[G.R. No. 189947. January 25, 2012.] MANILA PAVILION HOTEL, owned and operated by ACESITE (PHILS.

) HOTEL CORPORATION, petitioner, vs. HENRY DELADA,respondent.

DECISION

SERENO, J :
p

Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court, assailing the 27 July 2009 Decision and 12 October 2009 Resolution of the Court of Appeals (CA). 1

Facts
The present Petition stems from a grievance filed by respondent Henry Delada against petitioner Manila Pavilion Hotel (MPH). Delada was the Union President of the Manila Pavilion Supervisors Association at MPH. He was originally assigned as Head Waiter of Rotisserie, a fine-dining restaurant operated by petitioner. Pursuant to a supervisory personnel reorganization program, MPH reassigned him as Head Waiter of Seasons Coffee Shop, another restaurant operated by petitioner at the same hotel. Respondent declined the inter-outlet transfer and instead asked for a grievance meeting on the matter, pursuant to their Collective Bargaining Agreement (CBA). He also requested his retention as Head Waiter of Rotisserie while the grievance procedure was ongoing. MPH replied and told respondent to report to his new assignment for the time being, without prejudice to the resolution of the grievance involving the transfer. He adamantly refused to assume his new post at the Seasons Coffee Shop and instead continued to report to his previous assignment at Rotisserie. Thus, MPH sent him several memoranda on various dates, requiring him to explain in writing why he should not be penalized for the following offenses: serious misconduct; willful disobedience of the lawful orders of the employer; gross insubordination; gross and habitual neglect of duties; and willful breach of trust.
EcSCHD

Despite the notices from MPH, Delada persistently rebuffed orders for him to report to his new assignment. According to him, since the grievance machinery under their CBA had already been initiated, his transfer must be held in abeyance. Thus, on 9 May 2007, MPH initiated administrative proceedings against him. He attended the hearings together with union representatives. Meanwhile, the parties failed to reach a settlement during the grievance meeting concerning the validity of MPH's transfer order. Respondent then elevated his grievance to the Peers Resources Development Director. Still, no settlement between the parties was reached. Respondent appealed the matter to the Grievance Committee level. The committee recommended that he proceed to the next level of the grievance procedure, as it was unable to reach a decision on the matter. Consequently, on 20 April 2007, Delada lodged a Complaint before the National Conciliation and Mediation Board. On 25 May 2007, the parties agreed to submit the following issues for voluntary arbitration:
I.WHETHER OR NOT THE TRANSFER OF THE UNION PRESIDENT FROM HEAD WAITER AT ROTISSERIE TO HEAD WAITER AT SEASONS RESTAURANT IS VALID AND JUSTIFIED; II.WHETHER OR NOT THE PREVENTIVE SUSPENSION OF THE COMPLAINANT IS VALID AND JUSTIFIED;

III.WHETHER OR NOT THE PREVENTIVE SUSPENSION OF THE COMPLAINANT IS A VALID GROUND TO STRIKE; IV.WHETHER OR NOT THE RESPONDENT MAY BE HELD LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES; AND V.WHETHER OR NOT THE COMPLAINANT MAY BE HELD LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES. 2

While respondent's Complaint concerning the validity of his transfer was pending before the Panel of Voluntary Arbitrators (PVA), MPH continued with the disciplinary action against him for his refusal to report to his new post at Seasons Coffee Shop. Citing security and safety reasons, petitioner also placed respondent on a 30-day preventive suspension. On 8 June 2007, MPH issued a Decision, which found him guilty of insubordination based on his repeated and willful disobedience of the transfer order. The Decision imposed on Delada the penalty of 90-day suspension. He opposed the Decision, arguing that MPH had lost its authority to proceed with the disciplinary action against him, since the matter had already been included in the voluntary arbitration.
CITDES

On 14 December 2007, the PVA issued a Decision and ruled that the transfer of Delada was a valid exercise of management prerogative. According to the panel, the transfer order was done in the interest of the efficient and economic operations of MPH, and that there was no malice, bad faith, or improper motive attendant upon the transfer of Delada to Seasons Coffee Shop. They found that the mere fact that he was the Union President did not "put color or ill motive and purpose" to his transfer. On the contrary, the PVA found that the real reason why he refused to obey the transfer order was that he asked for additional monetary benefits as a condition for his transfer. Furthermore, the panel ruled that his transfer from Rotisserie to Seasons Coffee Shop did not prejudice or inconvenience him. Neither did it result in diminution of salaries or demotion in rank. The PVA thus pronounced that Delada had no valid and justifiable reason to refuse or even to delay compliance with the management's directive. The PVA also ruled that there was no legal and factual basis to support petitioner's imposition of preventive suspension on Delada. According to the panel, the mere assertion of MPH that "it is not far-fetched for Henry Delada to sabotage the food to be prepared and served to the respondent's dining guest and employees because of the hostile relationship then existing" was more imagined than real. It also found that MPH went beyond the 30-day period of preventive suspension prescribed by the Implementing Rules of the Labor Code when petitioner proceeded to impose a separate penalty of 90-day suspension on him. Furthermore, the PVA ruled that MPH lost its authority to continue with the administrative proceedings for insubordination and willful disobedience of the transfer order and to impose the penalty of 90-day suspension on respondent. According to the panel, it acquired exclusive jurisdiction over the issue when the parties submitted the aforementioned issues before it. The panel reasoned that the joint submission to it of the issue on the validity of the transfer order encompassed, by necessary implication, the issue of respondent's insubordination and willful disobedience of the transfer order. Thus, MPH effectively relinquished its power to impose disciplinary action on Delada. 3 As to the other issues, the panel found that there was no valid justification to conduct any strike or concerted action as a result of Delada's preventive suspension. It also ruled that since the 30-day preventive suspension and the penalty of 90-day suspension was invalid, then MPH was liable to pay back wages and other benefits. The CA affirmed the Decision of the PVA and denied petitioner's Motion for Reconsideration. Consequently, MPH filed the instant Petition.

Issue
Despite the various issues surrounding the case, MPH limited its appeal to the following:

I.Whether MPH retained the authority to continue with the administrative case against Delada for insubordination and willful disobedience of the transfer order. II.Whether MPH is liable to pay back wages.

Discussion
Petitioner argues that it did not lose its authority to discipline Delada notwithstanding the joint submission to the PVA of the issue of the validity of the transfer order. According to petitioner, the specific issue of whether respondent could be held liable for his refusal to assume the new assignment was not raised before the PVA, and that the panel's ruling was limited to the validity of the transfer order. Thus, petitioner maintains that it cannot be deemed to have surrendered its authority to impose the penalty of suspension.
TICAcD

In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin, 4 we ruled that the voluntary arbitrator had plenary jurisdiction and authority to interpret the agreement to arbitrate and to determine the scope of his own authority subject only, in a proper case, to the certiorari jurisdiction of this Court. In that case, the specific issue presented was "the issue of performance bonus." We then held that the arbitrator had the authority to determine not only the issue of whether or not a performance bonus was to be granted, but also the related question of the amount of bonus, were it to be granted. We then said that there was no indication at all that the parties to the arbitration agreement had regarded "the issue of performance bonus" as a twotiered issue, only one aspect of which was being submitted to arbitration; thus, we held that the failure of the parties to specifically limit the issues to that which was stated allowed the arbitrator to assume jurisdiction over the related issue. A more recent case is Ludo & Luym Corporation v. Saornido. 5 In that case, we recognized that voluntary arbitrators are generally expected to decide only those questions expressly delineated by the submission agreement; that, nevertheless, they can assume that they have the necessary power to make a final settlement on the related issues, since arbitration is the final resort for the adjudication of disputes. Thus, we ruled that even if the specific issue brought before the arbitrators merely mentioned the question of "whether an employee was discharged for just cause," they could reasonably assume that their powers extended beyond the determination thereof to include the power to reinstate the employee or to grant back wages. In the same vein, if the specific issue brought before the arbitrators referred to the date of regularization of the employee, law and jurisprudence gave them enough leeway as well as adequate prerogative to determine the entitlement of the employees to higher benefits in accordance with the finding of regularization. Indeed, to require the parties to file another action for payment of those benefits would certainly undermine labor proceedings and contravene the constitutional mandate providing full protection to labor and speedy labor justice. Consequently, could the PVA herein view that the issue presented before it the question of the validity of the transfer order necessarily included the question of respondent Delada's insubordination and willful disobedience of the transfer order? Pursuant to the doctrines in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA was authorized to assume jurisdiction over the related issue of insubordination and willful disobedience of the transfer order. Nevertheless, the doctrine in the aforementioned cases is inapplicable to the present Petition. In those cases, the voluntary arbitrators did in fact assume jurisdiction over the related issues and made rulings on the matter. In the present case, however, the PVA did not make a ruling on the specific issue of insubordination and willful disobedience of the transfer order. The PVA merely said that its disagreement with the 90-daypenalty of suspension stemmed from the fact that the penalty went beyond the 30-day limit for preventive suspension:
But to us, what militates against the validity of Delada's preventive suspension is the fact that it went beyond the 30-day period prescribed by the Implementing Rules of the Labor Code (Section 4, Rules XIV, Book V). The preventive suspension of Delada is supposed to expire on 09 June 2007, but without

notifying Delada, the MPH proceeded to impose a separate penalty of 90-days suspension to him which took effect only on 18 June 2007, or way beyond the 30-day rule mandated by the Rules. While the intention of the MPH is to impose the 90-day suspension as a separate penalty against Delada, the former is already proscribed from doing so because as of 05 June 2007, the dispute at hand is now under the exclusive jurisdiction of the panel of arbitrators. In fact, by its own admission, the MPH categorically stated in its Position Paper that as of 25 May 2007, or before the suspension order was issued, MPH and Delada had already formulated and submitted the issues for arbitration. For all legal intents and purposes, therefore, the MPH has now relinquished its authority to suspend Delada because the issue at this juncture is now within the Panel's ambit of jurisdiction. MPH's authority to impose disciplinary action to Delada must now give way to the jurisdiction of this panel of arbitrators to rule on the issues at hand. By necessary implication, this Panel is thus constrained to declare both the preventive suspension and the separate suspension of 90-days meted to Delada to be not valid and justified. 6

First, it must be pointed out that the basis of the 30-day preventive suspension imposed on Delada was different from that of the 90-day penalty of suspension. The 30-day preventive suspension was imposed by MPH on the assertion that Delada might sabotage hotel operations if preventive suspension would not be imposed on him. On the other hand, the penalty of 90-day suspension was imposed on respondent as a form of disciplinary action. It was the outcome of the administrative proceedings conducted against him. Preventive suspension is a disciplinary measure resorted to by the employer pending investigation of an alleged malfeasance or misfeasance committed by an employee. 7 The employer temporarily bars the employee from working if his continued employment poses a serious and imminent threat to the life or property of the employer or of his co-workers. 8 On the other hand, the penalty of suspension refers to the disciplinary action imposed on the employee after an official investigation or administrative hearing is conducted. 9 The employer exercises its right to discipline erring employees pursuant to company rules and regulations. 10 Thus, a finding of validity of the penalty of 90-day suspension will not embrace the issue of the validity of the 30-day preventive suspension. In any event, petitioner no longer assails the ruling of the CA on the illegality of the 30-day preventive suspension. 11 It can be seen that, unlike in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA herein did not make a definitive ruling on the merits of the validity of the 90-day suspension. The panel only held that MPH lost its jurisdiction to impose disciplinary action on respondent. Accordingly, we rule in this case that MPH did not lose its authority to discipline respondent for his continued refusal to report to his new assignment. In relation to this point, we recall our Decision in Allied Banking Corporation v. Court of Appeals. 12 In Allied Banking Corporation, 13 employer Allied Bank reassigned respondent Galanida from its Cebu City branch to its Bacolod and Tagbilaran branches. He refused to follow the transfer order and instead filed a Complaint before the Labor Arbiter for constructive dismissal. While the case was pending, Allied Bank insisted that he report to his new assignment. When he continued to refuse, it directed him to explain in writing why no disciplinary action should be meted out to him. Due to his continued refusal to report to his new assignment, Allied Bank eventually terminated his services. When the issue of whether he could validly refuse to obey the transfer orders was brought before this Court, we ruled thus:
The refusal to obey a valid transfer order constitutes willful disobedience of a lawful order of an employer. Employees may object to, negotiate and seek redress against employers for rules or orders that they regard as unjust or illegal. However, until and unless these rules or orders are declared illegal or improper by competent authority, the employees ignore or disobey them at their peril. For Galanida's continued refusal to obey Allied Bank's transfer orders, we hold that the bank dismissed Galanida for just cause in accordance with Article 282(a) of the Labor Code. Galanida is thus not entitled to reinstatement or to separation pay. (Emphasis supplied, citations omitted). 14

It is important to note what the PVA said on Delada's defiance of the transfer order:

In fact, Delada cannot hide under the legal cloak of the grievance machinery of the CBA or the voluntary arbitration proceedings to disobey a valid order of transfer from the management of the hotel. While it is true that Delada's transfer to Seasons is the subject of the grievance machinery in accordance with the provisions of their CBA, Delada is expected to comply first with the said lawful directive while awaiting the results of the decision in the grievance proceedings. This issue falls squarely in the case of Allied Banking Corporation vs. Court of Appeals . . . . 15

Pursuant to Allied Banking, unless the order of MPH is rendered invalid, there is a presumption of the validity of that order. Since the PVA eventually ruled that the transfer order was a valid exercise of management prerogative, we hereby reverse the Decision and the Resolution of the CA affirming the Decision of the PVA in this respect. MPH had the authority to continue with the administrative proceedings for insubordination and willful disobedience against Delada and to impose on him the penalty of suspension. As a consequence, petitioner is not liable to pay back wages and other benefits for the period corresponding to the penalty of 90day suspension.
cAaETS

WHEREFORE, the Petition is GRANTED. The Decision and the Resolution of the Court of Appeals are hereby MODIFIED. We rule that petitioner Manila Pavilion Hotel had the authority to continue with the administrative proceedings for insubordination and willful disobedience against Delada and to impose on him the penalty of suspension. Consequently, petitioner is not liable to pay back wages and other benefits for the period corresponding to the penalty of 90-day suspension. SO ORDERED.

Carpio, Perez, Reyes and Perlas-Bernabe, * JJ., concur.

[G.R. No. 189082. July 11, 2012.] JOSEPHINE RUIZ, petitioner, vs. WENDEL OSAKA REALTY CORP., D.M. WENCESLAO AND ASSOCIATES, INC. and DELFIN J. WENCESLAO, JR., respondents.

DECISION

SERENO, J :
p

This is a Petition filed under Rule 45 of the 1997 Rules of Civil Procedure, praying for the reversal of the Decision 1 of the Court of Appeals (CA) dated 29 October 2008 and its subsequent Resolution 2 dated 10 August 2009. The CA reversed the Decision rendered by the National Labor Relations Commission (NLRC) against petitioners Wendel Osaka Realty Corp. (WORC), D.M. Wenceslao and Associates, Inc. (DMWAI), and Delfin Wenceslao (respondents) and reinstated the Decision of the Labor Arbiter, which ruled that petitioner Josephine Ruiz (petitioner) was not illegally dismissed.
AEHCDa

Petitioner was hired on 1 February 1982 as secretary to respondent Delfin J. Wenceslao, Jr. (Delfin), the president of DMWAI. 3 After a few years, she expressed her intention to resign, because she could not get along with her co-workers. Instead of allowing her to leave, Delfin decided to transfer her. 4 Thus, on 1 November 1989, she was appointed as executive assistant to the president of respondent WORC, who happens to be respondent Delfin also. 5 She was its only employee. 6

At that time, and even up to the present, the only undertaking of WORC has been its reclamation project in Cavite City known as the Ciudad Nuevo Project. 7 Delfin supposedly promoted petitioner to Office Manager of DMWAI effective 1 August 2001. 8 On 21 October 2002, she was assigned to be a member of a task force formed for the implementation of the marketing campaign for the Ciudad Nuevo Project. 9 Sometime in 2002, the BIR informed Delfin of the tax deficiency allegations against his companies. Its investigators supposedly had information that could only be verified in its business files. 10 He was further informed by the BIR that the bases for its allegations against his companies were the latter's very own records. This information prompted him to check the company files and records. On November 2002, he discovered that "various very important files" 11 of DMWAI were missing. It must be noted that the foregoing allegations were first raised in the Comment of respondents. In the Position Paper 12 they filed with the Labor Arbiter, they claimed that the chairperson of the board of directors of WORC had ordered a check of the company's files, because a number of them appeared to be missing. 13 Respondents claim that they received a call from a woman, who later turned out to be the wife of a former employee one who was close friends with petitioner. The caller supposedly wanted to report that there were records of DMWAI in her bedroom, and that it was her husband who had brought them there. He allegedly told her that these files were handed to him by another woman. 14
TaEIcS

The aforementioned female informant turned out to be Mrs. Miguela S. Sunico. Her husband was a former DMWAI employee, who is currently a BIR officer. She testified that the missing files were with her husband, who allegedly told her that these documents had been handed to him by petitioner. In order to determine who was responsible for the unauthorized taking of the files, Delfin required all the employees who had access to the files to fill up a questionnaire he had drawn up. Out of the 15 employees who were asked to submit their answers, 14 complied. 15 Petitioner was the only one who failed to answer the questionnaire. According to petitioner, she filled up the questionnaire, but wanted to talk to Delfin first before submitting it. She asked him if there was truth to the rumor that she was being suspected of stealing company records. He admitted that he had indeed received this kind of information. Petitioner thus requested that she be allowed to confront her accuser. However, Delfin informed her that all she needed to do was submit the questionnaire. She decided not to submit it. Delfin claims, on the other hand, that he was the one who called petitioner to ask why she did not answer the questionnaire. She allegedly said that accomplishing it would have been an acknowledgment of wrongdoing, and that it was not lawful for her to be compelled to fill it up. 16 Thus, on 3 December 2002, Delfin sent a letter 17 to petitioner informing her that she would be placed under a 30-day preventive suspension. He explained therein that he saw no reason why she refused to fill up the questionnaire, and that her refusal was equivalent to an admission that she took the corporate files, to wit:
. . . . Only you have not filled your copy up and you told me in person that you do not wish to answer the questionnaire. For me, there is no reason why you do not wish to accomplish the form. Your not doing so only serves to make you acknowledge that you have gotten corporate files for purposes inimical to the interest of the company. This is serious misconduct for which you should be dismissed for cause. You will accordingly face an investigation for the charge and the panel to inquire into the matter shall be convened shortly.
ASHaTc

Petitioner refused to accept the letter when a copy was served upon her. On 9 December 2002, petitioner, through one of the employees of DMWAI, submitted the questionnaire the former had filled up. Thereafter, specifically on 10 December 2002, petitioner filed an illegal suspension case with the Labor Arbiter against respondent corporations. Meanwhile respondent corporations formed a panel of investigators to look into the matter. When the 30-day preventive suspension of petitioner ended, there was still an ongoing investigation on the matter. Thus, in a 2 January 2003 letter, 18 she was informed by Andrew M. Taningco, a member of the panel of investigators, that the company had decided to put her on "vacation leave with pay for a period of fifteen (15) days." The letter also mentioned that its contents had been conveyed to petitioner on 26 December 2002, and that she did "not voice any objections." Petitioner was furnished a copy of the Sworn Statement 19 of Mrs. Sunico and was given three days from her receipt of the statement to submit her written explanation. 20 Petitioner denied the accusations of Mrs. Sunico through a letter dated 13 January 2003 and addressed to Andrew M. Taningco. 21 Petitioner insisted that Mr. Sunico had explicitly denied that the documents came from the former. 22 Respondents alleged, however, that "Mr. Francisco Sunico never denied that the files were found in his house. Much less did he deny that Ms. Ruiz gave them to him," 23 to wit:
. . . . Petitioner said she wanted to confront her accuse [sic]. . . . the panel decided to accommodate her.
SacDIE

xxx xxx xxx . . . . However, as Mrs. Sunico repeated her written statement that she saw the files in their bedroom and Mr. Sunico told her it was petitioner who gave the files to him, petitioner never, never confronted Mr. Francisco Sunico to ask him if he really gave such information to his wife. Much less did she take him to task for making such a statement to Mrs. Sunico. And all throughout the session, Mr. Sunico never denied that he made a statement to Mrs. Sunico that it was petitioner who gave the files to him. Neither did he deny that petitioner turned them over to him. (Underscoring in the original) 24

Thereafter, respondents reported the matter to the National Bureau of Investigation (NBI).

25

Delfin then informed petitioner that her 15-day vacation leave had ended on 18 January 2003. She was further informed that she should report for work on 20 January 2003, and so she did. On that same day, though, she was given a letter 26 dated 18 January 2003 informing her that she had been assigned to WORC's Ciudad Nuevo Project in Cavite City. She was further informed that the investigation was still ongoing and was expected to be completed within 30-45 working days. Petitioner, in a letter 27 dated 20 January 2003, wrote to Delfin reiterating her claim that she had no knowledge of how the missing files had ended up in Mr. Sunico's possession. She also requested that Delfin's decision to transfer her to Cavite City be reconsidered, considering that she lived in Bulacan. Petitioner continued to work in Cavite until 15 April 2003. She claims that she had to quit her job because of "poor health and the humiliation she was subjected to" in her workplace. She further alleged that the transportation allowance given by respondents was simply not sufficient.

Thereafter, petitioner amended her Complaint for illegal suspension to include constructive illegal dismissal; nonpayment of proportionate 13th month pay, confidential allowance, and separation pay; moral and exemplary damages; and attorney's fees. In a Decision 28 promulgated on 31 March 2004, the Labor Arbiter found that petitioner had not been illegally dismissed, but that she was entitled to her claim for prorata 13th month pay, to wit:
Under the circumstances, complainant was not illegally dismissed.
acEHSI

She was the prime suspect in a case involving the leaking of company files to the BIR, which is still pending investigation before the NBI. If found culpable, complainant may be administratively, civilly, and even criminally liable. Complainant was preventively suspended and was reassigned to a ongoing project outside the office to protect company interests. It was complainant who opted not to work, claiming constructive dismissal, harassments, demotion and non-payment of benefits. Only her money claims for pro-rata 13th month pay, has factual legal basis. WHEREFORE, premises considered, instant complaint is hereby dismissed for lack of merit. Respondent corporations, unless they have proof of payment, are directed to pay complainant's prorata 13th month pay for year 2003. SO ORDERED.
29

Petitioner filed her Appeal 30 with the NLRC on 3 May 2004. Through its 11 July 2007 Decision, the Labor Arbiter's Decision. The dispositive portion of the NLRC Decision reads:

31

it reversed

WHEREFORE, the Decision, dated 31 March 2004, of Labor Arbiter Edgardo M. Madriaga is hereby SET ASIDE, and a new judgment is rendered directing respondents WENDEL OSAKA REALTY CORP., D.M. WENCESLAO AND ASSOCIATES, INC. and DELFIN J. WENCESLAO, JR., to jointly and severally pay complainant separation pay equivalent to one (1) month salary for every year of service, and full backwages, inclusive of allowances, computed from the time her compensation was withheld from her up to the finality of this Decision.
EAcTDH

SO ORDERED.

32

Respondents filed their Motion for Reconsideration (MR), September 2007 Resolution. 34

33

but it was likewise denied through the NLRC's 28

Respondents appealed to the CA, which granted their Petition 35 and reinstated the Labor Arbiter's Decision. According to the CA, the suspension of petitioner pending investigation and her transfer to respondents' Cavite office was justified by the gravity of her offense. 36 It held that "letting her [petitioner] stay in Quezon City did not make petitioners [respondents] secure about their files and records." 37 Petitioner filed an MR,
38

but it was denied through a Resolution.

39

Hence, the present Petition for Review

under Rule 45.

For consideration in the present Petition is the sole issue of whether or not petitioner was constructively dismissed when she was reassigned to respondents' Cavite branch.

The NLRC ruled that petitioner's assignment to Cavite City was not for legitimate business reasons, but it was "simply because respondent believed that she was guilty, [and] that she was undesirable, unreliable, and a security risk." 40 The CA ruled, however, that the transfer of petitioner was justified, considering the gravity of the offense she was being charged with. 41 We agree with the appellate court. An employer has the inherent right to transfer or assign an employee in pursuance of its legitimate business interest, subject only to the condition that the move be not motivated by bad faith. 42 Insisting that there was no valid ground for her transfer,
43

petitioner claims thus:

As it was, there was really no business necessity to transfer petitioner. The only reason behind the transfer, as private respondents admitted, was that they suspected petitioner of taking out company records. Unsubstantiated suspicious and baseless conclusions of the employer do not provide legal justifications for transferring an employee. There was clearly no business urgency that necessitated the transfer. Proof of this was the fact that the complainant was not given any job to perform after her transfer to Cavite City. She was reduced into a mere office dcor, the only female among the throng of male project workers. 44
DTIcSH

She also claims that respondents' act of transferring her was motivated by bad faith constructive dismissal, viz.:

45

and thus amounted to

The underlying purpose behind the transfer was plainly to humiliate petitioner into giving up her job. The disdain and embarrassment she was made to suffer all the more established the fact that she was constructively dismissed. 46

To further prove that her transfer or reassignment was motivated by bad faith, petitioner avers that what made everything worse was that she was not given a single task for the four months she was working in Cavite. 47 She had no chair to sit on or table to work at a fact, she claims, that only proves respondents' intention to humiliate her. 48 She concludes: "There was no justifiable reason why private respondent failed to give petitioner any task if her transfer was due to legitimate business reasons." 49 In answering these allegations, respondents explained that the only undertaking of WORC was its reclamation project in Cavite City. When petitioner was transferred to Cavite, she was supposed to continue with what she was doing in Quezon City. None of her earlier functions was withheld from her. She was further given the task to assist those who were undertaking the reclamation project. Thus, they contend, it is not true that she was never given a job to perform. Besides, as the appellate court found and as petitioner admitted, Project had given her job description. 51
50

the project manager of the Ciudad Nuevo

As to the claim of petitioner that her transfer was without valid basis, we disagree. As the executive assistant of the president, petitioner undeniably occupied a sensitive position that required her employer's utmost trust and confidence. Respondents had the right to reassign her the moment that confidence was breached. It has been shown that such breach proved that she was no longer fit to discharge her assigned tasks, to wit:
. . . [B]reach of trust and confidence as a ground for reassignment must be related to the performance of the duties of the employee such as would show him to be thereby unfit to discharge the same task. 52
DaEcTC

Having lost his trust and confidence in petitioner, respondent Delfin had the right to transfer her to ensure that she would no longer have access to the companies' confidential files. Although it is true that petitioner has yet to be proven guilty, respondents had the authority to reassign her, pending investigation. As held in Blue Dairy Corporation and/or Aviguetero and Miguel v. NLRC and Recalde:
Re-assignments made by management pending investigation of irregularities allegedly committed by an employee fall within the ambit of management prerogative. The purpose of reassignments is no different from that of preventive suspension which management could validly impose as a disciplinary measure for the protection of the company's property pending investigation of any alleged malfeasance or misfeasance committed by the employee. 53

Substantial proof, and not clear and convincing evidence or proof beyond reasonable doubt, is a sufficient basis for the imposition of any disciplinary action upon the employee. The standard of substantial evidence is satisfied where the employer has reasonable ground to believe that the employee is responsible for the misconduct that renders the latter unworthy of the trust and confidence demanded by his or her position. 54 When petitioner was assigned to Cavite, there was an ongoing investigation of the charges filed against her. It is undisputed that she refused to fill up, for no justifiable reasons, the questionnaire distributed by her employer to determine who among those who had access to the confidential files was responsible for their taking. Furthermore, a witness had executed an Affidavit claiming that she found the missing files, and that her husband told her that it was petitioner who handed those files to him. Lastly, the person who supposedly received these documents from petitioner did not deny or rebuke the statements made by his wife. We rule that the foregoing reasons and circumstances are sufficient to justify respondents' transfer of petitioner. Still, for the transfer to be valid, petitioner asks this Court to rule that respondents should prove that it was not inconvenient or prejudicial to her. She insists that the validity or legality of the transfer of an employee is negated by the demotion or the withdrawal or decrease of the latter's salaries, benefits, and other privileges. 55
cCAIDS

Petitioner claims that the transfer was inconvenient or prejudicial to her, because "her health suffered and she became sickly because of the extended travel she was made to undergo every working day between her home in Bulacan and her assignment in Cavite City." 56 She also claims that the justification of private respondents that she should have rented a house in Cavite City is adding insult to injury. 57 An employer's decision to transfer an employee, if made in good faith, is a valid exercise of a management prerogative, although it may result in personal inconvenience or hardship to the employee. 58 We have already ruled that the transfer of the employment of petitioner to Cavite was not motivated by bad faith. Thus, any resulting inconvenience or hardship on her part is of no moment. Petitioner also claims that her transfer was coupled with a diminution in the benefits previously granted to her, to wit:
It is an established fact that petitioner has been enjoying a "confidential" allowance of P2,000.00 a month for more than a decade. This benefit was suddenly withdrawn when she was transferred. 59

However, respondents were able to prove that, for her position in Cavite, petitioner received a P2,554 per month travelling allowance, which was more than the P2,000 she received as monthly allowance prior to her transfer. 60

Petitioner says that her transfer resulted in her demotion from a managerial to a clerical position, viz.:
The matter is completely factual. It is beyond dispute that petitioner held the position of Office Manager. She was transferred to a position that was merely clerical in nature. Evidence of this fact was also submitted in the proceedings a quo. 61

As proof of her appointment to a managerial position, petitioner attached a 31 July 2001 letter 62 printed on a sheet of paper carrying the DMWAI letterhead. This letter signed by respondent Delfin informed her that she was being appointed as DMWAI's office manager effective 1 August 2001.
DcaSIH

In their Reply to Complainant's Position Paper, 63 respondents allege that they cannot recall the circumstances surrounding the writing of the letter, and why it was written on a sheet of paper with the DMWAI letterhead. 64 They deny her allegation that she was promoted to the position of office manager. According to them, such a promotion should have been preceded by the submission of an application for the position and by a document "severing the employer-employee relationship between WORC and the complainant." 65 Respondents add that they never saw the need to appoint an office manager. Even on the assumption that the appointment became necessary, that position was usually assigned to companies and not to individuals, to wit:
. . . . It has been his policy to assign companies, not individuals, to act as Office Managers. Besides, there was already somebody his own son, Carlos Delfin C. Wenceslao who was already discharging the position in the DMWAI quarterbacked by his two (2) other children, Edwin Michael C. Wenceslao and Paolo Vincent C. Wenceslao. In other words, there was absolutely no need therefor. 66

Petitioner failed to present evidence to prove that she was holding a managerial position. In fact, respondents aver that she was the only employee of WORC. 67 They also aver that she received her salaries from that company her Social Security System records, withholding tax forms, and income tax returns state that WORC was her employer. 68 Petitioner herself, being its only employee, was the one who executed all the foregoing documents. It is important to note that petitioner worked for four months in Cavite before giving up on her job. 69 Initially, she accepted the reassignment and had no issues with the fact that her residence was far from her new workplace. She was never dismissed from employment; she simply decided to stop going to work. It is obvious from the facts of this case that she resigned from work. Inevitably, her Complaint for illegal dismissal should be dismissed. It is clear that the filing of an illegal dismissal case by petitioner was a mere afterthought. It was filed not because she wanted to return to work, but to claim separation pay and back wages. Lastly, petitioner argues that respondent Delfin should be held jointly and severally liable with respondent corporations because of the "dilution of the identity employer." 70
IEDHAT

In labor cases, directors and officers are solidarily liable with the corporation for the termination of employment of corporate employees if their termination was committed with malice or bad faith. The ruling applies when a corporate officer acts with malice or bad faith in suspending an employee. 71 Such malice or bad faith is not present in this case. WHEREFORE, the instant Petition is DENIED. The 29 October 2008 Decision of the Court of Appeals reversing the 11 July 2007 Decision of the National Labor Relations Commission which had earlier directed respondents Wendel Osaka Realty Corporation, D.M. Wenceslao and Associates, Inc., and Delfin J. Wenceslao, Jr. to jointly and severally pay petitioner Josephine Ruiz separation pay and full back wages is hereby AFFIRMED.

SO ORDERED.

Carpio, Brion, Perez and Reyes, JJ., concur.

[G.R. No. 175932. February 15, 2012.] WUERTH PHILIPPINES, INC., petitioner, vs. RODANTE YNSON, respondent.

DECISION

PERALTA, J :
p

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to set aside the Decision 1 dated July 13, 2006 and the Resolution2 dated December 6, 2006 of the Court of Appeals (CA), in CA-G.R. SP No. 00845, which affirmed with modification the Resolutions of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City, in NLRC CA NO. M-008246-2004 (RAB 11-09-0094903), dated July 29, 2005 and November 24, 2005. The factual antecedents are as follows: On August 15, 2001, petitioner Wuerth Philippines, Inc., a subsidiary of Wuerth Germany, hired respondent Rodante Ynson, as its National Sales Manager (NSM) for Automotive. As NSM, respondent was required to travel to different parts of the country so as to supervise the sales activities of the company's sales managers, make a schedule of activities geared towards increasing the sales of petitioner's products, and submit said schedule to Marlon Ricanor, Chief Executive Officer of petitioner company. In an electronic mail (e-mail) 3 dated January 4, 2003 sent to Ricanor, respondent furnished the former with a copy of his sales targets for the year 2003 and coverage plan for the month of January 2003, and indicated that he intends to be on leave from January 23 to 24, 2003. However, respondent was not able to follow the said coverage plan starting January 26, 2003, as he failed to report to work since then. It turned out that on January 24, 2003, he suffered a stroke, and on the succeeding days, he was confined at the Davao Doctor's Hospital. He immediately informed petitioner about his ailment.
AHDTIE

On March 27, 2003, Dr. Daniel de la Paz, a Neurologist-Electroencephalographer in Davao City, issued a Certification 4 stating that respondent has been under his care since January 24, 2003 and was confined in the hospital from January 24 to February 3, 2003 due to sudden weakness on the left side of his body. In another Medical Certificate 5 dated June 4, 2003, Dr. De la Paz certified that respondent may return to work, but advised him to continue with his rehabilitation regimen for another month and a half. Dr. Bernard S. Chiew, a specialist on Adult Cardiology, also issued an undated Medical Certificate 6 stating that he examined respondent who was diagnosed with primary hypertension, diabetes mellitus II, S/P stroke on June 4, 2003, and recommended that the latter should continue with his physical rehabilitation until July 2003. On June 9, 2003, respondent sent an e-mail 7 to Hans Sigrit of Wuerth Germany, informing the latter that he can return to work on June 19, 2003, but in view of the recommendation of doctors that he should continue with his rehabilitation until July, he requested that administrative work be given to him while in Davao City, until completion of his therapy. On June 10, 2003, Alexandra Knapp, Secretary of the Management Board of Wuerth Germany, forwarded the e-mail 8 to Ricanor.

Thereafter, Ricanor sent a letter 9 dated June 12, 2003 to respondent, directing him to appear before the former's office in Manila, on July 1, 2003 at 9:00 a.m., for an investigation, relative to the following violations which carry the penalty of suspension and/or dismissal, based on the following alleged violations: (1) absences without leave since January 24, 2003 to date, and (2) abandonment of work. In a letter 10 dated June 26, 2003, respondent replied that his attending physician advised him to refrain from traveling, in order not to disrupt his daily schedule for therapy and medication. On June 18, 2003, Knapp sent an e-mail 11 to respondent, informing him that his request for detail in Davao was disapproved, as petitioner did not have any branch in Davao and there was no available administrative work for him. Meanwhile, petitioner company bewailed that its sales suffered, as nobody was performing the duties of the NSM and the office space reserved for respondent remained vacant. Later, Ricanor sent two letters, 12 dated July 4, 2003 and July 31, 2003, to respondent, resetting the investigation to July 25, 2003, at 9:00 a.m., and August 18, 2003, respectively. Both letters reiterated the contents of his first letter to respondent dated June 12, 2003, but included gross inefficiency as an additional ground for possible suspension or dismissal.
ITADaE

In his letters 13 dated July 21, 2003 and August 12, 2003, respondent reiterated the reasons for his inability to attend the investigation proceedings in Manila and, instead, suggested that Ricanor come to Davao and conduct the investigation there. Finally, in a letter 14 dated August 27, 2003, Ricanor informed respondent of the decision of petitioner's management to terminate his employment, effective upon date of receipt, on the ground of continued absences without filing a leave of absence. Respondent's salary at the time of the termination of his employment was P175,000.00 per month. On September 5, 2003, respondent filed a Complaint against petitioner and Ricanor, in his capacity as petitioner company's Chief Executive Officer, for illegal dismissal and non-payment of allowances, with claim for moral and exemplary damages and attorney's fees, in the NLRC, Regional Arbitration Branch No. XI in Davao City. The parties submitted their respective Position Papers. Thereafter, Labor Arbiter Amado M. Solamo rendered a Decision 15 dated July 15, 2004, the dispositive portion thereof reads:
WHEREFORE, judgment is hereby rendered:
a) Full backwages (Aug. 29, 2003 to July 15, 2004) (11 months x P175,000.00) b) c) d) e) Medical benefits 13th month pay Y2003 Moral and Exemplary Damages 10% of the total award as attorney's fees P1,925,000.00 300,000.00 175,000.00 3,000,000.00 540,000.00 TOTAL AMOUNT: P5,940,000.00

==========

SO ORDERED.

16

DSETac

Petitioner and Ricanor appealed to the NLRC (Cagayan de Oro City), which affirmed with modification the Decision of the Labor Arbiter in a Resolution 17 dated July 29, 2005, reducing the total awards of moral and exemplary damages from P3,000,000.00 to P600,000.00 and P300,000.00, respectively, and the attorney's fees adjusted in an amount equivalent to ten (10%) percent of the total monetary award. On August 26, 2005, petitioner and Ricanor filed their Motion for Reconsideration.
18

In a Resolution 19 dated November 24, 2005, the NLRC modified its Decision, further reducing the awards of moral damages from P600,000.00 to P150,000.00, and exemplary damages from P300,000.00 to P50,000.00, respectively. Aggrieved, petitioner and Ricanor filed before the CA a Petition for Certiorari with Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction. On July 13, 2006, the CA rendered a Decision, 20 finding the petition partly meritorious. It found that petitioner had the right to terminate the employment of respondent, and that it had observed due process in terminating his employment. While the CA deleted the awards of backwages and moral and exemplary damages, it nonetheless ordered petitioner to pay respondent the following amounts: P1,225,000.00 (representing his salary from February 2003 to August 29, 2003), medical expenses of P94,100.00, temperate damages of P100,000.00, 13th month pay of P175,000.00, and attorney's fees of 10% of the total monetary award. Petitioner filed a Motion for Reconsideration, which the CA denied in a Resolution
21

dated December 6, 2006.

Petitioner filed this present Petition for Review on Certiorari, raising the following assignment of errors:
I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AWARDED P1,225,000.00 REPRESENTING THE PRIVATE RESPONDENT'S MONTHLY SALARY OF P175,000.00 FROM FEBRUARY 2003 TO AUGUST 29, 2003.
aDSHCc

II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AWARDED MEDICAL EXPENSES OF P94,100.00 TO THE PRIVATE RESPONDENT. III. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AWARDED TEMPERATE DAMAGES OF P100,000.00 IN FAVOR OF THE PRIVATE RESPONDENT. IV. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AWARDED 13TH MONTH PAY OF P175,000.00 IN FAVOR OF THE PRIVATE RESPONDENT. V.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AWARDED ATTORNEY'S FEES IN FAVOR OF THE PRIVATE RESPONDENT. 22

Petitioner insists that the ground for the dismissal of the respondent was his gross dereliction of duties as NSM. The CA ruled that pursuant to Article 284 of the Labor Code, respondent's illness is considered an authorized cause to justify his termination from employment. The CA ruled that although petitioner did not comply with the medical certificate requirement before respondent's dismissal was effected, this was offset by respondent's absence for more than the six (6)-month period that the law allows an employee to be on leave in order to recover from an ailment. We agree. With regard to disease as a ground for termination, Article 284 of the Labor Code provides that an employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health, as well as to the health of his co-employees. In order to validly terminate employment on this ground, Section 8, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code requires that:
HcTEaA

Section 8.Disease as a ground for dismissal. Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his coemployees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.

In Triple Eight Integrated Services, Inc. v. NLRC, 23 the Court held that the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee's illness and, thus, defeat the public policy on the protection of labor. In the present case, there was no showing that prior to terminating respondent's employment, petitioner secured the required certification from a competent public health authority that the disease he suffered was of such nature or at such a stage that it cannot be cured within six months despite proper medical treatment, pursuant to Section 8, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code. The medical certificate, dated June 4, 2003, issued by the attending physician of respondent, shows the following:
DATE HOSPITALIZED and/or TREATED: January 24, 2003 to present. DIAGNOSIS: Hypertension, Diabetes Mellitus (adult onset),Hypercholesterolemia, Status Post Stroke, Ischemic-RMCA. RECOMMENDATION: Though the patient is allowed to resume work, in view of his recovery with rehabilitation, he has been advised to continue with his present regimen for at least another month and a half. 24

Thus, as of June 4, 2003, respondent would have been capable of returning to work. However, despite notices sent by the petitioner, i.e., letter 25 dated June 12, 2003, requiring respondent to attend an investigation set on July 14, 2003; letter 26 dated July 4, 2003, requiring respondent to appear on July 25, 2003 for investigation; and letter 27 dated July 31, 2003, requiring respondent to appear for the hearing and

investigation on August 18, 2003, respondent refused to report to his office, either to resume work or attend the investigations set by the petitioner. Even considering the directive of respondent's doctor to continue with his present regimen for at least another month and a half, it could be safely deduced that, counted from June 4, 2003, respondent's rehabilitation regimen ended on July 19, 2003. Despite the completion of his treatment, respondent failed to attend the investigations set on July 25, 2003 and August 18, 2003. Thus, his unexplained absence in the proceedings should be construed as waiver of his right to be present therein in order to adduce evidence that would have justified his continued absence from work.
TAESDH

In an undated Certification, Dr. Melanie Theresa P. Herrera of the East Asia Orthopaedic and Rehabilitation Institute in Davao City stated that respondent had been undergoing physical rehabilitation, and recommended that he may resume work, but the nature of his work had to be modified so as to give time for his strengthening and maintenance program. Thus,
This is to certify that Mr. Rodante N. Ynson is under my care and is currently undergoing physical rehabilitation. Diagnosis: S/P CVA, Acute Ischemic Infarction (L) Temporal Lobe (R) Frontal Lobe Reflex Sympathetic Dystrophy Hypertension Stage I LUE. Recommendation: 1)Continue physical rehabilitation at San Pedro Hospital. 2)He may resume work but has to modify it to give time for strengthening program home program and maintenance program at the center in SPH, Davao City. 28

Respondent alleged in his letters 29 dated July 21, 2003 and August 12, 2003 that he is not capable of returning to work, because he is still undergoing medications and therapy. However, apart from the clearance of respondent's doctors allowing him to return to work, he has failed to provide competent proof that he was actually undergoing therapy and medications. It is puzzling why despite respondent's submission that he was still undergoing treatment in July and August 2003, he failed to submit official receipts showing the medical expenses incurred and physician's professional fees paid by reason of such treatment. This casts serious doubt on the true condition of the respondent during the prolonged period he was absent from work and investigations, and as to whether he is still suffering from any form of illness from July to August 2003. Being the NSM, respondent should have reported back to work or attended the investigations conducted by petitioner immediately upon being permitted to work by his doctors, knowing that his position remained vacant for a considerable length of time. During his absence, nobody was performing the duties of NSM, which included, among others, supervising and monitoring of respondent's sales area which is vital to the company's orderly operation and viability. He did not even show any sincere effort to return to work.
IcTCHD

Clearly, since there is no more hindrance for him to return to work and attend the investigations set by petitioner, respondent's failure to do so was without any valid or justifiable reason. Respondent's conduct shows his indifference and utter disregard of his work and his employer's interest, and displays his clear, deliberate, and gross dereliction of duties. It bears stressing that respondent was not an ordinary rank-and-file employee. With the nature of his position, he was reposed with managerial duties to oversee petitioner's business in his assigned area. As a managerial employee, respondent was tasked to perform important and crucial functions and, thus, bound by more exacting work ethic. He should have realized that such sensitive position required the full trust and confidence of his employer in every exercise of managerial discretion insofar as the conduct of the latter's business is concerned. 30 The power to dismiss an employee is a recognized prerogative inherent in the employer's right to freely manage and regulate his business. The law, in protecting the rights of the laborers, authorizes neither oppression nor self-destruction of the employer. The worker's right to security of tenure is not an absolute

right, for the law provides that he may be dismissed for cause. 31 As a general rule, employers are allowed wide latitude of discretion in terminating the employment of managerial personnel. The mere existence of a basis for believing that such employee has breached the trust and confidence of his employer would suffice for his dismissal. 32 Needless to say, an irresponsible employee like respondent does not deserve a place in the workplace, and it is petitioner's management prerogative to terminate his employment. To be sure, an employer cannot be compelled to continue with the employment of workers when continued employment will prove inimical to the employer's interest. 33 To condone such conduct will certainly erode the discipline that an employer should uniformly apply so that it can expect compliance with the same rules and regulations by its other employees. Otherwise, the rules necessary and proper for the operation of its business would be gradually rendered ineffectual, ignored, and eventually become meaningless. 34 As applied to the present case, it would be the height of unfairness and injustice if the employer would be left hanging in the dark as to when respondent could report to work or be available for the scheduled hearings, which becomes detrimental to the orderly daily operations of petitioner's business. As regards the monetary awards, the CA ordered the petitioner to pay respondent the amount of P1,225,000.00, representing his salary from February 2003 to August 29, 2003, medical expenses of P94,100.00, temperate damages of P100,000.00, 13th month pay of P175,000.00, and attorney's fees of 10% of the total monetary award, but deleted the award of backwages and moral and exemplary damages. We modify. In Leonardo v. National Labor Relations Commission, 35 We held that where the employee's failure to work was occasioned neither by his abandonment nor by a termination, the burden of economic loss is not rightfully shifted to the employer; each party must bear his own loss. 36 In the same manner, respondent's inability to work from January 24 to June 4, 2003, was neither due to petitioner's fault nor due to his willful conduct, but because he suffered a stroke on January 24, 2003. Hence, each must bear the loss accordingly. Beginning June 5, 2003, respondent should have reported back to work, but he failed to do so. Consequently, he can only be entitled to compensation for the actual number of work days. It would be unfair to allow respondent to recover something he has not earned and count not have earned, since he could not discharge his work as NSM. Petitioner should be exempted from the burden of paying backwages. The age-old rule governing the relation between labor and capital, or management and employee, of "a fair day's wage for a fair day's labor" remains as the basic factor in determining employee's wages. If there is no work performed by the employee, there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed, or otherwise illegally prevented from working, a situation which is not prevailing in the present case. 37 Petitioner claims that assuming that respondent may be considered on sick leave for the duration that he did not report to work, the period should cover only up to June 2003. We agree. Being entitled to sick leave pay during the time that respondent was incapable of working, the Court deems it best that the reckoning date should be from January 24, 2003 38 to June 4, 2003 39 (not from February 2003 to August 29, 2003 as ruled by the CA), he may be entitled to salary, chargeable against his accrued sick leave benefits and other similar leave benefits, if any, as may be provided by existing company policy of petitioner. Petitioner next assails the CA's award of medical expenses to respondent in the amount of P94,100.00, merely on the basis of the Certification 40 dated March 27, 2003 of Dr. De la Paz, which states that respondent spent approximately P350.00 daily on medicines and that his continued rehabilitation would cost P250.00 per day. It contends that the bare statements made by Dr. De la Paz, without actual proof of receipts, cannot suffice to warrant the payment of medical expenses.

AcSHCD

In order to justify a grant of actual or compensatory damages, it is necessary to prove, with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss. One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has adequately proved. Damages, to be recoverable, must not only be capable of proof, but must be actually proved with a reasonable degree of certainty. 41The Court cannot simply rely on speculation, conjecture or guesswork in determining the amount of damages. 42 Actual proof of expenses incurred for the purchase of medicines and other medical supplies necessary for his treatment and rehabilitation should have been presented by respondent, in the form of official receipts, to show the exact cost of his medication, and to prove that, indeed, he went through medication and rehabilitation. Aside from the letter of Dr. De la Paz, respondent miserably failed to produce even a single receipt showing his alleged medical and rehabilitation expenses. By reason thereof, petitioner should not be held liable for the P94,000.00 medical expenses of respondent as actual or compensatory damages, for lack of basis. Verily, in the absence of official receipts or other competent evidence to prove the actual expenses incurred, the CA's award of medical expenses in favor of respondent should be negated.
AcEIHC

Under Article 2224 of the Civil Code, temperate or moderate damages are more than nominal but less than compensatory, and may be recovered when the court finds that some pecuniary loss has been suffered, but the amount cannot, from the nature of the case, be proved with certainty. The CA found that respondent paid for the doctor's professional fees and incurred other hospital expenses; however, the records failed to show that he presented proof of the actual amount of expenses therein, which served as the basis for the CA to award temperate damages in the amount of P100,000.00. However, We reduce the amount of temperate damages awarded by the CA, from P100,000.00 to P50,000.00, considering that the stroke suffered by respondent was not debilitating in nature and the records showed that his health condition remained stable. Moreover, there were no instances of subsequent or recurring ailment that necessitates prolonged medical attention. Anent the CA's ruling that respondent should be entitled to 13th month pay, We clarify that the 13th Month Pay Law, which provides the rules on the entitlement and computation of the 13th month pay, cannot be applied to him because he is a managerial employee, and the law applies only to rank-and-file employees. 43 Be that as it may, although he is not covered by the said law, records showed that he is entitled to this benefit. 44 However, the Court cannot make a proper determination as to the exact amount either full or pro-rated amount of the 13th month pay, if any, that he would be entitled to. Thus, reference should be made in consonance with the existing company policy on the payment of the 13th month pay vis--vis the number of days that he actually worked. On the matter of attorney's fees, We have ruled that attorney's fees may be awarded only when the employee is illegally dismissed in bad faith, and is compelled to litigate or incur expenses to protect his rights by reason of the unjustified acts of his employer. 45 In view of Our findings that respondent was validly dismissed for unauthorized absences, amounting to gross dereliction of duties under Article 282 (e) of the Labor Code, reckoned from June 5, 2003 (i.e., the day after he was declared fit to return to work, but failed to do so), and lack of evidence that his dismissal was tainted with bad faith, the grant of 10% of the total monetary award as attorney's fees cannot be sustained. WHEREFORE, the petition is PARTLY GRANTED. The dispositions in the Decision dated July 13, 2006 and the Resolution dated December 6, 2006 of the Court of Appeals, in CA-G.R. SP No. 00845, which affirmed with modification the Resolutions of the National Labor Relations Commission, Fifth Division, Cagayan de Oro City, in NLRC CA NO. M-008246-2004 (RAB 11-09-00949-03), are MODIFIED as follows: a.The award of salary of respondent Rodante Ynson from February 2003 to August 29, 2003, amounting to P1,225,000.00, is deleted; however, he is entitled to the payment of his salary, chargeable against his accrued sick leave benefits and other similar leave benefits, if any, from January 24 to June 4, 2003, as may be provided by existing company policy of petitioner Wuerth Philippines, Inc.;
aHECST

b.The award of temperate damages, in the amount of P100,000.00, is reduced to P50,000.00; c.While the award of 13th month pay, in the amount of P175,000.00 is deleted; however, respondent may still be entitled to the 13th month pay, either full or pro-rated amount, in consonance with existing company policy of petitioner; and d.The award of medical expenses amounting to P94,100.00 and attorney's fees of 10% of the total monetary award are deleted. The case is REMANDEDto the National Labor Relations Commission, Fifth Division, Cagayan de Oro City, for proper computation of the awards that respondent may be entitled to, in accordance with this Decision, and shall report compliance thereon within thirty (30) days from notice of this Decision. SO ORDERED.

Carpio, * Abad, Perez and Mendoza,

**

JJ., concur.

[G.R. No. 146667. January 23, 2007.] JOHN F. McLEOD, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division), FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), FAR EASTERN TEXTILE MILLS, INC., STA. ROSA TEXTILES, INC., (PEGGY MILLS, INC.), PATRICIO L. LIM, and ERIC HU, respondents.

DECISION

CARPIO, J :
p

The Case This is a petition for review 1 to set aside the Decision 2 dated 15 June 2000 and the Resolution 3 dated 27 December 2000 of the Court of Appeals in CA-G.R. SP No. 55130. The Court of Appeals affirmed with modification the 29 December 1998 Decision 4 of the National Labor Relations Commission (NLRC) in NLRC NCR 02-00949-95. The Facts The facts, as summarized by the Labor Arbiter and adopted by the NLRC and the Court of Appeals, are as follows:
On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and sick leave benefits, non-payment of unused airline tickets, holiday pay, underpayment of salary and 13th month pay, moral and exemplary damages, attorney's fees plus interest against Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc., Sta. Rosa Textiles, Inc., Patricio Lim and Eric Hu. In his Position Paper, complainant alleged that he is an expert in textile manufacturing process; that as early as 1956 he was hired as the Assistant Spinning Manager of Universal Textiles, Inc. (UTEX); that he was promoted to Senior Manager and worked for UTEX till 1980 under its President, respondent

Patricio Lim; that in 1978 Patricio Lim formed Peggy Mills, Inc. with respondent Filsyn having controlling interest; that complainant was absorbed by Peggy Mills as its Vice President and Plant Manager of the plant at Sta. Rosa, Laguna; that at the time of his retirement complainant was receiving P60,000.00 monthly with vacation and sick leave benefits; 13th month pay, holiday pay and two round trip business class tickets on a Manila-London-Manila itinerary every three years which is convertible to cas[h] if unused; that in January 1986, respondents failed to pay vacation and leave credits and requested complainant to wait as it was short of funds but the same remain unpaid at present; that complainant is entitled to such benefit as per CBA provision (Annex "A"); that respondents likewise failed to pay complainant's holiday pay up to the present; that complainant is entitled to such benefits as per CBA provision (Annex "B"); that in 1989 the plant union staged a strike and in 1993 was found guilty of staging an illegal strike; that from 1989 to 1992 complainant was entitled to 4 round trip business class plane tickets on a Manila-London-Manila itinerary but this benefit not (sic) its monetary equivalent was not given; that on August 1990 the respondents reduced complainant's monthly salary of P60,000.00 by P9,900.00 till November 1993 or a period of 39 months; that in 1991 Filsyn sold Peggy Mills, Inc. to Far Eastern Textile Mills, Inc. as per agreement (Annex "D") and this was renamed as Sta. Rosa Textile with Patricio Lim as Chairman and President; that complainant worked for Sta. Rosa until November 30 that from time to time the owners of Far Eastern consulted with complainant on technical aspects of reoperation of the plant as per correspondence (Annexes "D-1" and "D-2"); that when complainant reached and applied retirement age at the end of 1993, he was only given a reduced 13th month pay of P44,183.63, leaving a balance of P15,816.87; that thereafter the owners of Far Eastern Textiles decided for cessation of operations of Sta. Rosa Textiles; that on two occasions, complainant wrote letters (Annexes "E-1" to "E-2") to Patricio Lim requesting for his retirement and other benefits; that in the last quarter of 1994 respondents offered complainant compromise settlement of only P300,000.00 which complainant rejected; that again complainant wrote a letter (Annex "F") reiterating his demand for full payment of all benefits and to no avail, hence this complaint; and that he is entitled to all his money claims pursuant to law. On the other hand, respondents in their Position Paper alleged that complainant was the former VicePresident and Plant Manager of Peggy Mills, Inc.; that he was hired in June 1980 and Peggy Mills closed operations due to irreversible losses at the end of July 1992 but the corporation still exists at present; that its assets were acquired by Sta. Rosa Textile Corporation which was established in April 1992 but still remains non-operational at present; that complainant was hired as consultant by Sta. Rosa Textile in November 1992 but he resigned on November 30, 1993; that Filsyn and Far Eastern Textiles are separate legal entities and have no employer relationship with complainant; that respondent Patricio Lim is the President and Board Chairman of Sta. Rosa Textile Corporation; that respondent Eric Hu is a Taiwanese and is Director of Sta. Rosa Textiles, Inc.; that complainant has no cause of action against Filsyn, Far Eastern Textile Ltd., Sta. Rosa Textile Corporation and Eric Hu; that Sta. Rosa only acquired the assets and not the liabilities of Peggy Mills, Inc.; that Patricio Lim was only impleaded as Board Chairman of Sta. Rosa Textile and not as private individual; that while complainant was Vice President and Plant Manager of Peggy Mills, the union staged a strike up to July 1992 resulting in closure of operations due to irreversible losses as per Notice (Annex "1"); that complainant was relied upon to settle the labor problem but due to his lack of attention and absence the strike continued resulting in closure of the company; and losses to Sta. Rosa which acquired its assets as per their financial statements (Annexes "2" and "3"); that the attendance records of complainant from April 1992 to November 1993 (Annexes "4" and "5") show that he was either absent or worked at most two hours a day; that Sta. Rosa and Peggy Mills are interposing counterclaims for damages in the total amount of P36,757.00 against complainant; that complainant's monthly salary at Peggy Mills was P50,495.00 and not P60,000.00; that Peggy Mills, does not have a retirement program; that whatever amount complainant is entitled should be offset with the counterclaims; that complainant worked only for 12 years from 1980 to 1992; that complainant was only hired as a consultant and not an employee by Sta. Rosa Textile; that complainant's attendance record of absence and two hours daily work during the period of the strike wipes out any vacation/sick leave he may have accumulated; that there is no basis for complainant's claim of two (2) business class airline tickets; that complainant's pay already included the holiday pay; that he is entitled to holiday pay as consultant by Sta. Rosa; that he has waived this benefit in his 12 years of work with Peggy Mills; that he is not entitled to 13th month pay as consultant; and that he is not entitled to moral and exemplary damages and attorney's fees.

In his Reply, complainant alleged that all respondents being one and the same entities are solidarily liable for all salaries and benefits and complainant is entitled to; that all respondents have the same address at 12/F B.A. Lepanto Building, Makati City; that their counsel holds office in the same address; that all respondents have the same offices and key personnel such as Patricio Lim and Eric Hu; that respondents' Position Paper is verified by Marialen C. Corpuz who knows all the corporate officers of all respondents; that the veil of corporate fiction may be pierced if it is used as a shield to perpetuate fraud and confuse legitimate issues; that complainant never accepted the change in his position from Vice-President and Plant Manager to consultant and it is incumbent upon respondents to prove that he was only a consultant; that the Deed of Dation in Payment with Lease (Annex "C") proves that Sta. Rosa took over the assets of Peggy Mills as early as June 15, 1992 and not 1995 as alleged by respondents; that complainant never resigned from his job but applied for retirement as per letters (Annexes "E-1", "E-2" and "F"); that documents "G", "H" and "I" show that Eric Hu is a top official of Peggy Mills that the closure of Peggy Mills cannot be the fault of complainant; that the strike was staged on the issue of CBA negotiations which is not part of the usual duties and responsibilities as Plant Manager; that complainant is a British national and is prohibited by law in engaging in union activities; that as per Resolution (Annex "3") of the NLRC in the proper case, complainant testified in favor of management; that the alleged attendance record of complainant was lifted from the logbook of a security agency and is hearsay evidence; that in the other attendance record it shows that complainant was reporting daily and even on Saturdays; that his limited hours was due to the strike and cessation of operations; that as plant manager complainant was on call 24 hours a day; that respondents must pay complainant the unpaid portion of his salaries and his retirement benefits that cash voucher No. 17015 (Annex "K") shows that complainant drew the monthly salary of P60,000.00 which was reduced to P50,495.00 in August 1990 and therefore without the consent of complainant; that complainant was assured that he will be paid the deduction as soon as the company improved its financial standing but this assurance was never fulfilled; that Patricio Lim promised complainant his retirement pay as per the latter's letters (Annexes "E-1", "E-2" and "F"); that the law itself provides for retirement benefits; that Patricio Lim by way of Memorandum (Annex "M") approved vacation and sick leave benefits of 22 days per year effective 1986; that Peggy Mills required monthly paid employees to sign an acknowledgement that their monthly compensation includes holiday pay; that complainant was not made to sign this undertaking precisely because he is entitled to holiday pay over and above his monthly pay; that the company paid for complainant's two (2) round trip tickets to London in 1983 and 1986 as reflected in the complainant's passport (Annex "N"); that respondents claim that complainant is not entitled to 13th month pay but paid in 1993 and all the past 13 years; that complainant is entitled to moral and exemplary damages and attorney's fees; that all doubts must be resolved in favor of complainant; and that complainant reserved the right to file perjury cases against those concerned.

In their Reply, respondents alleged that except for Peggy Mills, the other respondents are not proper persons in interest due to the lack of employer-employee relationship between them and complainant; that undersigned counsel does not represent Peggy Mills, Inc. In a separate Position Paper, respondent Peggy Mills alleged that complainant was hired on February 10, 1991 as per Board Minutes (Annex "A"); that on August 19, 1987, the workers staged an illegal strike causing cessation of operations on July 21, 1992; that respondent filed a Notice of Closure with the DOLE (Annex "B"); that all employees were given separation pay except for complainant whose task was extended to December 31, 1992 to wind up the affairs of the company as per vouchers (Annexes "C" and "C-1"); that respondent offered complainant his retirement benefits under RA 7641 but complainant refused; that the regular salaries of complainant from closure up to December 31, 1992 have offset whatever vacation and sick leaves he accumulated; that his claim for unused plane tickets from 1989 to 1992 has no policy basis, the company's formula of employees monthly rate x 314 days over 12 months already included holiday pay; that complainant's unpaid portion of the 13th month pay in 1993 has no basis because he was only an employee up to December 31, 1992; that the 13th month pay was based on his last salary; and that complainant is not entitled to damages. 5

On 3 April 1998, the Labor Arbiter rendered his decision with the following dispositive portion:

WHEREFORE, premises considered, We hold all respondents as jointly and solidarily liable for complainant's money claims as adjudicated above and computed below as follows: Retirement Benefits (one month salary for every year of service) 6/80-11/30/93 = 14 years P60,000 x 14.0 mos.P840,000.00 Vacation and Sick Leave (3 yrs.) P2,000.00 x 22 days x 3 yrs.132,000.00 Underpayment of Salaries (3 yrs.) P60,000-P50,495 = P9,505 P9,505 x 36.0 mos.342,180.00 Holiday Pay (3 yrs.) P2,000 x 30 days60,000.00 Underpayment of 13th month pay (1993) 15,816.87 Moral Damages3,000,000.00 Exemplary Damages1,000,000.00 10% Attorney's Fees138,999.68 TOTALP5,528,996.55 Unused Airline Tickets (3 yrs.) (To be converted in Peso upon payment) $2,450.00 x 3.0 [yrs.]$7,350.00 SO ORDERED.
6

Filipinas Synthetic Fiber Corporation (Filsyn), Far Eastern Textile Mills, Inc. (FETMI), Sta. Rosa Textiles, Inc. (SRTI), Patricio L. Lim (Patricio), and Eric Hu appealed to the NLRC. The NLRC rendered its decision on 29 December 1998, thus:
WHEREFORE, the Decision dated 3 April 1998 is hereby REVERSED and SET ASIDE and a new one is entered ORDERING respondent Peggy Mills, Inc. to pay complainant his retirement pay equivalent to 22.5 days for every year of service for his twelve (12) years of service from 1980 to 1992 based on a salary rate of P50,495.00 a month. All other claims are DISMISSED for lack of merit. SO ORDERED.
7

John F. McLeod (McLeod) filed a motion for reconsideration which the NLRC denied in its Resolution of 30 June 1999. 8 McLeod thus filed a petition for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. 9 The Ruling of the Court of Appeals On 15 June 2000, the Court of Appeals rendered judgment as follows:

WHEREFORE, the decision dated December 29, 1998 of the NLRC is hereby AFFIRMED with the MODIFICATION that respondent Patricio Lim is jointly and solidarily liable with Peggy Mills, Inc., to pay the following amounts to petitioner John F. McLeod: 1.retirement pay equivalent to 22.5 days for every year of service for his twelve (12) years of service from 1980 to 1992 based on a salary rate of P50,495, a month; 2.moral damages in the amount of one hundred thousand (P100,000.00) Pesos; 3.exemplary damages in the amount of fifty thousand (P50,000.00) Pesos; and 4.attorney's fees equivalent to 10% of the total award. No costs is awarded. SO ORDERED.
10

The Court of Appeals rejected McLeod's theory that all respondent corporations are the same corporate entity which should be held solidarily liable for the payment of his monetary claims. The Court of Appeals ruled that the fact that (1) all respondent corporations have the same address; (2) all were represented by the same counsel, Atty. Isidro S. Escano; (3) Atty. Escano holds office at respondent corporations' address; and (4) all respondent corporations have common officers and key personnel, would not justify the application of the doctrine of piercing the veil of corporate fiction. The Court of Appeals held that there should be clear and convincing evidence that SRTI, FETMI, and Filsyn were being used as alter ego, adjunct or business conduit for the sole benefit of Peggy Mills, Inc. (PMI), otherwise, said corporations should be treated as distinct and separate from each other. The Court of Appeals pointed out that the Articles of Incorporation of PMI show that it has six incorporators, namely, Patricio, Jose Yulo, Jr., Carlos Palanca, Jr., Cesar R. Concio, Jr., E. A. Picasso, and Walter Euyang. On the other hand, the Articles of Incorporation of Filsyn show that it has 10 incorporators, namely, Jesus Y. Yujuico, Carlos Palanca, Jr., Patricio, Ang Beng Uh, Ramon A. Yulo, Honorio Poblador, Jr., Cipriano Azada, Manuel Tomacruz, Ismael Maningas, and Benigno Zialcita, Jr. The Court of Appeals pointed out that PMI and Filsyn have only two interlocking incorporators and directors, namely, Patricio and Carlos Palanca, Jr. Reiterating the ruling of this Court in Laguio v. NLRC, 11 the Court of Appeals held that mere substantial identity of the incorporators of two corporations does not necessarily imply fraud, nor warrant the piercing of the veil of corporate fiction. The Court of Appeals also pointed out that when SRTI and PMI executed the Dation in Payment with Lease, it was clear that SRTI did not assume the liabilities PMI incurred before the execution of the contract. The Court of Appeals held that McLeod failed to substantiate his claim that all respondent corporations should be treated as one corporate entity. The Court of Appeals thus upheld the NLRC's finding that no employeremployee relationship existed between McLeod and respondent corporations except PMI. The Court of Appeals ruled that Eric Hu, as an officer of PMI, should be exonerated from any liability, there being no proof of malice or bad faith on his part. The Court of Appeals, however, ruled that McLeod was entitled to recover from PMI and Patricio, the company's Chairman and President.

The Court of Appeals pointed out that Patricio deliberately and maliciously evaded PMI's financial obligation to McLeod. The Court of Appeals stated that, on several occasions, despite his approval, Patricio refused and ignored to pay McLeod's retirement benefits. The Court of Appeals stated that the delay lasted for one year prompting McLeod to initiate legal action. The Court of Appeals stated that although PMI offered to pay McLeod his retirement benefits, this offer for P300,000 was still below the "floor limits" provided by law. The Court of Appeals held that an employee could demand payment of retirement benefits as a matter of right. The Court of Appeals stated that considering that PMI was no longer in operation, its "officer should be held liable for acting on behalf of the corporation." The Court of Appeals also ruled that since PMI did not have a retirement program providing for retirement benefits of its employees, Article 287 of the Labor Code must be followed. The Court of Appeals thus upheld the NLRC's finding that McLeod was entitled to retirement pay equivalent to 22.5 days for every year of service from 1980 to 1992 based on a salary rate of P50,495 a month. The Court of Appeals held that McLeod was not entitled to payment of vacation, sick leave and holiday pay because as Vice President and Plant Manager, McLeod is a managerial employee who, under Article 82 of the Labor Code, is not entitled to these benefits. The Court of Appeals stated that for McLeod to be entitled to payment of service incentive leave and holidays, there must be an agreement to that effect between him and his employer. Moreover, the Court of Appeals rejected McLeod's argument that since PMI paid for his two round-trip tickets Manila-London in 1983 and 1986, he was also "entitled to unused airline tickets." The Court of Appeals stated that the fact that PMI granted McLeod "free transport to and from Manila and London for the year 1983 and 1986 does not ipso facto characterize it as regular that would establish a prevailing company policy." The Court of Appeals also denied McLeod's claims for underpayment of salaries and his 13th month pay for the year 1994. The Court of Appeals upheld the NLRC's ruling that it could be deduced from McLeod's own narration of facts that he agreed to the reduction of his compensation from P60,000 to P50,495 in August 1990 to November 1993. The Court of Appeals found the award of moral damages for P50,000 in order because of the "stubborn refusal" of PMI and Patricio to respect McLeod's valid claims. The Court of Appeals also ruled that attorney's fees equivalent to 10% of the total award should be given to McLeod under Article 2208, paragraph 2 of the Civil Code. 12 Hence, this petition. The Issues McLeod submits the following issues for our consideration:
1.Whether the challenged Decision and Resolution of the 14th Division of the Court of Appeals promulgated on 15 June 2000 and 27 December 2000, respectively, in CA-G.R. SP No. 55130 are in accord with law and jurisprudence; 2.Whether an employer-employee relationship exists between the private respondents and the petitioner for purposes of determining employer liability to the petitioner; 3.Whether the private respondents may avoid their financial obligations to the petitioner by invoking the veil of corporate fiction;

4.Whether petitioner is entitled to the relief he seeks against the private respondents;

5.Whether the ruling of [this] Court in Special Police and Watchman Association (PLUM) Federation v. National Labor Relations Commission cited by the Office of the Solicitor General is applicable to the case of petitioner; and 6.Whether the appeal taken by the private respondents from the Decision of the labor arbiter meets the mandatory requirements recited in the Labor Code of the Philippines, as amended. 13

The Court's Ruling The petition must fail. McLeod asserts that the Court of Appeals should not have upheld the NLRC's findings that he was a managerial employee of PMI from 20 June 1980 to 31 December 1992, and then a consultant of SRTI up to 30 November 1993. McLeod asserts that if only for this "brazen assumption," the Court of Appeals should not have sustained the NLRC's ruling that his cause of action was only against PMI. These assertions do not deserve serious consideration. Records disclose that McLeod was an employee only of PMI. 14 PMI hired McLeod as its acting Vice President and General Manager on 20 June 1980. 15 PMI confirmed McLeod's appointment as Vice President/Plant Manager in the Special Meeting of its Board of Directors on 10 February 1981. 16 McLeod himself testified during the hearing before the Labor Arbiter that his "regular employment" was with PMI. 17 When PMI's rank-and-file employees staged a strike on 19 August 1989 to July 1992, PMI incurred serious business losses. 18 This prompted PMI to stop permanently plant operations and to send a notice of closure to the Department of Labor and Employment on 21 July 1992. 19 PMI informed its employees, including McLeod, of the closure. 20 PMI paid its employees, including managerial employees, except McLeod, their unpaid wages, sick leave, vacation leave, prorated 13th month pay, and separation pay. Under the compromise agreement between PMI and its employees, the employer-employee relationship between them ended on 25 November 1992. 21 Records also disclose that PMI extended McLeod's service up to 31 December 1992 "to wind up some affairs" of the company. 22 McLeod testified on cross-examination that he received his last salary from PMI in December 1992. 23 It is thus clear that McLeod was a managerial employee of PMI from 20 June 1980 to 31 December 1992. However, McLeod claims that after FETMI purchased PMI in January 1993, he "continued to work at the same plant with the same responsibilities" until 30 November 1993. McLeod claims that FETMI merely renamed PMI as SRTI. McLeod asserts that it was for this reason that when he reached the retirement age in 1993, he asked all the respondents for the payment of his benefits. 24 These assertions deserve scant consideration. What took place between PMI and SRTI was dation in payment with lease. Pertinent portions of the contract that PMI and SRTI executed on 15 June 1992 read:

WHEREAS, PMI is indebted to the Development Bank of the Philippines ("DBP") and as security for such debts (the "Obligations") has mortgaged its real properties covered by TCT Nos. T-38647, T-37136, and T-37135, together with all machineries and improvements found thereat, a complete listing of which is hereto attached as Annex "A" (the "Assets"); WHEREAS, by virtue of an inter-governmental agency arrangement, DBP transferred the Obligations, including the Assets, to the Asset Privatization Trust ("APT") and the latter has received payment for the Obligations from PMI, under APT's Direct Debt Buy-Out ("DDBO") program thereby causing APT to completely discharge and cancel the mortgage in the Assets and to release the titles of the Assets back to PMI; WHEREAS, PMI obtained cash advances from SRTC in the total amount of TWO HUNDRED TEN MILLION PESOS (P210,000,000.00) (the "Advances") to enable PMI to consummate the DDBO with APT, with SRTC subrogating APT as PMI's creditor thereby; WHEREAS, in payment to SRTC for PMI's liability, PMI has agreed to transfer all its rights, title and interests in the Assets by way of a dation in payment to SRTC, provided that simultaneous with the dation in payment, SRTC shall grant unto PMI the right to lease the Assets under terms and conditions stated hereunder ; xxx xxx xxx NOW THEREFORE, for and in consideration of the foregoing premises, and of the terms and conditions hereinafter set forth, the parties hereby agree as follows: 1.CESSION. In consideration of the amount of TWO HUNDRED TEN MILLION PESOS (P210,000,000.00), PMI hereby cedes, conveys and transfers to SRTC all of its rights, title and interest in and to the Assets by way of a dation in payment. 25 (Emphasis supplied)

As a rule, a corporation that purchases the assets of another will not be liable for the debts of the selling corporation, provided the former acted in good faith and paid adequate consideration for such assets, except when any of the following circumstances is present: (1) where the purchaser expressly or impliedly agrees to assume the debts, (2) where the transaction amounts to a consolidation or merger of the corporations, (3) where the purchasing corporation is merely a continuation of the selling corporation, and (4) where the selling corporation fraudulently enters into the transaction to escape liability for those debts. 26 None of the foregoing exceptions is present in this case. Here, PMI transferred its assets to SRTI to settle its obligation to SRTI in the sum of P210,000,000. We are not convinced that PMI fraudulently transferred these assets to escape its liability for any of its debts. PMI had already paid its employees, except McLeod, their money claims. There was also no merger or consolidation of PMI and SRTI. Consolidation is the union of two or more existing corporations to form a new corporation called the consolidated corporation. It is a combination by agreement between two or more corporations by which their rights, franchises, and property are united and become those of a single, new corporation, composed generally, although not necessarily, of the stockholders of the original corporations. Merger, on the other hand, is a union whereby one corporation absorbs one or more existing corporations, and the absorbing corporation survives and continues the combined business. The parties to a merger or consolidation are called constituent corporations. In consolidation, all the constituents are dissolved and absorbed by the new consolidated enterprise. In merger, all constituents, except the surviving corporation, are dissolved. In both cases, however, there is no liquidation of the assets of

the dissolved corporations, and the surviving or consolidated corporation acquires all their properties, rights and franchises and their stockholders usually become its stockholders. The surviving or consolidated corporation assumes automatically the liabilities of the dissolved corporations, regardless of whether the creditors have consented or not to such merger or consolidation. 27 In the present case, there is no showing that the subject dation in payment involved any corporate merger or consolidation. Neither is there any showing of those indicative factors that SRTI is a mere instrumentality of PMI. Moreover, SRTI did not expressly or impliedly agree to assume any of PMI's debts. Pertinent portions of the subject Deed of Dation in Payment with Lease provide, thus:
2.WARRANTIES AND REPRESENTATIONS. PMI hereby warrants and represents the following: xxx xxx xxx (e)PMI shall warrant that it will hold SRTC or its assigns, free and harmless from any liability for claims of PMI's creditors, laborers, and workers and for physical injury or injury to property arising from PMI's custody, possession, care, repairs, maintenance, use or operation of the Assets except ordinary wear and tear; 28 (Emphasis supplied)

Also, McLeod did not present any evidence to show the alleged renaming of "Peggy Mills, Inc." to "Sta. Rosa Textiles, Inc." Hence, it is not correct for McLeod to treat PMI and SRTI as the same entity. Respondent corporations assert that SRTI hired McLeod as consultant after PMI stopped operations. 29 On the other hand, McLeod asserts that he was respondent corporations' employee from 1980 to 30 November 1993. 30 However, McLeod failed to present any proof of employer-employee relationship between him and Filsyn, SRTI, or FETMI. McLeod testified, thus:
ATTY. ESCANO: Do you have any employment contract with Far Eastern Textile? WITNESS: It is my belief up the present time. ATTY. AVECILLA: May I request that the witness be allowed to go through his Annexes, Your Honor. ATTY. ESCANO: Yes, but I want a precise answer to that question. If he has an employment contract with Far Eastern Textile? WITNESS: Can I answer it this way, sir? There is not a valid contract but I was under the impression taking into consideration that the closeness that I had at Far Eastern Textile is enough during that period of time of the development of Peggy Mills to reorganize a staff. I was under the basic

impression that they might still retain my status as Vice President and Plant Manager of the company. ATTY. ESCANO: But the answer is still, there is no employment contract in your possession appointing you in any capacity by Far Eastern? WITNESS: There was no written contract, sir. xxx xxx xxx ATTY. ESCANO: So, there is proof that you were in fact really employed by Peggy Mills? WITNESS: Yes, sir. ATTY. ESCANO: Of course, my interest now is to whether or not there is a similar document to present that you were employed by the other respondents like Filsyn Corporation? WITNESS: I have no document, sir. ATTY. ESCANO: What about Far Eastern Textile Mills? WITNESS: I have no document, sir. ATTY. ESCANO: And Sta. Rosa Textile Mills? WITNESS: There is no document, sir.
31

xxx xxx xxx ATTY. ESCANO: QYes. Let me be more specific, Mr. McLeod. Do you have a contract of employment from Far Eastern Textiles, Inc.?

ANo, sir. QWhat about Sta. Rosa Textile Mills, do you have an employment contract from this company?

ANo, sir.
xxx xxx xxx QAnd what about respondent Eric Hu. Have you had any contract of employment from Mr. Eric Hu? ANot a direct contract but I was taken in and I told to take over this from Mr. Eric Hu. Automatically, it confirms that Mr. Eric Hu, in other words, was under the control of Mr. Patricio Lim at that period of time. QNo documents to show, Mr. McLeod? ANo. No documents, sir.
32

McLeod could have presented evidence to support his allegation of employer-employee relationship between him and any of Filsyn, SRTI, and FETMI, but he did not. Appointment letters or employment contracts, payrolls, organization charts, SSS registration, personnel list, as well as testimony of co-employees, may serve as evidence of employee status. 33 It is a basic rule in evidence that parties must prove their affirmative allegations. While technical rules are not strictly followed in the NLRC, this does not mean that the rules on proving allegations are entirely ignored. Bare allegations are not enough. They must be supported by substantial evidence at the very least. 34 However, McLeod claims that "for purposes of determining employer liability, all private respondents are one and the same employer" because: (1) they have the same address; (2) they are all engaged in the same business; and (3) they have interlocking directors and officers. 35 This assertion is untenable. A corporation is 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. 36 While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. This is the doctrine of piercing the veil of corporate fiction. The doctrine applies only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, 37 or when it is made as a shield to confuse the legitimate issues, or where a corporation is the 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. 38 To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and convincingly. It cannot be presumed. 39 Here, we do not find any of the evils sought to be prevented by the doctrine of piercing the corporate veil. Respondent corporations may be engaged in the same business as that of PMI, but this fact alone is not enough reason to pierce the veil of corporate fiction. 40 In Indophil Textile Mill Workers Union v. Calica,
41 the

Court ruled, thus:

In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the creation of the corporation is a devise to evade the application of the CBA between petitioner Union and private respondent Company. While we do not discount the possibility of the similarities of the businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting the relief sought. The fact that the businesses of private respondent and Acrylic are related, that some of the employees of the private respondent are the same persons manning and providing for auxiliary services to the units of Acrylic, and that the physical plants, offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of Acrylic. 42(Emphasis supplied)

Also, the fact that SRTI and PMI shared the same address, i.e., 11/F BA-Lepanto Bldg., Paseo de Roxas, Makati City, 43 can be explained by the two companies' stipulation in their Deed of Dation in Payment with Lease that "simultaneous with the dation in payment, SRTC shall grant unto PMI the right to lease the Assets under terms and conditions stated hereunder." 44 As for the addresses of Filsyn and FETMI, Filsyn held office at 12th Floor, BA-Lepanto Bldg., Paseo de Roxas, Makati City, 45 while FETMI held office at 18F, Tun Nan Commercial Building, 333 Tun Hwa South Road, Sec. 2, Taipei, Taiwan, R.O.C. 46 Hence, they did not have the same address as that of PMI. That respondent corporations have interlocking incorporators, directors, and officers is of no moment. The only interlocking incorporators of PMI and Filsyn were Patricio and Carlos Palanca, Jr. 47 While Patricio was Director and Board Chairman of Filsyn, SRTI, and PMI,48 he was never an officer of FETMI. Eric Hu, on the other hand, was Director of Filsyn and SRTI.
49 He

was never an officer of PMI.

Marialen C. Corpuz, Filsyn's Finance Officer, 50 testified on cross-examination that (1) among all of Filsyn's officers, only she was the one involved in the management of PMI; (2) only she and Patricio were the common officers between Filsyn and PMI; and (3) Filsyn and PMI are "two separate companies." 51 Apolinario L. Posio, PMI's Chief Accountant, testified that "SRTI is a different corporation from PMI."
52

At any rate, the existence of interlocking incorporators, directors, and officers is not enough justification to pierce the veil of corporate fiction, in the absence of fraud or other public policy considerations. 53 In Del Rosario v. NLRC, 54 the Court ruled that substantial identity of the incorporators of corporations does not necessarily imply fraud. In light of the foregoing, and there being no proof of employer-employee relationship between McLeod and respondent corporations and Eric Hu, McLeod's cause of action is only against his former employer, PMI. On Patricio's personal liability, it is settled that in the absence of malice, bad faith, or specific provision of law, a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. 55 To reiterate, a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities. 56 Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons; (2) they consent to the issuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with the corporate secretary their written objection; (3) they agree to hold

themselves personally and solidarily liable with the corporation; or (4) they are made by specific provision of law personally answerable for their corporate action. 57 Considering that McLeod failed to prove any of the foregoing exceptions in the present case, McLeod cannot hold Patricio solidarily liable with PMI. The records are bereft of any evidence that Patricio acted with malice or bad faith. Bad faith is a question of fact and is evidentiary. Bad faith does not connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious wrongdoing. It means breach of a known duty through some ill motive or interest. It partakes of the nature of fraud. 58 In the present case, there is nothing substantial on record to show that Patricio acted in bad faith in terminating McLeod's services to warrant Patricio's personal liability. PMI had no other choice but to stop plant operations. The work stoppage therefore was by necessity. The company could no longer continue with its plant operations because of the serious business losses that it had suffered. The mere fact that Patricio was president and director of PMI is not a ground to conclude that he should be held solidarily liable with PMI for McLeod's money claims. The ruling in A.C. Ransom Labor Union-CCLU v. NLRC, 59 which the Court of Appeals cited, does not apply to this case. We quote pertinent portions of the ruling, thus:
(a)Article 265 of the Labor Code, in part, expressly provides: "Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to reinstatement with full backwages." Article 273 of the Code provides that: "Any person violating any of the provisions of Article 265 of this Code shall be punished by a fine of not exceeding five hundred pesos and/or imprisonment for not less than one (1) day nor more than six (6) months." (b)How can the foregoing provisions be implemented when the employer is a corporation? The answer is found in Article 212 (c) of the Labor Code which provides: "(c)'Employer' includes any person acting in the interest of an employer, directly or indirectly. The term shall not include any labor organization or any of its officers or agents except when acting as employer." The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM 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" RANSOM. The corporation, only in the technical sense, is the employer.

The responsible officer of an employer corporation can be held personally, not to say even criminally, liable for non-payment of back wages. That is the policy of the law. xxx xxx xxx (c)If the policy of the law were otherwise, the corporation employer can have devious ways for evading payment of back wages. In the instant case, it would appear that RANSOM, in 1969, foreseeing the possibility or probability of payment of back wages to the 22 strikers, organized ROSARIO to replace RANSOM, with the latter to be eventually phased out if the

22 strikers win their case. RANSOM actually ceased operations on May 1, 1973, after the December 19, 1972 Decision of the Court of Industrial Relations was promulgated against RANSOM. 60 (Emphasis supplied)

Clearly, in A.C. Ransom, RANSOM, through its President, organized ROSARIO to evade payment of backwages to the 22 strikers. This situation, or anything similar showing malice or bad faith on the part of Patricio, does not obtain in the present case. In Santos v. NLRC, 61 the Court held, thus:
It is true, there were various cases when corporate officers were themselves held by the Court to be personally accountable for the payment of wages and money claims to its employees. In A.C. Ransom Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under the Minimum Wage Law, the responsible officer of an employer corporation could be held personally liable for nonpayment of backwages for "(i)f the policy of the law were otherwise, the corporation employer (would) have devious ways for evading payment of backwages." In the absence of a clear identification of the officer directly responsible for failure to pay the backwages, the Court considered the President of the corporation as such officer. The case was cited in Chua vs. NLRC in holding personally liable the vicepresident of the company, being the highest and most ranking official of the corporation next to the President who was dismissed for the latter's claim for unpaid wages. A review of the above exceptional cases would readily disclose the attendance of facts and circumstances that could rightly sanction personal liability on the part of the company officer. In A.C. Ransom, the corporate entity was a family corporation and execution against it could not be implemented because of the disposition posthaste of its leviable assets evidently in order to evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction" was thus clearly appropriate. Chua likewise involved another family corporation, and this time the conflict was between two brothers occupying the highest ranking positions in the company. There were incontrovertible facts which pointed to extreme personal animosity that resulted, evidently in bad faith, in the easing out from the company of one of the brothers by the other. The basic rule is still that which can be deduced from the Court's pronouncement in Sunio vs. National Labor Relations Commission; thus: We come now to the personal liability of petitioner, Sunio, who was made jointly and severally responsible with petitioner company and CIPI for the payment of the backwages of private respondents. This is reversible error. The Assistant Regional Director's Decision failed to disclose the reason why he was made personally liable. Respondents, however, alleged as grounds thereof, his being the owner of one-half (1/2) interest of said corporation, and his alleged arbitrary dismissal of private respondents. Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner corporation. There appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services of private respondents. His act, therefore, was within the scope of his authority and was a corporate act. It is basic 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. Petitioner Sunio, therefore, should not have been made personally answerable for the payment of private respondents' back salaries. 62 (Emphasis supplied)

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. 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. Neither Article 212 (c) nor Article 273 (now 272) of the Labor Code expressly makes any corporate officer personally liable for the debts of the corporation. As this Court ruled in H.L. Carlos Construction, Inc. v. Marina Properties Corporation: 63

We concur with the CA that these two respondents are not liable. Section 31 of the Corporation Code (Batas Pambansa Blg. 68) provides: "Section 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 . . . shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders and other persons." The personal liability of corporate officers validly attaches only when (a) they assent to a patently unlawful act of the corporation; or (b) they are guilty of bad faith or gross negligence in directing its affairs; or (c) they incur conflict of interest, resulting in damages to the corporation, its stockholders or other persons. The records are bereft of any evidence that Typoco acted in bad faith with gross or inexcusable negligence, or that he acted outside the scope of his authority as company president. The unilateral termination of the Contract during the existence of the TRO was indeed contemptible for which MPC should have merely been cited for contempt of court at the most and a preliminary injunction would have then stopped work by the second contractor. Besides, there is no showing that the unilateral termination of the Contract was null and void. 64

McLeod is not entitled to payment of vacation leave and sick leave as well as to holiday pay. Article 82, Title I, Book Three of the Labor Code, on Working Conditions and Rest Periods, provides:
Coverage. The provisions of this title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations. As used herein, "managerial employees" refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff. (Emphasis supplied)

As Vice President/Plant Manager, McLeod is a managerial employee who is excluded from the coverage of Title I, Book Three of the Labor Code. McLeod is entitled to payment of vacation leave and sick leave only if he and PMI had agreed on it. The payment of vacation leave and sick leave depends on the policy of the employer or the agreement between the employer and employee. 65 In the present case, there is no showing that McLeod and PMI had an agreement concerning payment of these benefits. McLeod's assertion of underpayment of his 13th month pay in December 1993 is unavailing. 66 As already stated, PMI stopped plant operations in 1992. McLeod himself testified that he received his last salary from PMI in December 1992. After the termination of the employer-employee relationship between McLeod and PMI, SRTI hired McLeod as consultant and not as employee. Since McLeod was no longer an employee, he was not entitled to the 13th month pay. 67 Besides, there is no evidence on record that McLeod indeed received his alleged "reduced 13th month pay of P44,183.63" in December 1993. 68 Also unavailing is McLeod's claim that he was entitled to the "unpaid monetary equivalent of unused plane tickets for the period covering 1989 to 1992 in the amount of P279,300.00." 69 PMI has no company policy granting its officers and employees expenses for trips abroad. 70 That at one time PMI reimbursed McLeod for his and his wife's plane tickets in a vacation to London 71 could not be deemed as an established practice considering that it happened only once. To be considered a "regular practice," the giving of the benefits should have been done over a long period, and must be shown to have been consistent and deliberate. 72 In American Wire and Cable Daily Rated Employees Union v. American Wire and Cable Co., Inc., 73 the Court held that for a bonus to be enforceable, the employer must have promised it, and the parties must have

expressly agreed upon it, or it must have had a fixed amount and had been a long and regular practice on the part of the employer. In the present case, there is no showing that PMI ever promised McLeod that it would continue to grant him the benefit in question. Neither is there any proof that PMI and McLeod had expressly agreed upon the giving of that benefit. McLeod's reliance on Annex M 74 can hardly carry the day for him. Annex M, which is McLeod's letter addressed to "Philip Lim, VP Administration," merely contains McLeod's proposals for the grant of some benefits to supervisory and confidential employees. Contrary to McLeod's allegation, Patricio did not sign the letter. Hence, the letter does not embody any agreement between McLeod and the management that would entitle McLeod to his money claims.

Neither can McLeod's assertions find support in Annex U. 75 Annex U is the Agreement which McLeod and Universal Textile Mills, Inc. executed in 1959. The Agreement merely contains the renewal of the service agreement which the parties signed in 1956. McLeod cannot successfully pretend that his monthly salary of P60,000 was reduced without his consent. McLeod testified that in 1990, Philip Lim explained to him why his salary would have to be reduced. McLeod said that Philip told him that "they were short in finances; that it would be repaid." 76 Were McLeod not amenable to that reduction in salary, he could have immediately resigned from his work in PMI. McLeod knew that PMI was then suffering from serious business losses. In fact, McLeod testified that PMI was not able to operate from August 1989 to 1992 because of the strike. Even before 1989, as Vice President of PMI, McLeod was aware that the company had incurred "huge loans from DBP." 77 As it happened, McLeod continued to work with PMI. We find it pertinent to quote some portions of Apolinario Posio's testimony, to wit:
QYou also stated that before the period of the strike as shown by annex "K" of the reply filed by the complainant which was I think a voucher, the salary of Mr. McLeod was roughly P60,000.00 a month? AYes, sir. QAnd as shown by their annex "L" to their reply, that this was reduced to roughly P50,000.00 a month? AYes, sir. QYou stated that this was indeed upon the instruction by the Vice-President of Peggy Mills at that time and that was Mr. Philip Lim, would you not? AYes, sir. QOf your own personal knowledge, can you say if this was, in fact, by agreement between Mr. Philip Lim or any other officers of Peggy Mills and Mr. McLeod? AIf I recall it correctly, I assume it was an agreement, verbal agreement with, between Mr. Philip Lim and Mr. McLeod, because the voucher that we prepared was actually acknowledged by Mr. McLeod, the reduced amount was acknowledged by Mr. McLeod thru the voucher that we prepared.

QIn other words, Mr. Witness, you mean to tell us that Mr. McLeod continuously received the reduced amount of P50,000.00 by signing the voucher and receiving the amount in question? AYes, sir. QAs far as you remember, Mr. Posio, was there any complaint by Mr. McLeod because of this reduced amount of his salary at that time? AI don't have any personal knowledge of any complaint, sir. QAt least, that is in so far as you were concerned, he said nothing when he signed the voucher in question? AYes, sir. QNow, you also stated that the reason for what appears to be an agreement between Peggy Mills and Mr. McLeod in so far as the reduction of his salary from P60,000.00 to P50,000.00 a month was because he would have a reduced number of working days in view of the strike at Peggy Mills, is that right? AYes, sir. QAnd that this was so because on account of the strike, there was no work to be done in the company? AYes, sir.
78

xxx xxx xxx QNow, you also stated if you remember during the first time that you testified that in the beginning, the monthly salary of the complainant was P60,000.00, is that correct? AYes, sir. QAnd because of the long period of the strike, when there was no work to be done, by agreement with the complainant, his monthly salary was adjusted to only P50,495 because he would not have to report for work on Saturday. Do you remember having made that explanation? AYes, sir. QYou also stated that the complainant continuously received his monthly salary in the adjusted amount of P50,495.00 monthly signing the necessary vouchers or pay slips for that without complaining, is that not right, Mr. Posio? AYes, sir.
79

Since the last salary that McLeod received from PMI was P50,495, that amount should be the basis in computing his retirement benefits. McLeod must be credited only with his service to PMI as it had a juridical personality separate and distinct from that of the other respondent corporations. Since PMI has no retirement plan, Retirement Law which provides:
80 we

apply Section 5, Rule II of the Rules Implementing the New

5.1In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

5.2Components of One-half (1/2) Month Salary. For the purpose of determining the minimum retirement pay due an employee under this Rule, the term "one-half month salary" shall include all of the following: (a)Fifteen (15) days salary of the employee based on his latest salary rate. . . .

With McLeod having worked with PMI for 12 years, from 1980 to 1992, he is entitled to a retirement pay equivalent to 1/2 month salary for every year of service based on his latest salary rate of P50,495 a month. There is no basis for the award of moral damages. Moral damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. The breach must be wanton, reckless, malicious, or in bad faith, oppressive or abusive. 81 From the records of the case, the Court finds no ultimate facts to support a conclusion of bad faith on the part of PMI. Records disclose that PMI had long offered to pay McLeod his money claims. In their Comment, respondents assert that they offered to pay McLeod the sum of P840,000, as "separation benefits, and not P300,000, if only to buy peace and to forestall any complaint" that McLeod may initiate before the NLRC. McLeod admitted at the hearing before the Labor Arbiter that PMI has made this offer
ATTY. ESCANO: . . . According to your own statement in your Position Paper and I am referring to page 8, your unpaid retirement benefit for fourteen (14) years of service at P60,000.00 per year is P840,000.00, is that correct? WITNESS: That is correct, sir. ATTY. ESCANO: And this amount is correct P840,000.00, according to your Position Paper? WITNESS: That is correct, sir. ATTY. ESCANO: The question I want to ask is, are you aware that this amount was offered to you sometime last year through your own lawyer, my good friend, Atty. Avecilla, who is right here with us? WITNESS: I was aware, sir. ATTY. ESCANO: So this was offered to you, is that correct? WITNESS:

I was told that a fixed sum of P840,000.00 was offered. ATTY. ESCANO: And, of course, the reason, if I may assume, that you declined this offer was that, according to you, there are other claims which you would like to raise against the Respondents which, by your impression, they were not willing to pay in addition to this particular amount? WITNESS: Yes, sir.

ATTY. ESCANO:
The question now is, if the same amount is offered to you by way of retirement which is exactly what you stated in your own Position Paper, would you accept it or not? WITNESS: Not on the concept without all the basic benefits due me, I will refuse. xxx xxx xxx ATTY. ROXAS: QYou mentioned in the cross-examination of Atty. Escano that you were offered the separation pay in 1994, is that correct, Mr. Witness? WITNESS: AI was offered a settlement of P300,000.00 for complete settlement and that was I think in January or February 1994, sir. ATTY. ESCANO: No. What was mentioned was the amount of P840,000.00. WITNESS: What did you say, Atty. Escano? ATTY. ESCANO: The amount that I mentioned was P840,000.00 corresponding to the . . . WITNESS: May I ask that the question be clarified, your Honor? ATTY. ROXAS: QYou mentioned that you were offered for the settlement of your claims in 1994 for P840,000.00, is that right, Mr. Witness?
82

ADuring that period in time, while the petition in this case was ongoing, we already filed a case at that period of time, sir. There was a discussion. To the best of my knowledge, they are willing to settle for P840,000.00 and based on what the Attorney told me, I refused to accept because I believe that my position was not in anyway due to a compromise situation to the benefits I am entitled to. 83

Hence, the awards for exemplary damages and attorney's fees are not proper in the present case.

84

That respondent corporations, in their appeal to the NLRC, did not serve a copy of their memorandum of appeal upon PMI is of no moment. Section 3 (a), Rule VI of the NLRC New Rules of Procedure provides:
Requisites for Perfection of Appeal. (a) The appeal shall be filed within the reglementary period as provided in Section 1 of this Rule; shall be under oath with proof of payment of the required appeal fee and the posting of a cash or surety bond as provided in Section 5 of this Rule; shall be accompanied by a memorandum of appeal . . . and proof of service on the other party of such appeal. (Emphasis supplied)

The "other party" mentioned in the Rule obviously refers to the adverse party, in this case, McLeod. Besides, Section 3, Rule VI of the Rules which requires, among others, proof of service of the memorandum of appeal on the other party, is merely a rundown of the contents of the required memorandum of appeal to be submitted by the appellant. These are not jurisdictional requirements. 85 WHEREFORE, we DENY the petition and AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No. 55130, with the following MODIFICATIONS: (a) the retirement pay of John F. McLeod should be computed at 1/2 month salary for every year of service for 12 years based on his salary rate of P50,495 a month; (b) Patricio L. Lim is absolved from personal liability; and (c) the awards for moral and exemplary damages and attorney's fees are deleted. No pronouncement as to costs. SO ORDERED.

Quisumbing, Tinga and Velasco, Jr., JJ., concur. Carpio-Morales, J., took no part, concurred in assailed decision.

[G.R. Nos. 142732-33. December 4, 2007.] MARILOU S. GENUINO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ RAJKOTWALA, respondents. [G.R. Nos. 142753-54. December 4, 2007.] CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ RAJKOTWALA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and MARILOU GENUINO, respondents.

DECISION

VELASCO, JR., J :
p

The Case This Petition for Review on Certiorari under Rule 45 seeks to set aside the September 30, 1999 Decision 1 and March 31, 2000 Resolution 2 of the Court of Appeals (CA) in the consolidated cases docketed as CA-G.R. SP Nos. 51532 and 51533. The appellate court dismissed the parties' petitions involving the National Labor Relations Commission's (NLRC's) Decision 3 and Resolution, 4 which held that Marilou S. Genuino was validly dismissed by Citibank, N.A. (Citibank). The NLRC likewise ordered the payment of salaries from the time that Genuino was reinstated in the payroll to the date of the NLRC decision. Upon reconsideration, however, the CA modified its decision and held that Citibank failed to observe due process in CA-G.R. SP No. 51532; hence, Citibank should indemnify Genuino in the amount of PhP5,000. Both parties are now before this Court assailing portions of the CA's rulings. In G.R. Nos. 142732-33, Genuino assails the CA's finding that her dismissal was valid. In G.R. Nos. 142753-54, Citibank questions the CA's finding that Citibank violated Genuino's right to procedural due process and that Genuino has a right to salaries. Citibank is an American banking corporation duly licensed to do business in the Philippines. William Ferguson was the Manila Country Corporate Officer and Business Head of the Global Finance Bank of Citibank while Aziz Rajkotwala was the International Business Manager for the Global Consumer Bank of Citibank. 5 Genuino was employed by Citibank sometime in January 1992 as Treasury Sales Division Head with the rank of Assistant Vice-President. She received a monthly compensation of PhP60,487.96, exclusive of benefits and privileges. 6 On August 23, 1993, Citibank sent Genuino a letter charging her with "knowledge and/or involvement" in transactions "which were irregular or even fraudulent." In the same letter, Genuino was informed she was under preventive suspension. 7 Genuino wrote Citibank on September 13, 1993 and asked the bank the following:
a.Confront our client with the factual and legal basis of your charges, and afford her an opportunity to explain;
ACDIcS

b.Substantiate your charge of fraudulent transactions against our client; or if the same cannot be substantiated; c.Correct/repair/compensate the damage you have caused our client.
8

On September 13, 1993, Citibank, through Victorino P. Vargas, its Country Senior Human Resources Officer, sent a letter to Genuino, the relevant portions of which read:
As you are well aware, the bank served you a letter dated August 23, 1993 advising you that ongoing investigations show that you are involved and/or know of irregular transactions which are at the very least in conflict with the bank's interest, and, may even be fraudulent in nature. These transactions are those involving Global Pacific and/or Citibank and the following bank clients, among others: 1.Norma T. de Jesus 2.Carmen Intengan/Romeo Neri 3.Mario Mamon 4.Vienna Ochoa/IETI

5.William Samara 6.Roberto Estandarte 7.Rita Browner 8.Ma. Redencion Sumpaico 9.Cesar Bautista 10.Teddy Keng 11.NDC-Guthrie 12.Olivia Sy In view of the foregoing, you are hereby directed to explain in writing three (3) days from your receipt hereof why your employment should not be terminated in view of your involvement in these irregular transactions. You are also directed to appear in an administrative investigation of the matter which is set on Tuesday, Sept. 21, 1993 at 2:00 P.M. at the HR Conference Room, 6th Floor, Citibank Center. You may bring your counsel if you so desire. 9
AacCHD

Genuino's counsel replied through a letter dated September 17, 1993, demanding for a bill of particulars regarding the charges against Genuino. Citibank's counsel replied on September 20, 1993, as follows:
1.2.[T]he bank has no intention of converting the administrative investigation of this case to a full blown trial. What it is prepared to do is give your client, as required by law and Supreme Court decisions, an opportunity to explain her side on the issue of whether she violated the conflict of interest rule either in writing (which could be in the form of a letter-reply to the September 13, 1993 letter to Citibank, N.A.) or in person, in the administrative investigation which is set for tomorrow afternoon vis-vis the bank clients/parties mentioned in the letter of Citibank, N.A. xxx xxx xxx 2.2.You will certainly not deny that we have already fully discussed with you what is meant by the conflict with the bank's interest vis--vis the bank clients/parties named in the September 13, 1993 letter of Citibank to Ms. Genuino. As we have repeatedly explained to you, what the bank meant by it is that your client and Mr. Dante Santos, using the facilities of their family corporations (Torrance and Global) appear to have participated in the diversion of bank clients' funds from Citibank to, and investment thereof in, other companies and that they made money in the process, in violation of the conflict of law rule. It is her side of this issue that Citibank, N.A. is waiting to receive/hear from Ms. Genuino. 10

Genuino did not appear in the administrative investigation held on September 21, 1993. Her lawyers wrote a letter to Citibank's counsel asking "what bank clients' funds were diverted from the bank and invested in other companies, the specific amounts involved, the manner by which and the date when such diversions were purportedly affected." In reply, Citibank's counsel noted Genuino's failure to appear in the investigation and gave Genuino up to September 23, 1993 to submit her written explanation. Genuino did not submit her written explanation. 11 On September 27, 1993, Citibank informed Genuino of the result of their investigation. It found that Genuino with Santos used "facilities of Genuino's family corporation, namely, Global Pacific, personally and actively participated in the diversion of bank clients' funds to products of other companies that yielded interests higher than what Citibank products offered, and that Genuino and Santos realized substantial financial gains, all in

violation of existing company policy and the Corporation Code, which for your information, carries a penal sanction." 12 Genuino's employment was terminated by Citibank on grounds of (1) serious misconduct, (2) willful breach of the trust reposed upon her by the bank, and (3) commission of a crime against the bank. 13
CAacTH

On October 15, 1993, Genuino filed before the Labor Arbiter a Complaint 14 against Citibank docketed as NLRC Case No. 00-10-06450-93 for illegal suspension and illegal dismissal with damages and prayer for temporary restraining order and/or writ of preliminary injunction. The Labor Arbiter rendered a Decision 15 on May 2, 1994, the dispositive portion of which reads:
WHEREFORE, finding the dismissal of the complainant Marilou S. Genuino to be without just cause and in violation of her right to due process, respondent CITIBANK, N.A., and any and all persons acting on its behalf or by or under their authority are hereby ordered to reinstate complainant immediately to her former position as Treasury Sales Division Head or its equivalent without loss of seniority rights and other benefits, with backwages from August 23, 1993 up to April 30, 1994 in the amount of P493,800.00 (P60,000 x 8.23 mos.) subject to adjustment until reinstated actually or in the payroll. Respondents are likewise ordered to pay complainant the amount of 1.5 Million Pesos and P500,000.00 by way of moral and exemplary damages plus 10% of the total monetary award as attorney's fees. 16

Both parties appealed to the NLRC. The NLRC, in its September 3, 1994 Decision in NLRC-NCR Case No. 0010-06450-93 (CA No. 006947-94), reversed the Labor Arbiter's decision with the following modification:
WHEREFORE, Judgment is hereby rendered (1) SETTING ASIDE the appealed decision of the Labor Arbiter; (2) DECLARING the dismissal of the complainant valid and legal on the ground of serious misconduct and breach of trust and confidence and consequently DISMISSING the complaint a quo; but (3) ORDERING the respondent bank to pay the salaries due to the complainant from the date it reinstated complainant in the payroll (computed at P60,000.00 a month, as found by the Labor Arbiter) up to and until the date of this decision. SO ORDERED.
17

The parties' motions for reconsideration were denied by the NLRC in a resolution dated October 28, 1994. The Ruling of the Court of Appeals

18

On December 6, 1994, Genuino filed a petition for certiorari docketed as G.R. No. 118023 with this Court. Citibank's petition for certiorari, on the other hand, was docketed as G.R. No. 118667. In the January 27, 1999 Resolution, we referred these petitions to the CA pursuant to our ruling in St. Martin Funeral Home v.

NLRC. 19

EHaASD

Genuino's petition before the CA was docketed as CA-G.R. SP No. 51532 while Citibank's petition was docketed as CA-G.R. SP No. 51533. Genuino prayed for the reversal of the NLRC's decision insofar as it declared her dismissal valid and legal. Meanwhile, Citibank questioned the NLRC's order to pay Genuino's salaries from the date of reinstatement until the date of the NLRC's decision. The CA promulgated its decision on September 30, 1999, denying due course to and dismissing both petitions. 20 Both parties filed motions for reconsideration and on March 31, 2000, the appellate court modified its decision and held:

WHEREFORE, save for the MODIFICATION ordering Citibank, N.A. to pay Ms. Marilou S. Genuino five thousand pesos (P5,000.00) as indemnity for non-observance of due process in CA-G.R. SP No. 51532, this Court's 30 September 1999 decision is REITERATED and AFFIRMED in all other respects. SO ORDERED.
21

Hence, we have this petition. The Issue

WHETHER OR NOT THE DISMISSAL OF GENUINO IS FOR A JUST CAUSE AND IN ACCORDANCE WITH DUE PROCESS

In G.R. Nos. 142732-33, Genuino contends that Citibank failed to observe procedural due process in terminating her employment. This failure is allegedly an indication that there were no valid grounds in dismissing her. In G.R. Nos. 142753-54, Citibank questions the ruling that Genuino has a right to reinstatement under Article 223 of the Labor Code. Citibank contends that the Labor Arbiter's finding is not supported by evidence; thus, the decision is void. Since a void decision cannot give rise to any rights, Citibank opines that there can be no right to payroll reinstatement. The dismissal was for just cause but lacked due process We affirm that Genuino was dismissed for just cause but without the observance of due process. In a string of cases, 22 we have repeatedly said that the requirement of twin notices must be met. In the recent case of King of Kings Transport, Inc. v. Mamac, we explained:
HTASIa

To clarify, the following should be considered in terminating the services of employees: (1)The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against the employees. (2)After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the management. During the hearing or conference, the employees are given the chance to defend themselves personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an amicable settlement. (3)After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment. 23

The Labor Arbiter found that Citibank failed to adequately notify Genuino of the charges against her. On the contrary, the NLRC held that "the function of a 'notice to explain' is only to state the basic facts of the employer's charges, which . . . the letters of September 13 and 17, 1993 in question have fully served." 24
SCaEcD

We agree with the CA that the dismissal was valid and legal, and with its modification of the NLRC ruling that PhP5,000 is due Genuino for failure of Citibank to observe due process. The Implementing Rules and Regulations of the Labor Code provide that any employer seeking to dismiss a worker shall furnish the latter a written notice stating the particular acts or omissions constituting the grounds for dismissal. 25 The purpose of this notice is to sufficiently apprise the employee of the acts complained of and enable him/her to prepare his/her defense. In this case, the letters dated August 23, September 13 and 20, 1993 sent by Citibank did not identify the particular acts or omissions allegedly committed by Genuino. The August 23, 1993 letter charged Genuino with having "some knowledge and/or involvement" in some transactions "which have the appearance of being irregular at the least and may even be fraudulent." The September 13, 1993 letter, on the other hand, mentioned "irregular transactions" involving Global Pacific and/or Citibank and 12 bank clients. Lastly, the September 20, 1993 letter stated that Genuino and "Mr. Dante Santos, using the facilities of their family corporations (Torrance and Global) appear to have participated in the diversion of bank clients' funds from Citibank to, and investment thereof in, other companies and that they made money in the process, in violation of the conflict of law rule [sic]." The extent of Genuino's alleged knowledge and participation in the diversion of bank's clients' funds, manner of diversion, and amounts involved; the acts attributed to Genuino that conflicted with the bank's interests; and the circumstances surrounding the alleged irregular transactions, were not specified in the notices/letters. While the bank gave Genuino an opportunity to deny the truth of the allegations in writing and participate in the administrative investigation, the fact remains that the charges were too general to enable Genuino to intelligently and adequately prepare her defense. The two-notice requirement of the Labor Code is an essential part of due process. The first notice informing the employee of the charges should neither be pro-formanor vague. It should set out clearly what the employee is being held liable for. The employee should be afforded ample opportunity to be heard and not mere opportunity. As explained in King of Kings Transport, Inc., ample opportunity to be heard is especially accorded the employees sought to be dismissed after they are specifically informed of the charges in order to give them an opportunity to refute such accusations leveled against them. Since the notice of charges given to Genuino is inadequate, the dismissal could not be in accordance with due process. While we hold that Citibank failed to observe procedural due process, we nevertheless find Genuino's dismissal justified. Citibank maintains that Genuino was aware of the bank's Corporate Policy Manual specifically Chapter 3 on "Principles and Policies" with regard to avoiding conflicts of interest. She had even submitted a Conflict of Interest Survey to Citibank. In that survey, she denied any knowledge of engaging in transactions in conflict with Citibank's interests. Citibank, for its part, submitted evidence showing 99% ownership of Global stocks by Genuino and Santos. In July 1993, Citibank discovered that Genuino and Santos were instrumental in the withdrawal by bank depositors of PhP120 million of investments in Citibank. This amount was subsequently invested in another foreign bank, Internationale Nederlanden Bank, N.V., under the control of Global and Torrance, another corporation controlled by Genuino and Santos. 26Citibank also filed two criminal complaints against Genuino and Santos for violations of the conflict of interest rule provided in Sec. 31 in relation to Sec. 144 27 of the Corporation Code. 28
ITADaE

We note also that during the proceedings before the Labor Arbiter, Citibank presented the following affidavits, with supporting documentary evidence against Genuino:

1)Vic Lim, an officer of Citibank who investigated the anomalies of Genuino and Santos, concluded that Genuino and Santos realized substantial financial gains out of the transfer of monies as supported by the following documents:
1)[S]ome of the Term Investment Applications (TIA), Applications for Money Transfer, all filled up in the handwriting of Ms. Marilou Genuino. These documents cover/show the transfer of the monies of the Citibank clients from their money placements/deposits with Citibank, N.A. to Global and/or Torrance. 2)[S]ome of the checks that were drawn by Global and Torrance against their Citibank accounts in favor of the other companies by which Global and Torrance transferred the monies of the bank clients to the other companies. 3)[S]ome of the checks drawn by the other companies in favor of Global or Torrance by which the other companies remitted back to Global and/or Torrance the monies of the bank clients concerned. 4)[S]ome of the checks drawn by Global and Torrance against their Citibank accounts in favor of Mr. Dante Santos and Ms. Marilou Genuino, covering the shares of the latter in the spreads or margins Global and Torrance had derived from the investments of the monies of the Citibank clients in the other companies. 5)[S]ome of the checks drawn by Torrance and Global in favor of Citibank clients by which Global and Torrance remitted back to said bank clients their principal investments (or portions thereof) and the rates of interests realized from their investment placed with the other companies less the spreads made by Global and/or Torrance, Mr. Dante L. Santos and Ms. Marilou Genuino. 29

In Lim's Reply-Affidavit with attached supporting documents, he stated that out of the competing money placement activities, Genuino and Santos derived financial gains amounting to PhP2,027,098.08 and PhP2,134,863.80, respectively. 30
AcCTaD

2)Marilyn Bautista, a Treasury Sales Specialist in the Treasury Department of the Global Consumer Bank of Citibank and whose superiors were Genuino and Santos, stated that:
Based on documents that have subsequently come to my knowledge, I realized that the two (Genuino and Dante L. Santos), with the active cooperation of Redencion Sumpaico (the Accountant of Global) had . . . brokered for their own benefits and/or of Global the sale of the financial products of Citibank called "Mortgage Backed Securities" or MBS and in the process made money at the expense of the (Citibank) investors and the bank. 31

3)Patrick Cheng attested to other transactions from which Genuino, Santos, and Global brokered the Mortgage Backed Securities (MBS), namely: ICC/Nemesio and Olivia Sy transaction, San Miguel Corporation/ICC, CIPI/Asiatrust, FAPE, PERAA and Union Bank, and NDC-Guthrie transactions. 32 In her defense, Genuino asserts that Citibank has no evidence of any wrongful act or omission imputable to her. According to her, she did not try to conceal from the bank her participation in Global and she even disclosed the information when Global designated Citibank as its depositary. She avers there was no conflict of interest because Global was not engaged in Citibank's accepting deposits and granting loans, nor in money placement activities that compete with Citibank's activities; and neither does Citibank invest in the outlets used by Global. She claims that the controversy between Santos and Global had already been amicably resolved in a Compromise Agreement between the two parties. 33 Genuino further asserts that the letter of termination did not indicate what existing company policy had been violated, and what acts constituted serious misconduct or willful breach of the trust reposed by the bank. She

claims that Lim's testimony that the checks issued by Global in her name were profits was malicious, hearsay, and lacked factual basis. She also posits that as to the withdrawals of clients, she could not possibly dictate on the depositors. She pointed out that the depositors even sent Citibank a letter dated August 25, 1993 informing the bank that the withdrawals were made upon their express instructions. Genuino avers the bank's loss of confidence should have to be proven by substantial evidence, setting out the facts upon which loss of confidence in the employee may be made to rest. 34 Contrary to the Labor Arbiter's finding, the NLRC found the following facts supported by the records:
a)Respondent bank has a conflict of interest rule, embodied in Chapter 3 of its Corporate Policy Manual, prohibiting the officers of the bank from engaging in business activities, situations or circumstances that are in conflict with the interest of the bank.
SAaTHc

b)Complainant was familiar with said conflict of interest rule of the bank and of her duty to disclose to the bank in writing any personal circumstances which conflicts or appears to be in conflict with Citibank's interest. c)Complainant is a substantial stockholder of Global Pacific, but she did not disclose fact to the bank. d)Global Pacific is engaged in money placement business like Citibank, N.A.; that in carrying out its said money placement business, it used funds belonging to Citibank clients which were withdrawn from Citibank with participation of complainant and Dante L. Santos. In one transaction of this nature, P120,000,000.00 belonging to Citibank clients was withdrawn from Citibank, N.A. and placed in another foreign bank, under the control of Global Pacific. Said big investment money was returned to Citibank, N.A. only when Citibank, N.A. filed an injunction suit. e)Global Pacific also engaged in the brokering of the ABS or MBS, another financial product of Citibank. It was the duty of complainant Genuino and Dante L. Santos to sell said product on behalf of Citibank, N.A. and for Citibank N.A.'s benefit. In the brokering of the ABS or MBS, Global Pacific made substantial profits which otherwise would have gone to Citibank, N.A. if only they brokered the ABS or MBS for and on behalf of Citibank, N.A.

Art. 282 (c) of the Labor Code provides that an employer may terminate an employment for fraud or willful breach by the employee of the trust reposed in him/her by his/her employer or duly authorized representative. In order to constitute as just cause for dismissal, loss of confidence should relate to acts inimical to the interests of the employer. 35 Also, the act complained of should have arisen from the performance of the employee's duties. 36 For loss of trust and confidence to be a valid ground for an employee's dismissal, it must be substantial and not arbitrary, and must be founded on clearly established facts sufficient to warrant the employee's separation from work. 37 We also held that:
[L]oss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt of the employee's misconduct is not required. It is sufficient if there is some basis for such loss of confidence or if the employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him unworthy of the trust and confidence demanded by his position. 38

As Assistant Vice-President of Citibank's Treasury Department, Genuino was tasked to solicit investments, and peso and dollar deposits for, and keep them in Citibank; and to sell and/or push for the sale of Citibank's financial products, such as the MBS, for the account and benefit of Citibank. 39 She held a position of trust and confidence. There is no way she could deny any knowledge of the bank's policies nor her understanding of these policies as reflected in the survey done by the bank. She could not likewise feign ignorance of the businesses of Citibank, and of Global and Torrance. Assuming that Citibank did not engage in the same securities dealt with by Global and Torrance; nevertheless, it is to the interests of Citibank to retain its clients and continue investing in Citibank. Curiously, Genuino did not even dissuade the depositors from withdrawing

their monies from Citibank, and was even instrumental in the transfers of monies from Citibank to a competing bank through Global and Torrance, the corporations under Genuino's control.
TcHCDI

All the pieces of evidence compel us to conclude that Genuino did not have her employer's interest. The letter of the bank's clients which attested that the withdrawals from Citibank were made upon their instructions is of no import. It did not explain why they preferred to invest in Global and Torrance, nor did it mention that Genuino tried to dissuade them from withdrawing their deposits. Genuino herself admitted her relationship with some of the depositors in her affidavit, to wit:
6.Contrary to the allegations of Mr. Lim in par. 6.1 up to 8.1 concerning the alleged scheme employed in the questioned transactions, insinuating an "in" and "out" movement of funds of the seven (7) depositors, the truth is that after said "depositors" instructed/authorized us to effect the withdrawal of their respective monies from Citibank to attain the common goal of higher yields utilizing Global as the vehicle for bulk purchases of securities or papers not dealt with/offered by Citibank, said pooled investment remained with Global, and were managed through Global for over a year until the controversy arose; 10.The seven (7) "depositors" mentioned in Mr. Lim's Affidavits are the long-time friends of affiant Genuino who had formed a loosely constituted investment group for purposes of realizing higher yields derivable from pooled investments, and as the advisor of the group she had in effect chosen Citibank as the initial repository of their respective monies prior to the implementation of plans for pooled investments under Global. Hence, she had known and dealt with said "depositors" before they became substantial depositors of Citibank. She did not come across them because of Citibank. 40 (Emphasis supplied.)

All told, Citibank had valid grounds to dismiss Genuino on ground of loss of confidence. In view of Citibank's failure to observe due process, however, nominal damages are in order but the amount is hereby raised to PhP30,000 pursuant to Agabon v. NLRC. The NLRC's order for payroll reinstatement is set aside. In Agabon, we explained:
DSEaHT

The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules. 41

Thus, the award of PhP5,000 to Genuino as indemnity for non-observance of due process under the CA's March 31, 2000 Resolution in CA-G.R. SP No. 51532 is increased to PhP30,000. Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the salaries due to the complainant from the date it reinstated complainant in the payroll (computed at P60,000.00 a month, as found by the Labor Arbiter) up to and until the date of this decision," the Court hereby cancels said award in view of its finding that the dismissal of Genuino is for a legal and valid ground. Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal pursuant to Art. 223, paragraph 3 of the Labor Code, which states:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices.42 However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.
IDSEAH

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision. WHEREFORE, the petitions of Genuino in G.R. Nos. 142732-33 are DENIED for lack of merit. The petitions of Citibank in G.R. Nos. 142753-54 are GRANTED. The September 30, 1999 Decision and March 31, 2000 Resolution in CA-G.R. SP Nos. 51532 and 51533 are AFFIRMED with MODIFICATION that Genuino is entitled to PhP30,000 as indemnity for non-observance of due process. Item (3) in the dispositive portion of the September 3, 1994 Decision of the NLRC in NLRC-NCR Case No. 00-10-06450-93 (CA No. 006947-94) is DELETED and SET ASIDE, and said NLRC decision is MODIFIED as follows:
WHEREFORE, Judgment is hereby rendered (1) SETTING ASIDE the appealed decision of the Labor Arbiter; (2) DECLARING the dismissal of the complainant valid and legal on the ground of serious misconduct and breach of trust and confidence and consequently DISMISSING the complaint a quo; but (3)ORDERING the respondent bank to pay the complainant nominal damages in the amount of PhP30,000.

SO ORDERED.

Quisumbing, Carpio, Carpio-Morales and Tinga, JJ., concur.

[G.R. No. 164856. January 20, 2009.] JUANITO A. GARCIA and ALBERTO J. DUMAGO, petitioners, vs. PHILIPPINE AIRLINES, INC., respondent.

DECISION

CARPIO-MORALES, J :
p

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004 Resolution of the Court of Appeals 1 in CA-G.R. SP No. 69540 which granted the petition for certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners' Motion for Reconsideration, respectively. The dispositive portion of the assailed Decision reads:
ECDaTI

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE. SO ORDERED.
2

The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners 3 after they were allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL Technical Center's Toolroom Section on July 24, 1995. After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of Discipline, 4 prompting them to file a complaint for illegal dismissal and damages which was, by Decision of January 11, 1999, 5 resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the decision. Prior to the promulgation of the Labor Arbiter's decision, the Securities and Exchange Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial losses, under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999. From the Labor Arbiter's decision, respondent appealed to the NLRC which, by Resolution of January 31, 2000, reversed said decision and dismissed petitioners' complaint for lack of merit. 6 Petitioners' Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of Judgment was issued on July 13, 2000. 7
TEcCHD

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting the reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners moved to release the garnished amount. In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action. Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter's decision (the first ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides a reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second ground). By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz.:
Since petitioners' claim against PAL is a money claim for their wages during the pendency of PAL's appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners' case for illegal dismissal and should instead have directed them to lodge their claim before PAL's receiver.

However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar circumstances of the case that their dismissal was eventually held valid with only the matter of reinstatement pending appeal being the issue this Court deems it legally expedient to suspend the proceedings in this case. WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.
HEITAD

SO ORDERED.

(Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by Order of September 28, 2007, granted its request to exit from rehabilitation proceedings. 9 In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining issue for consideration, which is whether petitioners may collect their wages during the period between the Labor Arbiter's order of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter's decision. On this score, the Court's attention is drawn to seemingly divergent decisions concerning reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora, 10 while on the other is the recent case of Genuino v. National Labor Relations Commission. 11 At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which reads:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shallimmediately be executory, pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis and underscoring supplied)

The view as maintained in a number of cases is that:

cSIADa

. . . [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period. 12 (Emphasis in the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply therewith. 13 The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund. Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision. 14 (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to be valid, and to do so would constitute unjust enrichment. Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases, 15 the Court did not order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of the reinstatement order.
SCIAaT

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale of reinstatement pending appeal.
. . . [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man. xxx xxx xxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability. xxx xxx xxx . . . In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal. xxx xxx xxx . . . Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family. 16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory precepts portray the otherwise "unjust" situation as a condition affording full protection to labor. Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more

than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.
SADECI

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior toGenuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon. Further, the Genuinoruling not only disregards the social justice principles behind the rule, but also institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter's decision ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond premiums. This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not stay the execution for reinstatement." 17 In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis--vis the effect of a reversal on appeal. Respondent insists that with the reversal of the Labor Arbiter's Decision, there is no more basis to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the present case, the writ of execution therein was secured prior to the reversal of the Labor Arbiter's decision. The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there without considering the cause of the delay. Second,it requires the issuance of a writ of execution despite the immediately executory nature of the reinstatement aspect of the decision. In Pioneer Texturing * Corp. v. NLRC, 18 which was cited in Panuncillo v. CAP Philippines, Inc., 19 the Court observed:
. . . The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be

immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of

reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223 , i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. . . . In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic exercise. . . . 20 (Italics in the original; emphasis and underscoring supplied)
HDCAaS

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. 21 It settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-admit

them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employee's salaries. 22

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by the appellate court in the assailed issuances. The Court sustains the appellate court's finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for respondent to exercise its option under the circumstances. The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution needs no further elaboration. Reinstatement pending appeal necessitates its immediate execution during the pendency of the appeal, if the law is to serve its noble purpose. At the same time, any attempt on the part of the employer to evade or delay its execution, as observed in Panuncillo and as what actually transpired in Kimberly, 23 Composite, 24 Air Philippines, 25 and Roquero, 26 should not be countenanced. After the labor arbiter's decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer.
SIaHDA

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer's unjustified act or omission. If the delay is due to the employer's unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter's decision. In Genuino, there was no showing that the employer refused to reinstate the employee, who was the Treasury Sales Division Head, during the short span of four months or from the promulgation on May 2, 1994 of the Labor Arbiter's Decision up to the promulgation on September 3, 1994 of the NLRC Decision. Notably, the former NLRC Rules of Procedure did not lay down a mechanism to promptly effectuate the self-executory order of reinstatement, making it difficult to establish that the employer actually refused to comply. In a situation like that in International Container Terminal Services, Inc. v. NLRC 27 where it was alleged that the employer was willing to comply with the order and that the employee opted not to pursue the execution of the order, the Court upheld the self-executory nature of the reinstatement order and ruled that the salary automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later discovered that the employee indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that scenario where the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed to act upon the employee's motion for the issuance of a writ of execution may no longer adversely affect the cause of the dismissed employee in view of the selfexecutory nature of the order of reinstatement. 28

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to submit a report of compliance within 10 calendar days from receipt of the Labor Arbiter's decision, 29 disobedience to which clearly denotes a refusal to reinstate. The employee need not file a motion for the issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is hardly any difficulty in determining the employer's intransigence in immediately complying with the order. In the case at bar, petitioners exerted efforts 30 to execute the Labor Arbiter's order of reinstatement until they were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the NLRC

of the Labor Arbiter's decision. Technically, there was still actual delay which brings to the question of whether the delay was due to respondent's unjustified act or omission. It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was justified depends on the onset of the exigency of corporate rehabilitation.
ADaECI

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended. 31 As stated early on, during the pendency of petitioners' complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver. Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is ministerial and mandatory. 32 This injunction or suspension of claims by legislative fiat 33 partakes of the nature of a restraining order that constitutes a legal justification for respondent's non-compliance with the reinstatement order. Respondent's failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondent's obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach. While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the dismissed employee and his family, it does not contemplate the period when the employercorporation itself is similarly in a judicially monitored state of being resuscitated in order to survive. The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a competent court and not formulated for the first time in this case by respondent. More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation. Respondent was, during the period material to the case, effectively deprived of the alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to optimize the utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver may decide otherwise, not to mention the subsistence of the injunction on claims. In sum, the obligation to pay the employee's salaries upon the employer's failure to exercise the alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of corporate rehabilitation.
cCTAIE

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and the Notice of Garnishment are concerned, the Court finds no reversible error. SO ORDERED.

Puno, C.J., Ynares-Santiago, Carpio, Austria-Martinez, Corona, Azcuna, Tinga, Nachuraand Leonardo-de Castro, JJ., concur.

Quisumbing, J., with Separate Opinion. Chico-Nazario, J., I join the concurring and dissenting opinion of J. Brion. Velasco, Jr., J., I concur in the result. With separate opinion. Brion, J., with concurring and dissenting opinion.

[G.R. No. 158693. November 17, 2004.] JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J :
p

This petition for review seeks to reverse the decision 1 of the Court of Appeals dated January 23, 2003, in CAG.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00. Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2, 1992 2 until February 23, 1999 when they were dismissed for abandonment of work. Petitioners then filed a complaint for illegal dismissal and payment of money claims 3 and on December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of: 1.Jenny M. Agabon P56,231.93 2.Virgilio C. Agabon 56,231.93 and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of hiring up to November 29, 1999. Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.

SO ORDERED.

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also denied for lack of evidence. 5 Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals. The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00.
aIcCTA

SO ORDERED.

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

Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing. 8 Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work. 9 In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not report for work because they had subcontracted to perform installation work for another company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the illegal dismissal case. 10 It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed by the Court of Appeals. 11 However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and examine for itself the questioned findings. 12 Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just cause. They had abandoned their employment and were already working for another employer. To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give the employee the opportunity to be heard and to defend himself. 13 Article 282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's representative in connection with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)

commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing. Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. 14 It is a form of neglect of duty, hence, a just cause for termination of employment by the employer. 15 For a valid finding of abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified. 16 In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company. Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private respondent. This was not the first time they did this. In January 1996, they did not report for work because they were working for another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a relevant consideration in determining the penalty that should be meted out to him. 17 In Sandoval Shipyard v. Clave, 18 we held that an employee who deliberately absented from work without leave or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job. We should apply that rule with more reason here where petitioners were absent because they were already working in another company. The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct 19 and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests. 20 After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were observed. The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of termination of employment, the
following standards of due process shall be substantially observed: I.For termination of employment based on just causes as defined in Article 282 of the Code: (a)A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side;
CaEATI

(b)A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c)A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee's last known address.

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

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed. In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability. In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement. In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process. The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employee's last known address. 21 Thus, it should be held liable for non-compliance with the procedural requirements of due process. A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment termination in the light of Serrano v. National Labor Relations Commission. 22 Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission, 23 we reversed this long-standing rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding backwages "may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to observe." 24 We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employment. However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer. 25

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

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause. The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause.

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

This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed. The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the doctrine. To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our entire history. Due process is that which comports with the deepest notions of what is fair and right and just. 26 It is a constitutional restraint on the legislative as well as on the executive and judicial powers of the government provided by the Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10. 27 Breaches of these due process requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply with constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and

Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing. In Sebuguero v. National Labor Relations Commission, 28 the dismissal was for a just and valid cause but the employee was not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the employer. In Nath v. National Labor Relations Commission, 29 it was ruled that even if the employee was not given due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause, albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorney's fees. Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations Commission, 30 which opinion he reiterated in Serrano, stated:
C.Where there is just cause for dismissal but due process has not been properly observed by an employer, it would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally constitute the two-part due process requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would be no more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the employee. . . . 31

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

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a

month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy. The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case. 32 Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned. The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. 33 It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the requirements of due process were complied with, would undoubtedly result in a valid dismissal. An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number." 34

the necessity of interdependence among diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and dispense justice with an even hand in every case:
We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for justice must always be served for the poor and the rich alike, according to the mandate of the law. 35

Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity and economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer. Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission. 36 The indemnity to be imposed should be stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 37

As enunciated by this Court in Viernes v. National Labor Relations Commissions, 38 an employer is liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee's right to statutory due process which was violated by the employer. 39 The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. 40 Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules. Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay, service incentive leave pay and 13th month pay. We are not persuaded. We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions. As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but in the custody and absolute control of the employer. 41 In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in the years disputed. 42 Allegations by private respondent that it does not operate during holidays and that it allows its employees 10 days leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners. Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in the form of the 13th month pay to employees not already receiving the same 43 so as "to further protect the level of real wages from the ravages of world-wide inflation." 44 Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit:
(f)"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. . . ."

from which an employer is prohibited under Article 113 45 of the same Code from making any deductions without the employee's knowledge and consent. In the instant case, private respondent failed to show that

the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims against private respondent.
STCDaI

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

Quisumbing, Carpio, Carpio-Morales, Callejo, Sr. and Azcuna, JJ ., concur. Davide, Jr., C .J ., I join Mr. Justice Puno in his dissenting opinion. Puno and Panganiban, JJ ., See dissenting opinion. Sandoval-Gutierrez, J ., I join Justice Puno in his dissent. Austria-Martinez, J ., I join in the separate opinion of Justice Tinga. Corona, J ., is on leave. Tinga, J ., In the result, per separate opinion. Chico-Nazario, J ., I concur in J. Puno's dissenting opinion. Garcia, J ., I join J. Puno's dissenting opinion.

[G.R. No. 164662. February 18, 2013.] MARIA LOURDES C. DE JESUS, petitioner, vs. HON. RAUL T. AQUINO, PRESIDING COMMISSIONER, NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION, QUEZON CITY, AND SUPERSONIC SERVICES, INC., respondents. [G.R. No. 165787. February 18, 2013.]

SUPERSONIC SERVICES, INC., petitioner, vs. MARIA LOURDES C. DE JESUS, respondent.

DECISION

BERSAMIN, J :
p

The dismissal of an employee for a just or authorized cause is valid despite the employer's non-observance of the due process of law the Labor Code has guaranteed to the employee. The dismissal is effective against the employee subject to the payment by the employer of an indemnity. Under review on certiorari is the July 23, 2004 Decision promulgated in C.A.-G.R. SP No. 81798 entitled Maria

Lourdes C. De Jesus v. Hon. Raul T. Aquino, Presiding Commissioner, NLRC, Second Division, Quezon City, and Supersonic Services, Inc., 1 whereby the Court of Appeals (CA) affirmed the validity of the dismissal from her
employment of Maria Lourdes C. De Jesus (petitioner in G.R. No. 164622), but directed her employer, Supersonic Services, Inc. (Supersonic), to pay her full backwages from the time her employment was terminated until the finality of the decision because of the failure of Supersonic to comply with the two-written notice rule, citing the ruling in Serrano v. National Labor Relations Commission. 2 Antecedents The antecedent facts, as summarized by the CA, follow:
On February 20, 2002, petitioner Ma. Lourdes De Jesus (De Jesus for brevity) filed with the Labor Arbiter a complaint for illegal dismissal against private respondents Supersonic Services, Inc., (Supersonic for brevity), Pakistan Airlines, Gil Puyat, Jr. and Divina Abad Santos praying for the payment of separation pay, full backwages, moral and exemplary damages, etc.
DCAHcT

De Jesus alleged that: she was employed by Supersonic since February 1976 until her illegal dismissal of March 15, 2001; from 1976 to 1992, she held the position of reservation staff, and from 1992 until her illegal dismissal on March 15, 2001, she held the position of Sales Promotion Officer where she solicited clients for Supersonic and sold plane tickets to various travel agencies on credit; on March 12, 2001, she had an emergency hysterectomy operation preceded by continuous bleeding; she stayed at the Makati Medical Center for three (3) days and applied for a sixty-(60) day leave in the meantime; on June 1, 2001, she went to Supersonic and found the drawers of her desk opened and her personal belongings packed, without her knowledge and consent; while there, Divina Abad Santos (Santos for brevity), the company's general manager, asked her to sign a promissory note and directed her secretary, Cora Malubay (Malubay for brevity) not to allow her to leave unless she execute a promissory note; she was later forced to execute a promissory note which she merely copied from the draft prepared by Santos and Malubay; she was also forced to indorse to Supersonic her SSS check in the amount of P25,000.00 which represents her benefits from the hysterectomy operation; there was no notice and hearing nor any opportunity given her to explain her side prior to the termination of her employment; Supersonic even filed a case for Estafa against her for her alleged failure to remit collections despite the fact that she had completely remitted all her collections; and the termination was done in bad faith and in violation of due process. Supersonic countered that: as Sales Promotion Officer, De Jesus was fully authorized to solicit clients and receive payments for and in its behalf, and as such, she occupied a highly confidential and financially sensitive position in the company; De Jesus was able to solicit several ticket purchases for Pakistan International Airlines (PIA) routed from Manila to various destinations abroad and received all payments for the PIA tickets in its behalf; for the period starting May 30, 2000 until September 28, 2000, De Jesus issued PIA tickets to Monaliza Placement Agency, a client under her special solicitation and account, in the amount of U.S.$15,085.00; on January 24, 2001, the company's general manager

sent a memorandum to De Jesus informing her of the official endorsement of collectibles from clients under her account; in March 2001, another memorandum was issued to De Jesus reminding her to collect payments of accounts guaranteed by her and which had been past due since the year 2000; based on the company records, an outstanding balance of U.S.$36,168.39 accumulated under the account of De Jesus; after verifications with its clients, it discovered that the amount of U.S.$36,168.39 were already paid to De Jesus but this was not turned over and duly accounted for by her; hence, another memorandum was issued to De Jesus directing her to explain in writing why she should not be dismissed for cause for failure to account for the total amount of U.S.$36,168.39; De Jesus was informed that her failure to explain in writing shall be construed that she misappropriated said amount for her own use and benefit to the damage of the company; De Jesus was likewise verbally notified of the company's intention to dismiss her for cause; after due investigation and confrontation, De Jesus admitted that she received the U.S.$36,168.39 from their clients and even executed a promissory note in her own handwriting acknowledging her obligation; she was fully aware of her dismissal and even obligated herself to offset her obligation with any amount she would receive from her retirement; when De Jesus failed to comply with her promise to settle her obligation, a demand letter was sent to her; because of her persistent failure to settle the unremitted collections, it was constrained to suspend her as a precautionary measure and to protect its interests; despite demands, De Jesus failed to fulfill her promise, hence, a criminal case for estafa was filed against her; and in retaliation to the criminal case filed against her, she filed this illegal dismissal case. 3
STcDIE

After due proceedings, on October 30, 2002, the Labor Arbiter ruled against De Jesus, 4 declaring her dismissal to be for just cause and finding that she had been accorded due process of law. Aggrieved, De Jesus appealed to the National Labor Relations Commission (NLRC), insisting that she had not been afforded the opportunity to explain her side. On July 31, 2003, however, the NLRC rendered its Resolution, dismissing De Jesus' appeal for its lack of merit, stating:
5

affirming the Labor Arbiter's Decision and

Records show that pursuant to a Memorandum dated May 12, 2001, complainant was required to explain in writing why she should not be dismissed from employment for her failure to account for the cash collections in her custody (Records, p. 37). In a letter dated June 1, 2001, complainant acknowledged her failure to effect a turn-over of the amount of US$36,168.39 to the respondent (Records, p. 40). More than this, she offered no explanation for her failure to immediately account for her collections. Further, her allegation of duress may not be accorded credence, there being no evidence as to the circumstances under which her consent was allegedly vitiated. Having been given the opportunity to explain her side, complainant may not successfully claim that she was denied due process. Further, her admission and other related evidence, particularly the finding of a prima facie case for estafa against her, and corroborative statements from respondent's client, sufficiently controvert complainant's assertion that no just cause existed for the dismissal. WHEREFORE, premises considered, the decision under review is AFFIRMED, and complainant's appeal, DISMISSED, for lack of merit. SO ORDERED.

The NLRC denied the Motion for Reconsideration filed by De Jesus on October 30, 2003.

De Jesus brought a petition for certiorari to the CA, charging the NLRC with committing grave abuse of discretion amounting to lack or excess of jurisdiction in finding that she had not been denied due process; and in finding that her dismissal had been for just cause. On July 23, 2004, the CA promulgated its assailed decision,
The petition is partly meritorious.
EHCaDS

relevantly stating as follows:

In termination of employment based on just cause, it is not enough that the employee is guilty of misfeasance towards his employer, or that his continuance in service is patently inimical to the employer's interest. The law requires the employer to furnish the employee concerned with two written notices one, specifying the ground or grounds for termination and giving said employee reasonable opportunity within which to explain his side, and another, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In addition to this, a hearing or conference is also required, whereby the employee may present evidence to rebut the accusations against him. There appears to be no dispute upon the fact that De Jesus failed to remit and account for some of her collections. This she admitted and explained in her letters dated April 5, 2001 and May 15, 2001 to Santos, the company's general manager. Without totally disregarding her allegations of duress in executing the promissory note, the facts disclose therein also coincide with the fact that De Jesus was somehow remiss in her duties. Considering that she occupied a confidential and sensitive position in the company, the circumstances presented fairly justified her termination from employment based on just cause. De Jesus' failure to fully account her collections is sufficient justification for the company to lose its trust and confidence in her. Loss of trust and confidence as a ground for dismissing an employee does not require proof beyond reasonable doubt. It is sufficient if there is "some basis" for such loss of confidence, or if the employer has reasonable grounds to believe that the employee concerned is responsible for the misconduct, as to be unworthy of the trust and confidence demanded by his position. Nonetheless, while this Court is inclined to rule that De Jesus' dismissal was for just cause, the manner by which the same was effected does not comply with the procedure outlined under the Labor Code and as enunciated in the landmark case of Serrano vs. NLRC. The evidence on record is bereft of any indicia that the two written notices were furnished to De Jesus prior to her dismissal. The various memoranda given her were not the same notices required by law, as they were mere internal correspondence intended to remind De Jesus of her outstanding accountabilities to the company. Assuming for the sake of argument that the memoranda furnished to De Jesus may have satisfied the minimum requirements of due process, still, the same did not satisfy the notice requirement under the Labor Code because the intention to sever the employee's services must be made clear in the notice. Such was not apparent from the memoranda. As the Supreme Court held in Serrano, the violation of the notice requirement is not strictly a denial of due process. This is because such notice is precisely intended to enable the employee not only to prepare himself for the legal battle to protect his tenure of employment, but also to find other means of employment and ease the impact of the loss of his job and, necessarily, his income.
acHDTA

Conformably with the doctrine laid down in Serrano vs. NLRC, the dismissal of De Jesus should therefore be struck as ineffectual. WHEREFORE, premises considered, the Resolutions dated July 31, 2003 and October 30, 2003 of the NLRC, Second Division in NLRC NCR 30-02-01058-02 (CA NO. 033714-02) are hereby MODIFIED, in that while the dismissal is hereby held to be valid, the same must declared ineffectual. As a consequence thereof, Supersonic is hereby required to pay petitioner Maria Lourdes De Jesus full backwages from the time her employment was terminated up to the finality of this decision. SO ORDERED.

De Jesus appealed by petition for review on certiorari to the Court (G.R. No. 164662), while Supersonic first sought the reconsideration of the Decision in the CA. Upon the denial of its motion for reconsideration on October 21, 2004, Supersonic likewise appealed to the Court by petition for review on certiorari (G.R. No. 165787). The appeals were consolidated on October 5, 2005. 8 In G.R. No. 164662, De Jesus avers that:

I.The Honorable Court of Appeals erred in finding that respondent Supersonic is liable only on the backwages and not for the damages prayed for. II.The Honorable Court of Appeals erred in finding that the dismissal was valid and at the same time, declaring it ineffectual. 9

In G.R. No. 165787, Supersonic ascribes the following errors to the CA, to wit:
I.Respondent Court of Appeals committed serious errors which are not in accordance with law and applicable decisions of the Honorable Supreme Court when it concluded that the two-notice requirement has not been complied with when respondent De Jesus was terminated from service. II.Respondent Court of Appeals committed serious errors by concluding that the Serrano Doctrine applies squarely to the facts and legal issues of the present case which are contrary to the law and jurisprudence.
aIcETS

III.Serrano Doctrine has already been abandoned in the case of Agabon v. NLRC, which is prevailing and landmark doctrine applicable in the resolution of the present case. IV.Respondent Court of Appeals committed serious errors by disregarding the law and jurisprudence when it awarded damages to private respondent which is excessive and unduly penalized petitioner SSI. 10

Based on the foregoing, the decisive issues to be passed upon are: (1) Whether or not Supersonic was justified in terminating De Jesus' employment; (2) Whether or not Supersonic complied with the two-written notice rule; and (3) Whether or not De Jesus was entitled to full backwages and damages. Ruling We partially grant the petition for review of Supersonic in G.R. No. 165787. Anent the first issue, Supersonic substantially proved that De Jesus had failed to remit and had misappropriated the amounts she had collected in behalf of Supersonic. In that regard, the factual findings of the Labor Arbiter and NLRC on the presence of the just cause for terminating her employment, being already affirmed by the CA, are binding if not conclusive upon this Court. There being no cogent reason to disturb such findings, the dismissal of De Jesus was valid. Article 282 of the Labor Code enumerates the causes by which the employer may validly terminate the employment of the employee, viz.:
Article 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;
STcHEI

(c)Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d)Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and

(e)Other causes analogous to the foregoing.

The CA observed that De Jesus had not disputed her failure to remit and account for some of her collections, for, in fact, she herself had expressly admitted her failure to do so through her letters dated April 5, 2001 and May 15, 2001 sent to Supersonic's general manager. Thereby, the CA concluded, she defrauded her employer or willfully violated the trust reposed in her by Supersonic. In that regard, the CA rightly observed that proof beyond reasonable doubt of her violation of the trust was not required, for it was sufficient that the employer had "reasonable grounds to believe that the employee concerned is responsible for the misconduct as to be unworthy of the trust and confidence demanded by [her] position." 11 Concerning the second issue, the NLRC and the CA differed from each other, with the CA concluding, unlike the NLRC, that Supersonic did not comply with the two-written notice rule. In the exercise of its equity jurisdiction, then, this Court should now re-evaluate and re-examine the relevant findings. 12 A careful consideration of the records persuades us to affirm the decision of the CA holding that Supersonic had not complied with the two-written notice rule. It ought to be without dispute that the betrayal of the trust the employer reposed in De Jesus was the essence of the offense for which she was to be validly penalized with the supreme penalty of dismissal. 13 Nevertheless, she was still entitled to due processing order to effectively safeguard her security of tenure. The law affording to her due process as an employee imposed on Supersonic as the employer the obligation to send to her two written notices before finally dismissing her. This requirement of two written notices is enunciated in Article 277 of the Labor Code, as amended, which relevantly states:
DHITCc

Article 277.Miscellaneous provisions. . . .

xxx xxx xxx

(b)Subject to the constitutional right of workers to security of tenure and their right to be 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 company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. The Secretary of the Department of Labor and Employment may suspend the effects of the termination pending resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off. 14 xxx xxx xxx

and in Section 2 15 and Section 7, 16 Rule I, Book VI of the Implementing Rules of the Labor Code. The first written notice would inform her of the particular acts or omissions for which her dismissal was being sought. The second written notice would notify her of the employer's decision to dismiss her. But the second written notice must not be made until after she was given a reasonable period after receiving the first written notice within which to answer the charge, and after she was given the ample opportunity to be heard and to defend herself with the assistance of her representative, if she so desired. 17 The requirement was mandatory. 18

Did Supersonic observe due process before dismissing De Jesus? Supersonic contends that it gave the two written notices to De Jesus in the form of the memoranda dated March 26, 2001 and May 12, 2001, to wit:
EHSTDA

Memorandum dated March 26, 2001 26 March 2001

TO : MA. LOURDES DE JESUS SALES PROMOTION OFFICER FROM SUBJECT : : DIVINA S. ABAD SANTOS PAST DUE ACCOUNTS

We have repeatedly reminded you to collect payment of accounts guaranteed by you and which have been past due since last year. You have assured us that these will be settled by the end of February 2001. Our books show, that as of today, March 26, 2001, the following accounts have outstanding balances:
Wafa Monaliza/Ragab Salah Jerico Rafat Mahmood/Alhirsh Amina MMML RDRI HMD Amru Iyad Ali Ali Maher Sharikat Imad Rubies $6,585 4,326.39 1,950 1,300 4,730 3,205 2,000 1,653 361 2,100 1,388 97 740 675 350 905 2,678

Adel

1,125 $36,168.39 =========

Please give us an updated report on your collection efforts and the status of each of the above accounts to enable us to take necessary actions. This would be submitted on or before April 2, 2001.
AcSCaI

(SGD.) DIVINA ABAD SANTOS General Manager 19 Memorandum dated May 12, 2001 12 May 2001 MEMORANDUM
TO : MA. LOURDES DE JESUS SALES PROMOTION OFFICER FROM : DIVINA S. ABAD SANTOS GENERAL MANAGER SUBJECT : PAST DUE ACCOUNTS

You are asked to refer to my memorandum dated 26 March 2001. We were informed that the following accounts have been paid to you but not accounted/turned over to the office:
NAME Wafa Monaliza/Ragab Salah Jerico Rafat Mahmood/Alhirsh Amina MMML RDRI HMD Amru AMOUNTS $6,585 4,326.39 1,950 1,300 4,730 3,205 2,000 1,653 361 2,100 1,388

Iyad Ali Ali Maher Sharikat Imad Rubies Adel

97 740 675 350 905 2,678 1,125 $36,168.39 =========

You are hereby directed to explain in writing within 72 hours from receipt of this memorandum, why you should not be dismissed for cause for failure to account for above amounts.
cDTIAC

By your failure to explain in writing the above accountabilities, within the set deadline, we shall assume that you have misappropriated the same for your own use and benefit to the damage of the office. (SGD.) DIVINA S. ABAD SANTOS General Manager 20

Contrary to Supersonic's contention, however, the aforequoted memoranda did not satisfy the requirement for the two written notices under the law. The March 26, 2001 memorandum did not specify the grounds for which her dismissal would be sought, and for that reason was at best a mere reminder to De Jesus to submit her report on the status of her accounts. The May 12, 2001 memorandum did not provide the notice of dismissal under the law because it only directed her to explain why she should not be dismissed for cause. The latter memorandum was apparently only the first written notice under the requirement. The insufficiency of the two memoranda as compliance with the two-written notices requirement of due process was, indeed, indubitable enough to impel the CA to hold:
The evidence on record is bereft of any indicia that the two written notices were furnished to De Jesus prior to her dismissal. The various memoranda given her were not the same notices required by law, as they were mere internal correspondences intended to remind De Jesus of her outstanding accountabilities to the company. Assuming for the sake of argument that the memoranda furnished to De Jesus may have satisfied the minimum requirements of due process, still, the same did not satisfy the notice requirement under the Labor Code because the intention to sever the employee's services must be made clear in the notice. Such was not apparent from the memoranda. As the Supreme Court held in Serrano, the violation of the notice requirement is not strictly a denial of due process. This is because such notice is precisely intended to enable the employee not only to prepare himself for the legal battle to protect his tenure of employment, but also to find other means of employment and ease the impact of the loss of his job and, necessarily, his income. Conformably with the doctrine laid down in Serrano vs. NLRC, the dismissal of De Jesus should therefore be struck (down) as ineffectual. 21
STaAcC

On the third issue, Supersonic posits that the CA gravely erred in declaring the dismissal of De Jesus ineffectual pursuant to the ruling in Serrano v. National Labor Relations Commission; and insists that the CA should have instead applied the ruling in Agabon v. National Labor Relations Commission, 22 which meanwhile abandoned Serrano.

In Serrano, the Court pronounced as follows:

. . ., with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstated. However, he must be paid backwages from the time his employment was terminated until it is determined that the termination of employment is for a just cause because the failure to hear him before he is dismissed renders the termination of his employment without legal effect. WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate 13th month pay and, in addition, full backwages from the time his employment was terminated on October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary awards to petitioner. SO ORDERED.
23

The CA did not err. Relying on Serrano, the CA precisely ruled that the violation by Supersonic of the twowritten notice requirement rendered ineffectual the dismissal of De Jesus for just cause under Article 282 of the Labor Code, and entitled her to be paid full backwages from the time of her dismissal until the finality of its decision. The Court cannot ignore that the applicable case law when the CA promulgated its decision on July 23, 2004, and when it denied Supersonic's motion for reconsideration on October 21, 2004 was still Serrano. Considering that the Court determines in this appeal by petition for review on certiorari only whether or not the CA committed an error of law in promulgating its assailed decision of July 23, 2004, the CA cannot be declared to have erred on the basis of Serrano being meanwhile abandoned through Agabon if all that the CA did was to fully apply the law and jurisprudence applicable at the time of its rendition of the judgment. As a rule, a judicial interpretation becomes a part of the law as of the date that the law was originally passed, subject only to the qualification that when a doctrine of the Court is overruled and the Court adopts a different view, and more so when there is a reversal of the doctrine, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. 24 To hold otherwise would be to deprive the law of its quality of fairness and justice, for, then, there is no recognition of what had transpired prior to such adjudication. 25
CDHcaS

Although Agabon, being promulgated only on November 17, 2004, ought to be prospective, not retroactive, in its operation because its language did not expressly state that it would also operate retroactively, 26 the Court has already deemed it to be the wise judicial course to let its abandonment of Serrano be retroactive as its means of giving effect to its recognition of the unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process. 27 Under Agabon, the new doctrine is that the failure of the employer to observe the requirements of due process in favor of the dismissed employee (that is, the two-written notices rule) should not invalidate or render ineffectual the dismissal for just or authorized cause. The Agabon Court plainly saw the likelihood of Serrano producing unfair but far-reaching consequences, such as, but not limited to, encouraging frivolous suits where even the most notorious violators of company policies would be rewarded by invoking due process; to having the constitutional policy of providing protection to labor be used as a sword to oppress the employers; and to compelling the employers to continue employing persons who were admittedly guilty of misfeasance or malfeasance and whose continued employment would be patently inimical to the interest of employers. 28 Even so, the Agabon Court still deplored the employer's violation of the employee's right to statutory due process by directing the payment of indemnity in the form of nominal damages, the amount of which would be addressed to the sound discretion of the labor tribunal upon taking into account the relevant circumstances. Thus, the Agabon Court designed such form of damages as a deterrent to employers from committing in the future violations of the statutory due process rights of employees, and, at the same time, as at the very least a vindication or recognition of the fundamental right granted to the employees under the Labor Code and its

implementing rules. 29 Accordingly, consistent with precedent, 30 the amount of P50,000.00 as nominal damages is hereby fixed for the purpose of indemnifying De Jesus for the violation of her right to due process. WHEREFORE, the Court DENIES the petition for review on certiorari in G.R. No. 164662 entitled Maria

Lourdes C. De Jesus v. Hon. Raul T. Aquino, Presiding Commissioner, NLRC, Second Division, Quezon City, and Supersonic Services, Inc.; PARTIALLY GRANTS the petition for review on certiorari in G.R. No. 165787 entitled Supersonic Services, Inc. v. Maria Lourdes C. De Jesus and, accordingly, DECLARES the dismissal of
Maria Lourdes C. De Jesus for just or authorized cause as valid and effectual; and ORDERS Supersonic Services, Inc. to pay to Maria Lourdes C. De Jesus P50,000.00 as nominal damages to indemnify her for the violation of her right to due process.
SDHCac

No pronouncements on costs of suit. SO ORDERED.

Sereno, C.J., Leonardo-de Castro, Villarama, Jr. and Reyes, JJ., concur.

[G.R. No. 185280. January 18, 2012.] TIMOTEO H. SARONA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ROYALE SECURITY AGENCY (FORMERLY SCEPTRE SECURITY AGENCY) and CESAR S. TAN, respondents.

DECISION

REYES, J :
p

This is a petition for review under Rule 45 of the Rules of Court from the May 29, 2008 Decision 1 of the Twentieth Division of the Court of Appeals (CA) in CA-G.R. SP No. 02127 entitled "Timoteo H. Sarona v.

National Labor Relations Commission, Royale Security Agency (formerly Sceptre Security Agency) and Cesar S. Tan"(Assailed Decision), which affirmed the National Labor Relations Commission's (NLRC) November 30, 2005
Decision and January 31, 2006 Resolution, finding the petitioner illegally dismissed but limiting the amount of his backwages to three (3) monthly salaries. The CA likewise affirmed the NLRC's finding that the petitioner's separation pay should be computed only on the basis of his length of service with respondent Royale Security Agency (Royale). The CA held that absent any showing that Royale is a mere alter ego of Sceptre Security Agency (Sceptre), Royale cannot be compelled to recognize the petitioner's tenure with Sceptre. The dispositive portion of the CA's Assailed Decision states:
WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED, though piercing of the corporate veil is hereby denied for lack of merit. Accordingly, the assailed Decision and Resolution of the NLRC respectively dated November 30, 2005 and January 31, 2006 are hereby AFFIRMED as to the monetary awards. SO ORDERED.
2

Factual Antecedents

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April 1976, was asked by Karen Therese Tan (Karen), Sceptre's Operation Manager, to submit a resignation letter as the same was supposedly required for applying for a position at Royale. The petitioner was also asked to fill up Royale's employment application form, which was handed to him by Royale's General Manager, respondent Cesar Antonio Tan II (Cesar). 3 After several weeks of being in floating status, Royale's Security Officer, Martin Gono (Martin), assigned the petitioner at Highlight Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the petitioner was transferred and assigned to Wide Wide World Express, Inc. (WWWE, Inc.). During his assignment at Highlight Metal, the petitioner used the patches and agency cloths of Sceptre and it was only when he was posted at WWWE, Inc. that he started using those of Royale. 4
EcDSTI

On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been withdrawn because Royale had allegedly been replaced by another security agency. The petitioner, however, shortly discovered thereafter that Royale was never replaced as WWWE, Inc.'s security agency. When he placed a call at WWWE, Inc., he learned that his fellow security guard was not relieved from his post. 5 On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit for a short period from September 22, 2003 to September 30, 2003. Subsequently, when the petitioner reported at Royale's office on October 1, 2003, Martin informed him that he would no longer be given any assignment per the instructions of Aida Sabalones-Tan (Aida), general manager of Sceptre. This prompted him to file a complaint for illegal dismissal on October 4, 2003. 6 In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the petitioner's favor and found him illegally dismissed. For being unsubstantiated, LA Gutierrez denied credence to the respondents' claim that the termination of the petitioner's employment relationship with Royale was on his accord following his alleged employment in another company. That the petitioner was no longer interested in being an employee of Royale cannot be presumed from his request for a certificate of employment, a claim which, to begin with, he vehemently denies. Allegation of the petitioner's abandonment is negated by his filing of a complaint for illegal dismissal three (3) days after he was informed that he would no longer be given any assignments. LA Gutierrez ruled:
In short, respondent wanted to impress before us that complainant abandoned his employment. We are not however, convinced. There is abandonment when there is a clear proof showing that one has no more interest to return to work. In this instant case, the record has no proof to such effect. In a long line of decisions, the Supreme Court ruled:

"Abandonment of position is a matter of intention expressed in clearly certain and unequivocal acts, however, an interim employment does not mean abandonment." (Jardine Davis, Inc. vs. NLRC, 225 SCRA 757). "In abandonment, there must be a concurrence of the intention to abandon and some overt acts from which an employee may be declared as having no more interest to work." (C. Alcontin & Sons, Inc. vs. NLRC, 229 SCRA 109). "It is clear, deliberate and unjustified refusal to severe employment and not mere absence that is required to constitute abandonment." . . ." (De Ysasi III vs. NLRC, 231 SCRA 173).
AHCcET

Aside from lack of proof showing that complainant has abandoned his employment, the record would show that immediate action was taken in order to protest his dismissal from employment. He filed a complaint [for] illegal dismissal on October 4, 2004 or three (3) days after he was dismissed. This act,

as declared by the Supreme Court is inconsistent with abandonment, as held in the case of Pampanga Sugar Development Co., Inc. vs. NLRC, 272 SCRA 737 where the Supreme Court ruled:

"The immediate filing of a complaint for [i]llegal [d]ismissal by an employee is inconsistent with abandonment." 7

The respondents were ordered to pay the petitioner backwages, which LA Gutierrez computed from the day he was dismissed, or on October 1, 2003, up to the promulgation of his Decision on May 11, 2005. In lieu of reinstatement, the respondents were ordered to pay the petitioner separation pay equivalent to his one (1) month salary in consideration of his tenure with Royale, which lasted for only one (1) month and three (3) days. In this regard, LA Gutierrez refused to pierce Royale's corporate veil for purposes of factoring the petitioner's length of service with Sceptre in the computation of his separation pay. LA Gutierrez ruled that Royale's corporate personality, which is separate and distinct from that of Sceptre, a sole proprietorship owned by the late Roso Sabalones (Roso) and later, Aida, cannot be pierced absent clear and convincing evidence that Sceptre and Royale share the same stockholders and incorporators and that Sceptre has complete control and dominion over the finances and business affairs of Royale. Specifically:
To support its prayer of piercing the veil of corporate entity of respondent Royale, complainant avers that respondent Royal (sic) was using the very same office of SCEPTRE in C. Padilla St., Cebu City. In addition, all officers and staff of SCEPTRE are now the same officers and staff of ROYALE, that all [the] properties of SCEPTRE are now being owned by ROYALE and that ROYALE is now occupying the property of SCEPTRE. We are not however, persuaded. It should be pointed out at this juncture that SCEPTRE, is a single proprietorship. Being so, it has no distinct and separate personality. It is owned by the late Roso T. Sabalones. After the death of the owner, the property is supposed to be divided by the heirs and any claim against the sole proprietorship is a claim against Roso T. Sabalones. After his death, the claims should be instituted against the estate of Roso T. Sabalones. In short, the estate of the late Roso T. Sabalones should have been impleaded as respondent of this case. Complainant wanted to impress upon us that Sceptre was organized into another entity now called Royale Security Agency. There is however, no proof to this assertion. Likewise, there is no proof that Roso T. Sabalones, organized his single proprietorship business into a corporation, Royale Security Agency. On the contrary, the name of Roso T. Sabalones does not appear in the Articles of Incorporation. The names therein as incorporators are:
CAIaHS

Bruno M. Kuizon [P]150,000.00 Wilfredo K. Tan 100,000.00 Karen Therese S. Tan 100,000.00 Cesar Antonio S. Tan 100,000.00 Gabeth Maria K. Tan 50,000.00 Complainant claims that two (2) of the incorporators are the granddaughters of Roso T. Sabalones. This fact even give (sic) us further reason to conclude that respondent Royal ( sic) Security Agency is not an alter ego or conduit of SCEPTRE. It is obvious that respondent Royal ( sic) Security Agency is not owned by the owner of "SCEPTRE". It may be true that the place where respondent Royale hold ( sic) office is the same office formerly used by "SCEPTRE." Likewise, it may be true that the same officers and staff now employed by respondent Royale Security Agency were the same officers and staff employed by "SCEPTRE." We find, however, that these facts are not sufficient to justify to require respondent Royale to answer for the liability of

Sceptre, which was owned solely by the late Roso T. Sabalones. As we have stated above, the remedy is to address the claim on the estate of Roso T. Sabalones. 8

The respondents appealed LA Gutierrez's May 11, 2005 Decision to the NLRC, claiming that the finding of illegal dismissal was attended with grave abuse of discretion. This appeal was, however, dismissed by the NLRC in its November 30, 2005 Decision, 9 the dispositive portion of which states:
WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the illegal dismissal of complainant is hereby AFFIRMED. However[,] We modify the monetary award by limiting the grant of backwages to only three (3) months in view of complainant's very limited service which lasted only for one month and three days. 1.Backwages [P]15,600.00 2.Separation Pay 5,200.00 3.13th Month Pay 583.34 [P]21,383.34 Attorney's Fees 2,138.33 Total [P]23,521.67 The appeal of respondent Royal (sic) Security Agency is hereby DISMISSED for lack of merit. SO ORDERED.
10
HASDcC

The NLRC partially affirmed LA Gutierrez's May 11, 2005 Decision. It concurred with the latter's finding that the petitioner was illegally dismissed and the manner by which his separation pay was computed, but modified the monetary award in the petitioner's favor by reducing the amount of his backwages from P95,600.00 to P15,600.00. The NLRC determined the petitioner's backwages as limited to three (3) months of his last monthly salary, considering that his employment with Royale was only for a period for one (1) month and three (3) days, thus: 11
On the other hand, while complainant is entitled to backwages, We are aware that his stint with respondent Royal (sic) lasted only for one (1) month and three (3) days such that it is Our considered view that his backwages should be limited to only three (3) months. Backwages: [P]5,200.00 x 3 months = [P]15,600.00
12

The petitioner, on the other hand, did not appeal LA Gutierrez's May 11, 2005 Decision but opted to raise the validity of LA Gutierrez's adverse findings with respect to piercing Royale's corporate personality and computation of his separation pay in his Reply to the respondents' Memorandum of Appeal. As the filing of an appeal is the prescribed remedy and no aspect of the decision can be overturned by a mere reply, the NLRC dismissed the petitioner's efforts to reverse LA Gutierrez's disposition of these issues. Effectively, the petitioner had already waived his right to question LA Gutierrez's Decision when he failed to file an appeal within the reglementary period. The NLRC held:
On the other hand, in complainant's Reply to Respondent's Appeal Memorandum he prayed that the doctrine of piercing the veil of corporate fiction of respondent be applied so that his services with Sceptre since 1976 [will not] be deleted. If complainant assails this particular finding in the Labor Arbiter's Decision, complainant should have filed an appeal and not seek a relief by merely filing a Reply to Respondent's Appeal Memorandum. 13

Consequently, the petitioner elevated the NLRC's November 30, 2005 Decision to the CA by way of a Petition for Certiorari under Rule 65 of the Rules of Court. On the other hand, the respondents filed no appeal from the NLRC's finding that the petitioner was illegally dismissed. The CA, in consideration of substantial justice and the jurisprudential dictum that an appealed case is thrown open for the appellate court's review, disagreed with the NLRC and proceeded to review the evidence on record to determine if Royale is Sceptre's alter ego that would warrant the piercing of its corporate veil. 14According to the CA, errors not assigned on appeal may be reviewed as technicalities should not serve as bar to the full adjudication of cases. Thus:
In Cuyco v. Cuyco, which We find application in the instant case, the Supreme Court held:
IaDcTC

"In their Reply, petitioners alleged that their petition only raised the sole issue of interest on the interest due, thus, by not filing their own petition for review, respondents waived their privilege to bring matters for the Court's review that [does] not deal with the sole issue raised. Procedurally, the appellate court in deciding the case shall consider only the assigned errors, however, it is equally settled that the Court is clothed with ample authority to review matters not assigned as errors in an appeal, if it finds that their consideration is necessary to arrive at a just disposition of the case." Therefore, for full adjudication of the case, We have to primarily resolve the issue of whether the doctrine of piercing the corporate veil be justly applied in order to determine petitioner's length of service with private respondents. 15 (citations omitted)

Nonetheless, the CA ruled against the petitioner and found the evidence he submitted to support his allegation that Royale and Sceptre are one and the same juridical entity to be wanting. The CA refused to pierce Royale's corporate mask as one of the "probative factors that would justify the application of the doctrine of piercing the corporate veil is stock ownership by one or common ownership of both corporations" and the petitioner failed to present clear and convincing proof that Royale and Sceptre are commonly owned or controlled. The relevant portions of the CA's Decision state:
In the instant case, We find no evidence to show that Royale Security Agency, Inc. (hereinafter "Royale"), a corporation duly registered with the Securities and Exchange Commission (SEC) and Sceptre Security Agency (hereinafter "Sceptre"), a single proprietorship, are one and the same entity. Petitioner, who has been with Sceptre since 1976 and, as ruled by both the Labor Arbiter and the NLRC, was illegally dismissed by Royale on October 1, 2003, alleged that in order to circumvent labor laws, especially to avoid payment of money claims and the consideration on the length of service of its employees, Royale was established as an alter ego or business conduit of Sceptre. To prove his claim, petitioner declared that Royale is conducting business in the same office of Sceptre, the latter being owned by the late retired Gen. Roso Sabalones, and was managed by the latter's daughter, Dr. Aida Sabalones-Tan; that two of Royale's incorporators are grandchildren [of] the late Gen. Roso Sabalones; that all the properties of Sceptre are now owned by Royale, and that the officers and staff of both business establishments are the same; that the heirs of Gen. Sabalones should have applied for dissolution of Sceptre before the SEC before forming a new corporation.
HSCAIT

On the other hand, private respondents declared that Royale was incorporated only on March 10, 2003 as evidenced by the Certificate of Incorporation issued by the SEC on the same date; that Royale's incorporators are Bruino M. Kuizon, Wilfredo Gracia K. Tan, Karen Therese S. Tan, Cesar Antonio S. Tan II and [Gabeth] Maria K. Tan. Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and the burden of proof is on the party making the allegation. Further, Section 1 of Rule 131 of the Revised Rules of Court provides:

"SECTION 1.Burden of proof. Burden of proof is the duty of a party to present evidence on

the facts in issue necessary to establish his claim or defense by the amount of evidence required by law."

We believe that petitioner did not discharge the required burden of proof to establish his allegations. As We see it, petitioner's claim that Royale is an alter ego or business conduit of Sceptre is without basis because aside from the fact that there is no common ownership of both Royale and Sceptre, no evidence on record would prove that Sceptre, much less the late retired Gen. Roso Sabalones or his heirs, has control or complete domination of Royale's finances and business transactions. Absence of this first element, coupled by petitioner's failure to present clear and convincing evidence to substantiate his allegations, would prevent piercing of the corporate veil. Allegations must be proven by sufficient evidence. Simply stated, he who alleges a fact has the burden of proving it; mere allegation is not evidence. 16 (citations omitted)

By way of this Petition, the petitioner would like this Court to revisit the computation of his backwages, claiming that the same should be computed from the time he was illegally dismissed until the finality of this decision. 17 The petitioner would likewise have this Court review and examine anew the factual allegations and the supporting evidence to determine if the CA erred in its refusal to pierce Royale's corporate mask and rule that it is but a mere continuation or successor of Sceptre. According to the petitioner, the erroneous computation of his separation pay was due to the CA's failure, as well as the NLRC and LA Gutierrez, to consider evidence conclusively demonstrating that Royale and Sceptre are one and the same juridical entity. The petitioner claims that since Royale is no more than Sceptre's alter ego, it should recognize and credit his length of service with Sceptre. 18 The petitioner claimed that Royale and Sceptre are not separate legal persons for purposes of computing the amount of his separation pay and other benefits under the Labor Code. The piercing of Royale's corporate personality is justified by several indicators that Royale was incorporated for the sole purpose of defeating his right to security of tenure and circumvent payment of his benefits to which he is entitled under the law: (i) Royale was holding office in the same property used by Sceptre as its principal place of business; 19 (ii) Sceptre and Royal have the same officers and employees; 20 (iii) on October 14, 1994, Roso, the sole proprietor of Sceptre, sold to Aida, and her husband, Wilfredo Gracia K. Tan (Wilfredo), 21 the property used by Sceptre as its principal place of business; 22 (iv) Wilfredo is one of the incorporators of Royale; 23 (v) on May 3, 1999, Roso ceded the license to operate Sceptre issued by the Philippine National Police to Aida; 24 (vi) on July 28, 1999, the business name "Sceptre Security & Detective Agency" was registered with the Department of Trade and Industry (DTI) under the name of Aida; 25 (vii) Aida exercised control over the affairs of Sceptre and Royale, as she was, in fact, the one who dismissed the petitioner from employment; 26 (viii) Karen, the daughter of Aida, was Sceptre's Operation Manager and is one of the incorporators of Royale; 27 and (ix) Cesar Tan II, the son of Aida was one of Sceptre's officers and is one of the incorporators of Royale. 28
SIaHDA

In their Comment, the respondents claim that the petitioner is barred from questioning the manner by which his backwages and separation pay were computed. Earlier, the petitioner moved for the execution of the NLRC's November 30, 2005 Decision 29 and the respondents paid him the full amount of the monetary award thereunder shortly after the writ of execution was issued. 30 The respondents likewise maintain that Royale's separate and distinct corporate personality should be respected considering that the evidence presented by the petitioner fell short of establishing that Royale is a mere alter ego of Sceptre. The petitioner does not deny that he has received the full amount of backwages and separation pay as provided under the NLRC's November 30, 2005 Decision. 31However, he claims that this does not preclude this Court from modifying a decision that is tainted with grave abuse of discretion or issued without jurisdiction. 32 ISSUES

Considering the conflicting submissions of the parties, a judicious determination of their respective rights and obligations requires this Court to resolve the following substantive issues:
a.Whether Royale's corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner's length of service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his employment with Sceptre; and b.Whether the petitioner's backwages should be limited to his salary for three (3) months.

OUR RULING Because his receipt of the proceeds of the award under the NLRC's November 30, 2005 Decision is qualified and without prejudice to the CA's resolution of his petition for certiorari, the petitioner is not barred from exercising his right to elevate the decision of the CA to this Court. Before this Court proceeds to decide this Petition on its merits, it is imperative to resolve the respondents' contention that the full satisfaction of the award under the NLRC's November 30, 2005 Decision bars the petitioner from questioning the validity thereof. The respondents submit that they had paid the petitioner the amount of P21,521.67 as directed by the NLRC and this constitutes a waiver of his right to file an appeal to this Court. The respondents fail to convince.
ACTISD

The petitioner's receipt of the monetary award adjudicated by the NLRC is not absolute, unconditional and unqualified. The petitioner's May 3, 2007 Motion for Release contains a reservation, stating in his prayer that: "it is respectfully prayed that the respondents and/or Great Domestic Insurance Co. be ordered to RELEASE/GIVE the amount of P23,521.67 in favor of the complainant TIMOTEO H. SARONA without prejudice to the outcome of the petition with the CA." 33 In Leonis Navigation Co., Inc., et al. v. Villamater, et al., 34 this Court ruled that the prevailing party's receipt of the full amount of the judgment award pursuant to a writ of execution issued by the labor arbiter does not close or terminate the case if such receipt is qualified as without prejudice to the outcome of the petition forcertiorari pending with the CA.
Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed despite the pendency of a petition for certiorari, unless it is restrained by the proper court. In the present case, petitioners already paid Villamater's widow, Sonia, the amount of P3,649,800.00, representing the total and permanent disability award plus attorney's fees, pursuant to the Writ of Execution issued by the Labor Arbiter. Thereafter, an Order was issued declaring the case as "closed and terminated". However, although there was no motion for reconsideration of this last Order, Sonia was, nonetheless, estopped from claiming that the controversy had already reached its end with the issuance of the Order closing and terminating the case. This is because the Acknowledgment Receipt she signed when she received petitioners' payment was without prejudice to the final outcome of the petition for certiorari pending before the CA. 35

The finality of the NLRC's decision does not preclude the filing of a petition for certiorari under Rule 65 of the Rules of Court. That the NLRC issues an entry of judgment after the lapse of ten (10) days from the parties' receipt of its decision 36 will only give rise to the prevailing party's right to move for the execution thereof but will not prevent the CA from taking cognizance of a petition for certiorari on jurisdictional and due process considerations. 37 In turn, the decision rendered by the CA on a petition for certiorari may be appealed to this Court by way of a petition for review on certiorari under Rule 45 of the Rules of Court. Under Section 5, Article VIII of the Constitution, this Court has the power to "review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final judgments and orders of lower courts in . . . all cases in which only an error or question of law is involved." Consistent with this constitutional mandate, Rule

45 of the Rules of Court provides the remedy of an appeal by certiorari from decisions, final orders or resolutions of the CA in any case, i.e., regardless of the nature of the action or proceedings involved, which would be but a continuation of the appellate process over the original case. 38 Since an appeal to this Court is not an original and independent action but a continuation of the proceedings before the CA, the filing of a petition for review under Rule 45 cannot be barred by the finality of the NLRC's decision in the same way that a petition for certiorari under Rule 65 with the CA cannot.
ECAaTS

Furthermore, if the NLRC's decision or resolution was reversed and set aside for being issued with grave abuse of discretion by way of a petition for certiorari to the CA or to this Court by way of an appeal from the decision of the CA, it is considered void ab initio and, thus, had never become final and executory. 39 A Rule 45 Petition should be confined to questions of law. Nevertheless, this Court has the power to resolve a question of fact, such as whether a corporation is a mere alter ego of another entity or whether the corporate fiction was invoked for fraudulent or malevolent ends, if the findings in assailed decision is not supported by the evidence on record or based on a misapprehension of facts. The question of whether one corporation is merely an alter ego of another is purely one of fact. So is the question of whether a corporation is a paper company, a sham or subterfuge or whether the petitioner adduced the requisite quantum of evidence warranting the piercing of the veil of the respondent's corporate personality.40 As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45 of the Rules of Court must exclusively raise questions of law. Moreover, if factual findings of the NLRC and the LA have been affirmed by the CA, this Court accords them the respect and finality they deserve. It is well-settled and oft-repeated 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 finality when affirmed by the CA. 41 Nevertheless, this Court will not hesitate to deviate from what are clearly procedural guidelines and disturb and strike down the findings of the CA and those of the labor tribunals if there is a showing that they are unsupported by the evidence on record or there was a patent misappreciation of facts. Indeed, that the impugned decision of the CA is consistent with the findings of the labor tribunals does not per se conclusively demonstrate the correctness thereof. By way of exception to the general rule, this Court will scrutinize the facts if only to rectify the prejudice and injustice resulting from an incorrect assessment of the evidence presented. A resolution of an issue that has supposedly become final and executory as the petitioner only raised it in his reply to the respondents' appeal may be revisited by the appellate court if such is necessary for a just disposition of the case. As above-stated, the NLRC refused to disturb LA Gutierrez's denial of the petitioner's plea to pierce Royale's corporate veil as the petitioner did not appeal any portion of LA Gutierrez's May 11, 2005 Decision.
cACTaI

In this respect, the NLRC cannot be accused of grave abuse of discretion. Under Section 4 (c), Rule VI of the NLRC Rules, 42 the NLRC shall limit itself to reviewing and deciding only the issues that were elevated on appeal. The NLRC, while not totally bound by technical rules of procedure, is not licensed to disregard and violate the implementing rules it implemented. 43 Nonetheless, technicalities should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. Technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the working man. 44 This Court may choose not to encumber itself with technicalities and limitations consequent to procedural rules if such will only serve as a hindrance to its

duty to decide cases judiciously and in a manner that would put an end with finality to all existing conflicts between the parties. Royale is a continuation or successor of Sceptre. A corporation is an artificial being created by operation of law. It possesses the right of succession and such powers, attributes, and properties expressly authorized by law or incident to its existence. It has a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related. This is basic. 45 Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a person or of another corporation. For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against third persons. 46 Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court should be mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an extent that injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may result from an erroneous application. 47 Whether the separate personality of the corporation should be pierced hinges on obtaining facts appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. After all, the concept of corporate entity was not meant to promote unfair objectives. 48
cIDHSC

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. 49 In this regard, this Court finds cogent reason to reverse the CA's findings. Evidence abound showing that Royale is a mere continuation or successor of Sceptre and fraudulent objectives are behind Royale's incorporation and the petitioner's subsequent employment therein. These are plainly suggested by events that the respondents do not dispute and which the CA, the NLRC and LA Gutierrez accept as fully substantiated but misappreciated as insufficient to warrant the use of the equitable weapon of piercing. As correctly pointed out by the petitioner, it was Aida who exercised control and supervision over the affairs of both Sceptre and Royale. Contrary to the submissions of the respondents that Roso had been the only one in sole control of Sceptre's finances and business affairs, Aida took over as early as 1999 when Roso assigned his license to operate Sceptre on May 3, 1999. 50 As further proof of Aida's acquisition of the rights as Sceptre's sole proprietor, she caused the registration of the business name "Sceptre Security & Detective Agency" under her name with the DTI a few months after Roso abdicated his rights to Sceptre in her favor. 51 As far as Royale is concerned, the respondents do not deny that she has a hand in its management and operation and possesses control and supervision of its employees, including the petitioner. As the petitioner correctly pointed out, that Aida was the one who decided to stop giving any assignments to the petitioner and summarily dismiss him is an eloquent testament of the power she wields insofar as Royale's affairs are concerned. The presence of actual common control coupled with the misuse of the corporate form to perpetrate oppressive or manipulative conduct or evade performance of legal obligations is patent; Royale cannot hide behind its corporate fiction.

Aida's control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction. There must be a showing that a fraudulent intent or illegal purpose is behind the exercise of such control to warrant the piercing of the corporate veil. 52 However, the manner by which the petitioner was made to resign from Sceptre and how he became an employee of Royale suggest the perverted use of the legal fiction of the separate corporate personality. It is undisputed that the petitioner tendered his resignation and that he applied at Royale at the instance of Karen and Cesar and on the impression they created that these were necessary for his continued employment. They orchestrated the petitioner's resignation from Sceptre and subsequent employment at Royale, taking advantage of their ascendancy over the petitioner and the latter's lack of knowledge of his rights and the consequences of his actions. Furthermore, that the petitioner was made to resign from Sceptre and apply with Royale only to be unceremoniously terminated shortly thereafter leads to the ineluctable conclusion that there was intent to violate the petitioner's rights as an employee, particularly his right to security of tenure. The respondents' scheme reeks of bad faith and fraud and compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling Royale to credit and recognize the petitioner's length of service with Sceptre. The respondents cannot use the legal fiction of a separate corporate personality for ends subversive of the policy and purpose behind its creation 53 or which could not have been intended by law to which it owed its being. 54
SEcAIC

For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole proprietorship. As ruled in Prince Transport, Inc., et al. v. Garcia, et al., 55 it is the act of hiding behind the separate and distinct personalities of juridical entities to perpetuate fraud, commit illegal acts, evade one's obligations that the equitable piercing doctrine was formulated to address and prevent:
A settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises are owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights of third parties, disregard the legal fiction that these two entities are distinct and treat them as identical or as one and the same. In the present case, it may be true that Lubas is a single proprietorship and not a corporation. However, petitioners' attempt to isolate themselves from and hide behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy. 56

Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994, Aida and Wilfredo became the owners of the property used by Sceptre as its principal place of business by virtue of a Deed of Absolute Sale they executed with Roso. 57 Royale, shortly after its incorporation, started to hold office in the same property. These, the respondents failed to dispute. The respondents do not likewise deny that Royale and Sceptre share the same officers and employees. Karen assumed the dual role of Sceptre's Operation Manager and incorporator of Royale. With respect to the petitioner, even if he has already resigned from Sceptre and has been employed by Royale, he was still using the patches and agency cloths of Sceptre during his assignment at Highlight Metal. Royale also claimed a right to the cash bond which the petitioner posted when he was still with Sceptre. If Sceptre and Royale are indeed separate entities, Sceptre should have released the petitioner's cash bond when he resigned and Royale would have required the petitioner to post a new cash bond in its favor. Taking the foregoing in conjunction with Aida's control over Sceptre's and Royale's business affairs, it is patent that Royale was a mere subterfuge for Aida. Since a sole proprietorship does not have a separate and distinct personality from that of the owner of the enterprise, the latter is personally liable. This is what she sought to avoid but cannot prosper.
IcaHTA

Effectively, the petitioner cannot be deemed to have changed employers as Royale and Sceptre are one and the same. His separation pay should, thus, be computed from the date he was hired by Sceptre in April 1976 until the finality of this decision. Based on this Court's ruling in Masagana Concrete Products, et al. v. NLRC, et al., 58 the intervening period between the day an employee was illegally dismissed and the day the decision

finding him illegally dismissed becomes final and executory shall be considered in the computation of his separation pay as a period of "imputed" or "putative" service:
Separation pay, equivalent to one month's salary for every year of service, is awarded as an alternative to reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of employment up to the time of termination, including the imputed service for which the employee is entitled to backwages, with the salary rate prevailing at the end of the period of putative service being the basis for computation. 59

It is well-settled, even axiomatic, that if reinstatement is not possible, the period covered in the computation of backwages is from the time the employee was unlawfully terminated until the finality of the decision finding illegal dismissal. With respect to the petitioner's backwages, this Court cannot subscribe to the view that it should be limited to an amount equivalent to three (3) months of his salary. Backwages is a remedy affording the employee a way to recover what he has lost by reason of the unlawful dismissal. 60 In awarding backwages, the primordial consideration is the income that should have accrued to the employee from the time that he was dismissed up to his reinstatement 61 and the length of service prior to his dismissal is definitely inconsequential. As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al., 62 clarified in no uncertain terms that if reinstatement is no longer possible, backwages should be computed from the time the employee was terminated until the finality of the decision, finding the dismissal unlawful.
Therefore, in accordance with R.A. No. 6715, petitioners are entitled on their full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld on them up to the time of their actual reinstatement.
cDTaSH

As to reinstatement of petitioners, this Court has already ruled that reinstatement is no longer feasible, because the company would be adjustly prejudiced by the continued employment of petitioners who at present are overage, a separation pay equal to one-month salary granted to them in the Labor Arbiter's decision was in order and, therefore, affirmed on the Court's decision of 15 March 1996. Furthermore, since reinstatement on this case is no longer feasible, the amount of backwages shall be computed from the time of their illegal termination on 25 June 1990 up to the time of finality of this decision. 63 (emphasis supplied)

A further clarification was made in Javellana, Jr. v. Belen:

64

Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs: Art. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

Clearly, the law intends the award of backwages and similar benefits to accumulate past the date of the Labor Arbiter's decision until the dismissed employee is actually reinstated. But if, as in this case, reinstatement is no longer possible, this Court has consistently ruled that backwages shall be computed from the time of illegal dismissal until the date the decision becomes final. 65 (citation omitted)In case separation pay is awarded and reinstatement is no longer feasible, backwages shall be computed from the time of illegal dismissal up to the finality of the decision should separation pay not be paid in the meantime. It is the employee's actual receipt of the full amount of his separation pay that will effectively terminate the employment of an illegally dismissed employee. 66 Otherwise, the employer-employee relationship subsists and the illegally dismissed employee is entitled to backwages, taking into account the increases and other benefits, including the 13th month pay,

that were received by his co-employees who are not dismissed. 67 It is the obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the salaries or wages, plus all other benefits and bonuses and general increases, to which he would have been normally entitled had he not been dismissed and had not stopped working. 68 In fine, this Court holds Royale liable to pay the petitioner backwages to be computed from his dismissal on October 1, 2003 until the finality of this decision. Nonetheless, the amount received by the petitioner from the respondents in satisfaction of the November 30, 2005 Decision shall be deducted accordingly.
ESCTaA

Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the petitioner's dismissal, which was tainted by bad faith and fraud, are in order. Moral damages may be recovered where the dismissal of the employee was tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner contrary to morals, good customs or public policy while exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner. 69 WHEREFORE, premises considered, the Petition is hereby GRANTED. We REVERSE and SET ASIDE the CA's May 29, 2008 Decision in C.A.-G.R. SP No. 02127 and order the respondents to pay the petitioner the following minus the amount of (P23,521.67) paid to the petitioner in satisfaction of the NLRC's November 30, 2005 Decision in NLRC Case No. V-000355-05: a)full backwages and other benefits computed from October 1, 2003 (the date Royale illegally dismissed the petitioner) until the finality of this decision; b)separation pay computed from April 1976 until the finality of this decision at the rate of one month pay per year of service; c)ten percent (10%) attorney's fees based on the total amount of the awards under (a) and (b) above; d)moral damages of Twenty-Five Thousand Pesos (P25,000.00); 5. * and exemplary damages of Twenty-Five Thousand Pesos (P25,000.00). *Note from the publisher: Copied verbatim from the official copy. This case is REMANDED to the labor arbiter for computation of the separation pay, backwages, and other monetary awards due the petitioner. SO ORDERED.

Carpio, Perez, Sereno and Perlas-Bernabe, * JJ., concur.

[G.R. No. 193756. April 10, 2013.] VENANCIO S. REYES, EDGARDO C. DABBAY, WALTER A. VIGILIA, NEMECIO M. CALANNO, ROGELIO A. SUPE, JR., ROLAND R. TRINIDAD, and AURELIO A. DULDULAO, petitioners, vs. RP GUARDIANS SECURITY AGENCY, INC., respondent.

DECISION

MENDOZA, J :
p

Before the Court is a petition for review under Rule 45 of the Rules of Court, assailing the May 18, 2010 Amended Decision 1 and the September 13, 2010 Resolution2 of the Court of Appeals (CA), in C.A.-G.R. SP No. 106643, which modified the April 9, 2008 Decision 3 of the National Labor Relations Commission (NLRC) in NLRC LAC Case No. 11-002990-07, insofar as the award of backwages, the computation of separation pay, and the refund for the trust fund contributions are concerned.

The Facts:
Petitioners Venancio S. Reyes, Edgardo C. Dabbay, Walter A. Vigilia, Nemesio M. Calanno, Rogelio A. Supe, Jr., Roland R. Trinidad, and Aurelio A. Duldulao(petitioners) were hired by respondent RP Guardians Security Agency, Inc. (respondent) as security guards. They were deployed to various clients of respondent, the last of which were the different branches of Banco Filipino Savings and Mortgage Bank (Banco Filipino). In September 2006, respondent's security contract with Banco Filipino was terminated. In separate letters, 4 petitioners were individually informed of the termination of the security contract with Banco de Oro. In two (2) memoranda, dated September 21, 2006 5 and September 29, 2006, 6 petitioners were directed to turnover their duties and responsibilities to the incoming security agency and were advised that they would be placed on floating status while waiting for available post. Petitioners waited for their next assignment, but several months lapsed and they were not given new assignments. Consequently, on April 10, 2007, petitioners filed a complaint
7

for constructive dismissal.

ICHcaD

In its position paper, 8 respondent claimed that there was no dismissal, of petitioners, constructive or otherwise, and asserted that their termination was due to the expiration of the service contract which was coterminus with their contract of employment. On August 20, 2007, the Labor Arbiter (LA) rendered a decision 9 in favor of petitioners ordering respondent to pay petitioners separation pay, backwages, refund of trust fund, moral and exemplary damages, and attorneys fees. Aggrieved, respondent appealed to the NLRC. On April 9, 2008, the NLRC promulgated its decision 10 sustaining the finding of constructive dismissal by the LA, and the awards she made in the decision. The award of moral and exemplary damages, however, were deleted. Upon denial of its motion for reconsideration,
11

respondent filed a petition for certiorari before the CA.

12

On February 26, 2010, the CA rendered a decision decision and resolution.

dismissing the petition and affirming the assailed NLRC

On motion for reconsideration, the CA issued the Amended Decision 13 dated May 18, 2010, modifying its earlier decision. Citing Section 6.5 (4) of Department Order No. 14 of the Department of Labor and Employment (DOLE D.O. No. 14), otherwise known as Guidelines Governing the Employment and Working Conditions of Security Guards and Similar Personnel in the Private Security Industry, the CA reduced the computation of the separation pay from one month pay per year of service to one-half month pay for every year of service; reduced the refund of trust fund contribution from Sixty (P60.00) Pesos to Thirty (P30.00) Pesos; and deleted the award of backwages and attorney's fees. Hence, this petition anchored on the following:

GROUNDS FOR THE PETITION 8.0The Court of Appeals has decided a question of substance in a way that is not in accord with law and with applicable decisions of the Supreme Court concerning the Petitioner's basic right to fair play, justice and due process, with more reason that a conclusion of law cannot be made in the motion for reconsideration.
IcAaEH

8.1The first decision promulgated by the Court of Appeals on February 26, 2010 affirming the decision of the NLRC awarding both backwages and separation pay of one month pay for every year of service can only be set aside upon proof of grave abuse of discretion, fraud or error of law. 8.2Petitioners are entitled to backwages for the period covered from the time the Labor Arbiter rendered the decision in their favor on August 20, 2007 until said decision was reversed by the Court of Appeals in its Amended Decision promulgated on May 18, 2010.14

There is no doubt that petitioners were constructively dismissed. The LA, the NLRC and the CA were one in their conclusion that respondent was guilty of illegal dismissal when it placed petitioners on floating status beyond the reasonable six-month period after the termination of their service contract with Banco de Oro. Temporary displacement or temporary off-detail of security guard is, generally, allowed in a situation where a security agency's client decided not to renew their service contract with the agency and no post is available for the relieved security guard. 15 Such situation does not normally result in a constructive dismissal. Nonetheless, when the floating status lasts for more than six (6) months, the employee may be considered to have been constructively dismissed. 16 No less than the Constitution 17 guarantees the right of workers to security of tenure, thus, employees can only be dismissed for just or authorized causes and after they have been afforded the due process of law. 18 Settled is the rule that that an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, and to his full backwages, inclusive of allowances and to his other benefits or their monetary equivalent computed from the time his compensation was withheld up to the time of actual reinstatement. 19 If reinstatement is not possible, however, the award of separation pay is proper. 20 Backwages and reinstatement are separate and distinct reliefs given to an illegally dismissed employee in order to alleviate the economic damage brought about by the employee's dismissal. 21 "Reinstatement is a restoration to a state from which one has been removed or separated" while "the payment of backwages is a form of relief that restores the income that was lost by reason of the unlawful dismissal." Therefore, the award of one does not bar the other. 22 In the case of Aliling v. Feliciano,
23

citing Golden Ace Builders v. Talde,

24

the Court explained:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.
ICTDEa

The normal consequences of respondents' illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to payment of backwages. [Emphasis Supplied]

Furthermore, the entitlement of the dismissed employee to separation pay of one month for every year of service should not be confused with Section 6.5 (4) of DOLE D.O. No. 14 which grants a separation pay of one-half month for every year service, to wit:
6.5Other Mandatory Benefits. In appropriate cases, security guards/similar personnel are entitled to the mandatory benefits as listed below, although the same may not be included in the monthly cost distribution in the contracts, except the required premiums for their coverage: a.Maternity benefit as provided under the SSS Law; b.Separation pay if the termination of employment is for authorized cause as provided by law and as enumerated below: Half-Month Pay Per Year of Service, but in no case less than One Month Pay, if separation is due to: 1.Retrenchment or reduction of personnel effected by management to prevent serious losses; 2.Closure or cessation of operation of an establishment not due to serious losses or financial reverses; 3.Illness or disease not curable within a period of 6 months and continued employment is prohibited by law or prejudicial to the employee's health or that of co-employees; or 4.Lack of service assignment for a continuous period of 6 months.

The said provision contemplates a situation where a security guard is removed for authorized causes such as when the security agency experiences a surplus of security guards brought about by lack of clients. In such a case, the security agency has the option to resort to retrenchment upon compliance with the procedural requirements of "two-notice rule" set forth in the Labor Code and to pay separation pay of one-half month for every year of service.
EcSCAD

In this case, respondent would have been liable for reinstatement and payment of backwages. Reinstatement, however, was no longer feasible because, as found by the LA, respondent had already ceased operation of its business. 25 Thus, backwages and separation pay, in the amount of one month for every year of service, should be paid in lieu of reinstatement. As to their claim of attorney's fees, petitioners were compelled to file an action for the recovery of their lawful wages and other benefits and, in the process, incurred expenses. Hence, petitioners are entitled to attorney's fees equivalent to ten percent (10%) of the monetary award. 26 Finally, as to the refund of the trust fund contribution, a perusal of the records shows that the amount deducted for the trust fund contribution from each petitioner varies. Some petitioners were deducted the amount of P15.00 every payday while others were deducted P30.00 every payday. Thus, the Court deems it proper to refer the computation of the same to the LA. WHEREFORE, the petition is GRANTED. The May 18, 2010 Amended Decision and the September 13, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 106643 are REVERSED and SET ASIDE. The April 9, 2008 Decision of the National Labor Relations Commission, modifying the August 20, 2007 Decision of the Labor Arbiter, is REINSTATED. The case is REMANDED to the Labor Arbiter for further proceedings to make a detailed computation of the exact amount of monetary benefits due petitioners. SO ORDERED.

Velasco, Jr., Peralta, Abad and Leonen, JJ., concur.

[G.R. No. 198423. October 23, 2012.] LEO A. GONZALES, petitioner, vs. SOLID CEMENT CORPORATION and ALLEN QUERUBIN, respondents.

RESOLUTION

BRION, J :
p

Before us is the Second Motion for Reconsideration 1 filed by petitioner Leo Gonzales (petitioner) in the case in caption (the current petition). Previously, the Court granted the petitioner's Motion for Leave to File and Admit the Attached Motion to Refer the Case to the Court En Banc. The motion for reconsideration addresses our Minute Resolutions of November 16, 2011 and February 27, 2012, both denying petitioner's petition for review on certiorari. The Antecedent Facts The current petition arose from the execution of the final and executory judgment in the parties' illegal dismissal dispute (referred to as "original case," docketed in this Court as G.R. No. 165330 and entitled Solid Cement Corporation, et al. v. Leo Gonzales). The Labor Arbiter (LA) resolved the case at his level on December 12, 2000. Since the LA found that an illegal dismissal took place, the company reinstated petitioner Gonzales in the payroll on January 22, 2001. 2 In the meanwhile, the parties continued to pursue the original case on the merits. The case was appealed to the National Labor Relations Commission (NLRC) and from there to the Court of Appeals (CA) on a petition for certiorari under Rule 65 of the Rules of Court. The LA's ruling of illegal dismissal was largely left undisturbed in these subsequent recourses. The original case eventually came to this Court. In our Resolutions of March 9, 2005 3 and June 8, 2005, 4 we denied the petition of respondent Solid Cement Corporation (Solid Cement) for lack of merit. Our ruling became final and entry of judgment took place on July 12, 2005.
cIHSTC

Soon after its finality, the original case was remanded to the LA for execution. The LA decision dated December 12, 2000 declared the respondents guilty of illegal dismissal and ordered the reinstatement of Gonzales to his former position "with full backwages and without loss of seniority rights and other benefits[.]" 5 Under this ruling, as modified by the NLRC ruling on appeal, Gonzales was awarded the following: (1)Backwages in the amount of P636,633.33; (2)Food and Transportation Allowance in the amount of P18,080.00; (3)Moral damages in the amount of P100,000.00; (4)Exemplary damages in the amount of P50,000.00; and (5)Ten percent (10%) of all sums owing to the petitioner as attorney's fees.

Actual reinstatement and return to work for Gonzales (who had been on payroll reinstatement since January 22, 2001) came on July 15, 2008. 6 When Gonzales moved for the issuance of an alias writ of execution on August 4, 2008, he included several items as components in computing the amount of his backwages. Acting on the motion, the LA added P57,900.00 as rice allowance and P14,675.00 as medical reimbursement (with the company's apparent conformity), and excluded the rest of the items prayed for in the motion, either because these items have been paid or that, based on the records of the case, Gonzales was not entitled thereto. Under the LA's execution order dated August 18, 2009, Gonzales was entitled to a total of P965,014.15. 7 The NLRC, in its decision 8 dated February 19, 2010 and resolution dated May 18, 2010, modified the LA's execution order by including the following amounts as part of the judgment award:
CADacT

Additional backwages from Dec. 13, 2000 to Jan. 21, 2001 Salary differentials from year 2000 until August 2008 13th month pay differential 13th month pay for years 2000 and 2001 12% interest from July 12, 2005

P50,800.00 9 617,517.48 51,459.79 80,000.00 878,183.42

This ruling increased Gonzales' entitlement to P2,805,698.04. On a petition for certiorari under Rule 65 of the Rules of Court, the CA set aside the NLRC's decision and reinstated the LA's order, prompting Gonzales to come to the Court via a petition for review on certiorari (docketed as G.R. No. 198423) under Rule 45 of the Rules of Court. In our Minute Resolutions, we denied Gonzales' Rule 45 petition. At this point came the two motions now under consideration. For easier tracking and understanding, the developments in the original case and in the current petition are chronologically arranged in the table below:
October 5, 1999 December 12, 2000 Solid Cement terminated Gonzales' employment; The LA declared that Gonzales was illegally dismissed and ordered his reinstatement;

January 5, 2001

Gonzales filed a Motion for Execution of reinstatement aspect;

January 22, 2001

Solid Cement reinstated Gonzales in the payroll;

March 26, 2002

The NLRC modified the LA decision by reducing amount of damages awarded by the LA but otherwise affirmed the judgment;

June 28, 2004

The CA dismissed Solid Cement's certiorari petition;

March 9, 2005

The Court ultimately denied Solid Cement's petition for review;

July 12, 2005

The judgment became final and an entry of judgment was recorded;

July 15, 2008 August 4, 2008

Gonzales was actually reinstated; Gonzales filed with the LA a motion for the issuance of an alias writ of execution (with computation of monetary benefits as of August 28, 2008 the day before his termination anew, allegedly due to redundancy, shall take effect);

August 18, 2009

The LA issued an Order directing the issuance of a writ of execution;

February 19, 2010

The NLRC rendered a decision affirming with modification the LA's Order by including certain monetary benefits in favor of Gonzales;

May 31, 2011

The CA reversed the NLRC and reinstated the LA's Order;

November 16, 2011

The Court denied Gonzales' petition for review, questioning the reinstatement of the LA's Order;

February 27, 2012

The Court denied Gonzales' 1st motion for reconsideration;

April 12, 2012

Gonzales again moved for reconsideration and asked that his case be referred to the En Banc.

Our Ruling As a rule, a second motion for reconsideration is a prohibited pleading under the Rules of Court, 10 and this reason alone is sufficient basis for us to dismiss the present second motion for reconsideration. The ruling in the original case, as affirmed by the Court, has been expressly declared final. A definitive final judgment, however erroneous, is no longer subject to change or revision.
HIEAcC

A decision that has acquired finality becomes immutable and unalterable. This quality of immutability precludes the modification of a final judgment, even if the modification is meant to correct erroneous conclusions of fact and law. And this postulate holds true whether the modification is made by the court that rendered it or by the highest court in the land. The orderly administration of justice requires that, at the risk of occasional errors, the judgments/resolutions of a court must reach a point of finality set by the law . The noble purpose is to write finis to dispute once and for all. This is a fundamental principle in our justice system, without which there would be no end to litigations. Utmost respect and adherence to this principle must always be maintained by those who exercise the power of adjudication. Any act, which violates such principle, must immediately be struck down. Indeed, the principle of conclusiveness of prior adjudications is not confined in its operation to the judgments of what are ordinarily known as courts, but extends to all bodies upon which judicial powers had been conferred. 11 (emphases ours,

citations omitted)

After due consideration and further analysis of the case, however, we believe and so hold that the CA did not only legally err but even acted outside its jurisdiction when it issued its May 31, 2011 decision. Specifically, by deleting the awards properly granted by the NLRC and by reverting back to the LA's execution order, the CA effectively varied the final executory judgement in the original case, as modified on appeal and ultimately affirmed by the Court, and thereby acted outside its jurisdiction. The CA likewise, in the course of its rulings and as discussed below, acted with grave abuse of discretion amounting to lack or excess of jurisdiction by using wrong considerations, thereby acting outside the contemplation of law. The CA's actions outside its jurisdiction cannot produce legal effects and cannot likewise be perpetuated by a simple reference to the principle of immutability of final judgment; a void decision can never become final. "The only exceptions to the rule on the immutability of final judgments are (1) the correction of clerical errors, (2) the so-called nunc pro tunc entries which cause no prejudice to any party, and (3) void judgments." 12 For these reasons, the Court sees it legally appropriate to vacate the assailed Minute Resolutions of November 16, 2011 and February 27, 2012, and to reconsider its ruling on the current petition.
TSCIEa

The fallo or the dispositive portion

The resolution of the court in a given issue embodied in the fallo or dispositive part of a decision or order is the controlling factor in resolving the issues in a case. The fallo embodies the court's decisive action on the issue/s posed, and is thus the part of the decision that must be enforced during execution. The other parts of the decision only contain, and are aptly called, the ratio decidendi (or reason for the decision) and, in this sense, assume a lesser role in carrying into effect the tribunal's disposition of the case. When a conflict exists between the dispositive portion and the opinion of the court in the text or body of the decision, the former must prevail over the latter under the rule that the dispositive portion is the definitive order, while the opinion is merely an explanatory statement without the effect of a directive. Hence, the execution must conform with what the fallo or dispositive portion of the decision ordains or decrees. Significantly, no claim or issue has arisen regarding the fallo of the labor tribunals and the CA's ruling on the merits of the original case. We quote below the fallo of these rulings, which this Court ultimately sustained.

LA ruling:
WHEREFORE, premises considered, respondents are hereby declared guilty of ILLEGAL DISMISSAL and ordered to reinstate complainant to his former position with full backwages and without loss of seniority rights and other benefits which to date amounts (sic)to Six Hundred Thirty Six Thousand and Six Hundred Thirty Three Pesos and Thirty Three Centavos (P636,633.33). Further, respondents are jointly and severally liable to pay the following:
SEHaTC

1.P18,080 as reimbursement for food and transportation allowance; 2.Five Hundred Thousand (P500,000.00) Pesos as moral damages; 3.Two Hundred Fifty Thousand (P250,000.00) Pesos as exemplary damages; and 4.10% of all sums owing to complainant as attorney's fees.
13

ours)

(emphasis and underscoring

NLRC Ruling:

WHEREFORE, premises considered, the decision under review is hereby, MODIFIED by REDUCING the amount of moral and exemplary damages due the complainant to the sum of P100,000.00 and P50,000.00, respectively. Further, joint and several liability for the payment of backwages, food and transportation allowance and attorney's fees as adjudged in the appealed decision is hereby imposed only upon respondents Allen Querubin and Solid Cement Corporation, the latter having a personality which is distinct and separate from its officers. The relief of reinstatement is likewise, AFFIRMED.
14

CA Ruling:
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby dismissed for lack of merit. Accordingly, the decision of the Second Division of the NLRC dated 26 March 2002 in NLRC CA No. 027452-01 is hereby AFFIRMED. 15

We affirmed the CA ruling on the original case in the final recourse to us; thus, on the merits, the judgment in Gonzales' favor is already final. From that point, only the implementation or execution of the fallo of the final ruling remained to be done.
EDISaA

Re-computation of awards during execution of an illegal dismissal decision

On the execution aspect of an illegal dismissal decision, the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division), 16 despite its lack of a complete factual congruence with the present case, serves as a good guide on how to approach the execution of an illegal dismissal decision that contains a monetary award. In Session Delights, the LA found that the employee had been illegally dismissed and consequently ordered the payment of separation pay (in lieu of reinstatement), backwages, 13th month pay, and indemnity, all of which the LA itemized and computed as of the time of his decision. The NLRC and the CA affirmed the LA's decision on appellate review, except that the CA deleted the award for 13th month pay and indemnity. In due course, the CA decision became final. During the execution stage of the decision, the LA arrived at an updated computation of the final awards that included additional backwages, separation pay (computed from the date of the LA decision to the finality of the ruling on the case) and 13th month pay. This updated computation was affirmed by the NLRC and by the CA, except for the latter's deletion of the 13th month pay award. Session Delights went to this Court raising the issue of whether the original fallo of the LA's decision on the merits at that point already final could still be re-computed. After stating that only the monetary awards of backwages, separation pay, and attorney's fees required active enforcement and re-computation, the Court stated:
A source of misunderstanding in implementing the final decision in this case proceeds from the way the original labor arbiter framed his decision. The decision consists essentially of two parts.
EDCcaS

The first is . . . the finding of the illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages, attorney's fees, and legal interests. The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows that it was time-bound as can be seen from the figures used in the computation. This

part, being merely a computation of what the first part of the decision established and declared, can, by its nature, be re-computed. . . . . xxx xxx xxx However, the petitioner disagreed with the labor arbiter's findings on all counts i.e., on the finding of illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the labor arbiter's decision. . . . . The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13th month pay and indemnity, lapsed to finality and was subsequently returned to the labor arbiter of origin for execution. It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he apparently read the figures originally ordered to be paid to be the computation due had the case been terminated and implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the award to include the separation pay and the backwages due up to the finality of the CA decision that fully terminated the case on the merits. Unfortunately, the labor arbiter's approved computation went beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards the final CA decision had deleted specifically, the proportionate 13th month pay and the indemnity awards. Hence, the CA issued the decision now questioned in the present petition.
HITEaS

We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the labor arbiter's original decision in accordance with its basic component parts as we discussed above. To reiterate, the first part contains the finding of illegality and its monetary consequences; the second part is the computation of the awards or monetary consequences of the illegal dismissal, computed as of the time of the labor arbiter's original decision. xxx xxx xxx . . . . What the petitioner simply disputes is the re-computation of the award when the final CA decision did not order any re-computation while the NLRC decision that the CA affirmed and the labor arbiter decision the NLRC in turn affirmed, already made a computation that on the basis of immutability of judgment and the rule on execution of the dispositive portion of the decision should not now be disturbed. Consistent with what we discussed above, we hold that under the terms of the decision under execution, no essential change is made by a re-computation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared in that decision. A re-computation (or an original computation, if no previous computation has been made) is a part of the law specifically, Article 279 of the Labor Code and the established jurisprudence on this provision that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add on until full satisfaction, as expressed under Article 279 of the Labor Code. The re-computation of the consequences of illegal dismissal upon execution of the decision does not constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this dismissal is affected and this is not a violation of the principle of immutability of final judgments.
TEcHCA

. . . [T]he core issue in this case is not the payment of separation pay and backwages but their recomputation in light of an original labor arbiter ruling that already contained a dated computation of the monetary consequences of illegal dismissal.

That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against the labor arbiter's decision. Article 279 provides for the consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares that the employment relationship ended so that separation pay and backwages are to be computed up to that point. The decision also becomes a judgment for money from which another consequence flows the payment of interest in case of delay. This was what the CA correctly decreed when it provided for the payment of the legal interest of 12% from the finality of the judgment, in accordance with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals. 17 (emphases ours, italics supplied)

The re-computation of the amounts still due took off from the LA's decision that contained the itemized and computed dispositive portion as of the time the LA rendered his judgment. It was necessary because time transpired between the LA's decision and the final termination of the case on appeal, during which time the illegally dismissed employee should have been paid his salary and benefit entitlements. The present case, of course, is not totally the same as Session Delights. At the most obvious level, separation pay is not an issue here as reinstatement, not separation from service, is the final directive; Gonzales was almost immediately reinstated pending appeal, although only by way of a payroll reinstatement as allowed by law. Upon the finality of the decision on the appeal, Gonzales was actually reinstated.
DaAIHC

Although backwages was an issue in both cases, the thrusts of this issue in the two cases were different. In Session Delights, the issue was more on whether the award would be confined to what the LA originally awarded or would continue to run during the period of appeal. This is not an issue in the present case, since Gonzales received his salary and benefit entitlements during his payroll reinstatement; the general concern in the present case is more on the items that should be included in the award, part of which are the backwages. In other words, the current petition only generally involves a determination of the scope of the awards that include the backwages. The following were the demanded items: 1.Additional backwages from the LA's decision (on the merits) until Gonzales was payroll reinstated; 2.Seniority rights a.longevity pay/loyalty/service award b.general annual bonus c.annual birthday gift d.bereavement assistance; 3.Other benefits a.vacation and sick leave b.holiday pay; 4.Other allowances
THaAEC

a.monetary equivalent of rice allowance (from October 1999 to July 2005) which should be included in computing backwages b.monetary equivalent of yearly medical allowance from 2000 to July 2005 which should be included in computing backwages c.meal allowance d.uniform and clothing allowance e.transportation, gasoline and representation allowance; 5.13th month pay for the years 2000 and 2001; 6.Salary differentials; 7.Damages; 8.Interest on the computed judgment award; and 9.Attorney's fees.
18

The LA and the NLRC uniformly excluded some of these items from the awards they made and we could have dismissed the current petition outright on the issue of entitlement to these benefits, since entitlement mainly involves questions of fact which a Rule 45 petition generally does not allow. A deeper consideration of the current petition, however, shows that there is more beyond the factual issues of entitlement that are evident on the surface. To recall, the NLRC differed from the LA on the actual details of implementation and modified the latter's ruling by including
Additional backwages from Dec. 13, 2000 to Jan. 21, 2001P50,800.00 13th month pay differential51,459.79 13th month pay for years 2000 and 200180,000.00 12% interest from July 12, 2005878,183.42
19

Salary differentials from year 2000 until August 2008617,517.48

The CA, in its own Rule 65 review of the NLRC ruling, effectively found that the NLRC acted outside its jurisdiction when it modified the LA's execution order and, on this basis, ruled for the implementation of what the LA ordered.
IDTSaC

Under this situation and in the context of the Rule 45 petition before us, the reviewable issue before us is whether the CA was legally correct in finding that the NLRC acted outside its jurisdiction when it modified the LA's execution order. This is the issue on which our assailed Resolutions would rise or fall. For, indeed, a Rule 45 petition which seeks a review of the CA decision on a Rule 65 petition should be reviewed "from the prism of whether [the CA] correctly determined the presence or absence of grave abuse of discretion in the NLRC decision." 20 In short, we do not rule whether the CA committed grave abuse of discretion; rather, we rule on whether the CA correctly determined the absence or presence of

grave abuse of discretion by the NLRC. The components of the backwages

a.Salary and 13th month differential due after dismissal

In the case of BPI Employees Union Metro Manila and Zenaida Uy v. Bank of the Philippine Islands and Bank of the Philippine Islands v. BPI Employees Union Metro Manila and Zenaida Uy, 21 the Court ruled that in computing backwages, salary increases from the time of dismissal until actual reinstatement, and benefitsnot yet granted at the time of dismissal are excluded. Hence, we cannot fault the CA for finding that the NLRC committed grave abuse of discretion in awarding the salary differential amounting to P617,517.48 and the 13th month pay differentials amounting to P51,459.48 that accrued subsequent to Gonzales' dismissal.

b.Legal interest of 12% on total judgment

However, based on the same BPI case, Gonzales is entitled to 12% interest on the total unpaid judgment amount, from the time the Court's decision (on the merits in the original case) became final. When the CA reversed the NLRC and reinstated the LA's ruling (which did not order payment of interest), the CA overstepped the due bounds of its jurisdiction under a certiorari petition as it acted on the basis of wrong considerations and outside the contemplation of the law on the legal interests that final orders and rulings on forbearance of money should bear. In a certiorari petition, the scope of review is limited to the determination of whether a judicial or quasi-judicial tribunal acted without or in excess of its jurisdiction or grave abuse of discretion amounting to lack of jurisdiction; such grave abuse of discretion can exist when the ruling entity used the wrong considerations and thereby acted outside the contemplation of law. In justifying the return to and adoption of the LA's execution order, the CA solely relied on the doctrine of immutability of judgment which it considered to the exclusion of other attendant and relevant factors. This is a fatal error that amounted to grave abuse of discretion, particularly on the award of 12% interest. The seminal case of Eastern Shipping Lines, Inc. v. Court of Appeals 22 cannot be clearer on the rate of interest that applies:
3.When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest . . . shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. 23(emphasis ours)

In BPI, we even said that "[t]his natural consequence of a final judgment is not defeated notwithstanding the fact that the parties were at variance in the computation of what is due" 24 under the judgment. In the present case, the LA's failure to include this award in its order was properly corrected by the NLRC on appeal, only to be unreasonably deleted by the CA. Such deletion, based solely on the immutability of the judgment in the original case, is a wrong consideration that fatally afflicts and renders the CA's ruling void.
cSTHaE

c.Additional backwages and 13th month pay

We reach the same conclusion on the other deletions the CA made, particularly on the deletion of the 13th month pay for 2000-2001, amounting to P80,000.00, and the additional backwages for the period of December 13, 2000 to January 21, 2001, amounting to P50,800.00 . We note in this regard that the execution proceedings were conducted before the LA issued an Order requiring the payment of P965,014.15 in Gonzales' favor. An appeal of this computation to the NLRC to question the LA's determination of the amount due throws the LA's determination wide open for the NLRC's review. In granting these monetary reliefs, the NLRC reasoned that
Since there is no showing that complainant was paid his salaries from the time when he should have been immediately reinstated until his payroll reinstatement, he is entitled thereto. 25 (emphasis

ours)

To be sure, if the NLRC's findings had been arrived at arbitrarily or in disregard of the evidence on record, the CA would have been right and could have granted the petition for certiorari on the finding that the NLRC made

a factual finding not supported by substantial evidence. 26 The CA, in fact, did not appear to have looked into these matters and did not at all ask whether the NLRC's findings on the awarded monetary benefits were supported by substantial evidence. This omission, however, did not render the NLRC's ruling defective as Jimenez v. NLRC, et al. 27 teaches us that
On the first issue, we find no reason to disturb the findings of respondent NLRC that the entire amount of commissions was not paid, this by reason of the evident failure of herein petitioners to present evidence that full payment thereof has been made. It is a basic rule in evidence that each party must prove his affirmative allegations. Since the burden of evidence lies with the party who asserts an affirmative allegation, the plaintiff or complainant has to prove his affirmative allegation, in the complaint and the defendant or respondent has to prove the affirmative allegations in his affirmative defenses and counterclaim. Considering that petitioners herein assert that the disputed commissions have been paid, they have the bounden duty to prove that fact.
HAICTD

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going forward with the evidence as distinct from the general burden of proof shifts to the creditor, who is then under a duty of producing some evidence to show non-payment. 28 (emphases ours,

citations omitted)

Thus, even without proof of nonpayment, the NLRC was right in requiring the payment of the 13th month pay and the salaries due after the LA's decision until the illegally dismissed petitioner was reinstated in the payroll, i.e., from December 13, 2000 to January 21, 2001. It follows that the CA was wrong when it concluded that the NLRC acted outside its jurisdiction by including these monetary awards as items for execution. These amounts are not excluded from the concept of backwages as the salaries fell due after Gonzales should have been reinstated, while the 13th month pay fell due for the same period by legal mandate. These are entitlements that cannot now be glossed over if the final decision on the merits in this case were to be respected.

The Legal Obstacle: the prohibition on 2nd motion for reconsideration

The above discussions unavoidably lead to the conclusion that the Court's Minute Resolutions denying Gonzales' petition were not properly issued and are tainted by the nullity of the CA decision these Resolutions effectively approved. We do not aim to defend these actions, however, by mechanically and blindly applying the principle of immutability of judgment, nor by tolerating the CA's inappropriate application of this principle. The immutability principle, rather than being absolute, is subject to well-settled exceptions, among which is its inapplicability when a decision claimed to be final is not only erroneous, but null and void.
CcSTHI

We cannot also be oblivious to the legal reality that the matter before us is no longer the validity of Gonzales' dismissal and the legal consequences that follow matters long laid to rest and which we do not and cannot now disturb. Nor is the matter before us the additional monetary benefits that Gonzales claims in his petition, since these essentially involve factual matters that are beyond a Rule 45 petition to rule upon and correct.

The matter before us in the Rule 45 petition questioning the CA's Rule 65 determination is the scope of the benefits awarded by the LA, as modified on appeal and ultimately affirmed by this Court, which ruling has become final and which now must be implemented as a matter of law. Given these considerations, to reopen this case on second motion for reconsideration would not actually embroil the Court with changes in the decision on the merits of the case, but would confine itself solely to the issue of the CA's actions in the course of determining lack or excess of jurisdiction or the presence of grave abuse of discretion in reviewing the NLRC's ruling on the execution aspect of the case. Additionally, while continued consideration of a case on second motion for reconsideration very strongly remains an exception, our action in doing so in this case is not without sound legal justification. 29 An order of execution that varies the tenor of a final and executory judgment is null and void. 30 This was what the CA effectively did it varied the final and executory judgment of the LA, as modified on appeal and ultimately affirmed by the Court. We would simply be enforcing our own Decision on the merits of the original case by nullifying what the CA did. Viewed in these lights, the recognition of, and our corrective action on, the nullity of the CA's ruling on the current petition is a duty this Court is under obligation to undertake pursuant to Section 1, Article VIII of the Constitution. We undertake this corrective action by restoring what the CA should have properly recognized to be covered by the Decision on the merits of the original case.
cASIED

WHEREFORE, premises considered, in lieu of our Minute Resolutions of November 16, 2011 and February 27, 2012 which we hereby vacate, we hereby PARTIALLY GRANT the petition and DIRECT the payment of the following deficiencies in the payments due petitioner Leo Gonzales under the Labor Arbiter's Order of August 18, 2009: 1.13th month pay for the years 2000 and 2001; 2.Additional backwages from December 13, 2000 until January 21, 2001; and 3.12% interest on the total judgment award from the time of the judgment's finality on July 12, 2005 until the total award is fully paid.
IEHScT

The Labor Arbiter is hereby DIRECTED to issue the appropriate writ of execution incorporating these additional awards to those reflected in his Order of August 18, 2009. Costs against respondents Solid Cement Corporation and Allen Querubin. SO ORDERED.

Sereno, C.J., Velasco, Jr., Leonardo-de Castro, Peralta, Bersamin, Abad, Villarama, Jr., Mendoza, Reyes and Perlas-Bernabe, JJ., concur. Carpio, Del Castillo and Perez, JJ., are on leave.

[G.R. No. 202791. June 10, 2013.] PHILIPPINE TRANSMARINE CARRIERS, INC., petitioner, vs. LEANDRO LEGASPI, respondent.

DECISION

MENDOZA, J :
p

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the January 5, 2012 Resolution 1 and July 20, 2012 Resolution 2 of the Court of Appeals (CA), in CA-G.R. SP No. 116686, which denied the petitioner's motion to amend the dispositive portion of the June 29, 2011 CA Decision.

The Factual and Procedural Antecedents

Respondent Leandro Legaspi (respondent) was employed as Utility Pastry on board the vessel "Azamara Journey" under the employment of petitioner Philippine Transmarine Carriers, Inc. (petitioner). Respondent's employment was covered by a Collective Bargaining Agreement (CBA) wherein it was agreed that the company shall pay a maximum disability compensation of up to US$60,000.00 only. While on board the vessel, respondent suffered "Cardiac Arrest S/P ICD Insertation." He was checked by the ship's doctor and was prescribed medications. On November 14, 2008, respondent was repatriated to receive further medical treatment and examination. On May 23, 2009, the company-designated physician assessed his condition to be Disability Grade 2. Not satisfied, respondent filed a complaint for full and permanent disability compensation against petitioner before the Labor Arbiter (LA).

The Labor Arbiter's Ruling

In its January 25, 2010 Decision,
3

the LA ruled in favor of respondent, the dispositive portion of which reads:

WHEREFORE, respondents (now petitioner) are hereby ordered to pay complainant jointly and severally, the following: 1.US$80,000.00 or its peso equivalent at the time of payment as permanent disability compensation; 2.US$1,320.00 or its peso equivalent as sick wages; 3.Attorney's fees equivalent to 10% of the total award. SO ORDERED.

Notably, the LA awarded US$80,000.00 based on the ITF Cruise Ship Model Agreement for Catering Personnel, not on the CBA. Not satisfied, petitioner appealed the LA decision before the National Labor Relations Commission (NLRC).
DEcITS

The NLRC's Ruling

In its May 28, 2010 Decision, the NLRC affirmed the decision of the LA. Petitioner timely filed its motion for reconsideration but it was denied by the NLRC in its July 30, 2010 Resolution. On September 5, 2010, the NLRC issued the Entry of Judgment stating that its resolution affirming the LA decision had become final and executory.

On October 22, 2010, during the hearing on the motion for execution before the NLRC, petitioner agreed to pay respondent US$81,320.00. The terms and conditions of said payment were embodied in the Receipt of Judgment Award with Undertaking, 4 wherein respondent acknowledged receipt of the said amount and undertook to return it to petitioner in the event the latter's petition for certiorari would be granted, without prejudice to respondent's right to appeal. It was also agreed upon that the remaining balance would be given on the next scheduled conference. Pertinent portions of the said undertaking provide:
xxx xxx xxx 3.That counsel (of the petitioner) manifested their willingness to tender the judgment award without prejudice to the respondent's (now petitioner) right to file a Petition for Certiorari and provided, complainant (now respondent) undertakes to return the full amount without need of demand or a separate action in the event that the Petition for Certiorari is granted;
caCEDA

4.That complainant's counsel was amenable to the arrangement and accepted the offer. NOW THEREFORE complainant and his counsel hereby acknowledge RECEIPT of the sum of EIGHTY-ONE THOUSAND THREE HUNDRED TWENTY AND 0/100 (US$81,320.00) covered by CITIBANK CHECK with No. 1000001161 dated October 21, 2010 payable to the order of LEANDRO V. LEGASPI and UNDERTAKES to RETURN the entire amount to respondent PHILIPPINE TRANSMARINE CARRIERS, INC. in the event that the Petition for Certiorari is granted without prejudice to complainant's right to appeal. Such undertaking shall be ENFORCEABLE by mere motion before this Honorable office without need of separate action. 5[Emphases and underscoring supplied]

On November 8, 2010, petitioner timely filed a petition for certiorari with the CA.

In the meantime, on March 2, 2011, the LA issued a writ of execution which noted petitioner's payment of the amount of US$81,320.00. On March 16, 2011, in compliance with the said writ, petitioner tendered to the NLRC Cashier the additional amounts of US$8,132.00 as attorney's fees and P3,042.95 as execution fee. In its Order, dated March 31, 2011, the LA ordered the release of the aforementioned amounts to respondent.

The CA's Ruling

Unaware of a) the September 5, 2010 entry of judgment of the NLRC, b) the October 22, 2010 payment of US$81,320.00, and c) the writ of execution issued by the LA, the CA rendered its Decision, dated June 29, 2011. The CA partially granted the petition for certiorari and modified the assailed resolutions of the NLRC, awarding only US$60,000.00 pursuant to the CBA between Celebrity Cruise Lines and Federazione Italianaa Transporti CISL. Petitioner then filed its Manifestation with Motion to Amend the Dispositive Portion, submitting to the CA the writ of execution issued by the LA in support of its motion. Petitioner contended that since it had already paid the total amount of US$89,452.00, it was entitled to the return of the excess payment in the amount of US$29,452.00. In its assailed January 5, 2012 Resolution, the CA denied the motion and ruled that the petition should have been dismissed for being moot and academic not only because the assailed decision of the NLRC had become final and executory on September 5, 2010, but also because the said judgment had been satisfied on October 22, 2010, even before the filing of the petition for certiorari on November 8, 2010. In so ruling, the CA cited the pronouncement in Career Philippines Ship Management v. Geronimo Madjus 7 where it was stated that the satisfaction of the monetary award rendered the petition for certiorari moot. Petitioner filed a motion for reconsideration but it was denied by the CA in its assailed July 20, 2012 Resolution.

Hence, this petition. ISSUES I.WHETHER THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR OF LAW IN RULING THAT PETITIONER IS ESTOPPED IN COLLECTING THE EXCESS PAYMENT IT MADE TO THE RESPONDENT NOTWITHSTANDING THE RECEIPT OF JUDGMENT AWARD SIGNED BY THE RESPONDENT II.WHETHER THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN INVOKING THE RULING OF CAREER V. MADJUS
ASaTCE

Petitioner argues that it clearly filed its petition for certiorari within the 60-day reglementary period and, thus, the NLRC resolutions could not have attained finality. Citing Delima v. Gois, 8 petitioner avers that the NLRC cannot declare that a decision has become final and executory because the period to file the petition has not yet expired. Petitioner, thus, contends that the finality of the NLRC judgment did not render the petition moot and academic because such is null and void ab initio. Petitioner also argues that the Receipt of the Judgment Award with Undertaking, which was never refuted by respondent, clearly stated that the payment of the judgment award was without prejudice to its right to file a petition for certiorari with the CA. Petitioner asserts that the case relied upon by the CA, Career Philippines, is not applicable as it is not on all fours with this case. Instead, it asserts that the applicable case should be Leonis Navigation Co., Inc. v. Villamater, 9where it was held that the satisfaction of the monetary award by the employer does not render the petition for certiorari moot before the CA. On the other hand, respondent reiterates the CA ruling, asserting that the voluntary satisfaction by petitioner of the full judgment award rendered the case moot, and insists that it was a clear indication that it had already been persuaded by the judiciousness and merits of the award for disability compensation. He also avers that this petition is merely pro-forma as it is a reiteration of petitioner's previous issues and arguments already resolved by the CA. The Court's Ruling

Petition for Certiorari, Not Moot

SIacTE

Section 14, Rule VII of the 2011 NLRC Rules of Procedure provides that decisions, resolutions or orders of the NLRC shall become final and executory after ten (10) calendar days from receipt thereof by the parties, and entry of judgment shall be made upon the expiration of the said period. 10 In St. Martin Funeral Home v. NLRC, 11 however, it was ruled that judicial review of decisions of the NLRC may be sought via a petition for certiorari before the CA under Rule 65 of the Rules of Court; and under Section 4 thereof, petitioners are allowed sixty (60) days from notice of the assailed order or resolution within which to file the petition. Hence, in cases where a petition for certiorari is filed after the expiration of the 10-day period under the 2011 NLRC Rules of Procedure but within the 60-day period under Rule 65 of the Rules of Court, the CA can grant the petition and modify, nullify and reverse a decision or resolution of the NLRC. Accordingly, in this case, although the petition for certiorari was not filed within the 10-day period, petitioner timely filed it before the CA within the 60-day reglementary period under Rule 65. It has, thus, been held that the CA's review of the decisions or resolutions of the NLRC under Rule 65, particularly those which have already been executed, does not affect their statutory finality, considering that Section 4, 12 Rule XI of the 2011 NLRC Rules of Procedure, provides that a petition for certiorari filed with the CA shall not stay the execution of the assailed decision unless a restraining order is issued. In Leonis Navigation, it was further written:

The CA, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is material to or decisive of the controversy; and it cannot make this determination without looking into the evidence of the parties. Necessarily, the appellate court can only evaluate the materiality or significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on record. 13 Notably, if the CA grants the petition and nullifies the decision or resolution of the NLRC on the ground of grave abuse of discretion amounting to excess or lack of jurisdiction, the decision or resolution of the NLRC is, in contemplation of law, null and void ab initio; hence, the decision or resolution never became final and executory. 14

Career Philippines not applicable

In Career Philippines, believing that the execution of the LA Decision was imminent after its petition for injunctive relief was denied, the employer filed before the LA a pleading embodying a conditional satisfaction of judgment before the CA and, accordingly, paid the employee the monetary award in the LA decision. In the said pleading, the employer stated that the conditional satisfaction of the judgment award was without prejudice to its pending appeal before the CA and that it was being made only to prevent the imminent execution. 15 The CA later dismissed the employer's petition for being moot and academic, noting that the decision of the LA had attained finality with the satisfaction of the judgment award. This Court affirmed the ruling of the CA, interpreting the "conditional settlement" to be tantamount to an amicable settlement of the case resulting in the mootness of the petition for certiorari, considering (i) that the employee could no longer pursue other claims, 16 and (ii) that the employer could not have been compelled to immediately pay because it had filed an appeal bond to ensure payment to the employee.
AaCTID

Stated differently, the Court ruled against the employer because the conditional satisfaction of judgment signed by the parties was highly prejudicial to the employee. The agreement stated that the payment of the monetary award was without prejudice to the right of the employer to file a petition for certiorari and appeal, while the employee agreed that she would no longer file any complaint or prosecute any suit of action against the employer after receiving the payment. In contrast, in Leonis Navigation, after the NLRC resolution awarding disability benefits became final and executory, the employer paid the monetary award to the employee. The CA dismissed the employer's petition for certiorari, ruling that the final and executory decisions or resolutions of the NLRC rendered appeals to superior courts moot and academic. This Court disagreed with the CA and held that final and executed decisions of the NLRC did not prevent the CA from reviewing the same under Rule 65 of the Rules of Court. It was further ruled that the employee was estopped from claiming that the case was closed and terminated, considering that the employee's Acknowledgment Receipt stated that such was without prejudice to the final outcome of the petition for certiorari pending before the CA. In the present case, the Receipt of the Judgment Award with Undertaking was fair to both the employer and the employee. As in Leonis Navigation, the said agreement stipulated that respondent should return the amount to petitioner if the petition for certiorari would be granted but without prejudice to respondent's right to appeal. The agreement, thus, provided available remedies to both parties. It is clear that petitioner paid respondent subject to the terms and conditions stated in the Receipt of the Judgment Award with Undertaking. 17 Both parties signed the agreement. Respondent neither refuted the agreement nor claimed that he was forced to sign it against his will. Therefore, the petition for certiorari was not rendered moot despite petitioner's satisfaction of the judgment award, as the respondent had obliged himself to return the payment if the petition would be granted.

Return of Excess Payment

As the agreement was voluntarily entered into and represented a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. 18 Respondent agreed to the stipulation that he would return the amount paid to him in the event that the petition for certiorari would be granted. Since the petition was indeed granted by the CA, albeit partially, respondent must comply with the condition to return the excess amount. The Court finds that the Receipt of the Judgment Award with Undertaking was a fair and binding agreement. It was executed by the parties subject to outcome of the petition. To allow now respondent to retain the excess money judgment would amount to his unjust enrichment to the prejudice of petitioner. Unjust enrichment is a term used to depict result or effect of failure to make remuneration of or for property or benefits received under circumstances that give rise to legal or equitable obligation to account for them. To be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. Unjust enrichment is not itself a theory of reconveyance. Rather, it is a prerequisite for the enforcement of the doctrine of restitution. 19 There is unjust enrichment when: 1.A person is unjustly benefited; and 2.Such benefit is derived at the expense of or with damages to another.
20

In the case at bench, petitioner paid respondent US$81,320.00 in the pre-execution conference plus attorney's fees of US$8,132.00 pursuant to the writ of execution. The June 29, 2011 CA Decision, however, modified the final resolution of the NLRC and awarded only US$60,000.00 to respondent. If allowed to return the excess, the respondent would have been unjustly benefited to the prejudice and expense of petitioner. Petitioner's claim of excess payment is further buttressed by, and in line with, Section 14, Rule XI of the 2011 NLRC Rules of Procedure which provides:
EFFECT OF REVERSAL OF EXECUTED JUDGMENT. Where the executed judgment is totally or partially reversed or annulled by the Court of Appeals or the Supreme Court, the Labor Arbiter shall, on motion, issue such orders of restitution of the executed award, except wages paid during reinstatement pending appeal. [Emphases supplied]

Although the Court has, more often than not, been inclined towards the plight of the workers and has upheld their cause in their conflicts with the employers, such inclination has not blinded it to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine. 21 WHEREFORE, the petition is GRANTED. The Court of Appeals Resolutions, dated January 5, 2012 and July 20, 2012, are herebyREVERSED and SET ASIDE. Respondent Leandro Legaspi is ORDERED to return the excess amount of payment in the sum of US$29,452.00 to petitioner Philippine Transmarine Carriers, Inc. The amount shall earn interest at the rate of 12% per annum from the finality of this judgment.
EHScCA

SO ORDERED.

Velasco, Jr., Peralta, Abad and Leonen, JJ., concur.

[G.R. No. 198662. September 12, 2012.] RADIO MINDANAO NETWORK, INC. and ERIC S. CANOY, petitioners, vs. DOMINGO Z. YBAROLA, JR. and ALFONSO E. RIVERA, JR.,respondents.

RESOLUTION

BRION, J :
p

We resolve the motion for reconsideration 1 of petitioners Radio Mindanao Network, Inc. (RMN) and Eric S. Canoy addressing our Resolution 2 of December 7, 2011 which denied the appeal from the decision 3 and the resolution 4 of the Court of Appeals (CA) in CA-G.R. SP No. 109016. Factual Background Respondents Domingo Z. Ybarola, Jr. and Alfonso E. Rivera, Jr. were hired on June 15, 1977 and June 1, 1983, respectively, by RMN. They eventually became account managers, soliciting advertisements and servicing various clients of RMN. On September 15, 2002, the respondents' services were terminated as a result of RMN's reorganization/restructuring; they were given their separation pay P631,250.00 for Ybarola, and P481,250.00 for Rivera. Sometime in December 2002, they executed release/quitclaim affidavits. Dissatisfied with their separation pay, the respondents filed separate complaints (which were later consolidated) against RMN and its President, Eric S. Canoy, for illegal dismissal with several money claims, including attorney's fees. They indicated that their monthly salary rates were P60,000.00 for Ybarola and P40,000.00 for Rivera. The Compulsory Arbitration Proceedings The respondents argued that the release/quitclaim they executed should not be a bar to the recovery of the full benefits due them; while they admitted that they signed release documents, they did so due to dire necessity.
cSATDC

The petitioners denied liability, contending that the amounts the respondents received represented a fair and reasonable settlement of their claims, as attested to by the release/quitclaim affidavits which they executed freely and voluntarily. They belied the respondents' claimed salary rates, alleging that they each received a monthly salary of P9,177.00, as shown by the payrolls. On July 18, 2007, Labor Arbiter Patricio Libo-on dismissed the illegal dismissal complaint, but ordered the payment of additional separation pay to the respondents P490,066.00 for Ybarola and P429,517.55 for Rivera. 5 The labor arbiter adjusted the separation pay award based on the respondents' Certificates of Compensation Payment/Tax Withheld showing that Ybarola and Rivera were receiving an annual salary of P482,477.61 and P697,303.00, respectively. On appeal by the petitioners to the National Labor Relations Commission (NLRC), the NLRC set aside the labor arbiter's decision and dismissed the complaint for lack of merit. 6 It ruled that the withholding tax certificate cannot be the basis of the computation of the respondents' separation pay as the tax document included the respondents' cost-of-living allowance and commissions; as a general rule, commissions cannot be included in the base figure for the computation of the separation pay because they have to be earned by actual market transactions attributable to the respondents, as held by the Court in Soriano v. NLRC 7 and San Miguel Jeepney Service v. NLRC. 8 The NLRC upheld the validity of the respondents' quitclaim affidavits as they failed to show that they were forced to execute the documents. From the NLRC, the respondents sought relief from the CA through a petition for certiorari under Rule 65 of the Rules of Court.
acCITS

The CA Decision and the Court's Ruling In its decision 9 of February 17, 2011, the CA granted the petition and set aside the assailed NLRC dispositions. It reinstated the labor arbiter's separation pay award, rejecting the NLRC's ruling that the respondents' commissions are not included in the computation of their separation pay. It pointed out that in the present case, the respondents earned their commissions through actual market transactions attributable to them; these commissions, therefore, were part of their salary. The appellate court declared the release/quitclaim affidavits executed by the respondents invalid for being against public policy, citing two reasons: (1) the terms of the settlement are unconscionable; the separation pay the respondents received was deficient by at least P400,000.00 for each of them; and (2) the absence of voluntariness when the respondents signed the document, it was their dire circumstances and inability to support their families that finally drove them to accept the amount the petitioners offered. Significantly, they dallied and it took them three months to sign the release/quitclaim affidavits. The petitioners moved for reconsideration, but the CA denied the motion in a resolution 10 dated September 23, 2011. Thus, the petitioners appealed to this Court through a petition for review on certiorari under Rule 45 of the Rules of Court. By a Resolution 11 dated December 7, 2011, the Court denied the petition for failure to show any reversible error or grave abuse of discretion in the assailed CA rulings. The Motion for Reconsideration The petitioners seek reconsideration of the Court's denial of their appeal on the ground that the CA, in fact, committed reversible error in: (1) failing to declare that Canoy is not personally liable in the present case; (2) disregarding the rule laid down in Talam v. National Labor Relations Commission 12 on the proper appreciation of quitclaims; and (3) disregarding prevailing jurisprudence which places on the respondents the burden of proving that their commissions were earned through actual market transactions attributable to them. The petitioners fault the CA for not expressly declaring that no basis exists to hold Canoy personally liable for the award to the respondents as they failed to specify any act Canoy committed against them or to explain how Canoy participated in their dismissal. They express alarm as they believe that unless the Court acts, the respondents will enforce the award against Canoy himself. On the release/quitclaim issue, the petitioners bewail the CA's disregard of the Court's ruling in Talam that the quitclaim that Francis Ray Talam, who was not an unlettered employee, executed was a voluntary act as there was no showing that he was coerced into signing the instrument, and that he received a valuable consideration for his less than two years of service with the company. They point out that in this case, the labor arbiter and the NLRC correctly concluded that the respondents are hardly unlettered employees, but intelligent, well-educated and who were too smart to be caught unaware of what they were doing. They stress, too, that the respondents submitted no proof that they were in dire circumstances when they executed the release/quitclaim document.
HAICTD

With regard to the controversy on the inclusion of the respondents' commissions in the computation of their separation pay, the petitioners reiterate their contention that the respondents failed to show proof that they earned the commissions through actual market forces attributable to them. The Respondents' Position Through their Comment/Opposition (to the Motion for Reconsideration), 13 the respondents pray that the motion be denied for lack of merit. They argue that the motion is based on arguments already raised in the petition for review which had already been denied by this Court.

The respondents submit that the issue of Canoy's personal liability has become final and conclusive on the parties as the petitioners failed to raise the issue on time. They maintain that as the records show, the petitioners failed to raise the issue in their appeal to the NLRC and neither did they bring it up in their motion for reconsideration of the CA's decision reinstating the labor arbiter's award. The Petitioners' Reply In their reply (to the respondents' Comment/Opposition), 14 the petitioners ask that their petition be reinstated to allow the full ventilation of the issues presented for consideration. They contend that the respondents merely reiterated the CA pronouncements and have not confronted the issues raised and the jurisprudence they cited. On the question of Canoy's personal liability, the petitioners take exception to the respondents' submission that the matter had been resolved with finality and has become conclusive on them. They assert that they did not raise the issue with the CA because there was no reason for them to do so as the ruling then being reviewed was one which held that they were not liable to the respondents.
SaDICE

Our Ruling on the Motion for Reconsideration We find the motion for reconsideration unmeritorious. The motion raises substantially the same arguments presented in the petition and we find no compelling justification to grant the reconsideration prayed for. The petitioners insist that the respondents' commissions were not part of their salaries, because they failed to present proof that they earned the commission due to actual market transactions attributable to them. They submit that the commissions are profit-sharing payments which do not form part of their salaries. We are not convinced. If these commissions had been really profit-sharing bonuses to the respondents, they should have received the same amounts, yet, as the NLRC itself noted, Ybarola and Rivera received P372,173.11 and P586,998.50 commissions, respectively, in 2002. 15 The variance in amounts the respondents received as commissions supports the CA's finding that the salary structure of the respondents was such that they only received a minimal amount as guaranteed wage; a greater part of their income was derived from the commissions they get from soliciting advertisements; these advertisements are the "products" they sell. As the CA aptly noted, this kind of salary structure does not detract from the character of the commissions being part of the salary or wage paid to the employees for services rendered to the company, as the Court held in Philippine Duplicators, Inc. v. NLRC. 16 The petitioners' reliance on our ruling in Talam v. National Labor Relations Commission, 17 regarding the "proper appreciation of quitclaims," as they put it, is misplaced. While Talam, in the cited case, and Ybarola and Rivera, in this case, are not unlettered employees, their situations differ in all other respects. In Talam, the employee received a valuable consideration for his less than two years of service with the company; 18 he was not shortchanged and no essential unfairness took place. In this case, as the CA noted, the separation pay the respondents each received was deficient by at least P400,000.00; thus, they were given only half of the amount they were legally entitled to. To be sure, a settlement under these terms is not and cannot be a reasonable one, given especially the respondents' length of service 25 years for Ybarola and 19 years for Rivera. The CA was correct when it opined that the respondents were in dire straits when they executed the release/quitclaim affidavits. Without jobs and with families to support, they dallied in executing the quitclaim instrument, but were eventually forced to sign given their circumstances. Lastly, the petitioners are estopped from raising the issue of Canoy's personal liability. They did not raise it before the NLRC in their appeal from the labor arbiter's decision, nor with the CA in their motion for reconsideration of the appellate court's judgment. The risk of having Canoy's personal liability for the

judgment award did not arise only with the filing of the present petition, it had been there all along in the NLRC, as well as in the CA. WHEREFORE, premises considered, we hereby DENY the motion for reconsideration with finality. No second motion for reconsideration shall be entertained. Let judgment be entered in due course. SO ORDERED.

Sereno, C.J., Carpio, Perez and Reyes, JJ., concur.

[G.R. No. 193493. June 13, 2013.] JAIME N. GAPAYAO, petitioner, vs. ROSARIO FULO, SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.

DECISION

SERENO, C.J :
p

This is a Rule 45 Petition 1 assailing the Decision 2 and Resolution 3 of the Court of Appeals (CA) in CA-G.R. SP. No. 101688, affirming the Resolution 4 of the Social Security Commission (SSC). The SSC held petitioner Jaime N. Gapayao liable to pay the unpaid social security contributions due to the deceased Jaime Fulo, and the Social Security System (SSS) to pay private respondent Rosario L. Fulo, the widow of the deceased, the appropriate death benefits pursuant to the Social Security Law. The antecedent facts are as follows: On 4 November 1997, Jaime Fulo (deceased) died of "acute renal failure secondary to 1st degree burn 70% secondary electrocution" 5 while doing repairs at the residence and business establishment of petitioner located at San Julian, Irosin, Sorsogon. Allegedly moved by his Christian faith, petitioner extended some financial assistance to private respondent. On 16 November 1997, the latter executed an Affidavit of Desistance 6 stating that she was not holding them liable for the death of her late husband, Jaime Fulo, and was thereby waiving her right and desisting from filing any criminal or civil action against petitioner. On 14 January 1998, both parties executed a Compromise Agreement, quoted below:
cIETHa

the relevant portion of which is

We, the undersigned unto this Honorable Regional Office/District Office/Provincial Agency Office respectfully state: 1.The undersigned employer, hereby agrees to pay the sum of FORTY THOUSAND PESOS (P40,000.00) to the surviving spouse of JAIME POLO, an employee who died of an accident, as a complete and full payment for all claims due the victim.

2.On the other hand, the undersigned surviving spouse of the victim having received the said amount do [sic] hereby release and discharge the employer from any and all claims that maybe due the victim in connection with the victim's employment thereat.

Thereafter, private respondent filed a claim for social security benefits with the Social Security System (SSS) Sorsogon Branch. 8 However, upon verification and evaluation, it was discovered that the deceased was not a registered member of the SSS. 9 Upon the insistence of private respondent that her late husband had been employed by petitioner from January 1983 up to his untimely death on 4 November 1997, the SSS conducted a field investigation to clarify his status of employment. In its field investigation report, 10 it enumerated its findings as follows:
In connection with the complaint filed by Mrs. Rosario Fulo, hereunder are the findings per interview with Mr. Leonor Delgra, Santiago Bolanos and Amado Gacelo: 1.That Mr. Jaime Fulo was an employee of Jaime Gapayao as farm laborer from 1983 to 1997. 2.Mr. Leonor Delgra and Santiago Bolanos are co-employees of Jaime Fulo.
IcDESA

3.Mr. Jaime Fulo receives compensation on a daily basis ranging from P5.00 to P60.00 from 1983 to 1997. Per interview from Mrs. Estela Gapayao, please be informed that: 1.Jaime Fulo is an employee of Mr. & Mrs. Jaime Gapayao on an extra basis. 2.Sometimes Jaime Fulo is allowed to work in the farm as abaca harvester and earn 1/3 share of its harvest as his income. 3.Mr. & Mrs. Gapayao hired the services of Jaime Fulo not only in the farm as well as in doing house repairs whenever it is available. Mr. Fulo receives his remuneration usually in the afternoon after doing his job. 4.Mr. & Mrs. Gapayao hires 50-100 persons when necessary to work in their farm as laborer and Jaime Fulo is one of them. Jaime Fulo receives more or less P50.00 a day. (Emphases in the original)

Consequently, the SSS demanded that petitioner remit the social security contributions of the deceased. When petitioner denied that the deceased was his employee, the SSS required private respondent to present documentary and testimonial evidence to refute petitioner's allegations. 11 Instead of presenting evidence, private respondent filed a Petition 12 before the SSC on 17 February 2003. In her Petition, she sought social security coverage and payment of contributions in order to avail herself of the benefits accruing from the death of her husband.
CHcETA

On 6 May 2003, petitioner filed an Answer 13 disclaiming any liability on the premise that the deceased was not the former's employee, but was rather an independent contractor whose tasks were not subject to petitioner's control and supervision. 14 Assuming arguendo that the deceased was petitioner's employee, he was still not entitled to be paid his SSS premiums for the intervening period when he was not at work, as he was an "intermittent worker who [was] only summoned every now and then as the need [arose]." 15 Hence, petitioner insisted that he was under no obligation to report the former's demise to the SSS for social security coverage.

Subsequently, on 30 June 2003, the SSS filed a Petition-in-Intervention 16 before the SSC, outlining the factual circumstances of the case and praying that judgment be rendered based on the evidence adduced by the parties. On 14 March 2007, the SSC rendered a Resolution,
17

the dispositive portion of which provides:

WHEREFORE, PREMISES CONSIDERED, this Commission finds, and so holds, that Jaime Fulo, the late husband of petitioner, was employed by respondent Jaime N. Gapayao from January 1983 to November 4, 1997, working for nine (9) months a year receiving the minimum wage then prevailing. Accordingly, the respondent is hereby ordered to pay P45,315.95 representing the unpaid SS contributions due on behalf of deceased Jaime Fulo, the amount of P217,710.33 as 3% per month penalty for late remittance thereof, computed as of March 30, 2006, without prejudice to the collection of additional penalty accruing thereafter, and the sum of P230,542.20 (SSS) and P166,000.00 (EC) as damages for the failure of the respondent to report the deceased Jaime Fulo for SS coverage prior to his death pursuant to Section 24(a) of the SS Law, as amended. The SSS is hereby directed to pay petitioner Rosario Fulo the appropriate death benefit, pursuant to Section 13 of the SS Law, as amended, as well as its prevailing rules and regulations, and to inform this Commission of its compliance herewith. SO ORDERED.
DTSIEc

On 18 May 2007, petitioner filed a Motion for Reconsideration, August 2007.

18

which was denied in an Order

19

dated 16

Aggrieved, petitioner appealed to the CA on 19 December 2007. Decision 21 in favor of private respondent, as follows:

20

On 17 March 2010, the CA rendered a

In fine, public respondent SSC had sufficient basis in concluding that private respondent's husband was an employee of petitioner and should, therefore, be entitled to compulsory coverage under the Social Security Law. Having ruled in favor of the existence of employer-employee relationship between petitioner and the late Jaime Fulo, it is no longer necessary to dwell on the other issues raised. Resultantly, for his failure to report Jaime Fulo for compulsory social security coverage, petitioner should bear the consequences thereof. Under the law, an employer who fails to report his employee for social security coverage is liable to [1] pay the benefits of those who die, become disabled, get sick or reach retirement age; [2] pay all unpaid contributions plus a penalty of three percent per month; and [3] be held liable for a criminal offense punishable by fine and/or imprisonment. But an employee is still entitled to social security benefits even is (sic) his employer fails or refuses to remit his contribution to the SSS. WHEREFORE, premises considered, the Resolution appealed from is AFFIRMED in toto. SO ORDERED.
ETAICc

In holding thus, the CA gave credence to the findings of the SSC. The appellate court held that it "does not follow that a person who does not observe normal hours of work cannot be deemed an employee." 22 For one, it is not essential for the employer to actually supervise the performance of duties of the employee; it is sufficient that the former has a right to wield the power. In this case, petitioner exercised his control through an overseer in the person of Amado Gacelo, the tenant on petitioner's land. 23 Most important, petitioner entered into a Compromise Agreement with private respondent and expressly admitted therein that he was the

employer of the deceased. 24 The CA interpreted this admission as a declaration against interest, pursuant to Section 26, Rule 130 of the Rules of Court. 25 Hence, this petition. Public respondents SSS 26 and SSC 27 filed their Comments on 31 January 2011 and 28 February 2011, respectively, while private respondent filed her Comment on 14 March 2011. 28 On 6 March 2012, petitioner filed a "Consolidated Reply to the Comments of the Public Respondents SSS and SSC and Private Respondent Rosario Fulo." 29 ISSUE The sole issue presented before us is whether or not there exists between the deceased Jaime Fulo and petitioner an employer-employee relationship that would merit an award of benefits in favor of private respondent under social security laws. THE COURT'S RULING In asserting the existence of an employer-employee relationship, private respondent alleges that her late husband had been in the employ of petitioner for 14 years, from 1983 to 1997. 30 During that period, he was made to work as a laborer in the agricultural landholdings, a harvester in the abaca plantation, and a repairman/utility worker in several business establishments owned by petitioner. 31 To private respondent, the "considerable length of time during which [the deceased] was given diverse tasks by petitioner was a clear indication of the necessity and indispensability of her late husband's services to petitioner's business." 32This view is bolstered by the admission of petitioner himself in the Compromise Agreement that he was the deceased's employer. 33
cHaCAS

Private respondent's position is similarly espoused by the SSC, which contends that its findings are duly supported by evidence on record. 34 It insists that pakyawworkers are considered employees, as long as the employer exercises control over them. In this case, the exercise of control by the employer was delegated to the caretaker of his farm, Amado Gacelo. The SSC further asserts that the deceased rendered services essential for the petitioner's harvest. While these services were not rendered continuously (in the sense that they were not rendered every day throughout the year), still, the deceased had never stopped working for petitioner from year to year until the day the former died. 35 In fact, the deceased was required to work in the other business ventures of petitioner, such as the latter's bakery and grocery store. 36 The Compromise Agreement entered into by petitioner with private respondent should not be a bar to an employee demanding what is legally due the latter. 37 The SSS, while clarifying that it is "neither adversarial nor favoring any of the private parties . . . as it is only tasked to carry out the purposes of the Social Security Law," 38 agrees with both private respondent and SSC. It stresses that factual findings of the lower courts, when affirmed by the appellate court, are generally conclusive and binding upon the Court. 39 Petitioner, on the other hand, insists that the deceased was not his employee. Supposedly, the latter, during the performance of his function, was not under petitioner's control. Control is not necessarily present even if the worker works inside the premises of the person who has engaged his services. 40 Granting without admitting that petitioner gave rules or guidelines to the deceased in the process of the latter's performing his work, the situation cannot be interpreted as control, because it was only intended to promote mutually desired results. 41
HECaTD

Alternatively, petitioner insists that the deceased was hired by Adolfo Gamba, the contractor whom he had hired to construct their building; 42 and by Amado Gacelo, the tenant whom petitioner instructed to manage the latter's farm. 43 For this reason, petitioner believes that a tenant is not beholden to the landlord and is not

under the latter's control and supervision. So if a worker is hired to work on the land of a tenant such as petitioner the former cannot be the worker of the landlord, but of the tenant's. 44 Anent the Compromise Agreement, petitioner clarifies that it was executed to buy peace, because "respondent kept on pestering them by asking for money." 45Petitioner allegedly received threats that if the matter was not settled, private respondent would refer the matter to the New Peoples' Army. 46 Allegedly, the Compromise Agreement was "extortion camouflaged as an agreement." 47 Likewise, petitioner maintains that he shouldered the hospitalization and burial expenses of the deceased to express his "compassion and sympathy to a distressed person and his family," and not to admit liability. 48 Lastly, petitioner alleges that the deceased is a freelance worker. Since he was engaged on a pakyaw basis and worked for a short period of time, in the nature of a farm worker every season, he was not precluded from working with other persons and in fact worked for them. Under Article 280 of the Labor Code, 49 seasonal employees are not covered by the definitions of regular and casual employees. 50 Petitioner cites Mercado, Sr. v. NLRC, 51 in which the Court held that seasonal workers do not become regular employees by the mere fact that they have rendered at least one year of service, whether continuous or broken. 52
EHScCA

We see no cogent reason to reverse the CA. I Findings of fact of the SSC are given weight and credence. At the outset, it is settled that the Court is not a trier of facts and will not weigh evidence all over again. 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 finality when affirmed by the CA. 53 For as long as these findings are supported by substantial evidence, they must be upheld. 54 II

Farm workers may be considered regular seasonal employees.

Article 280 of the Labor Code states:
DCcHIS

Article 280.Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists.

Jurisprudence has identified the three types of employees mentioned in the provision: (1) regular employees or those who have been engaged to perform activities that are usually necessary or desirable in the usual business or trade of the employer; (2) project employees or those whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of

their engagement, or those whose work or service is seasonal in nature and is performed for the duration of the season; and (3) casual employees or those who are neither regular nor project employees. 55 Farm workers generally fall under the definition of seasonal employees. We have consistently held that seasonal employees may be considered as regular employees.56 Regular seasonal employees are those called to work from time to time. The nature of their relationship with the employer is such that during the off season, they are temporarily laid off; but reemployed during the summer season or when their services may be needed. 57 They are in regular employment because of the nature of their job, and not because of the length of time they have worked. 58
IESTcD

The rule, however, is not absolute. In Hacienda Fatima v. National Federation of Sugarcane Workers-Food & General Trade, 59 the Court held that seasonal workers who have worked for one season only may not be considered regular employees. Similarly, in Mercado, Sr. v. NLRC, 60 it was held that when seasonal employees are free to contract their services with other farm owners, then the former are not regular employees. For regular employees to be considered as such, the primary standard used is the reasonable connection between the particular activity they perform and the usual trade or business of the employer. 61 This test has been explained thoroughly in De Leon v. NLRC, 62 viz.:
The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists.

A reading of the records reveals that the deceased was indeed a farm worker who was in the regular employ of petitioner. From year to year, starting January 1983 up until his death, the deceased had been working on petitioner's land by harvesting abaca and coconut, processing copra, and clearing weeds. His employment was continuous in the sense that it was done for more than one harvesting season. Moreover, no amount of reasoning could detract from the fact that these tasks were necessary or desirable in the usual business of petitioner. The other tasks allegedly done by the deceased outside his usual farm work only bolster the existence of an employer-employee relationship. As found by the SSC, the deceased was a construction worker in the building and a helper in the bakery, grocery, hardware, and piggery all owned by petitioner. 63 This fact only proves that even during the off season, the deceased was still in the employ of petitioner. The most telling indicia of this relationship is the Compromise Agreement executed by petitioner and private respondent. It is a valid agreement as long as the consideration is reasonable and the employee signed the waiver voluntarily, with a full understanding of what he or she was entering into. 64 All that is required for the compromise to be deemed voluntarily entered into is personal and specific individual consent. 65 Once executed by the workers or employees and their employers to settle their differences, and done in good faith, a Compromise Agreement is deemed valid and binding among the parties. 66 Petitioner entered into the agreement with full knowledge that he was described as the employer of the deceased. 67 This knowledge cannot simply be denied by a statement that petitioner was merely forced or threatened into such an agreement. His belated attempt to circumvent the agreement should not be given any consideration or weight by this Court.

III Pakyaw workers are regular employees, provided they are subject to the control of petitioner.

Pakyaw workers are considered employees for as long as their employers exercise control over them. In Legend Hotel Manila v. Realuyo, 68 the Court held that "the power of the employer to control the work of

the employee is considered the most significant determinant of the existence of an employer-employee relationship. This is the so-called control test and is premised on whether the person for whom the services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end." It should be remembered that the control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. 69 It is not essential that the employer actually supervises the performance of duties by the employee. It is enough that the former has a right to wield the power. 70
ATICcS

In this case, we agree with the CA that petitioner wielded control over the deceased in the discharge of his functions. Being the owner of the farm on Which the latter worked, petitioner on his own or through his overseer necessarily had the right to review the quality of work produced by his laborers. It matters not whether the deceased conducted his work inside petitioner's farm or not because petitioner retained the right to control him in his work, and in fact exercised it through his farm manager Amado Gacelo. The latter himself testified that petitioner had hired the deceased as one of the pakyaw workers whose salaries were derived from the gross proceeds of the harvest. 71 We do not give credence to the allegation that the deceased was an independent contractor hired by a certain Adolfo Gamba, the contractor whom petitioner himself had hired to build a building. The allegation was based on the self-serving testimony of Joyce Gapay Demate, 72 the daughter of petitioner. The latter has not offered any other proof apart from her testimony to prove the contention. The right of an employee to be covered by the Social Security Act is premised on the existence of an employer-employee relationship. 73 That having been established, the Court hereby rules in favor of private respondent. WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP. No. 101688 dated 17 March 2010 and 13 August 2010, respectively, are hereby AFFIRMED. SO ORDERED.
EDIHSC

Leonardo-de Castro, Bersamin, Villarama, Jr. and Reyes, JJ., concur.