deleted. (Emphasis supplied)
40

The Court of Appeals deleted the moral and exemplary damages and attorney’s fees stating that:

Relevant to the award of moral damages, not every employee who is illegally dismissed or suspended isentitled to damages.
Settled is the rule that moral damages are recoverable only where the dismissal or suspension of the employee was attended by
bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy. Bad faith does not simply mean negligence or bad judgment. It involves a state of mind dominated by ill will or motive. It
implies a conscious and intentional design to do a wrongful act for a dishonest purpose orsome moral obliquity. The person
claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes
good faith.

In the case at bar, there is no showing that PAL was moved by any ill will or motive in suspending private respondent. It is
evident that petitioner gave private respondent every opportunity to refute the charges against her and to present her side as part
of due process.These negate the existence of bad faith on the part of petitioner. Under the circumstances, we hold that private
respondent is not entitled to moral damages and exemplary damages. Furthermore, the Court finds the award of attorney’s fees
improper. The award of attorney’s fees was merely cited in the dispositive portion of the decision without the RTC [sic] stating
any legal or factual basis for said award. (Citations omitted)
41

Montinola filed a partial motion for reconsideration, praying that the award of moral and exemplary damages and attorney’s fees
42

be reintegrated into the decision. PAL also filed a motion for reconsideration, but its motion sought a complete reversal of the
43

decision.

The Court of Appeals denied both motions. Only Montinola sought to continue challenging the Court of Appeals’ decision
44

through a petition for review on certiorari brought to this court.

45

The sole issue in this case is whether Montinola’s illegal suspension entitled her to an award of moral and exemplary damages
and attorney’s fees.

Montinola claims that she is entitled to moral damages because her illegal suspension was attended by bad faith, causing her to
suffer "mental anguish, fright, serious anxiety, and moral shock." Furthermore, the illegal suspension tarnished her good
46

standing. Prior to this incident and in her 12 years of service, she was never charged administratively. The illegal suspension
47 48

likewise affected her family because it created "a state of uncertainty and adversity."
49
Montinola underscores that the investigation against her was conducted in a "hasty, impetuous, harsh and unjust" manner. She
50

was not properly apprised of the charges against her. She requested for proper notice of the acts violative of PAL’s Codeof
51

Discipline. Instead of giving proper notice, PAL threatened that she would be waiving her right to a clarificatory hearing if she
insisted on her request.52

Montinola likewise alleges that PAL violated its own rules by not applying the same penalty uniformly. Flight Purser Juan
53

Chuidian III was involved in the same incident and was likewise suspended. However, on motion for reconsideration, PAL
allowed him to retire early without serving the penalty of suspension. 54

The claim for exemplary damages isanchored on Montinola’s belief that such damages "are designed to permit the courts to
mould behaviour that has socially deleterious consequences, and their imposition is required by public policy to suppress the
wanton acts of the offender." In Montinola’s view, PAL suspended her in a "wanton, oppressive, and malevolent manner."
55 56

Finally, Montinola argues that she is entitled to attorney’s fees because she was forced to litigate. In Article 2208, paragraph (2)
of the Civil Code, individuals forced to litigate may ask for attorney’s fees.

On the other hand, PAL argues that moral damages are only recoverable when "the dismissal of the employee was attended by
bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy." The company believes that Montinola failed to present clear and convincing proof of bad faith.
57

PAL stands by how it investigated the alleged pilferage of the in-flight items in the January 29, 2008 flight. Itbelieves that it
afforded due process to Montinola and the other implicated crew members. From PAL’s point of view, she was given an
opportunity to explain her side and was even assisted by counsel of her choice. 58

PAL claims that since moral damages have not been proven, exemplary damages should likewise not be awarded. 59

Moreover, PAL argues that Montinola failed to provide basis for the award of attorney’s fees. Attorney’s fees are only awarded
when the trial court (or in this case, the Labor Arbiter) states a factual, legal, or equitable justification for awarding the same. 60

Montinola is entitled to moral and exemplary damages. She is also entitled to attorney’s fees.

The Labor Code provides:

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

Security of tenure of workers is not only statutorily protected, it is also a constitutionally guaranteed right. Thus, any deprivation
61

of this right must be attended by due process of law. This means that any disciplinary action which affects employment must
62

pass due process scrutiny in both its substantive and procedural aspects.

The constitutional protection for workers elevates their work to the status of a vested right. It is a vested right protected not only
against state action but against the arbitrary acts of the employers as well. This court in Philippine Movie Pictures Workers’
Association v. Premier Productions, Inc. categorically stated that "[t]he rightof a person to his labor is deemed to be property
63

within the meaning of constitutional guarantees." Moreover, it is of that species of vestedconstitutional right that also affects an
64

employee’s liberty and quality of life. Work not only contributes to defining the individual, it also assists in determining
one’spurpose. Work provides for the material basis of human dignity.

Suspension from work is prima facie a deprivation of this right. Thus, termination and suspension from workmust be reasonable
to meet the constitutional requirement of due process of law. It will be reasonable if it is based on just or authorized causes
enumerated in the Labor Code. 65

On the other hand, articulation of procedural due process in labor cases is found in Article 277(b) ofthe Labor Code, which
states:

(b) Subject to the constitutional right of workers to security of tenure and their right tobe protected against dismissal except for a
just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with the company rules and regulations promulgated pursuant to guidelines set by
the Department of Labor and Employment. Any decision taken bythe employer shall be without prejudice to the right of the
worker to consent the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer.

The procedure can be summarized in this manner. First, the employer must furnish the employee with a written notice containing
the cause for termination. Second, the employer must give the employee an opportunity to be heard. This could be done either
through a position paper or through a clarificatory hearing. The employee may alsobe assisted by a representative or counsel.
66
Finally, the employer must give another written noticeapprising the employee of its findings and the penalty to be imposed
against the employee, if any. In labor cases, these requisites meet the constitutional requirement of procedural due process,
67

which "contemplates notice and opportunity to be heard before judgment is rendered, affecting one’s person or property." 68

In this case, PAL complied with procedural due process as laid out in Article 277, paragraph (b) of the LaborCode. PAL issued a
1âwphi1

written notice of administrative charge, conducted a clarificatory hearing, and rendered a written decision suspending Montinola.
However, we emphasize that the written notice of administrative charge did not serve the purpose required under due process.
PAL did not deny her allegation that there would be a waiver of the clarificatory hearing ifshe insisted on a specific notice of
administrative charge. With Montinola unable to clarify the contents of the notice of administrative charge, there were
irregularities in the procedural due process accorded to her.

Moreover, PAL denied Montinola substantial due process.

Just cause has to be supported by substantial evidence. Substantial evidence, or "such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion," is the quantum of evidence required in administrative bodies such as the
69

National Labor Relations Commission. It is reasonable to expect the employer to consider substantial evidence in disciplinary
proceedings against its employees. The employer’s decision will be subject to review by the LaborArbiter and National Labor
Relations Commission.

The employer has the burden of proof in showing that disciplinary action was made for lawful cause. The employer must
70

consider and show facts adequate to support the conclusionthat an employee deserves to be disciplined for his or her acts or
omissions.

PAL, however, merely relied on these pieces of information in finding administrative liability against Montinola:

1) a list of offenses found in PAL’s Code of Discipline that Montinola allegedly violated;

2) a list of flight crew members that were checked at the Honolulu airport; and

3) a list of all items confiscated from allthese flight crew members.

The lists are not sufficient to show the participation of any of the flight crew members,least of all Montinola. None of the evidence
presented show that the customs officials confiscated any of these items from her. Thus, the evidence by themselves do not
show that Montinola pilfered airline items.
Together with the manner in which the investigation proceeded, i.e., that Montinola was prevented from asking for clarification of
the charges against her, the absence of substantial evidence is so apparent that disciplining an employee only on these bases
constitutes bad faith. Under the Labor Code, Labor Arbitersare authorized by law to award moral and exemplary damages:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving
all workers, whether agricultural or non-agricultural:

....

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations[.]

The nature of moral damages is defined under our Civil Code. Article 2220 states that "[w]illful injury to property may be a legal
ground for awarding moral damages if the court should find that, under the circumstances, such damages are justlydue. The
same rule applies to breaches of contract where the defendantacted fraudulently or in bad faith." In Primero v. Intermediate
Appellate Court, this court stated that damages, as defined in the Civil Code, is recoverable in labor cases. Thus, moral
71

damages:

. . . cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor Code) that the employer fired his
employee without just cause or due process. Additional facts must be pleaded and proven to warrant the grant of moral damages
under the Civil Code, these being, to repeat, that the act of dismissal wasattended by bad faith or fraud, or was oppressive to
labor, or done ina manner contrary to morals, good customs, or public policy;and, of course, that social humiliation, wounded
feelings, grave anxiety, etc., resulted therefrom.
72

The employee is entitled to moral damages when the employer acted a) in bad faith or fraud; b) in a manner oppressive to labor;
or c) in a manner contrary to morals, good customs, or public policy.

Bad faith "implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity." Cathay
73

Pacific Airways v. Spouses Vazquez established that bad faith must be proven through clear and convincing evidence. This is
74 75

because "[b]adfaith and fraud . . . are serious accusations that can be so conveniently and casually invoked, and that is why they
are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging
them." Here, there was clear and convincing evidence of bad faith adduced in the lower tribunals.
76

PAL’s actions in implicating Montinola and penalizing her for no clear reason show bad faith. PAL’s denial of her request to clarify
the charges against her shows its intent to do a wrongful act for moral obliquity. If it were acting in good faith, it would have
gathered more evidence from its contact in Honolulu or from other employees before it started pointing fingers. PAL should not
have haphazardly implicated Montinola and denied her livelihood even for a moment.

PAL apparently granted Montinola procedural due process by giving her a notice of administrative charge and conducting a
hearing. However, this was more apparent than real. The notice of administrative charge did not specify the acts committed by
Montinola and how these acts violated PAL’s Code of Discipline. The notice did not state which among the items confiscated by
the US customs officials were originally found in Montinola’s possession. Worse, the panel of PAL officers led by Atty. Pascual
did not entertain any query toclarify the charges against her.

There is denial of an opportunity to be heard if the employee is not clearly apprised of the acts she committed that constituted the
cause for disciplinary action. The Omnibus Rules Implementing the Labor Code requires that "a written notice [be] served on the
employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to
explain his side." Reasonable opportunity has been described as "every kind of assistance that managementmust accord to the
77

employees to enable them to prepare adequately for their defense." 78

When the alleged participation of the employee in the illicit act which serves as a basis for the disciplinary action is not clear from
the notice, the opportunity to be heard will not be reasonable. The notice fails to meet reasonable standards. It does not have
enough information to enable the employee to adequatelyprepare a defense.

Moreover, the list of provisions in PAL’s Code of Discipline allegedly violated was long and exhaustive. PAL’s notice of
1âwphi1

administrative charge stated that it had probable cause to administratively chargeMontinola of the following:

I. ILLEGAL ACTS – Section 2/Article 20

....

As a cabin attendant you should know very well the laws, rules and regulations of every country in which the Company operates
including the entry/exit requirements to which your cabin crew must adhere.

II. VIOLATION OF LAW/GOVERNMENT REGULATIONS – Section 6/Article 46

....

Incident is a violation of the Entry/Exit requirements in HNL Station, as quoted:

"Note: U.S. Customs Trade Law/Sec. 301 on Intellectual Property Right prohibits bringing of counterfeit consumer goods such as
fake bags, clothes, shoes, colognes, books, medicine, audio/video tapes & CD’s." (ref. Entry-Exit Requirements Quick Reference
Guide–Transpacific)

III. ANTI-COMPANY OFFENSES – Article 44/Section 5

....

As noted on the e-mail report from HNL Station dated 30 January 2008, PAL will be penalized by customs and border protection
– HNL due to cabin crew took items again from the aircraft upon arrival.

Article 26 NON-OBSERVANCE OF QUALITY STANDARDS

....

As a cabin attendant, it is yourresponsibility to strictly adhered [sic] to the rules, regulations, prescriptions, mandates and policies
of the Company.

Article 28 INEFFICIENCY AND WASTE

....

The subject items confiscated at the holding gate area are Company supplies and resources which must only be consumed or
utilized reasonably inflight [sic].

Article 37 ANTI-TEAMWORK OFFENSES

....

In the email report from HNL Station, Ms. Nancy Graham, CBP–Supervisor your name was specifically listed as part of the cabin
crew members who were involved in the Flight

Crew Blitz in gate area.

Article 38 INSUBORDINATIONS OR WILLFUL DISOBEDIENCE

....

Article 58 MISHANDLING/MISUSE OF COMPANY FUNDS, PROPERTY OR RECORDS

....

The subject items confiscated at the holding gate area are Company supplies and resources which must only be consumed or
utilized reasonably inflight [sic].

Article 59 THEFT, PILFERAGE, OR EMBEZZLEMENT

....

As noted on the e-mail reports from HNL Station both from Station Supervisor, Ms. Keity Wells and Ms. Nancy Graham, CBP–
Supervisor, The different items confiscated are taken by the cabin crew from the aircraft upon arrival.

Article 61 UNOFFICIAL USE OF COMPANY PROPERTY AND FACILITIES

....

IV. FAILURE ON THE JOB – Article 25/Section 2

....

As a cabin attendant, you should know very well the certain laws, rules and regulations ofevery country in which the Company
operates. Thus, adherence (sic) to these rules and regulations is a must. 79

To constitute proper notice, the facts constitutive of the violations of these rules — and not just the rules of conduct — must be
clearly stated. Proper notice also requires that the alleged participation of the employee be clearly specified. Without these, the
most fundamental requirement of a fair hearing cannot be met.

Parenthetically, we note that the enumeration of rules violated even included violation of "U.S. Customs Trade Law/Sec. 301 on
Intellectual Property Right." This has no bearing on the basis for the termination or suspension of the employee. It only serves to
confuse. At worse, it is specified simply to intimidate.

Montinola was found by PAL to be guilty of allthe charges against her. According to PAL, "[t]hese offenses call for the imposition
of the penalty of Termination, however, we are imposing upon you the reduced penalty of One (01) year Suspension." It is not
80

clear how she could violate all the prestations in the long list of rules she allegedly violated. There is also no clear explanation
why termination would be the proper penalty to impose. That the penalty was downgraded, without legal explanation, to
suspension appears as a further badgeof intimidation and bad faith on the part of the employer.

Nothing in PAL’s action supports the finding that Montinola committed specific acts constituting violations of PAL’s Code of
Discipline.

This act of PAL is contrary tomorals, good customs, and public policy. PAL was willing to deprive Montinola of the wages she
would have earned during her year of suspension even if there was no substantial evidence that she was involved in the
pilferage.

Moral damages are, thus, appropriate. In Almira v. B.F. Goodrich Philippines, this court noted that unemployment "brings untold
hardships and sorrows on those dependent on the wage-earner." This is also true for the case of suspension. Suspension
81

istemporary unemployment. During the year of her suspension, Montinola and her family had to survive without her usual salary.
The deprivation of economic compensation caused mental anguish, fright, serious anxiety, besmirched reputation, and wounded
feelings. All these are grounds for an award of moral damages under the Civil Code. 82

II

Montinola is also entitled to exemplary damages.

Under Article 2229 of the Civil Code, "[e]xemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages." As this court has stated in the past:
"Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour." 83

If the case involves a contract, Article 2332 of the Civil Code provides that "the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless,oppressive or malevolent manner." Thus, in Garcia v. NLRC, this court ruled
84

that in labor cases, the court may award exemplary damages "if the dismissal was effected in a wanton, oppressive or
malevolent manner." 85

It is socially deleterious for PAL to suspend Montinola without just cause in the manner suffered by her.Hence, exemplary
damages are necessary to deter future employers from committing the same acts.

III

Montinola is also entitled to attorney’s fees.

Article 2208 of the Civil Code enumerates the instances when attorney’s fees can be awarded:

ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation,other than judicialcosts, cannot be recovered,
except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted ingross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and
demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should
 be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable. (Emphasis supplied)

This case qualifies for the first, second, and seventh reasons why attorney’s fees are awarded under the Civil Code.

First, considering thatwe have awarded exemplary damages in this case, attorney’s fees canlikewise be awarded.

Second, PAL’s acts and omissionscompelled Montinola to incur expenses to protect her rights with the National Labor Relations
Commission and the judicial system. She went through four tribunals, and she was assisted by counsel. These expenses would
have been unnecessary if PAL had sufficient basis for its decision to discipline Montinola.

Finally, the action included recovery for wages. To bring justice to the illegal suspension of Montinola, she asked for backwages
for her year of suspension:

PAL argued that the factual, legal, or equitable justification for awarding attorney's fees must be stated in the Labor Arbiter's
decision. The legal justification of the Labor Arbiter is apparent in the decision:

Complainant's claim for attorney's fees is also justified. It is settled that where an employee was forced 'to litigate and incur
expenses to protect his rights and interest, as in the instant case, he is entitled to an award of attorney's fees (Building Case
Corp. vs. NLRC, G.R. No. 94237, February 26, 1997). She is thus granted attorney's fees equivalent to ten percent of the total
award. 86

We find no factual, legal, or equitable reason to depart from this justification. Hence, we also affirm the award of attorney's fees
equivalent to 10% of the total award, or ₱57,863.00. 87

We acknowledge the right of PAL to be constantly vigilant to prevent and deter pilferage. After all, that is equally its property
which is also protected by the Constitution. However, PAL cannot assume liability on the employee. It has to endeavor to move
through its administrative investigations more humanely and more in consonance with the law. Its employees may only have their
work. It is their work, no matter what the classification and how significant they may be in the eyes of their employer, that should
give them their dignity.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 112552 is MODIFIED in order
to REINTEGRATE the award for moral damages of ₱100,000.00, exemplary damages of ₱100,000.00, and attorney's fees of
₱57,863.00.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO MARTIN S. VILLARAMA, JR.*

Associate Justice Associate Justice

BIENVENIDO L. REYES**
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's
Division.

ANTONIO T. CARPIO
Acting Chief Justice

Footnotes

* Designated acting member per S.O. No. 1767 August 27, 2014.

** Designated acting member per S.O. No. 1763 dated August 26, 2014 in relation to S.O. No. 1776 dated August 28,
2014.

1
Rollo, pp. 41-53.

2
Thirteenth Division, composed of Associate Justices Antonio L. Villamor, Jose C. Reyes, Jr., and Ramon A. Cruz.

3
Rollo, pp. 55–56.

4
This case is docketed as CA-G.R. SP NO. 112552.

5
Rollo, pp. 52–53.

6
Id. at 124, clarificatory hearing dated April 12, 2008.

7
Id. at 397. The existence of the email was based on the affidavit of Jaime Roberto A. Narciso, International Cabin Crew
Division Manager of Philippine Airlines.

8
Id.

9
Id. at 60–64, notice of administrative charge dated March 25, 2008.

10
Id. at 57.

11
Id., handwritten answer was dated February 4, 2008.

12
Id. at 58–59.

13
Id. at 60–64.

14
Id. at 119–125.

15
Id. at 114.
16
Id. at 33.

17
Id. at 26.

18
Id. at 119.

19
Id. at 26.

20
Id. at 609.

21
Id. at 60–64.

22
Id. at 181–185, decision dated May 30, 2008.

23
Id. at 186–198.

24
Id. at 200.

25
Id. at 826–828.

26
Labor Arbiter Romelita N. Rioflorido.

27
Rollo, pp. 608–628.

28
Id. at 622.

29
Id. at 626.

30
Id. at 627.

31
Id. at 626–627.

32
Id.
33
Id. at 629–661.

34
Id. at 1677–1679.

35
Id. at 744.

36
Id. at 732–745.

The resolution was penned by Commissioner Numeriano D. Villena and Presiding Commissioner Herminio V. Suelo
37

and Commissioner Angelo Ang Palaña, concurring, from the Seventh Division.

38
Rollo, pp. 751–780.

39
Id. at 41–53.

40
Id. at 52–53.

41
Id. at 51–52, citing Cual v. Leonis Navigation, G.R. No. 167775, October 10, 2005 (resolution, unpublished).

42
Id. at 1595–1599.

43
Id. at 1577–1592.

44
Id. at 55–56.

45
Id. at 18–36.

46
Id. at 31–32.

47
Id. at 32.

48
Id. at 34.
49
Id. at 32.

50
Id.

51
Id. at 33.

52
Id.

53
Id. at 77, PAL’s Code of Discipline, Article 4, states the following: "Discipline shall be imposed consistently. It shall be
applied uniformly to offenders similarly situated regardless of rank or positions within the company. The same sanctions
shall be applied on any offender for offenses committed under similar facts and circumstances. Like penalties shall be
imposed for like offenses."

54
Rollo, pp. 33–34.

55
Id. at 35, citing Keirulf v. Court of Appeals, 336 Phil. 414 (1997) [Per J. Panganiban, Third Division].

56
Rollo, p. 35.

57
Id. at 1680, citing M+W Zander Philippines, Inc. v. Enriquez,606 Phil. 591, 612 (2009) [Per C.J. Puno, First Division].

58
Rollo, p. 1681.

59
Id. at 1682.

60
Id. at 1683, citing Nazareno v. City of Dumaguete,607 Phil. 768, 807–808 (2009) [Per J. ChicoNazario, En Banc].

61
CONST. art. XIII, sec. 3, par. 2 states:

"It shall guarantee the rights of all workers. . . . They shall be entitled to security of tenure, humane conditions of
work, and a living wage. . . ."

62
CONST. art. III, sec. 1 states:
"No person shall be deprived of life, liberty or property without due process of law."

63
92 Phil. 843 (1953) [Per J. Bautista Angelo, En Banc].

64
Id. at 848.

65
Article 282 (Termination by Employer) of the Labor Code enumeratesjust causes, while Articles 283 (Closure of
Establishment and Reduction of Personnel) and 284 (Disease as Ground for Termination) present authorized causesfor
termination of employment by the employer. See National Labor Relations Commission v. Salgarino, 529 Phil. 355, 367
(2006) [Per J.Chico-Nazario, First Division].

66
See Perez v. Philippine Telegraph and Telephone Company, 602 Phil. 522, 541 (2009) [Per J. Corona, En Banc],
stating:

"The employee can be fully afforded a chance torespond to the charges against him, adduce his evidence or
rebut the evidence against him through a wide array of methods, verbal or written."

67
See Voyeur Visage Studio, Inc. v. Court of Appeals,493 Phil. 831, 840 (2005) [Per J. Garcia, Third Division]. The need
for 1) a notice apprising the acts and omissions of the employee for which discipline is sought; and 2) a notice informing
the penalty of the employer, is referred to as the "twin notice requirement" in labor law.

68
Lopez v. Director of Lands,47 Phil. 23, 32 (1924) [Per J. Johnson, En Banc], citingMr. Daniel Webster’s definition of
"due process of law" in his arguments before the US Supreme Court for the famous Dartmouth College case.

Ang Tibay v. CIR,69 Phil. 635, 642–643 (1940) [Per J. Laurel, En Banc], citing Appalachian Electric Power v. National
69

Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations Board v. Thompson Products, 6 Cir., 97 F. 2d
13, 15; Ballston-Stillwater Knitting Co. v. National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.

70
In Dizon v. National Labor Relations Commission, 259 Phil. 523, 528 (1989) [Per J. Feliciano, Third Division], it was
stated that "in an unlawful dismissal case, the employer has the burden of proving the lawful cause sustaining the
dismissal of the employee." This principle applies analogously to cases involving suspension of an employee.

71
240 Phil. 412 (1987) [Per J. Narvasa, First Division].
72
Id. at 421.

Laureano Investments and Development Corp. v. Court of Appeals, 338 Phil. 759, 771 (1997) [Per J. Panganiban, Third
73

Division].

74
447 Phil. 306 (2003) [Per C.J. Davide, Jr., First Division]. This is not a labor case; it is a civil case for damages.

75
Id. at 321.

76
Id.

77
Omnibus Rules Implementing the Labor Code (1989), book VI, rule I, sec. 2(d)(i).

78
King of Kings Transport, Inc. v. Mamac, 553 Phil. 108, 116 (2007) [Per J. Velasco, Second Division].

79
Rollo, pp. 60–64.

80
Id. at 185.

81
Almira v. B.F. Goodrich Philippines, Inc., 157 Phil. 110, 121–122 (1974) [Per J. Fernando, Second Division].

82
CIVIL CODE, art. 2217: Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act or
omission.

83
Mecenas v. Court of Appeals, 259 Phil. 556, 574 (1989) [Per J. Feliciano, Third Division].

84
G.R. No. 110518, August 1, 1994, 234 SCRA 632 [Per J. Cruz, First Division]. This case involved retrenchment. While
this court denied moral and exemplary damages, the case provides definitions on when these awards are appropriate in
labor cases.

85
Id. at 638.
 86
Rollo, p. 627.

87
The Court of Appeals only deleted the moral and exemplary damages, and attorney's foes. In effect, it agreed to the
award of backwages amounting to ₱378,630.00 (Rollo, pp. 52-53). Including moral and exemplary damages reinstated in
this decision (₱100,000.00 for moral damages, another for ₱100,000.00 exemplary damages), the total award is
₱578,630.00. 10% of ₱578,630.00 is ₱57,863.00.

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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 185215

VIRGINIA D. BAUTISTA, Petitioner,

vs.
CIVIL SERVICE COMMISSION and DEVELOPMENT BANK OF THE PHILIPPINES, Respondents.

DECISION

DEL CASTILLO, J.:

There is demotion when an employee is appointed to a position resulting to a diminution in duties, responsibilities, status or rank
which may or may not involve a reduction in salary.1 Where an employee is appointed to a position with the same duties and
responsibilities but a rank and salary higher than those enjoyed in his previous position, there is no demotion and the
appointment is valid. While this principle and its corollary are plain, it is through the use of misleading premises that a semblance
of demotion was attempted to be passed off in this case. Thus, we take this opportunity to again remind litigants to use only fair
and honest means to plead their cause in order not to waste the precious time and resources of our courts.

This Petition for Review on Certiorari assails the October 31, 2008 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No.
98934 which affirmed the Resolution No. 0707653 dated April 16, 2007 of the Civil Service Commission (CSC). The CSC
dismissed petitioner’s complaint based on the finding that the latter was not demoted upon her appointment as Bank Executive
Officer II (BEO II) in the Development Bank of the Philippines (DBP).
Factual Antecedents

Petitioner began her career in DBP on June 1, 1978 when she was appointed as Chief of Division. On December 1, 1982, she
was promoted to the position of Technical Assistant. On December 3, 1986, then President Corazon C. Aquino issued Executive
Order No. 814 which authorized, among others, the reorganization of DBP pursuant to Sections 32 5 and 336 thereof. As part of
DBP’s reorganization, petitioner was temporarily appointed in January 1987 as Account Officer with an annual salary of
₱62,640.00 which is equivalent to the 14th step of Salary Grade (SG)-20. In November 1988, this appointment was made
permanent subject to the result of the ongoing reorganization of DBP and the approval of the CSC. 7

Republic Act No. 6758 (RA 6758), or "The Compensation and Classification Act of 1989," took effect on July 1, 1989. To
implement the aforesaid law, the Department of Budget and Management (DBM) promulgated the Government Financial
Institutions’ (GFIs) Index of Occupational Services which mandated GFIs, like the DBP, to adopt a uniform set of position titles in
their plantilla. On October 2, 1989, the DBM issued Corporate Compensation Circular No. 10 (DBM-CCC No. 10) which
authorized the GFIs to match their current set of position titles to those prescribed by the GFIs Index of Occupational Services.
As a consequence, on February 15, 1991, petitioner was appointed on a permanent status as BEO II with an annual salary of
₱131,250.00 or the 8th step of SG-24 which was made to retroact to July 1, 1989 (the date of effectivity of RA 6758). Prior to her
appointment thereto, petitioner occupied the position of Account Officer with SG-20 (24th step) with an annual salary of
₱102,000.00.8

Proceedings before the Development Bank of the Philippines

In a letter9 dated March 23, 1993, petitioner protested her appointment as BEO II before the Head of the Personnel
Administration Department of the DBP because it allegedly amounted to a demotion. According to petitioner, prior to the
reorganization of DBP, she occupied the position of Account Officer which, under the GFIs Index of Occupational Services, was
assigned a salary grade of 25 while that of BEO II has a salary grade of 24. She thus opined that her appointment to the position
of BEO II constituted a demotion due to the attendant diminution of benefits and emoluments arising from said appointment.

On February 8, 1994, petitioner reiterated her protest in a letter 10 addressed to the Vice-Chairman of DBP.

Proceedings before the Department of Budget and Management

Petitioner’s complaint was referred to the DBM, which found the same to be lacking in merit. It held that the position of Account
Officer in DBP is "not in the rank of Assistant Department Manager II. Therefore, to allocate [the] subject positions to Account
Officer, SG-25 [under the GFIs Index of Occupational Services] will be highly illogical and totally out of context of the accepted
organizational set-up for GOCCs11/GFIs."12
Proceedings before the Civil Service Commission

Undaunted, petitioner appealed to the CSC through several letters dated September 26 1996, 13 October 24, 1997,14 and February
23, 199815 but the latter failed to act on the same. On October 8, 2001, while applying for early retirement, she again wrote a
letter-complaint to the CSC. This time the CSC required DBP to comment.

In its comment,16 DBP asserted that when the bank started to reorganize in 1987, petitioner was appointed to the position of
Account Officer with SG-20 on a temporary status. Pursuant to DBM-CCC No. 10 implementing RA 6758, the position of Account
Officer with SG-20 was matched with BEO II with SG-24 (8th step). Contrary to petitioner’s claim, there was, thus, no demotion
because her salary grade was even increased from 20 to 24.

On April 16, 2007, the CSC rendered a decision dismissing petitioner’s complaint for lack of merit. The CSC ruled that the
appointment of petitioner to the position of BEO II was done pursuant to a valid reorganization. Moreover, petitioner only raised
her claim to the contested position on September 26, 1996 or more than seven years from the time of her appointment. She is,
thus, deemed to have slept on her rights under the equitable doctrine of laches.

Proceedings before the Court of Appeals

Petitioner thereafter appealed to the CA. On the issue of laches, the CA disagreed with the CSC. It found that petitioner timely
protested her alleged demotion through several letter-complaints and appeals; first with the DBP a month after her appointment
as BEO II, and, later on, through several letter-appeals with the CSC. Thus, petitioner did not sleep on her rights. If at all, the
delay was attributable to the CSC’s inaction on her protests which spanned several years.

On the issue of demotion, the CA upheld the findings of the CSC that the appointment of petitioner to BEO II did not constitute a
demotion because this was done in good faith and pursuant to a valid reorganization. It ruled that the DBP undertook the
matching of positions in order to conform to the GFIs Index of Occupational Services based on the employee’s nature of function,
hierarchy of jobs, and existing salary range. Petitioner’s duties and responsibilities as Account Officer with SG-20 and as BEO II
with SG-24 are practically the same as shown by her BC-CSC Form 1 (Position Description Form). Rather than lowering her rank
and salary, petitioner’s appointment as BEO II had, in fact, resulted to an increase thereof from SG-20 to SG-24, thus, negating
petitioner’s claim of demotion.

Issues

Before this Court, petitioner attributes the following errors to the CA:

1. The CA erred in holding that petitioner’s appointment from Account Officer to BEO II did not result in a demotion in
 rank and salary, and

2. The CA erred in holding that DBP’s reorganization was valid and done in good faith. 17

Petitioner’s Arguments

Petitioner argues that her appointment as BEO II with SG-24 constitutes a demotion because prior to the reorganization of DBP,
she was an incumbent Account Officer with SG-25. The position of Account Officer with SG-25 was not abolished after the
reorganization. Thus, there was a decrease in her rank and salary from SG-25 to SG-24. Citing Department of Trade and
Industry v. Chairman and Commissioners of Civil Service Commission,18 petitioner claims that she should have been appointed to
a position comparable to her former position. She decries that the assailed reorganization did not promote economy and
efficiency but led to the demoralization of the employees who were not appointed to their old position.

Respondents’ Arguments

DBP counters that the appointment of petitioner to BEO II was done in good faith and pursuant to a valid reorganization. It claims
that petitioner failed to prove that she held the position of Account Officer with SG-25 under the GFIs Index of Occupational
Services prior to the reorganization of the bank. Rather, the evidence duly established that petitioner occupied the position of
Account Officer with SG-20. The position of Account Officer with SG-20 is not the same as Account Officer with SG-25 under the
GFIs Index of Occupational Services. When RA 6758 was passed by Congress, the DBM approved the GFIs Index of
Occupational Services which mandated the GFIs, including DBP, to adopt the position titles therein. As a result, DBP fixed the
positions of its employees to appropriate positions to conform to the GFIs Index of Occupational Services based on the nature of
their functions, hierarchy of jobs, and existing salary range. Thus, the position of Account Officer with SG-20 was matched to the
position of BEO II with SG-24. Petitioner’s duties and responsibilities as Account Officer and as BEO II remained essentially the
same. Taken together, there can be no demotion because petitioner’s salary grade was even increased from 20 to 24.

The CSC, represented by the Solicitor General, is fully in accord with the afore-stated position of the DBP. It emphasizes that
petitioner failed to prove that there was a reduction in her duties, responsibilities, status or rank as a result of her appointment to
the position of BEO II.

Our Ruling

We affirm the findings of the CA and DENY the petition. There was no demotion when petitioner was appointed as BEO II.

In this jurisdiction, a reorganization is valid provided that it is done in good faith. As a general rule, the test of good faith lies in
whether the purpose of the reorganization is for economy or to make the bureaucracy more efficient. 19 Removal from office as a
result of reorganization must, thus, pass the test of good faith.20 A demotion in office, i.e., the movement from one position to
another involving the issuance of an appointment with diminution in duties, responsibilities, status or rank which may or may not
involve a reduction in salary,21 is tantamount to removal, if no cause is shown for it.22 Consequently, before a demotion may be
effected pursuant to a reorganization, the observance of the rules on bona fide abolition of public office is essential.23

There was no demotion because petitioner was appointed to a position comparable to the one she previously occupied. There
was even an increase in her rank and salary.

Petitioner claims that she was illegally demoted when she was appointed from Account Officer with SG-25 to BEO II with SG-24
after the reorganization of DBP in 1989.

Petitioner’s contention is untenable and misleading.

The records show that prior to her appointment as BEO II, petitioner occupied the position of Account Officer with SG-20 and not
Account Officer with SG-25. This is stated in petitioner’s own evidence consisting of her service record 24 as well as the
admissions in her letter-complaints before the DBP and CSC. Curiously, in her arguments before the CA and this Court,
petitioner modified her position by claiming that she was an Account Officer with SG-25 prior to her appointment to the position of
BEO II with SG-24. We must, therefore, express our disapproval over the manner by which petitioner pleaded her cause which,
to our mind, is nothing but an attempt to mislead this Court.

As correctly found by the CA, petitioner failed to prove that the position of Account Officer with SG-20 in the plantilla of DBP prior
to its reorganization and the position of Account Officer with SG-25 under the GFIs Index of Occupational Services are the same.
Upon the passage of RA 6758, the DBM promulgated the GFIs Index of Occupational Services which mandated the adoption of
a uniform system of position titles in GFIs, including DBP. The DBM then issued DBM-CCC No. 10 which authorized DBP to
match its current set of position titles to those prescribed under the GFIs Index of Occupational Services based on the nature of
duties and responsibilities, qualification requirements for the position, hierarchy of jobs, and existing salary range. Consequently,
petitioner’s position of Account Officer with SG-20 was matched to the position of BEO II with SG-24 because she exercised
supervisory functions over certain bank personnel.

It will also be recalled that the DBM had earlier denied petitioner’s request that her position as Account Officer with SG-20 be
matched to Account Officer with SG-25 under the GFIs Index of Occupational Services because the Account Officer position in
DBP is not commensurate with the position of Account Officer with SG-25 under the said index. 25 While there was a change in
title from "Account Officer" to "Bank Executive Officer," petitioner’s duties and responsibilities before and after the reorganization
remained practically the same. Thus, her new appointment merely stated as reason therefor: "Change in Item Number due to
Reorganization."26 What is more, said appointment resulted to an increase of her salary grade from 20 to 24 translating to an
increase of her annual salary from ₱102,000.00 to ₱131,250.00. Under these circumstances, there is no room for us to rule that
a demotion took place because petitioner even benefited from an increase in rank and salary. 1avvphi1

Petitioner did not assail the alleged reduction in the scope of her duties and responsibilities.

In a last ditch effort to save her case, petitioner posits for the first time on appeal that the supervisory function of BEO II is less
than her former position. However, as correctly observed by the DBP and CSC, petitioner never assailed the reduction in the
scope of her duties and responsibilities arising from her appointment as BEO II in the proceedings below. Instead, she limited her
claim of demotion on the alleged decrease of her salary grade from 25 to 24 which, as stated earlier, has no legal and factual
bases to stand on. Well-settled is the rule that points of law, theories, issues and arguments not adequately brought to the
attention of the lower tribunal will not be ordinarily considered by a reviewing court as they cannot be raised for the first time on
appeal.27 Besides, even if we were to relax this rule, petitioner proffered no evidence to establish the extent of the alleged
reduction of her duties and responsibilities other than her self-serving allegations. Interestingly, petitioner even admitted before
the CA that she continued to exercise supervisory functions over bank personnel after she was appointed as BEO II. 28 She
further claimed that in 1993 she was assigned to head a unit where she exercised supervisory functions over more than 20 bank
personnel.29 Thus, we uphold the findings of the CA that petitioner’s duties and responsibilities after the reorganization remained
substantially the same.

The reorganization of the DBP was made in good faith.

Finally, petitioner’s reliance on the case of Department of Trade and Industry v. Chairman and Commissioners of Civil Service
Commission30 is misplaced. In said case, we affirmed the ruling of the CSC which found that the reorganization of the
Department of Trade and Industry (DTI) was done in bad faith. We noted that when the position of therein respondent Espejo
was abolished, there was a corresponding increase in the new staffing pattern of the DTI after the reorganization. Further, the
incumbents were replaced by those less qualified in terms of educational qualification, performance and merit. Within this
context, there was a clear intent to ease out the incumbents in order to favor less qualified individuals in the guise of a
reorganization plan. In contrast, herein petitioner has failed to prove that DBP acted in bad faith when it appointed her as BEO II.
None of the circumstances under Section 231 of RA 665632 which would be indicia of bad faith in the process of reorganization is
present here. Quite the contrary, the reorganization worked in petitioner’s favor as her salary grade was increased from 20 to 24.

All in all, we agree with the findings of the CA that there was no demotion because petitioner was appointed to a position
comparable to her former position. In fact, her new position entailed an increase in her salary grade from 20 to 24. There is, thus,
no evidence to suggest that DBP acted in bad faith. Given that these findings are supported by substantial evidence, we adhere
to the settled principle that the findings of an administrative body, when supported by substantial evidence, are accorded not only
respect but also finality by this Court.33

WHEREFORE, the petition is DENIED. The October 31, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 98934,
affirming Resolution No. 070765 of the Civil Service Commission which found that petitioner’s appointment as Bank Executive
Officer II in the Development Bank of the Philippines did not result to her demotion, is AFFIRMED.

Costs against petitioner.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

(No part)
LUCAS P. BERSAMIN
DIOSDADO M. PERALTA
Associate Justice
Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice
 JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA
Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice

Footnotes

1
Omnibus Civil Service Rules and Regulations, Rule VII (Other Personnel Actions), Section 11.

2
Rollo, pp. 18-33; penned by Associate Justice Normandie B. Pizarro and concurred in by Associate Justices Edgardo P.
Cruz and Fernanda Lampas Peralta.

3
Id. at 41-46; penned by Commissioner Cesar D. Buenaflor and concurred in by Chairwoman Karina Constantino-David
and Commissioner Mary Ann Z. Fernandez-Mendoza.

4
The 1986 Revised Charter of the Development Bank of the Philippines.

5
Sec. 32. Authority to Reorganize. - In view of the new scope of operations of the Bank, a reorganization of the Bank and
a reduction in force are hereby authorized to achieve simplicity and economy in operations, including adopting a new
staffing pattern to suit the reduced operations envisioned. The formulation of the program of reorganization shall be
completed within six months after the approval of this Charter, and the full implementation of the reorganization program
within thirty months thereafter.

6
Sec. 33. Implementing Details; Organization and Staffing of the Bank. - Upon the effectivity of this Charter, the Board of
Directors of the Bank shall be constituted and its Chairman appointed. The Chairman is hereby authorized, subject to the
approval of the Board of Directors as appropriate, to issue such orders, rules and regulations as may be necessary to
implement the provisions of this Charter including those relative to the financial aspects, if any, and to the reorganization
of the Bank as hereinabove authorized which will involve the determination and adoption of (1) the new internal structure
of the Bank as reorganized down to the divisional section or lowest organizational levels, including such appropriate units
as may be needed to handle caretaking activities such as the disposition of certain assets and the collection of certain
accounts; (2) a new staffing pattern including appropriate salary rates, and (3) the initial operating budget.

7
CA rollo, pp. 159-160.

8
Rollo, p. 52; Annex "A" (petitioner’s Service Record).

9
Id. at 34-36.

10
Id. at 37-39.

11
Government Owned and Controlled Corporations.

12
Rollo, p.51.

13
Id. at 49-51.

14
Id. at 53-55.

15
Id. at 56-58.

16
CA rollo, p. 147.

17
Rollo, pp. 7-8.

18
G.R. No. 96739, October 13, 1993, 227 SCRA 198.

19
Dario v. Mison, 257 Phil. 84, 130 (1989).

20
Id.

21
Supra note 1.
22
Gayatao v. Civil Service Commission, G.R. No. 93064, June 22, 1992, 210 SCRA 183, 192.

23
Id.

24
Supra note 8.

25
Supra note 12.

26
CA rollo, p. 161.

27
Natalia v. Court of Appeals, G.R. No. 116216, June 20, 1997, 274 SCRA 527, 538-539.

28
CA rollo, pp. 173-174.

29
Id.

30
Supra note 18.

31
Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and
hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or
rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving rise
to a claim for reinstatement or reappointment by an aggrieved party:

(a) Where there is a significant increase in the number of positions in the new staffing pattern of the department
or agency concerned;

(b) Where an office is abolished and other performing substantially the same functions is created;

(c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and
merit;

(d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices
 perform substantially the same function as the original offices;

(e) Where the removal violates the order of separation provided in Section 3 hereof.

"An Act to Protect the Security of Tenure of Civil Service Officers and Employees in the Implementation of Government
32

Reorganization." Effective: June 10, 1988.

33
Tiatco v. Civil Service Commission, G.R. No. 100294, December 21, 1992, 216 SCRA 749, 754.

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