FASAP v. Philippine Airlines, G.R. No.

178083, October 2, 2009

October 2, 2009
Republic of the Philippines

SUPREME COURT

Manila

SPECIAL THIRD DIVISION

G.R. No. 178083 October 2, 2009

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP), Petitioner,

vs.

PHILIPPINE AIRLINES, INC., PATRIA CHIONG and COURT OF APPEALS, Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

For resolution is respondent Philippine Airlines, Inc.’s (PAL) Motion for Reconsideration 1 of our Decision

of July 22, 2008, the dispositive portion of which provides:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R.

SP No. 87956 dated August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor

Arbiter’s findings of illegal retrenchment and its Resolution of May 29, 2007 denying the motion for

reconsideration, are REVERSED and SET ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were covered by the

retrenchment and demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of

seniority rights and other privileges, and to pay them full backwages, inclusive of allowances and other

monetary benefits computed from the time of their separation up to the time of their actual

reinstatement, provided that with respect to those who had received their respective separation pay, the

amounts of payments shall be deducted from their backwages. Where reinstatement is no longer

feasible because the positions previously held no longer exist, respondent Corporation shall pay

backwages plus, in lieu of reinstatement, separation pay equal to one (1) month pay for every year of

service;

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

monetary award.

Costs against respondent PAL.

SO ORDERED.

In its Motion for Reconsideration, PAL maintains that it was suffering from financial distress which

justified the retrenchment of more than 1,400 of its flight attendants. This, it argued, was an established

fact. Furthermore, FASAP never assailed the economic basis for the retrenchment, but only the

allegedly discriminatory and baseless manner by which it was carried out.

PAL asserts that it has presented proof of its claimed losses by attaching its petition for suspension of

payments, as well as the June 23, 1998 Order of the Securities and Exchange Commission (SEC)

approving the said petition for suspension of payments, in its Motion to Dismiss and/or Consolidation of

Case filed with the Labor Arbiter in NLRC-NCR Case No. 06-05100-98, or the labor case subject of the

herein petition. Also attached to the petition for suspension of payments were its audited financial

statements for its fiscal year ending March 1998, and interim financial statements as of the end of the

month prior to the filing of its petition for suspension of payments, as well as:
a) A summary of its debts and other liabilities;

b) A summary of its assets and properties;

c) List of its equity security shareholders showing the name of the security holder and the kind of

interest registered in the name of each holder;

d) A schedule which contains a full and true statement of all of its debts and liabilities, together with a

list of all those to whom said debts and liabilities are due;

e) An inventory which contains an accurate description of all the real and personal property, estate and

effects of PAL, together with a statement of the value of each item of said property, estate and effects,

their respective location and a statement of the encumbrances thereon.

In the instant Motion for Reconsideration, PAL attached a copy of its audited financial statements for

fiscal years 1996, 1997 and 1998. It justifies the submission before the Court of Appeals of its 2002-

2004, and not the 1996-1998, audited financial statements, to show that as of the time of their

submission with the Court of Appeals, PAL was still under rehabilitation, and not for the purpose of

establishing its financial problems during the retrenchment period.

PAL asserts further that the Court should have accorded the SEC’s findings as regards its financial

condition respect and finality, considering that said findings were based on the financial statements and

other documents submitted to it, which PAL now submits, albeit belatedly, via the instant Motion for

Reconsideration. It cites the case of Clarion Printing House Inc. v. National Labor Relations

Commission,2 where the Court declared that the appointment of a receiver or management committee

by the SEC presupposes a finding that, inter alia, a company possesses sufficient property to cover all

its debts but foresees the impossibility of meeting them when they respectively fall due and there is

imminent danger of dissipation, loss, wastage or destruction of assets or other properties or

paralyzation of business operations. On the other hand, it claims that in Rivera v. Espiritu, 3 the Court
made a finding that as a result of the pilots’ three-week strike that began on June 5, 1998, PAL’s

financial situation went from bad to worse and it was faced with bankruptcy, requiring it to seek

rehabilitation and downsize its labor force by more than one-third; and that said pilots’ strike was

immediately followed by another four-day employee-wide strike on July 22, 1998, which involved 1,899

union4 members.

PAL likewise cites previous decisions of the Court which declared a suspension of claims against it in

light of pending rehabilitation proceedings and the issuance of a stay order in the enforcement of all

claims, whether for money or otherwise, which is effective from the date of its issuance until the

dismissal of the petition or the termination of the rehabilitation proceedings. 5 Moreover, it claims that

the infusion of $200 million in PAL in June 1999 is proof of the airline’s financial distress, and was a

condition sine qua non if PAL’s Amended and Restated Rehabilitation Plan were to be approved by the

SEC, and if the absolute closure of PAL were to be averted.

PAL underscores that its situation in 1998 was unique, as it had to contend with—

the very distinct possibility that its losses would eventually result in default on its payments to creditors

for its aircraft leases. If that happened, creditors could have immediately seized all its leased planes

and that would have spelled PAL’s demise. The petition for rehabilitation and suspension of payments

was precisely intended to avoid PAL’s collapse and eventual liquidation. 6

Exercising its management prerogative and sound business judgment, it decided to cut its fleet of

aircraft in order to minimize its operating losses and rescue itself from “total downfall;” which meant

that a corresponding company-wide reduction in manpower necessarily had to be made. As a result,

5,000 PAL employees (including the herein 1,400 cabin attendants) were retrenched.

Further, PAL argues that aside from the confluence of simultaneous unfortunate events that occurred

during the time, like successive strikes, peso depreciation and the Asian currency crisis, there was a

serious drop in passenger traffic which necessitated the closure of PAL’s entire European, Australian,
and Middle East operations and numerous Asian stations, as well as some of its domestic stations.

Consequently, its 27 international routes were reduced to only 7, and its 37 domestic routes to just 17.

PAL claims that it did not act with undue haste in effecting the mass retrenchment of cabin attendants

since, as early as February 17, 1998, consultations were being held in connection with the proposed

retrenchment, and that twice-weekly meetings between the union and the airline were being held since

February 12, 1998. It claims that it took PAL four months before the retrenchment scheme was finally

implemented.

With regard to the implementation of Plan 22 instead of the original Plan 14, PAL asserts that, in so

doing, it should not be found guilty of bad faith. It sets out the chronology of events that led it to

implement Plan 22 instead of Plan 14, thus:

The initial plan was, indeed, to reduce PAL’s fleet from 54 planes to 14. With a smaller fleet, PAL

necessarily had to reduce manpower accordingly, and this was the basis for the retrenchment. The

retrenchment was done on the basis of the conditions and circumstances existing at that time. However,

a series of events ensued—

PAL was placed under corporate rehabilitation by the SEC on June 23, 1998.

Later, on July 22, 1998, the rank-and-file employees belonging to PALEA staged a strike.

Then, on August 28, 1998, President Joseph Ejercito Estrada issued Administrative Order No. 16

creating Inter-Agency Task Force to aid PAL and its employees in solving the problem.

On September 4, 1998, PAL submitted an offer to the Task Force of a plan to transfer shares of stocks to

its employees with a request to suspend existing Collective Bargaining Agreements, which was later

rejected by the employees.

On September 23, 1998, PAL ceased operations.

Then, President Estrada intervened again through the request of PAL employees. PALEA made an offer,

which was rejected by PAL. Finally, PALEA made an offer again which was successfully ratified by the

employees on October 2, 1998 and accepted by PAL.

Subsequently, PAL partially resumed domestic operations on October 7, 1998 believing that the

mutually beneficial terms of the suspension agreement could possibly redeem PAL. Later, it partially

resumed its operations internationally (Los Angeles and San Francisco, United States).

True enough, with some degree of relief as a result of the suspension of payment and rehabilitation

proceedings in the SEC and the suspension of the CBA, PAL began to see slow but steady

improvements. Also, airline industry experts who were commissioned by PAL to assist in drafting its

Amended and Restated Rehabilitation Plan came to a conclusion that PAL had to increase its fleet of

planes to improve its financial and operational viability. This advice was adopted by PAL in its Amended

and Restated Rehabilitation Plan, which was eventually approved by the SEC.

With these supervening events, PAL decided to implement Plan 22 upon reevaluation and optimistic

future projection for its operations. The decision to abandon Plan 14 was not done with precipitate

haste. The Honorable Court should appreciate that the chain of unfolding events after the retrenchment

encouraged PAL, in the exercise of its sound business discretion, to implement Plan 22. This was not a

capricious decision. In fact, the SEC approved PAL’s Amended and Restated Rehabilitation Plan, which

includes, among others, PAL’s Fleet Plan composed of 22 planes.

Neither does it show that PAL was uncertain of its financial condition when it retrenched based on Plan

14. PAL would not have even petitioned the SEC for its rehabilitation were it not certain of its dire

financial state. The decision to later abandon Plan 14 was a business judgment that PAL made in good

faith upon the advice of foreign airline industry experts and in light of the supervening circumstances

explained above.

In this regard, this Honorable Court has once held that—

“Questions of policy or of management are left solely to the honest decision of the board as the

business manager of the corporation, and the court is without authority to substitute its judgment for

that of the board, and as long as it acts in good faith and in the exercise of honest judgment in the

interest of the corporation, its orders are not reviewable by the courts.”

On the basis of Plan 22, PAL decided to recall/rehire some of the retrenched employees.

With due respect, this Honorable Court is mistaken in its ruling that PAL acted in bad faith simply

because it later on decided to recall or rehire the employees it initially retrenched. The decision to

recall/rehire was a logical consequence of PAL’s decision to increase its fleet from 14 to 22 planes,

which as discussed earlier, was a business judgment exercised in good faith by PAL after a series of

significant events.

PAL did not even have any legal obligation to rehire the employees who have already been paid their

separation pay and who have executed valid quitclaims. PAL, instead of being accused of bad faith for

rehiring these employees, should in fact be commended. That the retrenched employees were given

priority in hiring is certainly not bad faith. Noteworthy is the fact that PAL never hired NEW employees

until November 2000 or more than 2 years after the 1998 retrenchment.

It is respectfully submitted that the legality of the retrenchment could not be made to depend on the

fact that PAL recalled/rehired some of the employees after five months without taking into account the

supervening events. At the exact time of retrenchment, PAL was not in a position to know with certainty

that it could actually recover from the precarious financial problem it was facing and, if so, when.

The only thing PAL knew at that exact point in time was that it was in its most critical condition—when

its liabilities amounted to about Php 85,109,075,351.00, while its assets amounted to only about Php

90,642,330,919.00 aggravated by many other circumstances as explained earlier. At the time of the

retrenchment in June 1998, PAL was at the brink of total collapse and it could not have known that in

five months, there will be supervening events that will impel it to reassess its initial decisions.
xxxx

In the present case, PAL beseeches this Honorable Court to take a second look at the peculiar facts and

circumstances that clearly show that the recall/rehire was done in good faith. These facts and

circumstances make the case of PAL totally different from the other cases decided by this Honorable

Court where it found bad faith on the part of the employer for immediately rehiring or hiring employees

after retrenchment.

xxxx

But even then, PAL still endeavored to recall or rehire the maximum number of FASAP members that it

could. Thus, out of the 1,423 FASAP members who were retrenched, 496 were eventually recalled or

reinstated (those who did not receive separation pay and opted to resume their employment with PAL

with no loss of seniority).

On the other hand, 321 FASAP members were rehired (those who received separation pay and

voluntarily rejoined PAL as new employees). In this regard, PAL would like to take exception to the

Honorable Court’s observation that these employees were taken in as new hires without due regard to

their long years of service. The FASAP members who were rehired as new employees were those who

already received their separation pay because of the retrenchment but voluntarily accepted PAL’s offer

for them to be rehired when Plan 22 was implemented. It cannot be said that they were prejudiced by

the rehire process, as they already “cashed in” on their tenure when they accepted the separation pay.

That they later on accepted PAL’s offer to rehire them as new employees was purely voluntary on their

part.

Meanwhile, around 591 FASAP members opted not to return anymore after receiving their full

separation pay. Thus, including those who voluntarily opted not to resume their employment with PAL,

only about 591 can be considered to have remained unrecalled or unrehired.

It is significant to mention that FASAP directly and actively participated in the recall process, and even

suggested the names of its members for prospective recall.

Likewise, in the recall process, PAL followed the provisions of the CBA and as a result, some of the

recalled employees were assigned to lower positions (or “demoted” as noted by this Honorable Court).

However, this was only because there were not enough positions for all of them to be restored to their

previous posts. Evidently, with lesser planes flying international routes, not all international flight

attendants would be restored to international flight posts. Some of them would be downgraded to

domestic flights. This was the natural and logical effect of the fleet downsizing that PAL adopted. This

could not be a badge of bad faith, as this Honorable Court seems to believe.

xxxx

Likewise, no bad faith should be inferred from PAL’s closure in September 1998. That decision was by

no means easy being the national flag carrier and the oldest airline in Asia (having operated for 57 years

at the time). The closure could not have been a mere retaliation for rejecting the offer of PAL, as it

would have aggravated matters further and rendered rehabilitation impossible.

Hence, PAL’s decision to resume operations when the employees acceded to its request to suspend the

CBA should be seen in this context. This was not a coercive posture. PAL resumed operations only

because the suspension of the CBA, among others, gave it hope that it could recover.

Furthermore, any issue on the legality of the suspension of the CBA had already been put to rest by no

less than this Honorable Court in the case of Rivera vs. Espiritu where it held that—

“The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations

undertaken in the light of the severe financial situation faced by the employer, with the peculiar and

unique intention of not merely promoting industrial peace at PAL, but preventing the latter’s closure.” 7

(Emphasis supplied)
PAL explains that the 140 probationary cabin attendants who were fired and subsequently rehired were

part of an earlier retrenchment process in February and March 1998, a component of PAL’s “less drastic

cost cutting measures” then being implemented. Eventually, these rehired probationary cabin

attendants were included in the subject retrenchment of more than 1,400. Thus, it claims that it was

inaccurate for the Court to have held that these 140 probationary cabin attendants were retained while

those with permanent status were fired.

Finally, PAL begs the Court to reconsider its finding that the retrenchment scheme in question did not

pass the test of fairness and reasonableness with respect to the criteria used in selecting those whose

services should be retained or terminated. That it merely used the criteria stipulated in its CBA with

FASAP where efficiency rating and inverse seniority are the basic considerations as carried over from

the parties’ previous CBAs could allegedly be seen from the manner the retrenchment plan was carried

out. The rating variables contained in the Performance Evaluation Form of each and every cabin crew

personnel’s Grooming and Appearance Handbook are fair and reasonable since they are inherent

requirements (“necessarily intertwined,” as PAL would put it) for employment as flight attendant or

steward. More significantly, it claims that the criteria used in the implementation of the retrenchment

scheme in question was based on the ratified PAL-FASAP 1996-2000 CBA, which should be considered

as the law between the parties.

PAL believes that the Court may have misconstrued the significance of the term “other reasons” which

the NLRC utilized in its summary of FASAP members and causes for their retrenchment, 8 arguing that

the use of the phrase does not necessarily mean that the employees were retrenched for obscure

reasons that are not acceptable under the law; it simply points to the NLRC’s economy of language in

lumping together various reasons for retrenchment, such as excess sick leaves, previous admonitions,

suspensions, passenger complaints, poor performance, tardiness, etc. It claims that it used seniority in

conjunction with a combination of these grounds in arriving at a conclusion of whether to retain or

retrench.
PAL defends as well its use of a single year (1997) as basis for assessing the cabin attendants’ fitness

for retention or retrenchment, stressing that its CBA with FASAP requires—as basis for reduction in

personnel—only one efficiency rating, which should be construed as that obtained by each cabin

attendant for a single year, in accordance with Section 112 of the CBA which provides:

In the event of redundancy, phase-out of equipment or reduction of operations, the following rules in the

reduction of personnel shall apply:

A. Reduction in the number of Pursers:

1. In the event of a reduction of purser OCARs, pursers who have not attained an efficiency rating of

85% shall be downgraded to international Cabin Attendant in the reverse order of seniority.

2. If the reduction of purser OCARs would involve more than the number of pursers who have not

attained an efficiency rating of 85%, then pursers who have attained an efficiency rating of 85% shall be

downgraded to international Cabin Attendant in the inverse order of seniority.

B. In reducing the number of international Cabin Attendants due to reduction in international Cabin

Attendant OCARs, the same process in paragraph A shall be observed. International Cabin Attendants

shall be downgraded to domestic.

C. In the event of reduction of domestic OCARs thereby necessitating the retrenchment of personnel,

the same process shall be observed.

In no case, however, shall a regular Cabin Attendant be separated from the service in the event of

retrenchment until all probationary or contractual Cabin Attendant in the entire Cabin Attendants Corps,

in that order, shall have been retrenched. (Emphasis and underscoring supplied)

PAL asserts that since efficiency ratings for each cabin or flight attendant are computed on an annual

basis, it should therefore mean that when Section 112 referred to “an” efficiency rating of 85%, then it
should logically and practically follow that only one year’s worth of performance should be used as

criteria for the retrenchment of cabin attendants—that is, the most recent efficiency rating obtained by

each of them. For purposes of the present case, it would necessarily be that for the year 1997, or the

year immediately prior to the retrenchment, and no other.

Finally, regarding the quitclaims executed, PAL maintains that since the retrenchment scheme it

implemented was essentially valid, then it should follow that the quitclaims are regular as well, and

more so given the absence of mistake, duress, fraud or misrepresentation.

In its Comment9 to PAL’s Motion for Reconsideration, FASAP asserts that the issue is not centered on

PAL’s financial condition but whether the retrenchment of the 1,400 cabin personnel was warranted. It

alleges that:

The issue is whether or not the nature and extent of the financial circumstances and the methods used

to resolve fiscal difficulties warranted the illegal and unceremonious dismissal of around 1,400 flight

attendants, stewards, and cabin crew. It was the termination without considering the legal factors for

retrenchment. Because of the difficulties that the entire nation was going through, the ostensible name

given was retrenchment. But it was really an illegal dismissal and arbitrary termination. x x x

The casualties of illegal action, the ones sacrificed in the early stages of the situation and not as a last

resort, are not the employer and its officers or owner. As the Honorable Court pointed out, the

questioned action struck at the very heart of the workers’ employment, the lifeblood upon which the

worker and his family owe their survival. No proof has been adduced in ten long years of litigation that

retrenchment was only a measure of last resort, (that) other less drastic means were considered and

tried and found inadequate.

xxxx

The Court has treated the instant case for what it truly is—an illegal retrenchment, one that was
prematurely done and whimsically carried out. x x x

This is about a “bad faith” retrenchment—one which neither complied with the legal prerequisites

therefor nor observed the provisions of the PAL-FASAP CBA thereon; one which was not employed as a

last resort and which did not have any fair and reasonable criteria to serve as basis for selecting who

would be retrenched; one which was capriciously and whimsically implemented; one which was illegally

made.10

FASAP declares that although it recognized PAL’s financial difficulties in 1997 and 1998, it never

conceded the same to be valid reason upon which to base the questioned retrenchment, citing that in

proceedings below, the reasonable necessity of the retrenchment and its effectiveness in preventing

losses to PAL had been squarely raised. FASAP maintains that prior negotiations with PAL (on the

possible implementation of cost-cutting measures, employee rotation plans, triple and quadruple room

sharing arrangements, allocation of vacation leaves without pay, etc.) is proof of that recognition, but

that ultimately, it was incumbent upon PAL to have shown that it undertook a retrenchment scheme that

was in proportion to and commensurate with the financial distress it was experiencing at the time.

Essentially, FASAP merely echoed our pronouncements, focusing upon our dissertation on each of the

elements required in order to justify retrenchment, most of which were found lacking in PAL’s

retrenchment program or scheme. Specifically, FASAP points to the lack of prior resort to cost-cutting

measures, the rehiring of probationary employees, prior assurances by PAL that retrenchment was no

longer necessary, and lack of fair and reasonable criteria in selecting the employees to retrench.

Specifically, mention is made that there is nothing in its then existing CBA with PAL which mandates

that a single year—1997—should be used as the gauge or measure for determining the flight attendants’

performance for purposes of retrenchment. Asserting that PAL’s justification of its use of a single year

was a “very strained interpretation” of the provisions in the CBA, FASAP insists that seniority, loyalty

and past efficiency are requirements of law and jurisprudence which may not be summarily disregarded

in choosing whom to retrench, demote or retain, a proposition it claims to find support in Article III,
Section 7(A) of its CBA which provides:

The Association (FASAP) hereby acknowledges that the management of the Company (PAL) and the

direction of its employees; x x x; and the lay-off and re-employment of employees in connection with

increases or decreases in the work force are the exclusive rights and functions of management

provided only that the Company act in accordance with applicable laws and the provisions of this

Agreement.11 (Words in parentheses supplied)

FASAP goes on further to suggest that the basic criterion for effecting the retrenchment scheme should

have been seniority, as enunciated in Maya Farms Employees Organization v. National Labor Relations

Commission.12 In said case, the employer was constrained to streamline its manpower base owing to

losses and setbacks in operations. Management sent notices of termination (due to redundancy) to 66

of its employees. In the labor case that ensued, the union pointed to a violation of a specific provision in

its CBA which declared, thus:

Sec. 2. LIFO RULE. In all cases of lay-off or retrenchment resulting in termination of employment in the

line of work, the Last-In-First-Out (LIFO) Rule must always be strictly observed.

Ultimately, we held therein that the employer did not violate the LIFO rule in the CBA. We explained

therein that—

It is not disputed that the LIFO rule applies to termination of employment in the line of work. Verily, what

is contemplated in the LIFO rule is that when there are two or more employees occupying the same

position in the company affected by the retrenchment program, the last one employed will necessarily

be the first to go.

Moreover, the reason why there was no violation of the LIFO rule was amply explained by public

respondent in this wise:

. . . The LIFO rule under the CBA is explicit. It is ordained that in cases of retrenchment resulting in
termination of employment in line of work, the employee who was employed on the latest date must be

the first one to go. The provision speaks of termination in the line of work. This contemplates a situation

where employees occupying the same position in the company are to be affected by the retrenchment

program. Since there ought to be a reduction in the number of personnel in such positions, the length of

service of each employee is the determining factor, such that the employee who has a longer period of

employment will be retained.

In the case under consideration, specifically with respect to Maya Farms, several positions were

affected by the special involuntary redundancy program. These are packers, egg sorters/stockers,

drivers. In the case of packers, prior to the involuntary redundancy program, twenty-one employees

occupied the position of packers. Out of this number, only 5 were retained. In this group of employees,

the earliest date of employment was October 27, 1969, and the latest packer was employed in 1989.

The most senior employees occupying the position of packers who were retained are as follows:

Santos, Laura C. Oct. 27, 1969

Estrada, Mercedes Aug. 20, 1970

Hortaleza, Lita June 11, 1971

Jimenez, Lolita April 25, 1972

Aquino, Teresita June 25, 1975

All the other packers employed after June 2, 1975 (sic) were separated from the service.

The same is true with respect to egg sorters. The egg sorters employed on or before April 26, 1972

were retained. All those employed after said date were separated.

With respect to the position of drivers, there were eight drivers prior to the involuntary redundancy

program. Thereafter only 3 positions were retained. Accordingly, the three drivers who were most senior
in terms of period of employment, were retained.

They are: Ceferino D. Narag, Efren Macaraig and Pablito Macaraig.

The case of Roberta Cabrera and Lydia C. Bandong, Asst. Superintendent for packing and Asst.

Superintendent for meat processing respectively was presented by the union as an instance where the

LIFO rule was not observed by management. The union pointed out that Lydia Bandong who was

retained by management was employed on a much later date than Roberta Cabrera, and both are

Assistant Superintendent. We cannot sustain the union’s argument. It is indeed true that Roberta

Cabrera was employed earlier (January 28, 1961) and (sic) Lydia Bandong (July 9, 1966). However, it is

maintained that in meat processing department there were 3 Asst. Superintendents assigned as head of

the 3 sections thereat. The reason advanced by the company in retaining Bandong was that as Asst.

Superintendent for meat processing she could “already take care of the operations of the other

sections.” The nature of work of each assistant superintendent as well as experience were taken into

account by management. Such criteria was not shown to be whimsical nor carpricious (sic). 13

Finally, FASAP claims that PAL did not provide reasons for retrenching the more than 1,400 flight

attendants; that it was only when it filed its Supplemental Memorandum before the Labor Arbiter in

March 2000 that the airline submitted in evidence the ICCD Masterank and Seniority 1997 Ratings,

which allegedly took into account the subjective factors such as appearance and good grooming, which

supposedly require the written conformity of its members if they were to be considered at all, in

accordance with Section 124, Article XXVI of the CBA.

By way of reply to FASAP’s Comment, PAL insists that its decision to downsize the flight fleet was the

principal reason why it had to put into effect a corresponding downsizing of cabin crew personnel; that

the reduction in fleet size was an integral part of its SEC-approved rehabilitation plan; that the reduction

in the number of its aircraft by 75%—from 54 to just 14—likewise necessitated a corresponding 75%

reduction in its total cabin crew personnel; and that its subsequent decision to increase its remaining

fleet from 14 aircraft to 22 was a “business judgment exercised in good faith after a series of significant
events and upon the advice of airline industry experts who were assisting it in its rehabilitation

efforts.”14 This increase from 14 to 22 aircraft was then included in its Amended and Restated

Rehabilitation Plan, which was subsequently approved by the SEC. Because of this, it then had to

increase its manpower; it recalled or rehired the services of the employees it had previously terminated.

PAL begs the Court to recognize this downsizing of aircraft as a valid exercise of its management

prerogative to close its business operations, and not merely to reduce personnel. In other words, PAL

would have the Court believe that its retrenchment program is not merely a reduction of personnel for

the purpose of cutting on costs of operations, but as a closure of its business, a cessation of business

operations to prevent further financial drain. 15 PAL argues that cost-cutting measures could not have

sufficed to nurse the airline back to financial health; it had to resort to partial closure of its business.

Thus:

18. Moreover, how can PAL possibly implement the cost-cutting measures allegedly suggested by

FASAP with 75% of its fleet already gone? The situation would be different if PAL retained its 54-plane

fleet, and PAL’s only concern was to save on salaries and wages. In such a situation, PAL is indeed

obliged to resort to “less drastic cost-cutting measures” before it can validly proceed with

retrenchment. But this is not the case here. PAL’s financial condition could not have improved by merely

adopting cost-cutting measures such as work rotation and forced leaves. In fact, retrenchment alone

could not have saved PAL from financial ruin. PAL had to resort to the drastic action of partially closing

its business operations by downsizing its fleet of aircrafts. This naturally resulted in the reduction of

PAL’s personnel.

19. Assuming arguendo that the jurisprudence relied upon by FASAP apply, the proven facts in this case

show that retrenchment was not the only option for PAL. The problem with FASAP is that it is taking a

myopic view of what truly happened. It stubbornly claims that the reduction of employees is a simple

case of retrenchment program that was implemented in the first instance. But it is clear from the record

that when PAL suffered serious business losses, retrenchment was not the only option, obviously
because the objective was to cut down on operating expenses as a whole, and not merely in terms of

salaries and wages, which is the only purpose of a retrenchment.

20. What PAL did was to reduce its fleet of 54 planes to only 14 planes. It was only after PAL reduced its

fleet of aircrafts that it had to terminate the employment of its employees who were already in excess of

the workforce required under the reduced fleet set-up. In other words, retrenchment was merely a

necessary and natural consequence of PAL’s earlier decision to downsize its fleet of aircrafts. There is

thus simply no basis to say that PAL implemented retrenchment in the first instance.

xxxx

22. Neither is there basis to FASAP’s claim that PAL made the assurance that there will be no more need

for retrenchment. How could have PAL given such assurance in light of its huge business losses,

bordering on bankruptcy? The truth is, no such assurance was ever given by PAL. This is clear in the

minutes of all of the meetings with FASAP where the only issue discussed was how to proceed with the

retrenchment. These meetings were held in February to April 1998, or two to three months before the

decision to reduce operations was made by PAL due to various serious supervening events—the strike

staged by the Airline Pilots Association of the Philippines (ALPAP) and by the Philippine Airlines

Employees Association (PALEA).16

On the use of efficiency ratings obtained for the year 1997 as singular basis for determining the fitness

of cabin crew personnel to continue working with it, PAL explains that—

24. There is nothing unreasonable in using the year 1997 as basis for arriving at the efficiency ratings.

FASAP’s insinuations that it ignored the employees’ alleged exceptional performance ratings and

exemplary attendance records in the past are simply baseless, misleading and erroneous.

24.1. First, while an employee may rack up hundreds of awards and commendations and hundreds of

hours of leave credits, it does not necessarily follow that the same employee, although admittedly of
exceptional caliber, cannot be terminated if just or authorized cause subsequently exists. For instance,

if there is redundancy, an employee holding a superfluous position may be terminated regardless of

numerous awards and leave credits he may have earned. In this case, it cannot be denied that PAL’s

reduction, or partial closure, of its business operations, i.e., downsizing its flight fleet from 54 to 14

aircrafts, in order to prevent business losses and avoid total closure of its business, is one of the

recognized authorized causes expressly provided under Article 283 of the Labor Code.

PAL could, therefore, retrench employees regardless of the number of commendations, awards and

accumulated leave credits the latter obtained in the course of employment provided, of course, that the

retrenchment is valid and legal. In this case, the Labor Arbiter, the NLRC and the Court of Appeals

unanimouslyfound that the retrenchment is intrinsically valid and legal based on the same set of

evidence. In fact, the Labor Arbiter categorically ruled:

…there is no question that the rules imposed by law and jurisprudence to sustain retrenchment have

been amply satisfied by PAL. The only issue at hand is whether or not the retrenchment can be upheld

for complying with rules set forth in the collective bargaining agreement.

24.2. Second, in implementing retrenchment, the law does not require an employer to look back into far

reaches of time to check every good deed performed by every employee. This would not only be highly

impractical, but manifestly absurd as well. In evaluating job efficiency, it is enough for an employer to

fix a determinate time frame within which to base its evaluation. It can be six months, one year, two

years, three years or ten years. It can in fact be any period of time, subject to management’s sound

discretion.

But to be fair and reasonable, the application of the period must be uniform and consistent. It cannot be

one year for employee A, two years for employee B and three years for employee C. In this case, PAL

selected a period of one year (the year 1997), which was uniformly and consistently applied to all,

without exception.
The year 1997 was chosen by PAL as it was the most logical period being the year immediately

preceding the retrenchment. All relevant records for the year 1997, such as attendance and

performance evaluation, were complete and accurate. Certainly, the year 1997 was not selected for the

purpose of discriminating against any employee, but with the sole objective of retaining the more

efficient among the employees.

xxxx

26. FASAP then insists that the basic criterion to effect lay-off or retrenchment is seniority. FASAP cites

Article VII, Section 23 of the PAL-FASAP 1995-2000 CBA:

The term “seniority” whenever used in this Agreement shall be deemed to mean a measure of a regular

Cabin Attendant’s claim in relation to other regular Cabin Attendants holding similar positions, to

preferential consideration whenever the Company exercises its right to promote to a higher paying

position or lay-off of any Cabin Attendant.

27. FASAP obviously misread and misinterpreted Section 23 of the PAL-FASAP 1995-2000 CBA. The

provision does not even mandate seniority to be a criterion whenever PAL implements a reduction or

retrenchment, much less does it say that seniority is the one and only criterion to be applied. Section 23

simply defines seniority and states that seniority may be given “preferential consideration” whenever

PAL exercises its right to promote to a higher paying position or lay-off of cabin attendants. PAL did just

that in complying with Section 112 of the PAL-FASAP CBA 1995-2000 when seniority was applied

whenever all other factors were found to be equal. PAL clearly followed Section 23 of the PAL-FASAP

CBA in giving seniority preferential consideration. This is also reflected in the tabulation made by the

NLRC in its Decision.17

PAL argues that in its past two CBAs with FASAP prior to the one under controversy, the same

provisions and criteria for appearance, grooming, efficiency and performance were used, without

objections having been advanced by FASAP.

During oral arguments, PAL advanced an altogether new line of reasoning that has, until now, never been

advanced as the primary argument in defense of its retrenchment scheme: that the principal and true

reason why PAL had to implement the mass lay-off of cabin personnel was not the downsizing of

aircraft fleet size, but the June 5, 1998 pilots’ strike, where approximately six hundred (600) of its pilots

apparently abandoned their planes and simultaneously refused to fly. Thus, counsel for PAL manifested

to the Court that—

ATTY. MENDOZA

As a consequence, if your Honor please, but what really brought about, shall we say, “the really perilous

situation of closure was that on June 5, 1998, the pilots went on strike, ninety (90%) per cent of the

pilots went on strike, approximately six hundred (600).” These pilots’ strike was so devastating because

the pilots, if your Honors please, even left their place where they were at the time, somewhere in

Bangkok, somewhere in Taipei and they just left the planes. Without any pilots no plane can fly, your

Honor, that is the stark reality of the situation, and without airplanes flying, there would be no place for

employment of cabin attendants.18 (Emphasis supplied)

As a result of this pilots’ strike, PAL claims to have suffered daily revenue losses equivalent to P100

million and P50 million of lost fixed costs, which came at a time when PAL had “no more money.” 19

Owing to this pilots’ strike, PAL was brought to the brink of disaster and emergency that it needed to

align the number of cabin attendants with the number of airplanes that were flying. 20 After the pilots

went on strike, PAL was left with only 68 pilots who chose to remain, but with 2,039 cabin attendants.

Faced with this disproportionate ratio of pilots to cabin attendants, PAL immediately decided to

terminate the services of more than 1,400 cabin attendants via the retrenchment scheme in question. At

the same time, the reduction in fleet—which until that time remained a mere proposal—had to be

immediately implemented, and cost-cutting measures were simply out of the question. Thus:

ATTY. MENDOZA
While meetings between PAL and FASAP may have occurred prior to June 1998 to discuss measures in

which to possibly avoid retrenchment with its planned reduction of fleet, PAL’s financial circumstances

drastically changed in June 1998 that necessitated immediate and corresponding measures. Harsh

reality was that, there simply was no time. FASAP-suggested less drastic measures of work rotation,

forced vacation leaves, hotel sharing etc. were no longer feasible. Indeed, reduction by about 5,000

employees, including 1,423 cabin crew, was the less drastic measure. The alternative, harsher

obviously, was closure and liquidation.21 (Emphasis supplied)

All throughout, it has been impressed upon us that PAL’s decision to downsize its fleet size is the

principal reason why it had to put into effect a corresponding downsizing of cabin crew personnel.

However, on oral arguments before us, PAL now makes a total turnaround and attributes the

retrenchment to the June 5, 1998 pilots’ strike. Repeatedly, counsel for PAL blamed the pilots’ strike as

the main culprit, thus:

ATTY. MENDOZA

As a consequence, if your Honor please, but what really brought about, shall we say, “the really perilous

situation of closure was that on June 5, 1998, the pilots went on strike, ninety (90%) per cent of the

pilots went on strike, approximately six hundred (600).” These pilots’ strike was so devastating x x x.

Without any pilots no plane can fly, your Honor, that is the stark reality of the situation, and without

airplanes flying, there would be no place for employment of cabin attendants.

xxxx

ATTY. MENDOZA

Well, according to the Court, Your Honor, the Court principally invalidated this because, according to the

Court it was fraudulent. And it was fraudulent because PAL misrepresented that it was losing, but in fact

it was not as the Court found. So, in other words, if Your Honor please, as I have explained, there was no
misrepresentation because the members of FASAP could not have but known that there were less

planes that were flying. And they could not have but known that the number of cabin attendants cannot

have exceed that which were required by the number of planes that were flying. So that was basically

the reason for the redundancy and so it can never be said that this was redundant. But as I have said, if

Your Honor please, if the Court reconsiders its finding that there was illegal dismissal there would really

be no relevance to this quitclaim because, in any event, the separation pay has been received by some,

except for those who declined it.

So therefore, if Your Honor please, if I may conclude since my time is practically up. First, there can

hardly be any question, in fact, it is considered by FASAP and found by the National Labor Relations

Commission, the Labor Arbiter, and the Court of Appeals that circumstances existed that did not only

warrant the reduction of personnel including the members of FASAP and the cabin attendants but that

these were compelled by circumstances. If the cabin attendants were not retrenched you would have a

situation where cabin attendants would be there but were not needed but would earn compensation.

Second, if Your Honor please, as to the second issue, “cost-cutting measures”—they were

contemplated. But when the pilots struck, an emergency situation arose and so there needed to be an

immediate response to that situation and the only one of the components of that response is this

retrenchment.

Incidentally, if Your Honor please, a basic core of the rehabilitation of PAL was for the creditors to

agree. PAL is a different business than other businesses, Your Honor. An airline cannot stand still and

the creditors’ demands are not met immediately, PAL would simply lose its airplanes. And so far as

Point No. 3 is concerned, if Your Honor please, PAL did the best it could under the circumstances. And

as to number 3, as I said, if Your Honor please, PAL acted in accordance with criteria in the Collective

Bargaining Agreement which it followed meticulously and religiously.

Whereas for the fourth, if Your Honor please, there was no fraud in the execution of the quitclaim but I

must emphasize once again that PAL’s case does not really rest on the quitclaims. PAL’s case rests on
the response that we made on the first three (3) questions.

xxxx

ATTY. MENDOZA

Yes. As I explained, Your Honor, when the 1997 economic crisis took place and PAL saw that it was

going to create a problem, PAL started studying measures already. But before it could implement any of

these measures, even conclude the study the pilots struck, when the pilots struck the situations

changed entirely. It put PAL in complete peril of total closure because no planes could fly, so that

changed the picture, there was no more time to engage in cost-cutting measures. What needed to be

done, if Your Honor please, is to do what was necessary to survive at that point? The first thing to do to

survive was to fly as many planes as possible in order to earn some revenue. But you could only fly as

many planes as there were pilots, and that was the reason for the initial flights.

xxxx

ASSOCIATE JUSTICE NACHURA

During these conferences, did FASAP not suggest any other cost-cutting measures in order to

determine the immediate implementation of a retrenchment program?

ATTY. MENDOZA

Well, there was an endorsed initial conversation; there were suggestions if there is to be reduction of

personnel, rotations, and so on and so forth, Your Honor. So, by the time the pilots struck you have to

retrench quickly x x x.

ASSOCIATE JUSTICE NACHURA

Because related to this is a statement in our Decision that the retrenchment was illegal because it was
not actually the last resort that PAL could have; it was not the last resort that PAL could have attended,

well used. That means, there were other options that would probably have opened to PAL which would

not be as detrimental to FASAP as retrenchment.

ATTY. MENDOZA

If Your Honor please, may I put it this way? It was not just the last; it was the only resort, Your Honor,

because of these circumstances. There was no other option, but to operate flghts and spend only as

necessary. If you have more cabin attendants than we required for those planes which were flying you

are spending needlessly actually, Your Honor, and that is certainly not conducive to bring about a

recovery of Philippine Airlines.

xxxx

ASSOCIATE JUSTICE DE CASTRO

You mentioned that…before that, that there is a need for rehabilitation because the PAL was in dire

financial condition at that time, and it was…

ATTY. MENDOZA

Your Honor please, the rehabilitation came after the pilots’ strike. Actually, before the pilots’ strike the

effort of PAL is to find the way to address the Asian economic crisis. It’s just like, if Your Honor please, a

factory which is to be more efficient in order to be able to compete, let us say, with the imported goods,

so you downsize or you may try to be more efficient but the situation PAL confronted after the pilots’

strike was entirely different. It was a case of survival already, Your Honor, because it meant closure and

PAL was able to operate some planes only because of what they called management pilots. There were

certain pilots who were occupying supervisory positions but who were employed still by PAL. They were

the ones who actually flew the plane because the members of the pilots’ union simply stopped

working.22 (Emphasis supplied)

On the other hand, FASAP argued and reiterated its original contentions, inter alia, that during

negotiations for the implementation of cost-cutting measures, it was assured by PAL that since there

were negotiations with possible investors who were being eyed as business partners, retrenchment was

no longer necessary;23 that although it admitted PAL’s financial difficulties, it did not concede that these

losses justified the urgency, necessity and extent of the questioned retrenchment scheme; 24 that the

ICCD Masterank Listing was an afterthought, the same having been presented only on March 13, 2000,

and was never shown to the retrenched employees during the period of retrenchment; 25 that the criteria

for retrenchment did not conform to the CBA; 26 and that no cost-cutting measures were implemented.27

PAL has all this time tried to convince the Court that its decision to downsize its flight fleet was the

principal reason why it undertook a corresponding downsizing of cabin crew personnel. This time,

however, it significantly changed stance and blamed the June 5, 1998 pilots’ strike as the real culprit

which drove it to undertake the massive retrenchment under scrutiny. This time, PAL characterizes the

retrenchment scheme and the downsizing of aircraft as mere necessary reactions to or unfortunate

consequences of the pilots’ strike, which it claims likewise necessitated a disregard of all previous

negotiations for the implementation of cost-cutting measures that could have rendered the

retrenchment scheme unnecessary, and which cost-cutting measures it no longer found necessary to

undertake.

We find this argument untenable. The strike was a temporary occurrence that did not necessitate the

immediate and sweeping retrenchment of 1,400 cabin or flight attendants. By PAL’s own account, some

of the striking pilots went back to work in July 1998, or less than one month after the strike began.

Moreover, PAL admitted that it remedied the situation by employing “management pilots.” 28 It could have

hired new pilots as well. Certainly, it could have implemented the cost-cutting measures being

discussed as a temporary measure to obviate the adverse effects of the pilots’ strike. There was no

reason to drastically implement a permanent retrenchment scheme in response to a temporary strike,

which could have ended at any time, or remedied promptly, if management acted with alacrity.

Juxtaposed with its failure to implement the required cost-cutting measures, the retrenchment scheme
was a knee-jerk solution to a temporary problem that beset PAL at the time.

Besides, we cannot simply allow PAL to conveniently blame the striking pilots for causing the massive

retrenchment of cabin personnel. Using them as scapegoats to validate a comprehensive retrenchment

scheme of cabin personnel without observing the requirements set by law is both unfair and

underhanded. PAL must still prove that it implemented cost-cutting measures to obviate retrenchment,

which under the law should be the last resort. By PAL’s own admission, however, the cabin personnel

retrenchment scheme was one of the first remedies it resorted to, even before it could complete the

proposed downsizing of its aircraft fleet. It admittedly dropped all plans of implementing cost-cutting

measures as soon as the pilots went on strike, and right away it sent notices of termination to its cabin

personnel.29 This knee-jerk reaction would explain why it had to eventually recall and rehire some of the

cabin attendants almost immediately after it retrenched them, because the retrenchment simply was

not commensurate with the downsizing of aircraft fleet size. This outcome only proves to show that the

decision to retrench came even before a final determination of how many aircraft were needed to be

retained or discarded, or even before the rehabilitation plan could be approved. 30

Again, it must be emphasized that in order for a retrenchment scheme to be valid, all of the following

elements under Article 283 of the Labor Code must concur or be present, to wit:

(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if already

incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are

reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to the Department of Labor and

Employment at least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or

at least one-half (½) month pay for every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement

of its interest and not to defeat or circumvent the employees’ right to security of tenure; and,

(5) That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and who

would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and

financial hardship for certain workers.

In the absence of one element, the retrenchment scheme becomes an irregular exercise of management

prerogative. The employer’s obligation to exhaust all other means to avoid further losses without

retrenching its employees is a component of the first element as enumerated above. To impart

operational meaning to the constitutional policy of providing full protection to labor, the employer’s

prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last

resort, after less drastic means have been tried and found wanting. 31

In the instant case, PAL admitted that since the pilots’ strike allegedly created a situation of extreme

urgency, it no longer implemented cost-cutting measures and proceeded directly to retrench. This being

so, it clearly did not abide by all the requirements under Article 283 of the Labor Code. At the time it was

implemented, the retrenchment scheme under scrutiny was not triggered directly by any financial

difficulty PAL was experiencing at the time, nor borne of an actual implementation of its proposed

downsizing of aircraft. It was brought about by—and resorted to as an immediate reaction to—a pilots’

strike which, in strict point of law and as herein earlier discussed, may not be considered as a valid

reason to retrench, nor may it be used to excuse PAL for its non-observance of the requirements of the

law on retrenchment under the Labor Code.

On the basis of the foregoing disquisition, we find no further need to discuss the other arguments

advanced by the parties in their pleadings and during the oral arguments.

Therefore, this Court finds no reason to disturb its finding that the retrenchment of the flight attendants

was illegally executed. As held in the Decision sought to be reconsidered, PAL failed to observe the
procedure and requirements for a valid retrenchment. Assuming that PAL was indeed suffering financial

losses, the requisite proof therefor was not presented before the NLRC which was the proper forum.

More importantly, the manner of the retrenchment was not in accordance with the procedure required

by law. Hence, the retrenchment of the flight attendants amounted to illegal dismissal. Consequently,

the flight attendants affected are entitled to the reliefs provided by law, which include backwages and

reinstatement or separation pay, as the case may be.

PAL begs the compassion of this Court and alleges that the monetary award it stands to pay to the

affected flight attendants totals a whopping P2.3 billion, the payment of which will certainly paralyze its

operations and even lead to its untimely demise. However, a careful review of the records of the case, as

well as the respective allegations of the parties, shows that several of the crew members do not need to

be paid full backwages or separation pay. A substantial fraction of the 1,400 flight attendants have

already been either recalled, reinstated or relieved from the service. Still, some of them have reached

the age of compulsory retirement or even died. Likewise, a significant portion of these retrenched flight

attendants have already received separation pay and signed quitclaim. All of these factors, to the mind

of the Court, will greatly reduce the quoted amount of the money judgment that PAL will have to pay.

After finality of this case, the records will have to be remanded to the Labor Arbiter who decided the

case at the first instance. There, the actual amount of PAL’s liability to each and every flight attendant

will be computed. Both parties will have a chance to submit further proof and argument in support of

their respective proposed computations. For the guidance of the Labor Arbiter as well as the parties,

this Court lays down the following yardsticks in the computation of the final amount of liability, in order

to avoid any protracted and heated debates which can again lead to further delays in the final resolution

of this case and the full realization by the retrenched flight attendants of the amounts necessary to

compensate and indemnify them for the wrongful retrenchment.

1. Flight attendants who have been re-employed without loss of seniority rights shall be paid backwages

but only up to the time of their actual reinstatement.

2. Flight attendants who have been re-employed as new hires shall be restored their seniority and other

preferential rights. However, their backwages shall be computed only up to the date of actual re-hiring.

3. Flight attendants who have reached their compulsory age of retirement shall receive backwages up to

the date of their retirement only. The same is true as regards the heirs of those who have passed away.

4. Flight attendants who have not been re-employed by PAL, including those who executed quitclaims

and received separation pay or financial assistance, shall be reinstated without loss of seniority rights

and paid full backwages. However, the amounts they already received should be deducted from

whatever amounts are finally adjudged to them individually.

Four members of the Division voted to include a fifth (5th) criterion, namely that flight attendants who

had obtained substantially equivalent or even more lucrative employment elsewhere in 1998 or

thereafter are deemed to have severed their employment with PAL. They shall be entitled to full

backwages from the date of their retrenchment only up to the date they found employment elsewhere.

On a final note, this Court finds that the award of attorney’s fees equivalent to 10% of the total monetary

award should be tempered, considering the number of flight attendants who stand to receive monetary

awards and the totality of all amounts due to them. To be sure, attorney’s fees in labor cases are

awarded specifically in actions for recovery of wages or where an employee was forced to litigate and

thus incurred expenses to protect his rights and interests. In such cases, a maximum of 10% of the total

monetary award is justifiable under Article 111 of the Labor Code, Section 8, Rule VIII, Book III of its

Implementing Rules and paragraph 7, Article 2208 of the Civil Code. 32 The award of attorney’s fees is

proper where there is a showing that the lawful wages were not paid accordingly. 33

x x x [T]here are two commonly accepted concepts of attorney’s fees, the so-called ordinary and

extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer

by his client for the legal services he has rendered to the latter. The basis of this compensation is the

fact of his employment by and his agreement with the client. In its extraordinary concept, attorney’s fees
are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation.

The instances where these may be awarded are those enumerated in Article 2208 of the Civil Code,

specifically par. 7 thereof which pertains to actions for recovery of wages, and is payable not to the

lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional

compensation or as part thereof. The extraordinary concept of attorney’s fees is the one contemplated

in Article 111 of the Labor Code, which provides:

Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be

assessed attorney’s fees equivalent to ten percent of the amount of wages recovered x x x

The afore-quoted Article 111 is an exception to the declared policy of strict construction in the

awarding of attorney’s fees. Although an express finding of facts and law is still necessary to prove the

merit of the award, there need not be any showing that the employer acted maliciously or in bad faith

when it withheld the wages. There need only be a showing that the lawful wages were not paid

accordingly, as in this case.

In carrying out and interpreting the Labor Code’s provisions and its implementing regulations, the

employee’s welfare should be the primordial and paramount consideration. This kind of interpretation

gives meaning and substance to the liberal and compassionate spirit of the law as provided in Article 4

of the Labor Code which states that “[a]ll doubts in the implementation and interpretation of the

provisions of [the Labor] Code including its implementing rules and regulations, shall be resolved in

favor of labor”, and Article 1702 of the Civil Code which provides that “[i]n case of doubt, all labor

legislation and all labor contracts shall be construed in favor of the safety and decent living for the

laborer.” (Emphasis supplied)34

In the case of Concept Placement Resources, Inc. v. Funk, 35 this Court reduced the amount of attorney’s

fees which it ruled to be iniquitous and unconscionable after finding that the lawyer did not encounter

difficulty in representing his client. It was held:

We observe, however, that respondent did not encounter difficulty in representing petitioner. The

complaint against it was dismissed with prejudice. All that respondent did was to prepare the answer

with counterclaim and possibly petitioner’s position paper. Considering respondent’s limited legal

services and the case involved is not complicated, the award of P50,000.00 as attorney’s fees is a bit

excessive. In First Metro Investment Corporation vs. Este del Sol Mountain Reserve, Inc., we ruled that

courts are empowered to reduce the amount of attorney’s fees if the same is iniquitous or

unconscionable. Under the circumstances obtaining in this case, we consider the amount of P20,000.00

reasonable.36

In the case at bar, we find that the flight attendants were represented by respondent union which, in

turn, engaged the services of its own counsel. The flight attendants had a common cause of action.

While the work performed by respondent’s counsel was by no means simple, seeing as it spanned the

whole litigation from the Labor Arbiter stage all the way to this Court, nevertheless, the issues involved

in this case are simple, and the legal strategies, theories and arguments advanced were common for all

the affected crew members. Hence, it may not be reasonable to award said counsel an amount

equivalent to 10% of all monetary awards to be received by each individual flight attendant. Based on

the length of time that this case has been litigated, however, we find that the amount of P2,000,000.00

is reasonable as attorney’s fees. This amount should include all expenses of litigation that were incurred

by respondent union.

WHEREFORE, for lack of merit, the Motion for Reconsideration is hereby DENIED with FINALITY. The

assailed Decision dated July 22, 2008 is AFFIRMED with MODIFICATION in that the award of attorney’s

fees and expenses of litigation is reduced to P2,000,000.00. The case is hereby REMANDED to the

Labor Arbiter solely for the purpose of computing the exact amount of the award pursuant to the

guidelines herein stated.

No further pleadings will be entertained.

SO ORDERED.
CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:

EN BANC

March 13, 2018

G.R. No. 178083

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP), Petitioner

vs.

PHILIPPINE AIRLINES, INC., PATRIA CHIONG and THE COURT OF APPEALS, Respondents

IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO. 178083 - FLIGHT ATTENDANTS
AND STEWARDS ASSOCIATION OF THE PHILIPPINES (F ASAP) vs. PHILIPPINE AIRLINES, INC.,
ETAL.

RESOLUTION

BERSAMIN, J.:

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

Before the Court are the following matters for resolution, namely:

(a) Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008 filed by respondents Philippine Airlines, Inc.
(PAL) and Patria Chiong;1 and

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

Antecedents

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

Resolving the appeal of F ASAP, the Third Division of the Court 3 promulgated its decision on July
22, 2008 reversing the decision promulgated on August 23, 2006 by the Court of Appeals (CA) and
entering a new one finding PAL guilty of unlawful retrenchment, 4 disposing:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of
 Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the Decision
of the NLRC setting aside the Labor Arbiter's findings of illegal retrenchment and its
Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED
and SET ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

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

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

Costs against respondent PAL.

SO ORDERED. 5

The Third Division thereby differed from the decision of the Court of Appeals (CA), which had
pronounced in its appealed decision promulgated on August 23, 2006 6 that the remaining issue
between the parties concerned the manner by which PAL had carried out the retrenchment
program.7 Instead, the Third Division disbelieved the veracity of PAL’s claim of severe financial
losses, and concluded that PAL had not established its severe financial losses because of its non-
presentation of audited financial statements. It further concluded that PAL had implemented the
retrenchment program in bad faith, and had not used fair and reasonable criteria in selecting the
employees to be retrenched.
8
After PAL filed its Motion for Reconsideration, the Court, upon motion,9 held oral arguments on
the following issues:

WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED

II

WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES BEFORE

IMPLEMENTING ITS RETRENCHMENT PROGRAM

III

WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN IMPLEMENTING

THE RETRECHMENT PROGRAM

IV

WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY EXECUTED

Upon conclusion of the oral arguments, the Court directed the parties to explore a possible
settlement and to submit their respective memoranda. 10 Unfortunately, the parties did not reach
any settlement; hence, the Court, through the Special Third Division, 11 resolved the issues on the
merits through the resolution of October 2, 2009 denying PAL’s motion for reconsideration, 12 thus:

WHEREFORE, for lack of merit, the Motion for Reconsideration is hereby DENIED
with FINALITY. The assailed Decision dated July 22, 2008 is AFFIRMED with
MODIFICATION in that the award of attorney's fees and expenses of litigation is
reduced to ₱2,000,000.00. The case is hereby REMANDED to the Labor Arbiter solely
for the purpose of computing the exact amount of the award pursuant to the
guidelines herein stated.

No further pleadings will be entertained.

SO ORDERED.13

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

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

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

On September 7, 2011, the Second Division denied with finality PAL’s Second Motion for
Reconsideration of the Decision of July 22, 2008.20

Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a series of
letters inquiring into the propriety of the successive transfers of G.R. No. 178083. 21 His letters
were docketed as A.M. No. 11- 10-1-SC.

On October 4, 2011, the Court En Banc issued a resolution:22 (a) assuming jurisdiction over G.R.
No. 178083; (b)recalling the September 7, 2011 resolution of the Second Division; and (c) ordering
the re-raffle of G.R. No. 178083 to a new Member-in-Charge.

Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues raised against
the recall of the resolution of September 7, 2011, the Court En Banc promulgated its resolution in
A.M. No. 11-10-1-SC on March 13, 2012,23 in which it summarized the intricate developments
involving G.R. No. 178083, viz.:

To summarize all the developments that brought about the present dispute--
expressed in a format that can more readily be appreciated in terms of the Court en
bane's ruling to recall the September 7, 2011 ruling - the F ASAP case, as it
developed, was attended by special and unusual circumstances that saw:

(a) the confluence of the successive retirement of three Justices (in a Division of five
Justices) who actually participated in the assailed Decision and Resolution;
 (b) the change in the governing rules-from the A.M.s to the IRSC regime-which
transpired during the pendency of the case;

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

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

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

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

All these developments, in no small measure, contributed in their own peculiar way to
the confusing situations that attended the September 7, 2011 Resolution, resulting in
the recall of this Resolution by the Court en banc.24

In the same resolution of March 13, 2012, the Court En Banc directed the re-raffle of G.R. No.
178083 to the remaining Justices of the former Special Third Division who participated in
resolving the issues pursuant to Section 7, Rule 2 of the Internal Rules of the Supreme Court,
explaining:

On deeper consideration, the majority now firmly holds the view that Section 7, Rule
2 of the IRSC should have prevailed in considering the raffle and assignment of cases
after the 2nd MR was accepted, as advocated by some Members within the ruling
Division, as against the general rule on inhibition under Section 3, Rule 8. The
underlying constitutional reason, of course, is the requirement of Section 4(3), Article
VIII of the Constitution already referred to above.

The general rule on statutory interpretation is that apparently conflicting provisions

should be reconciled and harmonized, as a statute must be so construed as to
harmonize and give effect to all its provisions whenever possible. Only after the
failure at this attempt at reconciliation should one provision be considered the
applicable provision as against the other.

Applying these rules by reconciling the two provisions under consideration, Section
3, Rule 8 of the IRSC should be read as the general rule applicable to the inhibition of
a Member-in-Charge. This general rule should, however, yield where the inhibition
occurs at the late stage of the case when a decision or signed resolution is assailed
through an MR. At that point, when the situation calls for the review of the merits of
the decision or the signed resolution made by a ponente (or writer of the assailed
ruling), Section 3, Rule 8 no longer applies and must yield to Section 7, Rule 2 of the
IRSC which contemplates a situation when the ponente is no longer available, and
calls for the referral of the case for raffle among the remaining Members of the
Division who acted on the decision or on the signed resolution. This latter provision
should rightly apply as it gives those who intimately know the facts and merits of the
 case, through their previous participation and deliberations, the chance to take a look
at the decision or resolution produced with their participation.

To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition, but it must
yield to the more specific Section 7, Rule 2 of the IRSC where the obtaining situation
is for the review on the merits of an already issued decision or resolution and the
ponente or writer is no longer available to act on the matter. On this basis, the
ponente, on the merits of the case on review, should be chosen from the remaining
participating Justices, namely, Justices Peralta and Bersamin. 25

This last resolution impelled F ASAP to file the Motion for Reconsideration [Re: The Honorable
Court’s Resolution dated 13 March 2012], praying that the September 7, 2011 resolution in G.R.
No. 178083 be reinstated.26

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

Issues

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

xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO THE

FOLLOWING COMPELLING EVIDENCE AND CIRCUMSTANCES CLEARLY SHOWING
PALS; DIRE FINANCIAL CONDITION AT THE TIME OF THE RETRENCHMENT: (A)
PETITIONER'S ADMISSIONS OF PAL'S FINANCIAL LOSSES; (B) THE UNANIMOUS
FINDINGS OF THE SECURITIES AND EXCHANGE COMMISSION (SEC), THE LABOR
ARBITER, THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND THE
COURT OF APPEALS CONFIRMING PAL'S FINANCIAL CRISIS; (C) PREVIOUS CASES
DECIDED BY THE HONORABLE COURT RECOGNIZING PAL'S DIRE FINANCIAL
STATE; AND (D) PAL BEING PLACED BY THE SEC UNDER SUSPENSION OF
PAYMENTS AND CORPORATE REHABILITATION AND RECEIVERSHIP

II

xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S

CONCLUSION THAT PAL DID NOT EXERCISE GOOD FAITH [IN] ITS PREROGATIVE
TO RETRENCH EMPLOYEES

III

THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND
REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE RETRENCHED IS
CONTRARY TO ESTABLISHED FACTS, EVIDENCE ON RECORD AND THE FINDINGS
OF THE NLRC AND THE COURT OF APPEALS28

PAL insists that FASAP, while admitting PAL’s serious financial condition, only questioned before
the Labor Arbiter the alleged unfair and unreasonable measures in retrenching the employees; 29
that F ASAP categorically manifested before the NLRC, the CA and this Court that PAL’s financial
situation was not the issue but rather the manner of terminating the 1,400 cabin crew; that the
Court's disregard of FASAP's categorical admissions was contrary to the dictates of fair play; 30
that considering that the Labor Arbiter, the NLRC and the CA unanimously found PAL to have
experienced financial losses, the Court should have accorded such unanimous findings with
respect and finality;31 that its being placed under suspension of payments and corporate
rehabilitation and receivership already sufficiently indicated its grave financial condition; 32 and
that the Court should have also taken judicial notice of the suspension of payments and monetary
claims filed against PAL that had reached and had been consequently resolved by the Court. 33

PAL describes the Court's conclusion that it was not suffering from tremendous financial losses
because it was on the road to recovery a year after the retrenchment as a mere obiter dictum that
was relevant only in rehabilitation proceedings; that whether or not its supposed "stand-alone"
rehabilitation indicated its ability to recover on its own was a technical issue that the SEC was
tasked to determine in the rehabilitation proceedings; that at any rate, the supposed track to
recovery in 1999 and the capital infusion of $200,000,000.00 did not disprove the enormous losses
it was sustaining; that, on the contrary, the capital infusion accented the severe financial losses
suffered because the capital infusion was a condition precedent to the approval of the amended
and restated rehabilitation plan by the Securities and Exchange Commission (SEC) with the
conformity of PAL's creditors; and that PAL took nine years to exit from rehabilitation. 34

As regards the implementation of the retrenchment program in good faith, PAL argues that it
exercised sound management prerogatives and business judgment despite its critical financial
condition; that it did not act in due haste in terminating the services of the affected employees
considering that FASAP was being consulted thereon as early as February 17, 1998; that it
abandoned "Plan 14" due to intervening events, and instead proceeded to implement "Plan 22"
which led to the recall/rehire of some of the retrenched employees; 35 and that in selecting the
employees to be retrenched, it adopted a fair and reasonable criteria pursuant to the collective
bargaining agreement (CBA) where performance efficiency ratings and inverse seniority were
basic considerations.36

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

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

II

THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION OF THE

NUMBER OF CABIN CREW IN ACCORD WITH ITS ENTRY INTO REHABILITATION AND
THE CONSEQUENT TERMINATION OF EMPLOYMENT OF CABIN CREW PERSONNEL
AS A VALID EXERCISE OF MANAGEMENT PREROGATIVE

III

PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS FINANCIAL LOSSES,

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

IV

THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS NO SUFFICIENT

 BASIS FOR PAL TO IMPLEMENT THE RETRENCHMENT OF CABIN CREW
PERSONNEL

UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF LESS DRASTIC

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

VI

QUITCLAIMS WERE VALIDLY EXECUTED37

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

PAL posits that its business decision to downsize was far from being a hasty, knee-jerk reaction;
that the reduction of cabin crew personnel was an integral part of its corporate rehabilitation, and,
such being a management decision, the Court could not supplant the decision with its own
judgment’ and that the inaccurate depiction of the strike as a temporary disturbance was
lamentable in light of its imminent financial collapse due to the concerted action. 39

PAL submits that the Court’s declaration that PAL failed to prove its financial losses and to
explore less drastic cost-cutting measures did not at all jibe with the totality of the circumstances
and evidence presented; that the consistent findings of the Labor Arbiter, the NLRC, the CA and
even the SEC, acknowledging its serious financial difficulties could not be ignored or
disregarded; and that the challenged rulings of the Court conflicted with the pronouncements
made in Garcia v. Philippine Airlines, Inc. 40 and related cases41 that acknowledged PAL’s grave
financial distress.

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

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

The issues are restated as follows:

Procedural

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

II

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

Substantive

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

DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE THAT IT

INCURRED SERIOUS FINANCIAL LOSSES WHICH JUSTIFIED THE
DOWNSIZING OF ITS CABIN CREW?

DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE

RETRENCHMENT PROGRAM?

DID PAL COMPLY WITH SECTION 112 OF THE PALF ASAP CBA IN
SELECTING THE EMPLOYEES TO BE RETRENCHED?

III

ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT PROGRAM, DID

THE RETRENCHED EMPLOYEES SIGN VALID QUITCLAIMS?

Ruling of the Court

After a thorough review of the records and all previous dispositions, we GRANT the Motion for
Reconsideration of the Resolution of October 2, 2009 and Second Motion for Reconsideration of
the Decision of July 22, 2008 filed by PAL and Chiong; and DENY the Motion for Reconsideration
[Re: The Honorable Court’s Resolution dated 13 March 2012]43 of FASAP.

Accordingly, we REVERSE the July 22, 2008 decision and the October 2, 2009 resolution; and
AFFIRM the decision promulgated on August 23, 2006 by the CA.

The resolution of October 4, 2011

was a valid issuance of the Court

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

The urging of the petitioner is gravely flawed and mistaken.

The requirement for the Court to state the legal and factual basis for its decisions is found in
Section 14, Article VIII of the 1987 Constitution, which reads:

Section 14. No decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based.

The constitutional provision clearly indicates that it contemplates only a decision, which is the
judgment or order that adjudicates on the merits of a case. This is clear from the text and tenor of
Section 1, Rule 36 of the Rules of Court, the rule that implements the constitutional provision, to
wit:

Section 1. Rendition of judgments and final orders. A judgment or final order

determining the merits of the case shall be in writing personally and directly prepared
by the judge, stating clearly and distinctly the facts and the law on which it is based,
signed by him, and filed with the clerk of court.

The October 4, 2011 resolution did not adjudicate on the merits of G.R. No. 178083. We explicitly
stated so in the resolution of March 13, 2012. What we thereby did was instead to exercise the
Court's inherent power to recall orders and resolutions before they attain finality. In so doing, the
Court only exercised prudence in order to ensure that the Second Division was vested with the
appropriate legal competence in accordance with and under the Court's prevailing internal rules
to review and resolve the pending motion for reconsideration. We rationalized the exercise thusly:

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

At the time the Members of the ruling Division went to the Chief Justice to
recommend a recall, there was no clear indication of how they would definitively
settle the unresolved legal questions among themselves. The only matter legally
certain was the looming finality of the September 7, 2011 Resolution if it would not be
immediately recalled by the Court en banc by October 4, 2011. No unanimity among
the Members of the ruling Division could be gathered on the unresolved legal
questions; thus, they concluded that the matter is best determined by the Court en
banc as it potentially involved questions of jurisdiction and interpretation of
conflicting provisions of the IRSC. To the extent of the recommended recall, the
ruling Division was unanimous and the Members communicated this intent to the
Chief Justice in clear and unequivocal terms. 44 (Bold underscoring for emphasis)

It should further be clear from the same March 13, 2012 resolution that the factual considerations
for issuing the recall order were intentionally omitted therefrom in obeisance to the prohibition
against public disclosure of the internal deliberations of the Court. 45

Still, F ASAP assails the impropriety of the recall of the September 7, 2011 resolution. It contends
that the raffle of G.R. No. 178083 to the Second Division had not been erroneous but in "full and
complete consonance with Section 4(3) Article VIII of the Constitution;" 46 and that any error
thereby committed was only procedural, and thus a mere "harmless error" that did not invalidate
the prior rulings made in G.R. No. 178083.47

The contention of F ASAP lacks substance and persuasion.

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

FASAP is further wrong to insist on the application of the harmless error rule. The rule is
embodied in Section 6, Rule 51 of the Rules of Court, which states:

Section 6. Harmless error. No error in either the admission or the exclusion of

evidence and no error or defect in any ruling or order or in anything done or omitted
by the trial court or by any of the parties is ground for granting a new trial or for
setting aside, modifying, or otherwise disturbing a judgment or order, unless refusal
to take such action appears to the court inconsistent with substantial justice. The
court at every stage of the proceedings must disregard any error or defect which
does not affect the substantial rights of the parties.

The harmless error rule obtains during review of the things done by either the trial court or by any
of the parties themselves in the course of trial, and any error thereby found does not affect the
substantial rights or even the merits of the case. The Court has had occasions to apply the rule in
the correction of a misspelled name due to clerical error; 49 the signing of the decedents' names in
the notice of appeal by the heirs; 50 the trial court's treatment of the testimony of the party as an
adverse witness during cross-examination by his own counsel; 51 and the failure of the trial court
to give the plaintiffs the opportunity to orally argue against a motion. 52 All of the errors extant in
the mentioned situations did not have the effect of altering the dispositions rendered by the
respective trial courts. Evidently, therefore, the rule had no appropriate application herein.

The Court sees no justification for the urging of FASAP that the participation of the late Chief
Justice Corona voided the recall order. The urging derives from FASAP’s failure to distinguish the
role of the Chief Justice as the Presiding Officer of the Banc. In this regard, we advert to the
March 13, 2012 resolution, where the Court made the following observation:

A final point that needs to be fully clarified at this juncture, in light of the allegations
of the Dissent is the role of the Chief Justice in the recall of the September 7, 2011
Resolution. As can be seen from the xxx narration, the Chief Justice acted only on
the recommendation of the ruling Division, since he had inhibited himself from
participation in the case long before. The confusion on this matter could have been
brought about by the Chief Justice's role as the Presiding Officer ofthe Court en banc
(particularly in its meeting of October 4, 2011), and the fact that the four most senior
Justices of the Court (namely, Justices Corona, Carpio, Velasco and Leonardo-De
Castro) inhibited from participating in the case. In the absence of any clear personal
malicious participation, it is neither correct nor proper to hold the Chief Justice
personally accountable for the collegial ruling of the Court en banc. 53 (Bold
underscoring supplied for emphasis)
To reiterate, the Court, whether sitting En Banc or in Division, acts as a collegial body. By virtue of
the collegiality, the Chief Justice alone cannot promulgate or issue any decisions or orders. In
Complaint of Mr. Aurelio Jndencia Arrienda Against SC Justices Puna, Kapunan, Pardo,
YnaresSantiago, 54 the Court has elucidated on the collegial nature of the Court in relation to the
role of the Chief Justice, viz.:

The complainant’s vituperation against the Chief Justice on account of what he

perceived was the latter's refusal "to take a direct positive and favorable action" on
his letters of appeal overstepped the limits of proper conduct. It betrayed his lack of
understanding of a fundamental principle in our system of laws. Although the Chief
Justice is primus inter pares, he cannot legally decide a case on his own because of
the Court's nature as a collegial body. Neither can the Chief Justice, by himself,
overturn the decision of the Court, whether of a division or the en banc.

There is only one Supreme Court from whose decisions all other courts are required
to take their bearings.While most of the Court's work is performed by its three
divisions, the Court remains one court-single, unitary, complete and supreme.
Flowing from this is the fact that, while individual justices may dissent or only
partially concur, when the Court states what the law is, it speaks with only one voice.
Any doctrine or principle of law laid down by the court may be modified or reversed
only by the Court en banc.55

Lastly, any lingering doubt on the validity of the recall order should be dispelled by the fact that
the Court upheld its issuance of the order through the March 13, 2012 resolution, whereby the
Court disposed:

WHEREFORE, premises considered, we hereby confirm that the Court en bane has
assumed jurisdiction over the resolution of the merits of the motions for
reconsideration of Philippine Airlines, Inc., addressing our July 22, 2008 Decision and
October 2, 2009 Resolution; and that the September 7, 2011 ruling of the Second
Division has been effectively recalled. This case should now be raffled either to
Justice Lucas P. Bersamin or Justice Diosdado M. Peralta (the remaining members of
the case) as Member-in-Charge in resolving the merits of these motions.

xxxx

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

SO ORDERED.

II

PAL's Second Motion for Reconsideration

| of the Decision of July 22, 2008

| could be allowed in the higher interest of justice

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

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

Nonetheless, we should stress that the rule prohibiting the filing of a second motion for
reconsideration is by no means absolute. Although Section 2, Rule 52 of the Rules of Court
disallows the filing of a second motion for reconsideration, 59 the Internal Rules of the Supreme
Court (IRSC) allows an exception, to wit:

Section 3. Second motion for reconsideration. - The Court shall not entertain a
second motion for reconsideration, and any exception to this rule can only be
granted in the higher interest of justice by the Court en bane upon a vote of at least
two-thirds of its actual membership. There is reconsideration "in the higher interest
of justice" when the assailed decision is not only legally erroneous, but is likewise
patently unjust and potentially capable of causing unwarranted and irremediable
injury or damage to the parties. A second motion for reconsideration can only be
entertained before the ruling sought to be reconsidered becomes final by operation
of law or by the Court's declaration.

In the Division, a vote of three Members shall be required to elevate a second motion
for reconsideration to the Court en banc.

The conditions that must concur in order for the Court to entertain a second motion for
reconsideration are the following, namely:

1. The motion should satisfactorily explain why granting the same would be in the higher interest
of justice;

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

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

4. The favorable vote of at least two-thirds of the Court En Bane’s actual membership must be
mustered for the second motion for reconsideration to be granted. 60

Under the IRSC, a second motion for reconsideration may be allowed to prosper upon a showing
by the movant that a reconsideration of the previous ruling is necessary in the higher interest of
justice. There is higher interest of justice when the assailed decision is not only legally erroneous,
but is likewise patently unjust and potentially capable of causing unwarranted and irremediable
injury or damage to the parties.61

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

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

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

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

The proposition of the dissent is unacceptable.

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

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

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

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

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

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

The Court disagrees with the dissent’s narrow view respecting the residual powers of the Banc.

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

In the March 13, 2012 resolution, the Court recounted the exigencies that had prompted the Banc
to take cognizance of the matter, to wit:

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

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

A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be made among
the other Members of the san1e Division who participated in rendering the decision
or resolution and who concurred therein, which should now apply because the ruling
on the case is no longer final after the case had been opened for review on the
merits. In other words, after acceptance by the Third Division, through Justice
Velasco, of the 2nd MR, there should have been a referral to raffle because the
excepting qualification that the Clerk of Court cited no longer applied; what was
being reviewed were the merits of the case and the review should be by the same
Justices who had originally issued the original Decision and the subsequent
Resolution, or by whoever of these Justices are still left in the Court, pursuant to the
same A.M. No. 99-8-09- SC.

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

xxx xxx xxx

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

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

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

These were the legal considerations that largely confronted the ruling Division in late
September 2011 when it deliberated on what to do with Atty. Mendoza’s letters.

The propriety of and grounds for

the recall of the September 7,

2011 Resolution

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

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

RULE 2.

OPERATING STRUCTURES

Section 3. Court en bane matters and eases.-The Court en bane shall act on the
following matters and cases:
 xxxx

(n) cases that the Court en bane deems of sufficient importance to merit its
attention[.]"

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

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

At the time the Members of the ruling Division went to the Chief Justice to
recommend a recall, there was no clear indication of how they would definitively
settle the unresolved legal questions among themselves. The only matter legally
certain was the looming finality of the September 7, 2011 Resolution if it would not be
immediately recalled by the Court en bane by October 4, 2011. No unanimity among
the Members of the ruling Division could be gathered on the unresolved legal
questions; thus, they concluded that the matter is best determined by the Court en
bane as it potentially involved questions of jurisdiction and interpretation of
conflicting provisions of the IRSC. To the extent of the recommended recall, the
ruling Division was unanimous and the Members communicated this intent to the
Chief Justice in clear and unequivocal terms. 76 (Bold scoring supplied for emphasis)

It is well to stress that the Banc could not have assumed jurisdiction were it not for the initiative of
Justice Arturo V. Brion who consulted the Members of the ruling Division as well as Chief Justice
Corona regarding the jurisdictional implications of the successive retirements, transfers, and
inhibitions by the Members of the ruling Division. This move by Justice Brion led to the referral of
the case to the Banc in accordance with Section 3(1), Rule 2 of the IRSC that provided, among
others, that any Member of the Division could request the Court En Banc to take cognizance of
cases that fell under paragraph (m). This referral by the ruling Division became the basis for the
Banc to issue its October 4, 2011 resolution.

For sure, the Banc, by assuming jurisdiction over the case, did not seek to act as appellate body
in relation to the acts of the ruling Division, contrary to the dissent's position.77 The Bane's recall
of the resolution of September 7, 2011 should not be so characterized, considering that the Banc
did not thereby rule on the merits of the case, and did not thereby reverse the July 22, 2008
decision and the October 2, 2009 resolution. The referral of the case to the Banc was done to
address the conflict among the provisions of the IRSC that had potential jurisdictional
implications on the ruling made by the Second Division.
At any rate, PAL constantly raised in its motions for reconsideration that the ruling Division had
seriously erred not only in ignoring the consistent findings about its precarious financial situation
by the Labor Arbiter, the NLRC, the CA and the SEC, but also in disregarding the pronouncements
by the Court of its serious fiscal condition. To be clear, because the serious challenge by PAL
against the ruling of the Third Division was anchored on the Third Division’s having ignored or
reversed settled doctrines or principles of law, only the Banc could assume jurisdiction and
decide to either affirm, reverse or modify the earlier decision. The rationale for this arrangement
has been expressed in Lu v. Lu Ym78 thuswise:

It is argued that the assailed Resolutions in the present cases have already become
final, since a second motion for reconsideration is prohibited except for
extraordinarily persuasive reasons and only upon express leave first obtained; and
that once a judgment attains finality, it thereby becomes immutable and unalterable,
however unjust the result of error may appear.

The contention, however, misses an important point. The doctrine of immutability of

decisions applies only to final and executory decisions. Since the present cases may
involve a modification or reversal of a Court-ordained doctrine or principle, the
judgment rendered by the Special Third Division may be considered unconstitutional,
hence, it can never become final. It finds mooring in the deliberations of the framers
of the Constitution:

On proposed Section 3(4), Commissioner Natividad asked what the effect would be of
a decision that violates the proviso that "no doctrine or principle of law laid down by
the court in a decision rendered en bane or in division may be modified or reversed
except by the court en bane." The answer given was that such a decision would be
invalid. Following up, Father Bernas asked whether the decision, if not challenged,
could become final and binding at least on the parties. Romulo answered that, since
such a decision would be in excess of jurisdiction, the decision on the case could be
reopened anytime. (emphasis and underscoring supplied)

A decision rendered by a Division of this Court in violation of this constitutional

provision would be in excess of jurisdiction and, therefore, invalid. Any entry of
judgment may thus be said to be "inefficacious" since the decision is void for being
unconstitutional.

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

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

The law allows a determination at first impression that a doctrine or principle laid
down by the court en bane or in division may be modified or reversed in a case which
would warrant a referral to the Court En Banc. The use of the word "may" instead of
"shall" connotes probability, not certainty, of modification or reversal of a doctrine, as
may be deemed by the Court. Ultimately, it is the entire Court which shall decide on
the acceptance of the referral and, if so, "to reconcile any seeming conflict, to reverse
or modify an earlier decision, and to declare the Court's doctrine."
 The Court has the power and prerogative to suspend its own rules and to exempt a
case from their operation if and when justice requires it, as in the present
circumstance where movant filed a motion for leave after the prompt submission of a
second motion for reconsideration but, nonetheless, still within15 days from receipt
of the last assailed resolution.79

Lastly, the dissent proposes that a unanimous vote is required to grant PAL’s Second Motion for
Reconsideration of the Decision of July 22, 2008. 80 The dissent justifies the proposal by stating
that "[a] unanimous court would debate and deliberate more fully compared with a non-
unanimous court. "81

The radical proposal of the dissent is bereft of legal moorings. Neither the 1987 Constitution nor
the IRSC demands such unanimous vote. Under Section 4(2), Article VIII of the 1987 Constitution,
decisions by the Banc shall be attained by a "concurrence of a majority of the Members who
actually took part in the deliberations on the issues in the case and voted thereon." As a collegial
body, therefore, the Court votes after deliberating on the case, and only a majority vote is
required,82 unless the 1987 Constitution specifies otherwise. In all the deliberations by the Court,
dissenting and concurring opinions are welcome, they being seen as sound manifestations of
"the license of individual Justices or groups of Justices to separate themselves from "the
Court’s" adjudication of the case before them,"83 thus:

[C]oncurring and dissenting opinions serve functions quite consistent with a

collegial understanding of the Court. Internally within the Court itself---dissent
promotes and improves deliberation and judgment. Arguments on either side of a
disagreement test the strength of their rivals and demand attention and response.
The opportunity for challenge and response afforded by the publication of dissenting
and concurring opinions is a close and sympathetic neighbor of the obligation of
reasoned justification.

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

III

PAL implemented a valid retrenchment program

Retrenchment or downsizing is a mode of terminating employment initiated by the employer

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

Anent retrenchment, Article 29886 of the Labor Code provides as follows:

Article 298. Closure of Establishment and Reduction of Personnel. - The employer

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

Accordingly, the employer may resort to retrenchment in order to avert serious business losses.
To justify such retrenchment, the following conditions must be present, namely:

1. The retrenchment must be reasonably necessary and likely to prevent business losses;

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

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

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

5. There must be fair and reasonable criteria m ascertaining who would be dismissed and who
would be retained among the employees, such as status, efficiency, seniority, physical fitness,
age, and financial hardship for certain workers. 87

Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial losses because it did not
submit its audited financial statements as evidence; (2) observe good faith in implementing the
retrenchment program; and (3) apply a fair and reasonable criteria in selecting who would be
terminated.

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

PAL’s serious financial losses were duly established

PAL was discharged of the

| burden to prove serious

| financial losses in view of

| F ASAP's admission

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

It is quite notable that the matter of PAL’s financial distress had originated from the complaint
filed by F ASAP whereby it raised the sole issue of "Whether or not respondents committed Unfair
Labor Practice."88 F ASAP believed that PAL, in terminating the 1,400 cabin crew members, had
violated Section 23, Article VII and Section 31, Article IX of the 1995- 2000 P AL-FASAP CBA.
Interestingly, FASAP averred in its position paper therein that it was not opposed to the
retrenchment program because it understood PAL’s financial troubles; and that it was only
questioning the manner and lack of standard in carrying out the retrenchment, thus:

At the outset, it must be pointed out that complainant was never opposed to the
retrenchment program itself, as it understands respondent PAL’s financial troubles.
In fact, complainant religiously cooperated with respondents in their quest for a
workable solution to the company-threatening problem. Attached herewith as
Annexes "A" to "D" are the minutes of its meetings with respondent PAL’s
representatives showing complainant's active participation in the deliberations on the
issue.

What complainant vehemently objects to are the manner and the lack of criteria or
standard by which the retrenchment program was implemented or carried out,
despite the fact that there are available criteria or standard that respondents could
have utilized or relied on in reducing its workforce. In adopting a retrenchment
program that was fashioned after the evil prejudices and personal biases of
respondent Patria Chiong, respondent PAL grossly violated at least two important
provisions of its CBA with complainant - Article VII, Section 23 and Article IX,
Sections 31and 32.89

These foregoing averments of F ASAP were echoed in its reply 90 and memorandum91 submitted to
the Labor Arbiter.

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

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

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

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

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

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

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

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

Judicial notice could be taken

of the financial losses

incurred; the presentation of

audited financial statements

was not required in such

circumstances

The July 22, 2008 decision recognized that PAL underwent corporate rehabilitation. In seeming
inconsistency, however, the Special Third Division refused to accept that PAL had incurred
serious financial losses, observing thusly:

The audited financial statements should be presented before the Labor Arbiter who is
in the position to evaluate evidence. They may not be submitted belatedly with the
Court of Appeals, because the admission of evidence is outside the sphere of the
appellate court's certiorari jurisdiction. Neither can this Court admit in evidence
audited financial statements, or make a ruling on the question of whether the
employer incurred substantial losses justifying retrenchment on the basis thereof, as
this Court is not a trier of facts. Even so, this Court may not be compelled to accept
the contents of said documents blindly and without thinking.

xxxx

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

xxxx

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

d) To create and appoint a management committee, board, or body upon petition or

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

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

The management committee, or rehabilitation receiver, board or body shall not be

subject to any action, claim or demand for, or in connection with, any act done or
omitted to be done by it in good faith in the exercise of its functions, or in connection
with the exercise of its power herein conferred. (Bold underscoring supplied for
emphasis)

After having been placed under corporate rehabilitation and its rehabilitation plan having been
approved by the SEC on June 23, 2008, PAL’s dire financial predicament could not be doubted.
Incidentally, the SEC’s order of approval came a week after PAL had sent out notices of
termination to the affected employees. It is thus difficult to ignore the fact that PAL had then been
experiencing difficulty in meeting its financial obligations long before its rehabilitation.

Moreover, the fact that airline operations were capital intensive but earnings were volatile because
of their vulnerability to economic recession, among others. 99 The Asian financial crisis in 1997 had
wrought havoc among the Asian air carriers, PAL included. 100 The peculiarities existing in the
airline business made it easier to believe that at the time of the Asian financial crisis, PAL incurred
liabilities amounting to ₱90,642,933,919.00, which were way beyond the value of its assets that
then only stood at ₱85,109,075,35l.

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

Indeed, the Labor Arbiter properly took cognizance of PAL’s substantial financial losses during
the Asian financial crisis of 1997. 105 On its part, the NLRC recognized the grave financial distress
of PAL based on its ongoing rehabilitation/receivership. 106 The CA likewise found that PAL had
implemented a retrenchment program to counter its tremendous business losses that the strikes
of the pilot's union had aggravated. 107 Such recognitions could not be justly ignored or denied,
especially after PAL's financial and operational difficulties had attracted so much public attention
that even President Estrada had to intervene in order to save PAL as the country’s flag carrier. 108

The Special Third Division also observed that PAL had submitted a "stand-alone" rehabilitation
program that was viewed as an acknowledgment that it could "undertake recovery on its own and
that it possessed enough resources to weather the financial storm." The observation was
unfounded considering that PAL -had been constrained to submit the "stand-alone" rehabilitation
plan on December 7, 1998 because of the lack of a strategic partner. 109

We emphasize, too, that the presentation of the audited financial statements should not the sole
means by Which to establish the employer's serious financial losses. The presentation of audited
financial statements, although convenient in proving the unilateral claim of financial losses, is not
required for all cases of retrenchment. The evidence required for each case of retrenchment really
depends on the particular circumstances obtaining. The Court has cogently opined in that regard:

That petitioners were not able to present financial statements for years prior to 2005
should not be automatically taken against them. Petitioner BEMI was organized and
registered as a corporation in 2004 and started business operations in 2005 only.
While financial statements for previous years may be material in establishing the
financial trend for an employer, these are not indispensable in all cases of
retrenchment. The evidence required for each case of retrenchment will still depend
 on its particular circumstances. In fact, in Revidad v. National Labor Relations
Commission, the Court declared that "proof of actual financial losses incurred by the
company is not a condition sine qua non for retrenchment," and retrenchment may
be undertaken by the employer to prevent even future losses:

In its ordinary connotation, the phrase "to prevent losses" means that retrenchment
or termination of the services of some employees is authorized to be undertaken by
the employer sometime before the anticipated losses are actually sustained or
realized. It is not, in other words, the intention of the lawmaker to compel the
employer to stay his hand and keep all his employees until after losses shall have in
fact materialized. If such an intent were expressly written into the law, that law may
well be vulnerable to constitutional attack as unduly taking property from one man to
be given to another.110(Bold underscoring supplied for emphasis)

In short, to require a distressed corporation placed under rehabilitation or receivership to still

submit its audited financial statements may become unnecessary or superfluous.

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

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

The argument of PAL is valid and tenable.

Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement pending appeal
because PAL had been placed under corporate rehabilitation, explaining that unlike the ground of
substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was
judicially pre-determined by a competent court and not formulated for the first time by the
employer, viz.:

While reinstatement pending appeal aims to avert the continuing threat or danger to
the survival or even the life of the dismissed employee and his family, it does not
contemplate the period when the employer-corporation itself is similarly in a
judicially monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification

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

More importantly, there are legal effects arising from a judicial order placing a
 corporation under rehabilitation. Respondent was, during the period material to the
case, effectively deprived of the alternative choices under Article 223 of the Labor
Code, not only by virtue of the statutory injunction but also in view of the interim
relinquishment of management control to give way to the full exercise of the powers
of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may
have opted for actual physical reinstatement pending appeal to optimize the
utilization of resources. Then again, though the management may think this wise, the
rehabilitation receiver may decide otherwise, not to mention the subsistence of the
injunction on claims.111

In Philippine Airlines v. Kurangking; Philippine Airlines v. Court of Appeals, Philippine Airlines v.

PALEA and Philippine Airlines v. National Labor Relations Commission, the Court uniformly
upheld the suspension of monetary claims against PAL because of the SEC’s order placing it
under receivership. The Court emphasized the need to suspend the payment of the claims
pending the rehabilitation proceedings in order to enable the management committee/receiver to
channel the efforts towards restructuring and rehabilitation. Philippine Airlines v.
Zamorareiterated this rule and deferred to the prior judicial notice taken by the Court in
suspending the monetary claims of illegally dismissed employees. 112

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

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

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

For sure, it would not have been the first time that the Court would have taken judicial notice of
the findings of the SEC and of antecedent jurisprudence recognizing the fact of rehabilitation by
the employer. The Court did so in the 2002 case of Clarion Printing House, Inc. v. National Labor
Relations Commission, 114 to wit:

Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("REORGANIZATION

OF THE SECURITIES AND EXCHANGE COMMISSION WITH ADDITIONAL POWERS
AND PLACING SAID AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF THE
OFFICE OF THE PRESIDENT"), as amended, read:

SEC. 5. In addition to the regulatory and adjudicative functions of THE SECURITIES

AND EXCHANGE COMMISSION over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and decrees,
it shall have original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx

(d) Petitions of corporations, partnerships or associations declared in the state of

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

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall

possess the following powers:

xxx xxx xxx

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

(d) To create and appoint a management committee, board or body upon petition or
motupropio to undertake the management of corporations, partnership or other
associations not supervised or regulated by other government agencies in
appropriate cases when there is imminent danger of dissipation,· loss, wastage or
destruction of assets or other properties or paralization of business operations of
such corporations or entities which may be prejudicial to the interest of minority
stockholders, parties-litigants of the general public: ... (Emphasis and underscoring
supplied).

From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of
a receiver or management committee by the SEC presupposes a finding that, inter
alia, a company possesses sufficient property to cover all its debts but "foresees the
impossibility of meeting them when they respectively fall due" and "there is imminent
danger of dissipation, loss, wastage or destruction of assets of other properties or
paralization of business operations."

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

This Court in fact takes judicial notice of the Decision of the Court of Appeals dated
June 11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp., Nikolite Industrial
Corp., et al. [including CLARION], otherwise known as the EYCO Group of
Companies v. Philippine National Bank, Solidbank Corporation, et al., collectively
known and referred as the 'Consortium of Creditor Banks,"' which was elevated to
this Court via Petition for Certiorari and docketed as G.R. No. 145977, but which
petition this Court dismissed by Resolution dated May 3, 2005:
Considering the joint manifestation and motion to dismiss of petitioners and
respondents dated February 24, 2003, stating that the parties have reached a final
and comprehensive settlement of all the claims and counterclaims subject matter of
the case and accordingly, agreed to the dismissal of the petition for certiorari, the
Court Resolved to DISMISS the petition for certiorari (Underscoring supplied).

The parties in G.R. No. 145977 having sought, and this Court having granted, the
dismissal of the appeal of the therein petitioners including CLARION, the CA decision
which affirmed in toto the September 14, 1999 Order of the SEC, the dispositive
portion of which SEC Order reads:

WHEREFORE, premises considered, the appeal is as it is hereby, granted and the

Order dated 18 December 1998 is set aside. The Petition to be Declared in State of
Suspension of payments is hereby disapproved and the SAC Plan terminated.
Consequently, all committee, conservator/receivers created pursuant to said Order
are dissolved and discharged and all acts and orders issued therein are vacated.

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

xxx xxx x x x (Emphasis and underscoring supplied),

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

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

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

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of thelegislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time,
and the geographical divisions. (Emphasis and underscoring supplied)

which Mr. Justice Edgardo L. Paras interpreted as follows:

A court will take judicial notice of its own acts and records in the same case, of facts
established in prior proceedings in the same case, of the authenticity of its own
records of another case between the same parties, of the files of related cases in the
same court, and of public records on file in the same court. In addition judicial notice
will be taken of the record, pleadings or judgment of a case in another court between
the same parties or involving one of the same parties, as well as of the record of
another case between different parties in the same court. Judicial notice will also be
taken of court personnel. (Emphasis and underscoring supplied)

In fine, CLARION's claim that at the time it terminated Miclat it was experiencing
business reverses gains more light from the SEC's disapproval of the EYCO Group of
Companies' petition to be declared in state of suspension of payment, filed before
Miclat’stermination, and of the SEC’s consequent order for the group of companies’
 dissolution and liquidation.115

At any rate, even assuming that serious business losses had not been proved by PAL, it would
still be justified under Article 298 of the Labor Code to retrench employees to prevent the
occurrence of losses or its closing of the business, provided that the projected losses were not
merely de minimis, but substantial, serious, actual, and real, or, if only expected, were reasonably
imminent as perceived objectively and in good faith by the employer. 116 In the latter case, proof of
actual financial losses incurred by the employer would not be a condition sine qua non for
retrenchment,117 viz.:

Third, contrary to petitioner’s asseverations, proof of actual financial losses incurred

by the company is not a condition sine qua non for retrenchment. Retrenchment is
one of the economic grounds to dismiss employees, which is resorted to by an
employer primarily to avoid or minimize business losses. The law recognize this
under Article 283 of the Labor Code x x x

xxxx

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

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

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

PAL retrenched in good faith

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

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

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

A hard look at the records now impels the reconsideration of the July 22, 2008 decision and the
resolution of October 2, 2009.

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

Notable in this respect was PAL’s candor towards FASAP regarding its plan to implement the
retrenchment program. This impression is gathered from PAL’s letter dated February 11, 1998
inviting FASAP to a meeting to discuss the matter, thus:

Roberto D. Anduiza

President

Flight Attendants’ and Stewards' Association of the Philippines (FASAP)

xxxx

Mr. Anduiza:

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

In this connection, the Company would like to meet with the Flight Attendants' and
Stewards’ Association of the Philippines (FASAP) to discuss the implementation of
the lay-off/retrenchment or retirement of F ASAP-covered employees. The meeting
shall be at the Allied Bank Center (81h Floor-Board Room) on February 12, 1998 at
4:00 p.m.

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

Very truly yours,

(Sgd.)

JOSE ANTONIO GARCIA

President & Chief Operating Officer123

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

Given PAL’s dire financial predicament, it becomes understandable that PAL was constrained to
finally implement the retrenchment program when the ALPAP pilots strike crippled a major part of
PAL’s operations.127 In Rivera v. Espiritu, 128 we observed that said strike wrought "serious losses
to the financially beleaguered flag carrier;" that "PAL’s financial situation went from bad to
worse;" and that "[f]aced with bankruptcy, PAL adopted a rehabilitation plan and downsized its
labor force by more than one-third." Such observations sufficed to show that retrenchment
became a last resort, and was not the rash and impulsive decision that F ASAP would make it out
to be now.

As between maintaining the number of its flight crew and PAL’s survival, it was reasonable for
PAL to choose the latter alternative. This Court cannot legitimately force PAL as a distressed
employer to maintain its manpower despite its dire financial condition. To be sure, the right of PAL
as the employer to reasonable returns on its investments and to expansion and growth is also
enshrined in the 1987 Constitution. 129 Thus, although labor is entitled to the right to security of
tenure, the State will not interfere with the employer's valid exercise of its management
prerogative.

Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation Receiver and Approval of
a Rehabilitation Plan with the SEC on June 19, 1998, before the retrenchment became effective. 130
PAL likewise manifested that:

x x x The Rehabilitation Plan and Amended Rehabilitation Plan submitted by PAL in

pursuance of its corporate rehabilitation, and which obtained the joint approval of
PAL’s creditors and the SEC, had as a primary component, the downsizing of PAL’s
labor force by at least 5,000, including the 1,400 flight attendants. As conceptualized
by a team of industry experts, the cutting down of operations and the consequent
reduction of work force, along with the restructuring of debts with significant
"haircuts" and the capital infusion of Mr. Lucio Tan amounting to US$200 million,
were the key components of PAL's rehabilitation. The Interim Rehabilitation Receiver
was replaced by a Permanent Rehabilitation Receiver on June 7, 1999. 131 (Bold
underscoring supplies for emphasis)

Being under a rehabilitation program, PAL had no choice but to implement the measures
contained in the program, including that of reducing its manpower. Far from being an impulsive
decision to defeat its employees’ right to security of tenure, retrenchment resulted from a
meticulous plan primarily aimed to resuscitate PAL’s operations.

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

June 15, 1998

HON. MAXIMO B. LIM

THE REGIONAL DIRECTOR

Department of Labor and Employment

Regional Office No. NCR

 Dear Sir:

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

PAL is forced to take this action because of continuous losses it has suffered over
the years which losses were aggravated by the PALEA strike in October 1996, peso
depreciation, Asian currency crisis, causing a serious drop in our yield and the
collapse of passenger traffic in the region. Specifically, PAL suffered a net loss of
₱2.18 Billion during the fiscal year 1995-1996, ₱2.50 Billion during the fiscal year
1996-1997 and ₱8.08 Billion for the period starting April 1, 1997 to March 31, 1998.

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

In an effort to avoid a reduction of personnel, PAL has resorted to other measures,

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

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

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

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

Very truly yours,

(Sgd)

JOSE ANTONIO GARCIA

President & Chief Operating Officer132

As regards the observation made in the decision of July 22, 2008 to the effect that the recall of the
flight crew members indicated bad faith, we hold to the contrary.

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

During this time, the Company was slowly but steadily recovering. Its finances were
improving and additional planes were flying. Because of the Company's steady
recovery, necessity dictated more employees to man and service the additional
planes and flights. Thus, instead of taking in new hires, the Company first offered
employment to employees who were previously retrenched. A recall/rehire plan was
initiated.
 The recall/rehire plan was a success. A majority of retrenched employees were
recalled/rehired and went back to work including the members of petitioner union. In
the process of recall/rehire, many employees who could not be recalled for various
reasons (such as, among others, being unfit for the job or the employee simply did
not want to work for the Company anymore) decided to accept separation benefits
and executed, willingly and voluntarily, valid quitclaims. Those who received
separation packages included a good number of the members of the petitioner
union.133

Contrary to the statement in the dissent that the implementation of Plan 22 instead of Plan 14
indicated bad faith,134PAL reasonably demonstrated that the recall was devoid of bad faith or of an
attempt on its part to circumvent its affected employees’ right to security of tenure. Far from being
tainted with bad faith, the recall signified PAL’s reluctance to part with the retrenched employees.
Indeed, the prevailing unfavorable conditions had only compelled it to implement the
retrenchment.

The rehiring of previously retrenched employees should not invalidate a retrenchment program,
the rehiring being an exercise of the employer's right to continue its business. Thus, we pointed
out in one case:

We likewise cannot sustain petitioners' argument that their dismissal was illegal on
the basis that Lapanday did not actually cease its operation, or that they have rehired
some of the dismissed employees and even hired new set of employees to replace
the retrenched employees.

The law acknowledges the right of every business entity to reduce its workforce if
such measure is made necessary or compelled by economic factors that would
otherwise endanger its stability or existence. In exercising its right to retrench
employees, the firm may choose to close all, or a part of, its business to avoid further
losses or mitigate expenses. In Caffco International Limited v. Office of the Minister-
Ministry of Labor and Employment, the Court has aptly observed that -

Business enterprises today are faced with the pressures of economic recession, stiff
competition, and labor unrest. Thus, businessmen are always pressured to adopt
certain changes and programs in order to enhance their profits and protect their
investments. Such changes may take various forms. Management may even choose
to close a branch, a department, a plant, or a shop.

In the same manner, when Lapanday continued its business operation and eventually
hired some of its retrenched employees and new employees, it was merely exercising
its right to continue its business. The fact that Lapanday chose to continue its
business does not automatically make the retrenchment illegal. We reiterate that in
retrenchment, the goal is to prevent impending losses or further business reversals -
it therefore does not require that there is an actual closure of the business. Thus,
when the employer satisfactorily proved economic or business losses with sufficient
supporting evidence and have complied with the requirements mandated under the
law to justify retrenchment, as in this case, it cannot be said that the subsequent acts
of the employer to rehire the retrenched employees or to hire new employees
constitute bad faith. It could have been different if from the beginning the
retrenchment was illegal and the employer subsequently hired new employees or
rehired some of the previously dismissed employees because that would have
constituted bad faith. Consequently, when Lapanday continued its operation, it was
merely exercising its prerogative to streamline its operations, and to rehire or hire
only those who are qualified to replace the services rendered by the retrenched
employees in order to effect more economic and efficient methods of production and
to forestall business losses. The rehiring or reemployment of retrenched employees
 does not necessarily negate the presence or imminence of losses which prompted
Lapanday to retrench.

In spite of overwhelming support granted by the social justice provisions of our

Constitution in favor of labor, the fundan1ental law itself guarantees, even during the
process of tilting the scales of social justice towards workers and employees, "the
right of enterprises to reasonable returns of investment and to expansion and
growth." To hold otherwise would not only be oppressive and inhuman, but also
counter-productive and ultimately subversive of the nation's thrust towards a
resurgence in our economy which would ultimately benefit the majority of our people.
Where appropriate and where conditions are in accord with law and jurisprudence,
the Court has authorized valid reductions in the workforce to forestall business
losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the
volume of business which has rendered certain employees redundant. 135

Conselquently, we cannot pass judgment on the motive behind PAL's initiative to implement "Plan
22" instead of "Plan 14." The prerogative thereon belonged to the management alone due to its
being in the best position to assess its own financial situation and operate its own business. Even
the Court has no power to interfere with such exercise of the prerogative.

PAL used fair and reasonable criteria in selecting the

employees to be retrenched pursuant to the CBA

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

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

PAL’s contentions are meritorious.

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

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

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

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

PAL resorted to both efficiency rating and inverse seniority in selecting the employees to be
subject of termination. As the NLRC keenly pointed out, the "ICCD Masterank 1997 Ratings -
Seniority Listing" submitted by PAL sufficiently established the criteria for the selection of the
employees to be laid off. To insist on seniority as the sole basis for the selection would be
unwarranted, it appearing that the applicable CBA did not establish such limitation. This counters
the statement in the dissent that the retrenchment program was based on unreasonable standards
without regard to service, seniority, 1oya1ty and performance. 154

In this connection, we adopt the following cogent observations by the CA on the matter for being
fully in accord with law and jurisprudence:

FASAP insists that several CBA provisions have been violated by the retrenchment.
They are the provisions on seniority, performance appraisal, reduction in personnel
and downgrading and pem1anent OCARs. Seniority and performance stand out
because these were the main considerations of PAL in selecting workers to be
retrenched. Under the CBA, seniority is defined "to mean a measure of a regular
Cabin Attendant’s claim in relation to other regular Cabin Attendants holding similar
positions, to preferential consideration whatever the Company exercises its right to
promote to a higher paying position of lay-off of any Cabin Attendant." Seniority,
however, is not the sole determinant of retention. This is clear under Article XIII on
performance appraisal of the CBA provisions.

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

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

However, the contention of FASAP that these criteria required its prior conformity
before adoption is not supported by Section 30, Article VIII of the CBA. Note should
 be taken that this provision only mandates PAL to "meet and consult" the
Association (FASAP) in the formulation of the Performance and Professionalism
Appraisal System." By the ordinary import of this provision, PAL is only required to
confer with FASAP; it is not at all required to forge an addendum to the CBA, which
will concretize the appraisal system as basis for retrenchment or retention. 155

To require PAL to further limit its criteria would be inconsistent with jurisprudence and the
principle of fairness. Instead, we hold that for as long as PAL followed a rational criteria defined or
set by the CBA and existing laws and jurisprudence in determining who should be included in the
retrenchment program., it sufficiently met the standards of fain1ess and reason in its
implementation of its retrenchment program.

The retrenched employees signed valid quitclaims

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

We reverse.
156
In EDI Staffbuilders International, Inc. v. National Labor Relations Commission, we laid down
the basic contents of valid and effective quitclaims and waivers, to wit:

In order to prevent disputes on the validity and enforceability of quitclaims and

waivers of employees under Philippine laws, said agreements should contain the
following:

1. A fixedamount as full and final compromise settlement;

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

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

4. A statement that the employees signed and executed the document voluntarily, and
had fully understood the contents of the document and that their consent was freely
given without any threat, violence, duress, intimidation, or undue influence exerted
on their person.157 (Bold supplied for emphasis)

The release and quitclaim signed by the affected employees substantially satisfied the aforestated
requirements. The consideration was clearly indicated in the document in the English language,
including the benefits that the employees would be relinquishing in exchange for the amounts to
be received. There is no question that the employees who had occupied the position of flight crew
knew and understood the English language. Hence, they fully comprehended the terms used in
the release and quitclaim that they signed.

Indeed, not all quitclaims are per se invalid or against public policy.1a\^/phi1 A quitclaim is invalid
or contrary to public policy only: (1) where there is clear proof that the waiver was wrangled from
an unsuspecting or gullible person; or (2) where the terms of settlement are unconscionable on
their face.158 Based on these standards, we uphold the release and quitclaims signed by the
retrenched employees herein.
WHEREFORE, the Court:

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

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

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

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

No pronouncement on costs of still.

SO ORDERED.

FIRST DIVISION

G.R. No. 123518. March 13, 1998

LILIA PASCUA, MIMI MACANLALAY, SUSAN C. DE CASTRO, VIOLETA M. SORIANO

and VICTORIA L. SANTOS, Petitioners, v. , NATIONAL LABOR RELATIONS
COMMISSION (Third Division) and TIONGSAN SUPER BAZAAR, Respondents.

DECISION

PANGANIBAN, J.:

In granting this petition, the Court relies on the following doctrines: (1) where the
conclusions of the NLRC and the labor arbiter are conflicting, this Court may review factual
findings; (2) the employer has the burden of proof to show the validity of the dismissal; (3)
a dismissal is deemed illegal unless the employer proves (a) just or authorized cause and
(b) observance of due process; and (4) acceptance by the employee of separation pay does
not estop him from alleging the illegality of his dismissal and from pressing for
reinstatement.
The Case

This petition for certiorari under Rule 65 of the Rules of Court assails the Decision of the
National Labor Relations Commission[1] promulgated on April 29, 1995, and its
Resolution[2] promulgated on September 19, 1995 denying petitioners motion for
reconsideration in NLRC CA No. 007894-94,[3] both rendered in the consolidated cases for
illegal dismissal filed by petitioners against respondents in the Regional Arbitration Branch
of the Cordillera Administrative Region.

The assailed Decision disposed as follows:[4]

WHEREFORE, premises considered, the assailed decision of the Labor Arbiter, dated 30
September 1994 is hereby MODIFIED, as follows:ua
(a) Complainant Lilia Pascua is declared to have voluntarily resigned; hence, the finding a
quo of illegal dismissal and the consequent awards of backwages and additional separation
pay pertaining to her are hereby SET ASIDE;

(b) Complainant Victoria Santos is found not to have been dismissed; hence, the finding a
quo of illegal dismissal and the consequent award of backwages pertaining to her are
hereby SET ASIDE. However, she is still entitled to separation pay in lieu of reinstatement,
due to strained relationship;

(c) Complainant Violeta Sorianos dismissal is declared to be for just cause; hence, the
finding a quo of illegal dismissal and the consequent awards of backwages and separation
pay, as to her, are hereby SET ASIDE;

(d) Complainant Susan de Castro is found not to have been dismissed; hence, the finding a
quo of illegal dismissal and the consequent awards of backwages, as to her, are hereby SET
ASIDE. However, she is still entitled to separation pay in lieu of reinstatement due to
strained relationship, plus her unpaid salary.

Other holdings in the appealed decision stand AFFIRMED.

On the other hand, the labor arbiters[5] disposition, dated September 30, 1994, reads:[6]

VIEWED FROM THIS LIGHT, judgment is hereby rendered with the following dispositions:

1.That the complainants were illegally dismissed. Considering however, that,

reinstatement is no longer possible, because [of] the serious personal and
physical differences between them, respondent, should pay the complainants
backwages and/or separation [pay] as follows:

A. LILIA PASCUA P 126,696.52

(Backwages + separation pay)

B. MIMI MACANLALAY 4,138.49

(Separation pay)

C. VICTORIA SANTOS 123,038.18

(Backwages + separation pay)

D. SUSAN DE CASTRO 118,874.52

(Backwages + separation pay)

E. VIOLETA SORIANO 119,616.52;

(Backwages + separation pay)

PROVIDED, that, the payment of the backwages, shall be without prejudice to

any adjustment, for the purpose of deducting, the complainants earnings
elsewhere during the pendency of the case;
 2. That the claims for overtime pay, rest day premiums and service incentive
leave pay are denied, considering the finding of the office of the Regional Director
of DOLE-CAR, that respondent committed no violation in so far as general labor
standards are concerned; and

3. That the claims for moral and exemplary damages as well as attorneys fees
are denied for lack of proper basis.
The Facts

The facts of the case, as narrated by the labor arbiter and quoted by the NLRC, are as
follows:[7]

The complainants are among the thirty seven (37) employees of Henry Lao at the Tiongsan
Super Bazaar. On August 7, 1991, Henry Lao received a telephone call from a lady, who
informed him, that, Lydia Navarette, one of his sales ladies had just stolen a Sanyo
Karaoke, the previous night. Upon his receipt of the information, he immediately dispatched
Luisita Lavarias and Lydia Navarette to the latters house and [sic] recover the stolen item.
When the two (2) reached Navarettes house, she reasoned out, that, she did not have her
keys. Thereafter, they returned to the bazaar. There, Lydia Navarette made a confession,
that, there were others who were involved in the stealing of goods. Henry Lao, then called
his other sales ladies for a confrontation. The first person that he called was a certain
Noemi, who in turn pointed to a certain Celia Lazo, as one of them. Gloria Garcia was the
next person to be called. She likewise admitted her participation. When she said that she
knew the persons involved in the pilferage or price cutting, she was required by Henry Lao
to write down their names. Violeta Soriano and Susan Castillo were included in her list. The
eighteen (18) sales ladies who admitted their guilt resigned. The remaining workers were
placed under the watchful eyes of respondent.

On August 21, 1991, Lilia Pascua was caught repairing three (3) pairs of pants, that
allegedly was [sic] not bought at the Tiongsan Super Bazaar. The following day, she did not
report for work anymore. Instead, she went to see the respondents bookkeeper and
requested for the computation of her separation pay.

On August 24, 1991, barely seventeen (17) days after the mass resignation of the 18 sales
ladies, for various offenses, Victoria Santos was caught charging a meter of a cloth for the
price of a yard. For this offense, she was suspended for a period of thirty (30) days. She
never returned to work since then.

Mimi Macanlalay and Violeta Soriano were previously assigned as cashiers. But because of
their alleged acts of dishonesty, they were relieved from their positions. Mimi Macanlalay
later on resigned. While Violeta Soriano was terminated on the ground of insubordination on
December 11, 1991.

xxx xxx xxx

THE CASE OF LILIA PASCUA:

Lilia Pascua was employed on June 2, 1985, as a saleslady. She is [sic] assigned at the
pants section of [the] bazaar. She is [sic] a trusted employee of respondent. For a time, he
relied on her (TSN, Henry Lao, February 7, 1994, p. 9) On September 21, 1991, she left her
station unattended for about three (3) hours in the afternoon. At about the same time,
respondent noticed Mrs. Manaois, roaming around the store without buying anything. Henry
Lao closely watched her, because she was one of the people that were conniving with the
sales ladies. At 6:00 o clock p.m. respondent saw Mrs. Manaois approach Lilia Pascua at the
sewing machine. Lilia Pascua was finishing the last of the three (3) pairs of pants that
belonged to Mrs. Manaois. (TSN, Henry Lao, February 4, 1994, p. 9)

Respondent scolded Lilia Pascua for this offense, because it is against the respondents
policy that repair jobs of items that are not bought at the bazaar, should not be accepted.
She was given a warning, that this prohibition should be strictly followed. Lilia Pascua did
not report for work the next day. She opted to resign. Respondent paid her separation pay.

THE CASE OF MIMI MACANLALAY:

Mimi Macanlalay was employed on June 10, 1989. Previously, she worked for Mrs. Tan. On
September 19, 1991, Mrs. Tan went to the Tiongsan Super Bazaar, and she saw Mimi
Macanlalay working as a cashier. Mrs. Tan informed Mr. Lao, that Mimi Macanlalay was
previously dismissed by her for dishonesty. In relieving Ms. Macanlalay from her position as
cashier, respondent ratiocinates:

xxx xxx xxx

xxx (i)t is perfectly normal for Mr. Lao to be apprehensive when he was informed by his
customer friend about the previous dismissal of complainant Macanlalay from her previous
job for dishonesty. Considering the widescale underpricing pilferage and deceit which was
discovered only a month earlier, Mr. Lao was naturally worried xxx.

Upon the admission made by complainant, Mr. Lao, naturally had reason to doubt her
honesty. This was the reason why he informed her, that she was returning her as sales
lady. (See Vol. II, pp. 114-115, records of Macanlalay v-Lao cases)

Just like Lilia Pascua, Mimi Macanlalay resigned, and was paid her separation pay.

THE CASE OF VICTORIA SANTOS:

On August 24, 1991, Victoria Santos was caught charging a meter of a cloth for the price of
a yard. Mr. Lao immediately called her, for an explanation. Her explanation was found by
Mr. Lao to be unsatisfactory. She was suspended for thirty (30) days.

THE CASE OF VIOLETA SORIANO:

Violeta Soriano was employed on May 16, 1984. After the August 7, 1991 incident, she was
assigned as a cashier. She was reverted back as a sales lady after a few weeks when Mr.
Lao learned, that, she had some knowledge of the schemes of the resigned employees. On
November 9, 1991, Mr. Lao required her to explain in writing, why she should not be the
subject matter of a disciplinary action, for her failure to fill up her daily time record. Mr. Lao
ordered another employee to put the phrase no entry into Ms. Sorianos daily time record.
Ms. Soriano attempted to grab the daily time record from its custodian. A commotion
ensued, in the presence of many customers. She was suspended for thirty (30) days.
Respondent reviewed her past records and found out that, she was the subject matter of a
disciplinary action in the past. She was terminated [sic] on December 8, 1991.

THE CASE OF SUSAN DE CASTRO

Susan De Castro refused to receive her salary on November 18, 1991, because she insisted
on receiving more than what is indicated in the payrolls. Respondent told her, that if she is
[sic] not satisfied with her salary, she can [sic] find employment elsewhere. She failed to
report for work on the following day. In any case, respondent states, that, she can be
dismissed for lack of trust and confidence, for her involvement in the pilferage of goods.

Petitioners filed at the Regional Arbitration Branch of the NLRC[8] separate complaints
against Henry Lao[9]for illegal dismissal and claims for violation of labor standards
pertaining to payment of wages.[10] The parties submitted position papers and
documentary evidence, and hearings were held. Subsequently, the labor arbiter ruled that
the dismissals were illegal and awarded back wages and separation pay to petitioners.

Both petitioners and respondent appealed to the NLRC, which modified the appealed
decision. It found the termination of petitioners employment to be due either to voluntary
resignation or dismissals with just cause; however, it awarded separation pay to Victoria
Santos. Petitioners motion for reconsideration was unavailing. Hence, this petition which
was deemed submitted for decision upon receipt by the Court of private respondents
memorandum on October 22, 1997.[11]
Respondent NLRCs Ruling

The NLRC ruled:

On the bases of the foregoing, we find that the evidence on hand preponderates for the
dismissal of complainant. There could be no better evidence other than the DTR itself.
Granting that there was indeed an instruction in the past for the employees not to make
regular entries in their DTRs the same should not be expediently used as a lame excuse for
the employee who defies an order from management for him to now to make the proper
entries. Management should not be taken hostage of [sic] its previous mistakes or apparent
leniencies precluding it from instituting the necessary and needed reforms and punishing
violators thereof.

In the case at bar, there is no dispute that an order for the employees to make regular
entries in their DTRs is lawful and that defiance thereof undoubtedly amounts to
insubordination. Hence, complainants dismissal is justified under the premises.

Besides, there is reasonable ground to believe that complainant had indeed left for overseas
employment which explains why complainant was not able to testify on the witness stand
during the trial of the case and refute the charges of management in this regard (TSN dated
07 February 1994, p. 8, Volume III, Records).

Insofar as the payment of overtime pay is concerned it must be denied for lack of factual or
legal basis. Under the premises, complainants failed to substantiate their entitlement to
overtime pay by clear and convincing evidence. Unlike in ordering monetary claims whereby
the burden of proof rests [on] the shoulders of the employer the same does not squarely
apply in claims for overtime pay on the theory that an employee is presumed to have been
engaged to render the regular or normal eight (8) hours of work per day. Besides, the mere
fact that respondent committed no violation of labor standards laws per inspection report by
the Inspector Division of the Regional office concerned, should work in his favor (p. 33,
Volume I, Records).

Anent the claim for moral and exemplary damages, suffice it to say, that even granting that
the issue on sexual harassment implicating Mr. Henry Lao was sufficiently established, the
award for said damages must still fail because the said ground relied upon by the
complainants was neither the proximate nor contributory cause of their supposed
dismissals.

Finally, we need to stress that under Article III (a) of the Labor Code, as amended,
attorneys fees are recoverable only against the culpable party in case of unlawful
withholding of wages, a situation not obtaining in the case at bar.[12]
The Issues

In their Memorandum,[13] petitioners present the following issues:

Whether or not Respondent NLRC committed grave abuse of discretion amounting to lack of
jurisdiction

1. In reversing the finding of illegal dismissal of the labor arbiter who observed the
demeanors of the witnesses during the trial on the merits and in supplanting its conflicting
rulings which are contrary to law and settled jurisprudence.

2. In finding petitioners to have voluntarily resigned despite complete absence of any

evidence of resignation and consequently in finding them as not illegally dismissed despite
complete absence on [sic] evidence that private respondent complied with the termination
guidelines as mandated in Article 277 (b) and Rule XIV, Book V of the Rules Implementing
the Labor Code, thus making the questioned decision as not supported by evidence.

3. In not reinstating petitioners with full backwages and other benefits until actual
reinstatement and in not granting their money claims for underpayment of wages, overtime
pay and other benefits, claims for moral and exemplary damages and attorneys fees against
private respondent Henry Lao who has been established as a sexual harasser.

At bottom, the resolution of this case hinges on this question: Were petitioners employment
terminated because of resignation, abandonment or dismissal?
The Courts Ruling

The petition is meritorious.

Main Issue: Abandonment, Resignation or Dismissal?

Petitioners claim that they were denied due process. In the first place, they were not even
served a formal notice of dismissal. In particular, the violation of procedural due process
was manifested when Petitioner Mimi Macanlalay x x x was summarily discharged due to a
mere say-so suspicion of dishonesty.[14]

Petitioners further allege that their dismissals were oppressive and anti-social, complaining
that it was off-tangent and immaterial for private respondent to discuss the theft and price-
cutting of some employees of respondent bazaar x x x because the offenses of some
employees cannot be imputed against petitioners.[15]

Petitioners indignantly accuse the NLRC of being biased in favor of private respondent, as
shown when the Commission decreed the validity of their dismissals in the clear absence of
evidence, and of issuing conflicting rulings to accommodate respondent employer.[16]
Buttressing their contention, petitioners point out that the award of separation pay
expressly to Victoria Santos and Susan de Castro and impliedly to Mimi Macanlalay[17]
indicates that they were illegally dismissed because, if they were not, then they should not
have been awarded any separation pay as was done to Lilia Pascua and Violeta Soriano.
[18]

Petitioners also allege that the NLRC abused its discretion when it ruled that they had been
validly dismissed and [that they] resigned voluntarily just because they received money
from private respondent.[19] Citing Molave Tours Corporation vs. NLRC, et al.,[20] they
argue that since resignation must be made with the intent of relinquishing ones office, the
filing of their complaints for illegal dismissal is wholly incompatible with private respondents
assertion that they voluntarily resigned.[21]

Upholding public respondent, the solicitor general contends that Petitioners Lilia Pascua,
Victoria Santos and Susan C. De Castro resigned from their jobs; that Mimi Macanlalay
voluntarily left private respondents employ; and that Petitioner Violeta Soriano was
dismissed for just cause.

Private respondent, on the other hand, maintains the validity of the dismissal of the
petitioners. It contends that the award of separation pay [was] not inconsistent with the
finding that there [was] no illegal dismissal since it was given by the employer as financial
assistance.[22]

Private respondent also insists that Petitioner Pascua clearly violated the company rule that
only pants bought from Tiongsan may be worked on by the employees x x x.[23] She was
not dismissed but simply did not report for work and instead demanded x x x separation
pay.[24] Petitioner Santos, on the other hand, simply did not report back to work after
serving her thirty (30) days suspension. Instead, she asked private respondent to pay her
separation pay computed at one (1) month pay for every year of service.[25] Petitioner
Soriano was first suspended for causing a commotion inside the store in the presence of
customers. Later, her employment was validly terminated.[26] Petitioner De Castro showed
gross insubordination and hostility towards private respondent [Henry Lao]. Though it is
true that the latter had suggested to her to look for employment elsewhere, this certainly
did not amount to a termination.[27] Lastly, Petitioner Macanlalay resigned.[28]
Review of Evidence in Labor Cases

As a rule, petitions for certiorari under Rule 65 involve only jurisdictional issues, or grave
abuse of discretion amounting to lack or excess of jurisdiction. Hence, this Court refrains
from reviewing factual assessments of lower courts and agencies exercising adjudicative
functions, such as the NLRC. Occasionally, however, this Court is constrained to wade into
factual matters when there is insufficient or insubstantial evidence on record to support
those factual findings; or when too much is concluded, inferred or deduced from the bare or
incomplete facts appearing on record. In the present case, we find the need to review the
records to determine the facts with certainty not only because of the foregoing
inadequacies, but also because the NLRC and the labor arbiter have come up with conflicting
positions.[29]

In the present case, the central question is: Was petitioners employment terminated in
accordance with law? After poring over the records and the evidence, as well as the
applicable law and jurisprudence, the Court is convinced that the answer is No.

First. Basic is the doctrine that resignation must be voluntary and made with the intention
of relinquishing the office, accompanied with an act of relinquishment.[30] Based on the
evidence on record, we are more than convinced that Petitioners Lilia Pascua, Mimi
Macanlalay, Susan C. De Castro and Violeta Soriano did not voluntarily quit their jobs.
Rather, they were forced to resign or were summarily dismissed without just cause.
Petitioners -- except Victoria L. Santos -- forthwith took steps to protest their layoff and
thus cannot, by any logic, be said to have abandoned their work.[31]

Second. In labor cases, the employer has the burden of proving that the dismissal was for a
just cause; failure to show this, as in the instant case, would necessarily mean that the
dismissal was unjustified and, therefore, illegal.[32] To allow an employer to dismiss an
employee based on mere allegations and generalities would place the employee at the
mercy of his employer; and the right to security of tenure, which this Court is bound to
protect, would be unduly emasculated.[33] Considering the antecedents in the summary
dismissals effected against Petitioners Pascua, Macanlalay, De Castro and Soriano, the
causes asserted by private respondent are, at best, tenuous or conjectural; at worst, they
are mere afterthoughts.

Third. Under the Labor Code, as amended, the dismissal of an employee which the employer
must validate has a twofold requirement: one is substantive, the other procedural. Not only
must the dismissal be for a just or an authorized cause as provided by law (Articles 282,
283 and 284 of the Labor Code, as amended); the rudimentary requirements of due process
-- the opportunity to be heard and to defend oneself -- must be observed as well.[34]

Fourth. Petitioners Pascua and Macanlalays acceptance of separation pay did not necessarily
amount to estoppel; nor did it connote a waiver of their right to press for reinstatement,
considering that such acceptance -- particularly by Petitioner Pascua who had to feed her
four children[35] -- was due to dire financial necessity. [36]

Based on the above postulates, the facts and the law as they apply to each petitioner shall
now be discussed.
Petitioners Illegally Dismissed

Lilia Pascua. According to the NLRC, after being caught repairing the last of three pairs of
pants which were not bought at the Tiongsan Super Bazaar, Lilia Pascua admitted the
wrongdoing to Henry Lao, explaining that she was merely accommodating a certain Mrs.
Manaois, who was allegedly Laos friend. She averred:[37]

5. That at almost 6:30 o clock in the evening of August 21, 1991, a close friend of my
employers whom I know as Ms. Manaois approached me and requested me to cut and sew
the hem of her pants which I turned down;

6. That said Ms. Manaois however insisted that I work on her pants with the assurance that
she will be the one to talk to my employers anyway she is their kumadre such that with said
assurance I started to put my line (guhit) on the hem of the pants at which time, Henry Lao
approached us and questioned my act;

Thereupon, she was scolded and suspended by Lao, after which, the NLRC found, she
decided to resign from private respondents employ.

We cannot accept the NLRCs simplistic findings. The uncontested affidavit of Petitioner
Pascua provides the evidence conveniently ignored by the NLRC, which shows the folly of
the alleged resignation:[38]

7. That Henry Lao shouted at me and told me to go upstairs to the counter so that I can
sign for my suspension and hurried me up by pushing me by my shoulders towards the
direction of the counter and as soon as I was there, he hurriedly let me sign a blank paper
and no copy was given to me;

8. That thereafter, Henry Lao kept pushing me by my shoulders as he repeatedly told me in

a loud manner, pakuwenta mo na ang separation pay mo at hindi ka na rin makakabalik.
Puntahan mo ang accountant. which made me nervous and afraid especially that he kept on
pushing me even when I was already on top of the stairs;

9. That on August 22, 1991, as instructed by Henry Lao, I went to the accountant for the
computation of my separation pay which she computed after which I went to Tiong San
Super Bazaar where I was paid the computed separation pay of P8,010.; (Emphasis
supplied).

It is evident from the above that, contrary to private respondents allegation, Petitioner
Pascua was forced to resign -- an act which was tantamount to a dismissal, an illegal one at
that.

Was there any valid cause for her dismissal?[39] The solicitor general submits: It must be
pointed out that Henry Lao was acting within his rights when he chastised and suspended
petitioner for flagrant violation of company rules.[40] We do not agree. To be a just cause
for an employees dismissal, wilful disobedience must show the following: the employees
assailed conduct must have been wilful or intentional, the wilfulness being characterized by
a wrongful and perverse attitude; and the order violated must have been reasonable, lawful,
made known to the employee and pertinent to the duties which he or she had been engaged
to discharge. In this light, not every case of so-called wilful disobedience by an employee
can reasonably be penalized with dismissal.[41]

In the present case, Petitioner Pascua was aware of the close relationship between Henry
Lao and Mrs. Manaois. Indeed, Lao himself did not deny that he knew Manaois. Thus,
Pascua feared that, if she turned down Mrs. Manaois request, she would be subjected to
public scolding by Lao. Thus, accommodation of the said request may have been an act of
disobedience of her employers order, but hardly an instance of the wrongful and perverse
attitude that would warrant a penalty as grave as dismissal. Fairness requires that
dismissal, being the ultimate penalty that can be meted out to an employee, must have a
clear basis.[42] Any ambiguity in the ground for the termination of an employee should be
interpreted against the employer, who ordained such ground in the first place.

Susan De Castro. Finding that she was not at all dismissed, the NLRC, as well as the labor
arbiter, ruled that Petitioner De Castro was similarly situated as petitioner Santos. We do
not agree.

First of all, the NLRC could not explain the contradictions in Petitioner De Castros case. If
she had not been dismissed but was still an employee of private respondent, then why did
she file this case for illegal dismissal? And even more perplexing: Why would the NLRC
conclude that reinstatement was no longer possible because of the parties respective
imputations of charges against each other?

Furthermore, the labor arbiters finding that there was no evidence on record to establish
her dismissal is refuted by these uncontested allegations of Petitioner De Castro:[43]

2. Complainant Susan de Castro, in Case No. -0377-91, was also a saleslady of the
Tiongsan Super Bazaar from May 16, 1987 to November 19, 1991. She worked every day
except Mondays, her restday [sic], in nine and a half hours (9 ) but she was required to fill
up her daily time records reflecting eight (8) hours work only. Her wage rates were as
follows:

P 40/day - May 16, 1987 to December 31/87

64/day - January/88 to September 30/89

89/day - October/89 to November 30, 1990

99/day - December 1/90 to April 30/91

106/day - May 1/91 to November 19, 1991.

Complainant was not paid her legal benefits such as underpayment of basic wage, unpaid
overtime pay, premiums for restday [sic] and holiday pay, incentive leave pay and 13th
month pay differentials. That on November 19, 1991 she was dismissed summarily,
whimsically and capriciously in this manner: When she filled up her daily time record
correctly and demanded payment of her correct wage/overtime pay, respondent Henry Lao
flared up and said: Huwag ka ng pumasok? [sic] Suspended ka na! Antayin mo na lang ang
sulat ko! You are excused, goodbye! And she was not allowed to report for work anymore.
(Emphasis supplied).

What further muddles the issue of dismissal is the grant of separation pay. The solicitor
general contends that, since private respondent was not averse to giving separation pay to
Petitioners Pascua and Macanlalay, it may also be required to pay separation pay to those
employees who leave its employ.[44] The grant of separation pay, however, is inconsistent
with existing employment or voluntary resignation, for it presupposes illegal dismissal.[45]

The solicitor general rationalizes the award of separation pay as one that is based on
equitable consideration; that is, it was for the purpose of providing petitioner the
wherewithal during the period that she is looking for another employment.[46]This
explanation is unacceptable. If petitioner was legally dismissed, as the solicitor general held,
then the NLRC erred in finding her entitled to separation pay, in lieu of reinstatement.
Indeed, if she was dismissed for cause, jurisprudence demands that she should not be
granted any award for the wrongdoing she was alleged to have committed; nor is she
entitled to reinstatement and back wages.[47]

While this Court has allowed the grant of separation pay as a measure of social justice,
settled is the rule that separation pay is allowed only in those instances in which the
employee is validly dismissed for causes other than serious misconduct or those involving
his moral character.[48] And certainly, the charge against de Castro -- falsifying her daily
time records -- involves her moral character.

Mimi Macanlalay. According to the NLRC, Petitioner Macanlalay voluntarily left private
respondents employ. The solicitor general, in turn, alleges that this is supported by the
finding of the labor arbiter that she lodged her complaint, because her separation pay [was]
too little.[49]

The evidence on record negates resignation. Petitioner Macanlalay contends that, prior to
her employment at Tiongsan Super Bazaar, she had been a saleslady at Rommels which
was owned by a certain Mrs. Tan. On September 20, 1991, while she was working as a
cashier at Tiongsan, Mrs. Tan saw her; thereupon, Mrs. Tan reported to Henry Lao that
Petitioner Macanlalay had previously been dismissed for alleged dishonesty. Petitioner was
then called by Lao and unceremoniously told: Kunin mo na ang separation pay mo. Pa total
mo na sa accountant. At huwag ka ng magtrabajo dito.[50]

Clearly, she did not resign; she was orally dismissed by Lao. It is this lack of clear, valid and
legal cause, not to mention due process, that made her dismissal illegal, warranting
reinstatement and the award of back wages.[51]

Violeta M. Soriano. The solicitor general contends that the two labor tribunals were correct
in holding that Petitioner Soriano was dismissed for just causes, namely: (1) the omission of
an entry in her daily time record and her attempt to prevent the writing of no entry
thereon; (2) her reservation of certain merchandise which she intended to purchase without
informing the management; and (3) her absences without prior approval. Here, however,
the solicitor general declares that private respondent is subject to sanction for its failure to
accord Petitioner Soriano the right to an administrative investigation in conformity with the
procedural requirements of due process.[52]

We do not agree with the solicitor general. The NLRC justified Petitioner Sorianos dismissal
by alleging that it was due to her failure to make regular entries in her daily time records.
We believe, however, that this alleged just cause was convincingly disputed by Petitioner
Soriano in her letter dated November 9, 1991, which states:[53]

First, with respect to your finding that I have not been filling up my daily time record daily, I
would like to remind you that you are the one who established said system or practice
which is applicable to all employees in your establishment with specific instructions from you
as to what working hours are supposed to be reflected therein which is limited to only eight
(8) hours a day although I and the other employees regularly and normally render work
beyond eight (8) hours daily. With such system, you do not expect me and my co-
employees to do otherwise for fear of being charged by you for disobedience to your
instructions and consequently be the subject of persistent harassments and unnecessary
confrontations with you. In other words, if I and my co-employees have not been filling up
our daily time record on a daily basis, it was more in accordance with your specific
instructions. It is indeed a surprise to me why it is only now that you are seemingly making
a big issue out of a system that you yourself has [sic] created and this time in a way that is
against me when I do not have anything to do with said system that you imposed on me
and co-employees. Besides, this is what I had been doing from the time I was employed in
your establishment to November 07, 1991 [in] accordance with your instructions. It would
seem however that you instructed Dasig to fill up my daily time record by placing therein no
entry for the blank spaces provided for November 3 to 7, 1991, inclusive, which I asked her
to sign but she refused to do so. Likewise, you verbally told me today that I had to leave
the premises at 5:30 p.m. and to work for only eight (8) hours which I did not do
considering that this would be a sudden change of my regular working hours. x x x

The labor arbiter sustained Petitioner Sorianos explanation, holding thus:[54]

Violeta Soriano, was first relieved from her position as cashier, after the August 7, 1991
incident. On October 9, 1991, she executed an affidavit attesting that, the workers at
Tiongsan Super Bazaar were underpaid. (See Vol. I, p. 53, record of Lilia Pascua) According
to the respondent, after she was relieved from her position, she refused to perform the
task, that, she had been previously doing. When she was confronted by Mr. Lao, why she
was behaving that way, she flared up. Due to this, she was issued a memorandum for
insubordination. (See Vol. II, p. 157, record of Macanlalay, et al. cases) Another
memorandum was issued on November 8, 1991, directing her to explain why she had not
been filling up her daily time records. (See Vol. II, p. 86) A notice of preventive suspension
was issued to her on November 10, 1991. (See Vol. II, p. 89) And, finally a notice of
dismissal dated December 8, 1991. (See Vol. II, p. 90)/

Complainant believes that these series of memoranda, were issued by respondent only after
he failed to convince her to retract her statement that she executed in favor of Lilia Pascua.
(See Vol. II, p. 63, record of Macanlalay, et al. v- Henry Lao)

The respondents decision to dismiss is hazy. It does not contain any findings of fact, and the
basis for the imposition of the penalty.

As evidenced by the records, there should have been no basis for the issuance of the notice
of preventive suspension that was issued on November 10, 1991. Granting, that, it is true
that, complainant refused to receive on November 8, 1991, (see Vol. II, p. 86) she
submitted her explanation on November 10, 1991, at 8:30 a.m. (See p. 88, ibid) There is
likewise no basis for the accusation that complainant made an unauthorized change in her
lunch break. (See p. 89, ibid) Respondent himself confirmed that his salesladies were free
to arrange among themselves their time. (TSN, Henry Lao, February 10, 1994, p. 40)

xxx xxx xxx

It has been held, that, the employer is possessed with an inherent right to dismiss an
employee for loss of confidence. The Court has a plethora of decisions that supports and
recognizes this authority of the employer to sever its relationship with the employee
involving such cases. However, loss of confidence as a valid cause to terminate an employee
must nonetheless rest on an actual breach of duty committed by the employee and not on
the employers imagined whim or caprice. The employers evidence must clearly and
convincingly establish the facts and incidents upon which the loss of confidence in the
employee may fairly be made to rest. (Estiva v- NLRC, 22 SCRA 169, other citations
omitted)

The respondent failed to establish the bases for the complainants dismissal. They were
illegally dismissed. (Emphasis supplied).

To find a convenient justification to dismiss an employee, Henry Lao cannot unilaterally

change the previous rule -- irregular as it may have been -- regarding entries in daily time
records without first informing petitioners, particularly Soriano, of such change. True, an
employee may be validly dismissed for violation of a reasonable company rule or regulation
adopted for the conduct of the companys business. It is equally true, however, that
company policies and regulations are generally valid and binding on the parties and must be
complied with until finally revised or amended by competent authority.[55] It is settled,
too, that -- in order that an employer may terminate the services of an employee on the
ground of wilful disobedience of the formers orders, regulations or instructions -- it must be
established that the said orders, regulations, or instructions are (1) reasonable and lawful,
(2) sufficiently known to the employee, and (3) connected with the duties which the
employee has been engaged to discharge.[56]
Petitioner Santos Resigned

We agree that Petitioner Santos voluntarily resigned. The labor arbiter did not find Petitioner
Santos [or Petitioner De Castro] to have been illegally dismissed:[57]

Respondent states, that, Victoria Santos and Susan de Castro were not dismissed, but if
they reported back, Mr. Lao, had valid grounds to dismiss them. Except for the sweeping
accusations, there is no evidence on record to support their dismissal. Therefore, this Labor
Arbiter is not in a position to declare that complainants Santos and De Castro have forfeited
their employment with respondent.

Likewise, the NLRC ruled that Victoria L.
suspension for charging for a meter of cloth
to resign. The solicitor general supports
discovered this when he ruled that there
[Santos and De Castros] dismissal.[59]
Santos was not dismissed. Rather, after her
bought [at] the price of a yard,[58] she offered
this by stating that even the Labor Arbiter
[was] no evidence on record to support their

Notwithstanding his assertion that Petitioner Santos had resigned, the solicitor general
sustained the award of separation pay to her, because she had a right to return to private
respondent bazaar, which she could have exercised if not for her strained relationship [60]
with its owner.

Petitioner Santos contends that the affidavit she executed on October 9, 1991 caused her
illegal summary dismissal.[61] As correctly found by the NLRC, this allegation defies logic,
because Petitioner Santos was dismissed on September 25, 1991, that is, prior to the
execution of said affidavit.
Damages and Attorneys Fees

Moral damages are recoverable where the dismissal of the employee was attended by bad
faith or constituted an act oppressive to labor or was done in a manner contrary to morals,
good customs or public policy.[62] Although the Labor Code is silent on the liability of an
employer for damages in case the termination of employment is declared to be unjust, we
have ruled,[63] however, that the employer may be so liable if, in terminating the
employment, it also committed an antisocial and oppressive abuse of its right to investigate
and dismiss its employee in violation of Article 1701 of the Civil Code.[64] Thus, in CLLC
E.G. Gochangco Workers Union vs. NLRC,[65] we said:

As for moral damages, we hold the said respondent liable therefor under the provisions of
Article 2220 of the Civil Code providing for damages for breaches of contract where the
defendant acted fraudulently or in bad faith. We deem just and proper the sum of P5,000.00
each in favor of the terminated workers, in the concept of such damages.

In cases involving breaches of contracts, moral damages may also be awarded where the
defendant acted fraudulently or in bad faith.[66] Good faith refers to a state of mind, which
is manifested by the acts of the individual concerned. It consists of an intention to abstain
from taking an unconscionable and unscrupulous advantage of another.[67] Henry Laos
dismissals of petitioners, except Santos who resigned, was marked by precipitate dispatch
and utter disregard of due process. Clearly, Lao abused his position as an employer.

It is well-settled that, for dismissals to be valid, not only must employers show sufficient
ground therefor, but must also prove that they observed procedural due process by giving
their employees two notices -- first, of the intention to dismiss, indicating therein their acts
or omissions complained against; and, second, of the decision to dismiss and, in between
such notices, an opportunity for them to answer and rebut the charges against them.[68]
In the present case, not only was private respondents dismissal of petitioners without just
cause; it was also without procedural due process.

Attorneys fees may likewise be awarded, for concerned petitioners were dismissed in bad
faith.[69] Petitioner Pascua was summarily dismissed. Petitioner De Castro was also
dismissed without due process after she demanded to be paid her correct wages as
mandated by labor laws. Petitioner Soriano, in spite of her explanation in answer to the
capricious charges raised by Henry Lao, was still summarily dismissed. Attorneys fees may
be awarded when petitioners, illegally dismissed in bad faith, are compelled to litigate or
incur expenses to protect their rights by reason of the acts and the omissions of their
employer.[70]

WHEREFORE, the petition is GRANTED and the assailed Decision and Resolution are hereby
REVERSED and SET ASIDE. Petitioners Pascua, Macanlalay, De Castro and Soriano are
FOUND to have been illegally dismissed. Private respondents are ORDERED to REINSTATE
them immediately without loss of seniority rights and with full back wages and other
benefits from the time of their illegal dismissal up to the time of their actual reinstatement,
[71] but the amounts already paid to Petitioners Pascua and Macanlalay shall be deducted
from the sums respectively due them. Each illegally dismissed petitioners is AWARDED
P25,000 as moral damages plus ten percent of the total sum as and for attorneys fees.
Having voluntarily resigned, Petitioner Santos is not entitled to the awards given to other
petitioners. However, inasmuch as the private respondent did not appeal, it is bound by the
NLRCs disposition in regard to Santos.[72] No costs.

SO ORDERED.

FIRST DIVISION

[G.R. NO. 174893 - July 11, 2012]

FLORDELIZA MARIA REYES-RAYEL, Petitioner, v. PHILIPPINE LUEN THAI

HOLDINGS, CORPORATION/L&T INTERNATIONAL GROUP PHILIPPINES, INC.,
Respondents.

DECISION

DEL CASTILLO, J.:

The law is fair and just to both labor and management. Thus, while the Constitution accords
an employee security or tenure, it abhors oppression to an employer who cannot be
compelled to retain an employee whose continued employment would he patently inimical to
its interest.

This Petition for Review on Certiorari 1 assails the July IR, 2006 Decision 2 or the Court of
Appeals (CA) in CJ\-G.R. SP No. 86937, which (I) reversed the National Labor Relations
Commission (NLRC) March 23, 2004 Resolution 3 and in effect, its July 21, 2004 4 Resolution
as well, (2) declared petitioner Flordeliza Maria Reyes-Rayel s (petitioner) dismissal from
employment valid, and (3) ordered respondents Philippine Luen Thai Holdings, Corp.
(PLTHC)/L&T International Group Phils., Inc. (L&T) (respondents) to pay petitioner an
amount equivalent to three months salary pursuant to the termination provision of the
employment contract.

Factual Antecedents

In February 2000, PLTHC hired petitioner as Corporate Human Resources (CHR) Director for
Manufacturing for its subsidiary/affiliate company, L&T. In the employment contract, 5
petitioner was tasked to perform functions in relation to administration, recruitment,
benefits, audit/compliance, policy development/ structure, project plan, and such other
works as may be assigned by her immediate superior, Frank Sauceda (Sauceda), PLTHC s
Corporate Director for Human Resources.
On September 6, 2001, petitioner received a Prerequisite Notice 6 from Sauceda and the
Corporate Legal Counsel of PLTHC, Ma. Lorelie T. Edles (Edles), which
reads:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

This has reference to your failure to perform in accordance with management

directives in various instances, which collectively have resulted in loss of
confidence in your capability to promote the interests of the Company.

The most deleterious to the Company has been your pronouncements against the Human
Resource Information System (HRIS) or HR2 Program, a corporate initiative that is at the
core and is crucial to the enhancement of personnel management for the global operations
of the Company. On numerous occasions, in the presence of colleagues and subordinates,
you made statements that serve to undermine the Company s efforts at pursuing the HR2
Program. You ought to have realized that when leveled by an officer of your rank, no less
than a Director of the Corporate Human Resources Division, such remarks are highly
inflammatory and their negative impact is magnified.

Just as flagrant is your inability to incite collaboration and harmony within the Corporate
Human Resources Division. Instead, colleagues and subordinates complain of your negative
attitude towards the Company, its officers and people. You have established notoriety for
your temper and have alienated most members of your division. You ought to have realized
that when exhibited by an officer of your rank, no less than a Director of the Corporate
Human Resources Division, poor interpersonal skills and the lack of moral suasion are
extremely damaging.

The foregoing have, in fact, manifested in your own unsatisfactory performance rating, and
in the departure of promising employees who could not work with you.

In view of the above, we afford you the opportunity to submit your written reply to this
memorandum within forty-eight (48) hours from its receipt. Failure to so submit shall be
construed as waiver of your right to be heard. Consequently, the Company shall
immediately decide on this matter.

x x x 7ςrνll

chanrobles virtual law library

In petitioner s written response 8 dated September 10, 2001, she explained that her alleged
failure to perform management directives could be attributed to the lack of effective
communication with her superiors due to malfunctioning email system. This caused her to
miss certain directives coming from her superiors and likewise, for her superiors to overlook
the reports she was submitting. She denied uttering negative comments about the HR2
Program and instead claimed to have intimated her support for it. She further denied
causing disharmony in her division. Petitioner emphasized that in June 2001, she received a
relatively good rating of 80.2% in her overall performance appraisal 9 which meant that she
displayed dependable work level performance as well as good corporate relationship with
her superiors and subordinates.

In a Termination Notice 10 dated September 12, 2001, respondents, through Sauceda and
Edles, dismissed petitioner from the service for loss of confidence on her ability to promote
the interests of the company. This led petitioner to file a Complaint 11 for illegal dismissal,
payment of separation pay, 13thmonth pay, moral and exemplary damages, attorney s fees,
and other unpaid company benefits against respondents and its officers, namely, Sauceda,
Edles and Willie

Tan (Tan), the Executive Vice-President of PLTHC.

Proceedings before the Labor Arbiter

In her Position Paper, 12 petitioner argued that her dismissal was without valid or just cause
and was effected without due process. According to her, the causes for her dismissal as
stated in the Prerequisite Notice and Notice of Termination are not proper grounds for
termination under the Labor Code and the same do not even pertain to any willful violation
of the company s code of discipline or any other company policy. Even the alleged loss of
confidence was not supported by any evidence of wrongdoing on her part. She likewise
claimed that due process was not observed since she was not afforded a hearing,
investigation and right to appeal as per company procedure for disciplining employees.
Furthermore, respondents were guilty of violating the termination provision under the
employment contract which stipulated that employment after probationary period shall be
terminated by giving the employee a three-month notice in writing or by paying three
months salary in lieu of notice. Petitioner also accused respondents of having acted in bad
faith by subjecting her to public humiliation and embarrassment when she was ordered to
immediately turn over the company car, vacate her office and remove all her belongings on
the same day she received the termination notice, in full view of all the other employees.

Respondents, on the other hand, claimed that they have a wide discretion in dismissing
petitioner as she was occupying a managerial position. They claimed in their Position Paper
13
that petitioner s inefficiency and lackadaisical attitude in performing her work were just
and valid grounds for termination. In the same token, her gross and habitual neglect of
duties were enough bases for respondents to lose all their confidence in petitioner s ability
to perform her job satisfactorily. Also, petitioner was accorded due process as she was
furnished with two notices - the first requiring her to explain why she should not be
terminated, and the second apprising her of the management s decision to terminate her
from employment.

Further in their Reply 14 to petitioner s position paper, respondents enumerated the various
instances which manifested petitioner s poor work attitude and dismal performance, to wit:
1) her failure to perform in accordance with management directives such as when she
unreasonably delayed the hiring of a Human Rights and Compliance Manager; failed to
establish communication with superiors and co-workers; failed to regularly update Sauceda
of the progress of her work; requested for reimbursement of unauthorized expenditures;
and, gave orders contrary to policy on the computation of legal and holiday pay; 2) her
negative pronouncements against the company s program in the presence of colleagues and
subordinates; 3) her inability to incite collaboration and harmony within her department; 4)
her negative attitude towards the company, its officers and employees; and 5) her low
performance appraisal rating which is unacceptable for a top level personnel like herself.
Exchange of emails, affidavits and other documents were presented to provide proof of
incidents which gave rise to these allegations. Respondents also asserted that the procedure
laid down in the company s code of discipline, which provided for the mandatory
requirements of notice, hearing/investigation and right to appeal, only applies to rank and
file, supervisory, junior managerial and department managerial employees and not to
petitioner, a CHR Director, who plays a key role in these termination proceedings. Further,
the three-month notice for termination, as written in the employment contract, is only
necessary when there is no just cause for the employee s dismissal and, therefore, not
applicable to petitioner. Respondents then disputed petitioner s money claims and also
sought the dropping of Sauceda, Edles and Tan from the complaint for not being real parties
in interest.

In her rejoinder, 15 petitioner stood firm on her conviction that she was dismissed without
valid cause by presenting documentary evidence of her good performance. Further, she
insisted that she was dismissed for reasons different from those mentioned in the
Prerequisite Notice and Notice of Termination, both of which did not state gross and habitual
neglect of duties as a ground. She also construed respondents act of offering her a
settlement or compensation right after her termination as their acknowledgement of the
illegal act they committed against her. Moreover, petitioner argued that the company
policies on procedural due process apply to all its employees, whether rank and file or
managerial.

In a Decision 16 dated October 21, 2002, the Labor Arbiter declared petitioner to have been
illegally dismissed. It was held that petitioner cannot be charged with undermining the HR2
Program of the company since evidence was presented to show that she was already
divested of duties relative to this program. Also, respondents accusation that petitioner
caused disharmony among colleagues and subordinates has no merit as there was ample
proof that petitioner was in constant communication with her co-workers through official
channels and email. Further, the Labor Arbiter theorized that petitioner s performance
rating demonstrated a passing or satisfactory grade and therefore could not be a sufficient
and legitimate basis to terminate her for loss of trust and confidence. Moreover, petitioner
cannot be dismissed based merely on these vague offenses but only for specific offenses
which, under the company s code of conduct, merit the penalty of outright dismissal. The
dispositive portion of the Decision reads:ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ

WHEREFORE, premises considered, judgment is hereby rendered declaring that

complainant was illegally dismissed by respondent corporation, and the latter is
hereby directed to reinstate complainant to her former position and pay her full
backwages and benefits computed below, as follows:

A. Backwages September 12, 2001 to October 21, 2002

1. Salaries and Wages

P80,000 x 13.30 months = P1,064,000.00

2. 13th month pay

P1,064,000.00 / 12 = 88,666.67

3. VL
P80,000 / 26 x 10 days = 34,102.56

P1,186,769.23

B. Attorney s Fees (10%) 118,676.92

P1,305,446.15

17
SO ORDERED, ςrνll

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Proceedings before the National Labor Relations Commission

Respondents appealed to the NLRC.18 For her part, petitioner filed before the Labor Arbiter a
Motion for Recomputation 19 of the awards. This motion was, however, denied in an Order 20
dated March 17, 2003 on the ground that petitioner could challenge any disposition made
only by way of an appeal within the reglementary period and not through a motion.

In a Decision 21 dated August 20, 2003, the NLRC found merit in respondents appeal. To the
NLRC, respondents have sufficiently established the validity of petitioner s dismissal on the
ground of loss of trust and confidence through the various emails, affidavits and other
documents attached to the records. Specifically, respondents have proven that petitioner
failed to recruit a Human Rights and Compliance Manager, ignored company policies, failed
to effectively communicate with her superiors and subordinates, and displayed ineptitude in
her work as a director and in her relationship with her co-workers. These showed that there
exist enough bases for respondents to lose the trust they had reposed on petitioner, who,
as a managerial employee, was expected to possess exemplary work attitude. The NLRC,
however, noted that the employment contract specifically provided for payment of three
months salary in lieu of the stipulated three-month notice in case of termination,
thus:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

IN LIGHT OF THE FOREGOING PREMISES, the decision appealed from is hereby

MODIFIED, to declare the dismissal of complainant legal but to order
respondents to pay complainant the sum of P240,000.00 representing three
months salary as expressed in complainant s contract of employment. All other
claims are DISMISSED for lack of merit.

SO ORDERED.22ςrνll

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Petitioner filed a Motion for Reconsideration 23 which was granted by the NLRC. In a
Resolution 24 dated March 23, 2004, the NLRC concluded that petitioner was not afforded
due process as she was not given the opportunity to refute the charges against her through
an investigation and an appeal at the company level. Thus, respondents failed to establish
the truthfulness of the allegations against her as to support the validity of the dismissal. The
NLRC also agreed with petitioner s claim that she was subjected to humiliation on the day of
her termination. Consequently, the NLRC declared petitioner s dismissal as illegal and thus
reinstated the Labor Arbiter s Decision with modification that respondents be ordered to pay
petitioner separation pay in lieu of reinstatement due to the strained relation between the
parties.

In a Resolution 25 dated July 21, 2004, the NLRC resolved to dismiss respondents motion for
reconsideration.

Proceedings before the Court of Appeals

Respondents thus filed with the CA a Petition for Certiorari with Urgent Motion for Issuance
of Temporary Restraining Order (TRO) or Writ of Preliminary Injunction. 26 Petitioner then
filed her Comment27 thereto. Subsequently, the CA denied respondents prayer for TRO in a
Resolution28 dated February 15, 2005.

On July 18, 2006, the CA rendered a Decision 29 finding merit in the petition. The CA found
sufficient evidence to support the dismissal of petitioner on the ground of loss of trust and
confidence. It regarded petitioner s 80.2% performance rating as below par and hence,
declared that she cannot merely rely on the same in holding on to her position as CHR
Director, a highly sensitive and demanding post. Also, despite the opportunity to improve,
petitioner continued to display poor work attitude, dismal performance and rancorous and
abusive behavior towards co-workers as gleaned from the various emails and affidavits of
her superiors and other employees. These circumstances, taken together, constitute
sufficient cause for respondents to lose confidence in petitioner s ability to continue in her
job and to promote the interest of the company.

Moreover, the CA did not subscribe to petitioner s allegation that she was denied due
process. On the contrary, said court found that she was adequately notified of the charges
against her through the show cause notice which clearly stated the instances that served as
sufficient bases for the loss of trust and confidence, to wit: her failure to perform in
accordance with management directives and her actions of undermining company goals and
causing disharmony among her co-workers. After finding her written response to be
unsatisfactory, petitioner was likewise properly notified of the company s decision to
terminate her services. Clearly, respondents observed the requirements of procedural due
process. Nevertheless, respondents, in effecting the dismissal, should have paid petitioner
her salary for three months as provided for in the employment contract. For its failure to do
so, the CA ordered respondents to pay petitioner three months salary in accordance with
their contractual undertaking. The dispositive portion of the CA Decision states:ςrαlαω

WHEREFORE, the Resolution of the National Labor Relations Commission dated March 23,
2004 is REVERSED. [Respondents] are hereby ordered to pay petitioner the amount
corresponding to three [months] salary pursuant to the termination provision of the
employment contract.

SO ORDERED.30ςrνll

Petitioner s Motion for Reconsideration31 was denied in the CA Resolution 32 dated October 4,
2006.

Issues

Hence, the present petition raising the following issues:ςηαñrοblεš νιr†υαl
lαω lιbrαrÿ

I. WHETHER X X X THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT

REVERSED THE DECISION OF THE NLRC ON CERTIORARI DESPITE THE FACT
THAT THE NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION WHEN IT
AFFIRMED THE FACTUAL FINDINGS OF THE LABOR ARBITER ï€ THAT
PETITIONER WAS ILLEGALLY DISMISSED FROM HER EMPLOYMENT BY
RESPONDENTS.

II. WHETHER X X X THE ALLEGED VALID OR JUST CAUSE FOR TERMINATION OF

PETITIONER FROM HER EMPLOYMENT WAS PROVEN AND ESTABLISHED BY
SUBSTANTIAL EVIDENCE ON RECORD.

III. WHETHER X X X RESPONDENTS DEPRIVED PETITIONER OF HER RIGHT TO

DUE PROCESS WHEN RESPONDENTS DISMISSED PETITIONER WITHOUT
CONDUCTING ANY INVESTIGATION TO DETERMINE THE VERACITY AND
TRUTHFULNESS OF THE ALLEGATIONS AGAINST PETITIONER IN VIOLATION OF
RESPONDENTS OWN COMPANY POLICIES.33ςrνll

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Petitioner posits that there is no substantial evidence to establish valid grounds for her
dismissal since various emails from her superiors illustrating her accomplishments and
commendations, as well as her "good" overall performance rating negate loss of trust and
confidence. She also insists that she was not afforded due process at the company level.
She claims that she was not properly informed of the offenses charged against her due to
the vagueness of the terms written in the termination notices and that no investigation and
hearing was conducted as required by company policy.
Our Ruling

The petition is devoid of merit. The Court finds no cogent reason to depart from the ruling of
the CA that petitioner was validly dismissed.

There exists a valid ground for petitioner s termination from employment.

Jurisprudence provides that an employer has a distinct prerogative and wider latitude of
discretion in dismissing a managerial personnel who performs functions which by their
nature require the employer s full trust and confidence. 34 As distinguished from a rank and
file personnel, mere existence of a basis for believing that a managerial employee has
breached the trust of the employer justifies dismissal. 35 "[L]oss of confidence as a ground
for dismissal does not require proof beyond reasonable doubt as the law requires only that
there be at least some basis to justify it."36ςrνll

Petitioner, in the present case, was L&T s CHR Director for Manufacturing. As such, she was
directly responsible for managing her own departmental staff. It is therefore without
question that the CHR Director for Manufacturing is a managerial position saddled with great
responsibility. Because of this, petitioner must enjoy the full trust and confidence of her
superiors. Not only that, she ought to know that she is "bound by more exacting work
ethics"37 and should live up to thishigh standard of responsibility. However, petitioner
delivered dismal performance and displayed poor work attitude which constitute sufficient
reasons for an employer to terminate an employee on the ground of loss of trust and
confidence. Respondents also impute upon petitioner gross negligence and incompetence
which are likewise justifiable grounds for dismissal. 38 The burden of proving that the
termination was for a valid cause lies on the employer. 39 Here, respondents were able to
overcome this burden as the evidence presented clearly support the validity of petitioner s
dismissal.

First, records show that petitioner indeed unreasonably failed to effectively communicate
with her immediate superior. There was an apparent neglect in her obligation to maintain
constant communication with Sauceda in order to ensure that her work is up to par. This is
evident from the various emails 40showing that she failed to update Sauceda on the progress
of her important assignments on several occasions. While petitioner explained in her written
reply to the Prerequisite Notice that such failure to communicate was due to the company s
computer system breakdown, respondents however were able to negate this as they have
shown that the computer virus which affected the company s system only damaged some
email addresses of certain employees which did not include that of Sauceda s. On the other
hand, petitioner failed to present any concrete proof that the said computer virus also
damaged Sauceda s email account as to effectively disrupt their regular communication.
Moreover, we agree with respondents stance that petitioner could still reach Sauceda
through other means of communication and should not completely rely on the web.

Second, the affidavits of petitioner s co-workers revealed her negative attitude and
unprofessional behavior towards them and the company. In her affidavit, 41 Agnes Suzette
Pasustento, L&T s Manager for the Corporate Communications Department, attested to
petitioner s "badmouthing" of Sauceda in one of their meetings abroad and of discussing
with her about filing a labor case against the company. Also, in the affidavits of Rizza S.
Esplana42 (Sauceda s Executive Assistant), Cynthia Y iguez 43 (Corporate Human Resources
Manager of an affiliate of L&T), and Ana Wilma Arreza44 (Human Resources and
Administration Division Manager of an affiliate of L&T), they narrated several instances
which demonstrated petitioner s notoriously bad temper. They all described her to have an
"irrational" behavior and "superior and condescending" attitude in the workplace.
Unfortunately for petitioner, these sworn statements which notably remain uncontroverted
and unrefuted, militate against her innocence and strengthen the adverse averments
against her.45 It is well to state that as a CHR Director tasked to efficiently manage the
company s human resource team and practically being considered the "face" of the Human
Resource, petitioner should exhibit utmost concern for her employer s interest. She should
likewise establish not only credibility but also respect from co-workers which can only be
attained if she demonstrates maturity and professionalism in the discharge of her duties.
She is also expected to act as a role model who displays uprightness both in her own
behavior and in her dealings with others.

The third and most important is petitioner s display of inefficiency and ineptitude in her job
as a CHR Director. In the affidavit 46 of Ornida B. Calma, Chief Accountant of L&T s affiliate
company, petitioner, on two occasions, gave wrong information regarding issues on leave
and holiday pay which generated confusion among employees in the computation of salaries
and wages. Due to the nature of her functions, petitioner is expected to have strong
working knowledge of labor laws and regulations to help shed light on issues and questions
regarding the same instead of complicating them. Petitioner obviously failed in this respect.

No wonder she received a less than par performance in her performance evaluation
conducted in June 2001, contrary to her assertion that an 80.2% rating illustrates good and
dependable work performance. As can be gleaned in the performance appraisal form,
petitioner received deficient marks and low ratings on areas of problem solving and decision
making, interpersonal relationships, planning and organization, project management and
integrity notwithstanding an overall passing grade. As aptly remarked by the CA, these low
marks revealed the "degree of [petitioner s] work handicap" and should have served as a
notice for her to improve on her job. However, she appeared complacent and remained lax
in her duties and this naturally resulted to respondents loss of confidence in her managerial
abilities.

Taking all these circumstances collectively, the Court is convinced that respondents have
sufficient and valid reasons in terminating the services of petitioner as her continued
employment would be patently inimical to respondents interest. An employer "has the right
to regulate, according to its discretion and best judgment, all aspects of employment,
including work assignment, working methods, processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers." 47 "[S]o long as they are exercised in good faith for the
advancement of the employer s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements," 48
the exercise of this management prerogative must be upheld.

Anent petitioner s imputation of bad faith upon respondents, the same deserves no
credence. That she was publicly embarrassed when she was coerced by Sauceda and Edles
to vacate her office, return the company car and take all her personal belongings on the day
she was dismissed, are all mere allegations not substantiated by proof. And since it is
hornbook rule that he who alleges must prove, we could not therefore conclude that her
termination was tainted with any malice or bad faith without any sufficient basis to
substantiate this bare allegation. Moreover, we are more inclined to believe that
respondents offer of settlement immediately after petitioner s termination was more of a
generous offer of financial assistance rather than an indication of ill-motive on respondents
part.

Petitioner was accorded due process.

Petitioner insists that she was not properly apprised of the specific grounds for her
termination as to give her a reasonable opportunity to explain. This is because the
Prerequisite Notice and Notice of Termination did not mention any valid or authorized cause
for dismissal but rather merely contained general allegations and vague terms.
We have examined the Prerequisite Notice and contrary to petitioner s assertion, find the
same to be free from any ambiguity. The said notice properly advised petitioner to explain
through a written response her failure to perform in accordance with management
directives, which deficiency resulted in the company s loss of confidence in her capability to
promote its interest. As correctly explained by the CA, the notice cited specific incidents
from various instances which showed petitioner s "repeated failure to comply with work
directives, her inclination to make negative remarks about company goals and her difficult
personality," that have collectively contributed to the company s loss of trust and confidence
in her. Indeed, these specified acts, in addition to her low performance rating,
demonstrated petitioner s neglect of duty and incompetence which support the termination
for loss of trust and confidence.

Neither can there be any denial of due process due to the absence of a hearing or
investigation at the company level. It has been held in a plethora of cases that due process
requirement is met when there is simply an opportunity to be heard and to explain one s
side even if no hearing is conducted.49 In the case of Perez v. Philippine Telegraph and
Telephone Company,50 this Court pronounced that an employee may be afforded ample
opportunity to be heard by means of any method, verbal or written, whether in a hearing,
conference or some other fair, just and reasonable way, in that:

xxxxςηαñrοblεš νιr†υαl lαω lιbrαrÿ

After receiving the first notice apprising him of the charges against him, the
employee may submit a written explanation (which may be in the form of a
letter, memorandum, affidavit or position paper) and offer evidence in support
thereof, like relevant company records (such as his 201 file and daily time
records) and the sworn statements of his witnesses. For this purpose, he may
prepare his explanation personally or with the assistance of a representative or
counsel. He may also ask the employer to provide him copy of records material
to his defense. His written explanation may also include a request that a formal
hearing or conference be held. In such a case, the conduct of a formal hearing
or conference becomes mandatory, just as it is where there exist substantial
evidentiary disputes or where company rules or practice requires an actual
hearing as part of employment pretermination procedure. To this extent, we
refine the decisions we have rendered so far on this point of law.

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xxxxςηαñrοblεš νιr†υαl lαω lιbrαrÿ

In sum, the following are the guiding principles in connection with the hearing
requirement in dismissal cases:

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(a) ample opportunity to be heard means any meaningful opportunity (verbal or

written) given to the employee to answer the charges against him and submit
evidence in support of his defense, whether in a hearing, conference or some
other fair, just and reasonable way.

(b) a formal hearing or conference becomes mandatory only when requested by

the employee in writing or substantial evidentiary disputes exist or a company
rule or practice requires it, or when similar circumstances justify it.

(c) the ample opportunity to be heard standard in the Labor Code prevails over
the hearing or conference requirement in the implementing rules and
 regulations.51ςrνll

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In this case, petitioner's written response to the Prerequisite Notice provided her with an
avenue to explain and defend her side and thus served the purpose of due process. That
there was no hearing. investigation or right to appeal. which petitioner opined to be
violation of company policies, is of no moment since the records is bereft of any showing
that there is an existing company policy that requires these procedures with respect to the
termination of a CHR Director like petitioner or that company practice calls for the same.
There was also no request for a formal hearing on the part of petitioner.

As she was served with a notice apprising her of the changes against her and also a
subsequent notice informing her of the management's decision to terminate her services
alter respondents found her written response to the first notice unsatisfactory, petitioner
was clearly afforded her right to due process.

WHEREFORE, the petition is DENIED. The assailed Decision dated July 18, 2006 of the
Court of Appeals in CA-GR. SP No. 86937 is AFFIRMED.

SO ORDERED.

THIRD DIVISION

[G.R. NO. 166096 : September 11, 2008]

PHILIPPINE NATIONAL BANK, Petitioner, v. RAMON BRIGIDO L. VELASCO,

Respondent.

DECISION

REYES, R.T., J.:

THIS is a tale of a bank officer-depositor clinging to his position after violating bank
regulations and falsifying his passbook to cover up a false transaction.

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure seeking the reversal of the Decision1 and Resolution2 of the Court of Appeals
(CA). The appealed decision reversed those of the National Labor Relations Commission
(NLRC)3 and the Labor Arbiter4which dismissed the complaint for illegal dismissal and
damages of Ramon Brigido L. Velasco against Philippine National Bank (PNB).

The Facts

Ramon Brigido L. Velasco, a PNB audit officer, and his wife, Belen Amparo E. Velasco,
maintained Dollar Savings Account No. 010-714698-95 at PNB Escolta Branch. On June 30,
1995, while on official business at the Legazpi Branch, he went to the PNB Ligao,
Albay Branch and withdrew US$15,000.00 from the dollar savings account. At that
time, the account had a balance of US$15,486.07. The Ligao Branch is an off-line branch,
i.e., one with no network connection or computer linkage with other PNB branches and the
head office. The transaction was evidenced by an Interoffice Savings Account Withdrawal
Slip, also known as the Ticket Exchange Center (TEC).6
On July 10, 1995, PNB Escolta Branch received the TEC covering the withdrawal. It was
included among the proofsheet entries of Cashier IV Ruben Francisco, Jr. The withdrawal
was not, however, posted in the computer of the Escolta Branch when it received said
advice. This means that the withdrawal was not recorded. Thus, the account of Velasco
had an overstatement of US$15,000.00.

Sometime in September 1995, while Velasco was on a provincial audit, he claimed calling
through phone a kin in Manila who just arrived from abroad. This kin allegedly told
him that his New York-based brother, Gregorio Velasco, sent him various checks through his
kin totaling US$15,000.00 and that the checks would just be deposited in time in Velasco's
account.

On October 6, 1995, Velasco updated his dollar savings account by depositing US$12.78,
reflecting a balance of US$15,486.01. He was allegedly satisfied with the updated balance,
as he thought that the US$15,000.00 in his account was the amount given by his brother.

On different dates, Velasco made several inter-branch withdrawals from the dollar savings
account, to wit:
PNB Branch Date Amount

PNB Legaspi November 7, US $2,000.00

1995

PNB Legaspi November 13, 3,329.97

1995

Cash Dept. November 23, 4,000.00

1995

Total US $9,329.97
Mrs. Belen Velasco also withdrew several amounts on the dollar account, viz.:
PNB Branch Date Amount

PNB CEPZ December 6, US$11,494.00

1995
 PNB Frisco January 2, 1,292.32
1996

Total US$12,786.32
Subsequently, the dollar savings account of the spouses was closed.

On February 6, 1996, in the course of conducting an audit at PNB Escolta Branch,

Molina D. Salvador, a member of the Internal Audit Department (IAD) of PNB, discovered
that the inter-branch withdrawal made on June 30, 1995 by Velasco at PNB Ligao, Albay
Branch in the amount of US$15,000.00 was not posted; and that no deposit of said
amount had been credited to the dollar savings account.

On February 7, 1996, Velasco was notified of the glitch when he reported at the IAD. He
said it was only in the evening that he was able to verify from his kin that the latter was not
able to deposit in his account the US$15,000.00.7

The following day, or on February 8, 1996, Velasco went to Dolorita Donado, assistant vice
president of the Internal Audit Department and team leader of the Escolta Task Force, and
delivered three (3) checks in the amount of US$5,000.00 each or a total of US$15,000.00.
However, Donato returned the checks to Velasco and instructed him that he should
personally deposit the checks.

On February 14, 1996, he deposited the checks and the amount was consequently applied
to his unposted withdrawal of US$15,000.00.

Meanwhile, on February 9, 1996, PNB vice president, B.C. Hermoso, required 8 Velasco to
submit a written explanation concerning the incident.

On February 12, 1996, he submitted his sworn letter-explanation. 9 He described the inter-
branch withdrawal at PNB Ligao, Albay Branch on June 30, 1995 as "no-book," i.e., without
the corresponding presentation to the bank teller of the savings passbook. He stated,
among others, that his withdrawal was accommodated as the statement of account showed
a balance of US$15,486.01, and that he is personally known to the officers and staff, being
a former colleague at the PNB Ligao, Albay Branch.

On February 27, 1996, PNB Ligao, Albay Branch division chief III, Rexor Quiambao, financial
specialist II, Emma Gacer, and division chief II, Renato M. Letada, confirmed the "no-book"
withdrawal.10

On March 5, 1996, PNB formally charged Velasco with "Dishonesty, Grave Misconduct,
and/or Conduct Grossly Prejudicial to the Best Interest of the Service for the irregular
handling of Dollar Savings Account No. 010-714698-9"11 The administrative charge alleged
that: (1) he transacted a no-book withdrawal against his Dollar Savings Account No. 010-
714698-9 at PNB Ligao, Albay Branch in violation of Section 1216 of the Manual of
Regulations for Banks; (2) in transacting the no-book withdrawal, he failed to present any
letter of introduction as required under General Circular 3-72/92; (3) the irregular inter-
branch withdrawal was aggravated by the failure of Escolta Branch to post/enter the
withdrawal into the computer upon receipt of the TEC advice, resulting in the overstatement
of the account balance by US$15,000.00; and (4) since he was presumed to be fully aware
that neither the deposit nor withdrawal of the US$15,000.00 was reflected on the passbook,
he was able to appropriate the amount for his personal benefit, free of interest, to the
damage and prejudice of PNB.12

On April 8, 1996, PNB withheld his rice and sugar subsidy, dental/optical/outpatient medical
benefits, consolidated medical benefits, commutation of hospitalization benefits, clothing
allowance, longevity pay, anniversary bonus, Christmas bonus and cash gift, performance
incentive award, and mid-year financial assistance. 13 On April 10, 1996, he was placed
under preventive suspension for a period of ninety (90) days.14

On May 2, 1996, Velasco submitted his sworn Answer 15 to the administrative charge against
him. Unlike his previous answer, he here claimed that his withdrawal on June 30, 1995
was "with passbook." As proof, he attached a copy of his passbook 16 bearing the withdrawal
entry of US$15,000.00 on June 30, 1995. Explaining the inconsistency with his sworn
letter-explanation on February 12, 1996, he said his initial answer was made under
pressing circumstances. He was unable to find his passbook which was then kept by
his wife who could not be contacted at that moment.

On October 2, 1996, the Administrative Adjudication Office (AAO) of PNB composed of

Fernando R. Mangubat, Jr., Wilfredo S. Verzosa, Celso D. Benologa, and Jesse L. Figueroa
exonerated Velasco of the charges of dishonesty and conduct prejudicial to the best interest
of service. However, he was found guilty of grave misconduct, mitigated by length of
service and absence of actual loss to PNB. Thus, he was meted the penalty of forced
17
resignation with benefits.

On October 31, 1996, Velasco was formally notified of the findings of the AAO after its
approval by the management. As of that time, he had been employed with PNB for
eighteen (18) years, holding the position of Manager 1 of the IAD. He was earning
P14,932.00 per month plus a monthly allowance of P3,940.00 or a total salary of
P18,872.00 per month.

On December 22, 1997, he filed a Complaint 18 against PNB for illegal suspension, illegal
dismissal, and damages before the NLRC.

Labor Arbiter, NLRC, and CA Dispositions

On July 9, 1999, Labor Arbiter Pablo C. Espiritu gave judgment, the dispositive portion of
which reads:
WHEREFORE,judgment is hereby rendered as follows:

1. Dismissing the complaint for illegal dismissal against respondents for

want of merit.
 2. Ordering PNB to pay complainant unpaid wages for the period May 12,
1996 to October 31, 1996 in the amount of P103,796.00.

3. Dismissing complainant's claims for damages and other monetary claims

for lack of merit.

SO ORDERED.19
In his ruling, the Labor Arbiter opined that as an employee and officer of PNB for eighteen
(18) years, Velasco is expected to know bank procedures, including the expected entries in
a savings passbook. Even if it should be assumed that he presented his passbook when he
withdrew US$15,000.00 at the PNB Ligao Branch on June 30, 1995, he should have known
that there was something wrong with the amounts credited to his account when he made an
update on October 6, 1995. Being an audit officer, and fully aware of his withdrawal of
US$15,000.00, he should have made inquiries on the inconsistency of the entries in his
passbook.20

The Labor Arbiter also found as flimsy the argument that the additional US$15,000.00 was
the amount given to Velasco by his brother from the United States. As early as
October 6, 1995, when he updated his passbook, Velasco should have known that (1) his
brother's checks in the amount of US$15,000.00 have not been deposited in his dollar
savings account and (2) he appears to have been improperly credited with US$15,000.00. 21

Moreover, the Labor Arbiter held that the entry in the passbook purportedly reflecting the
withdrawal of US$15,000.00 is a forgery. It was done to conform to the defense of Velasco
that he presented his passbook on June 30, 1995.22

On the charge of illegal suspension, the Labor Arbiter held that the preventive suspension of
Velasco was reasonable in view of the sensitive nature of his position. It was also necessary
to protect the records of PNB.23 It follows that the withholding of his company benefits is
reasonable.24 Nonetheless, he should be paid his salary from May 12, 1996 up to October
31, 1996.25

His claim for damages and attorney's fees must be denied because PNB did not violate his
rights.26

Dissatisfied with the decision of the Labor Arbiter, both Velasco 27 and PNB28 appealed to the
NLRC.

On July 31, 2000, the NLRC affirmed with modification the Labor Arbiter decision,
disposing, thus:
WHEREFORE, the decision appealed from is hereby MODIFIED to the extent that
the award of unpaid salaries is hereby REDUCED to the complainant's salaries
from May 27, 1996 to July 31, 1996. Other dispositions in the appealed decision
stands (sic) affirmed.29
In sustaining the Labor Arbiter, the NLRC held that Velasco's lack of knowledge of the non-
posting of his withdrawal is not credible. Even a cursory look at his passbook shows
that no deposit of US$15,000.00 was ever made. That there was still a balance of
more than US$15,000.00 in his account after the withdrawal he made on June 30, 1995
could only mean that the withdrawal was never posted. Worse, based also on the entries
in his passbook, it is clear that the withdrawal on June 30, 1995 was a "no-book"
transaction. The withdrawal of US$15,000.00 was not taken into consideration in the
determination of the balance of June 30, 1995 and the succeeding dates. Thus, it is clear
that the entry in question was falsified. It was made merely to bolster his subsequent
claim that he presented his passbook when he withdrew on June 30, 1995.30

The NLRC concluded that the falsification of the passbook shows deceit on the part of
Velasco. He took advantage of his position. The posting of the falsified entry could not
have been made without, or was at least facilitated by, his being an employee of the bank.
Thus, his subsequent withdrawals amounted to losses on the part of the bank. He
made those withdrawals from his account with full knowledge that the balance of
his passbook of more than US$15,000.00 was attributed to the non-posting of the June 30,
1995 withdrawal.31

The NLRC also held that he had been preventively suspended for more than thirty
(30) days as of May 27, 1996. Since he was paid his salaries from August 1, 1996 to
October 31, 1996, he may recover only his salary from May 27, 1996 to July 31, 1996.32

Like the Labor Arbiter, the NLRC held that Velasco may not recover damages. His dismissal
was not done oppressively or in bad faith. Neither was he subjected to unnecessary
embarrassment or humiliation.33

His motion for reconsideration having been denied, Velasco elevated the matter to the CA
by way of petition for review on certiorari under Rule 43 of the Rules of Court. 34 On April
22, 2004, the CA rendered the assailed decision, the fallo stating, thus:
WHEREFORE, for the foregoing discussions, We REVERSE and SET ASIDE the
findings of public respondent NLRC and Labor Arbiter and hereby enter a
decision ordering PNB to pay petitioner a separation pay equivalent to half-
month salary for every year of service, plus backwages from the time of his
illegal termination up to the finality of this decision.

SO ORDERED.35
According to the CA, the failure of Velasco to present his passbook and a letter of
introduction does not constitute misconduct. Assuming for the sake of argument that he
committed a serious misconduct in not properly monitoring his account with ordinary
diligence and prudence, the same may be said of PNB when it failed to make the necessary
posting of his withdrawal.36 Lastly, the alleged offense of Velasco is not work-related to
constitute just cause for his dismissal.37

Issues

PNB has filed the instant petition for review on certiorari, putting forth the following issues
for Our resolution, viz.:
 1. WHETHER OR NOT THE COURT OF APPEALS ERRED AND GRAVELY
ABUSED ITS DISCRETION IN FINDING THAT RESPONDENT HAS BEEN
ILLEGALLY DISMISSED BY THE PETITIONERS.

2. WHETHER OR NOT THE COURT OF APPEALS ERRED AND GRAVELY

ABUSED ITS DISCRETION IN DIRECTING PNB TO PAY RESPONDENT
SEPARATION PAY AND BACKWAGES.38 (Underscoring supplied)

We add a third issue which was raised by PNB before the CA but was, however, left
unresolved: whether Velasco took the correct recourse when he elevated the decision of the
NLRC to the CA by way of petition for review on certiorari under Rule 43.

Our Ruling

I. Appeal does not lie from the decision of the NLRC.

We first address the procedural question on the propriety of the Rule 43 petition. Rule 43
provides for appeal from quasi-judicial agencies to the CA by way of petition for review.
Petition for review on certiorari or appeal by certiorari is a recourse to the Supreme Court
under Rule 45.

The mode of appeal resorted to by Velasco is wrong because appeal is not the proper
remedy in elevating to the CA the decision of the NLRC. Section 2, Rule 43 of the 1997
Rules of Civil Procedure is explicit that Rule 43 "shall not apply to judgments or final orders
issued under the Labor Code of the Philippines."

The correct remedy that should have been availed of is the special civil action of certiorari
under Rule 65. As this Court held in the case of Pure Foods Corporation v. NLRC,39 "the
party may also seasonably avail of the special civil action for certiorari, where the
tribunal, board or officer exercising judicial functions has acted without or in excess of its
jurisdiction, or with grave abuse of discretion, and praying that judgment be rendered
annulling or modifying the proceedings, as the law requires, of such tribunal, board or
officer"40 In any case, St. Martin Funeral Homes v. National Labor Relations Commission 41
settled any doubt as to the manner of elevating decisions of the NLRC to the CA by holding
that "the legislative intendment was that the special civil action ofcertiorari was and still is
the proper vehicle for judicial review of decisions of the NLRC"42

That the decision of the NLRC is not subject to appeal could have been a ground
for the CA to dismiss the appeal of Velasco. 43 But even assuming, arguendo, that his
petition could be liberally treated as one for certiorari under Rule 65, the recourse should
not have prospered.

II. Velasco committed serious misconduct, hence, his dismissal is justified.

Article 282 of the Labor Code enumerates the just causes where an employer may
terminate the services of an employee,44 to wit:
a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;

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

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

d) Commission of a crime or offense by the employee against the person of

his employer or any immediate member of his family or his duly
authorized representative; and

e) Other causes analogous to the foregoing.

In Austria v. National Labor Relations Commission,45 the Court defined misconduct as
"improper and wrongful conduct. It is the transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment" 46In Camusv. Civil Service Board of
Appeals,47 misconduct was described as "wrong or improper conduct" 48 It implies a
49
wrongful intention and not a mere error of judgment.

Of course, ordinary misconduct would not justify the termination of the services of an
employee. The law is explicit that the misconduct should be serious. It is settled that in
order for misconduct to be serious, "it must be of such grave and aggravated character and
not merely trivial or unimportant" 50 As amplified by jurisprudence, the misconduct must (1)
be serious; (2) relate to the performance of the employee's duties; and (3) show that the
employee has become unfit to continue working for the employer.51

Measured by the foregoing yardstick, We rule that Velasco committed serious misconduct
that warrants termination from employment.

A. The misconduct is serious. Velasco violated bank rules when he transacted a "no-
book" withdrawal by his failure to present his passbook to the PNB Ligao, Albay Branch on
June 30, 1995. Section 1216 of the Manual of Regulations for Banks and Other Financial
Intermediaries state that "[b]anks are prohibited from issuing/accepting `withdrawal
authority slips' or any other similar instruments designed to effect withdrawals of savings
deposits without following the usual practice of requiring the depositors concerned to
present their passbooks and accomplishing the necessary withdrawal slips."

Further, he failed to present any letter of introduction as mandated under General Circular
3-72-92 which requires that "[b]efore going out-of-town, the Depositor secures a Letter of
Introduction from the branch/office where his Peso Savings Account is maintained."

The presentation of passbook and letter of introduction is not without a valid reason. As
aptly stated by the IAD of PNB:
Considering that the PNB Ligao, Albay Branch is an offline branch, it is a must
that an LOI and the passbook be presented by the depositor before any
withdrawal is allowed. This procedure is required in order for the negotiating
branch to determine or ascertain the available balance and the specimen
signature of the withdrawing party. Moreover, the maintaining branch upon
issuance of the LOI shall place a "hold" on the account in the computer as an
internal control procedure.52
True, a strict reading of General Circular 3-72-92 would lead one to conclude that only
persons with peso savings account are required to secure a letter of introduction. However,
simple logic dictates that those maintaining dollar savings account are also included. No
cogent reason would be served by the rule if only persons with peso savings account are
required to get a letter of introduction. Otherwise, there can be a circumvention of the
rule. Nemo potest facere per alium qud non potest facere per directum. No one is allowed
to do indirectly what he is prohibited to do directly. Sinuman ay hindi pinapayagang
gawin nang hindi tuwiran ang ipinagbabawal gawin nang tuwiran.

As an audit officer, Velasco should be the first to ensure that banking laws, policies, rules
and regulations, are strictly observed and applied by its officers in the day-to-day
transactions. The banking system is an indispensable institution in the modern world.
It plays a vital role in the economic life of every civilized nation. Whether banks act as
mere passive entities for the safekeeping and saving of money, or as active instruments of
business and commerce, they have become an ubiquitous presence among the citizenry,
who have come to regard them with respect and even gratitude and, most of all,
confidence.53

The CA, however, opined that the failure of Velasco to abide by the rules is not serious
misconduct because (1) from the admission of PNB itself, allowing bank personnel who are
out-of-town to make a "no-book" transaction without a letter of introduction is considered
acommon practice, and (2) the approving officers of PNB Ligao Branch should have also
been administratively charged considering that the "no-book" transaction could not have
pushed through without their approval.54

In Santos v. San Miguel Corporation,55Petitioner, in his defense, cited the prolonged practice
of payroll personnel, including persons in managerial levels, of encashing personal checks.
Finding this argument unmeritorious, the Court held that "[p]rolonged practice of encashing
personal checks among respondent's payroll personnel does not excuse or justify
petitioner's misdeeds. Her willful and deliberate acts were in gross violation of
respondent's policy against encashment of personal checks of its personnel, embodied in its
Cash Department Memorandum dated September 6, 1989"56 The Court even added that
petitioner "cannot feign ignorance of such memorandum as she is duty-bound to keep
abreast of company policies related to financial matters within the corporation" 57 We apply
the same principle here.

Suffice it to state that the option of who to charge or punish belongs to PNB. As an
employer, PNB is given the latitude to determine who among its erring employees should be
punished, to what extent and what penalty to impose. 58 Too, by charging Velasco, PNB is
not estopped from charging its other employees who might as well have been remiss with
their job.

Of course, We are not unaware that Velasco had a change of heart. In his sworn Letter-
Explanation February 12, 1996, he admitted that his June 30, 1995 withdrawal of
US$15,000.00 was a "no-book" transaction. However, in his sworn Answer dated April 30,
1996, he claimed that he actually presented his passbook when he withdrew on June 30,
1995.

To recall, he was charged with dishonesty, grave misconduct, and/or conduct grossly
prejudicial to the best interest of the service for irregularly handling his dollar savings
account. Thus, it is safe to assume that when he prepared his February 12, 1996 sworn
Letter-Explanation, the circumstances surrounding his June 30, 1995 withdrawal at PNB
Ligao, Albay Branch were still fresh on his mind. The allegations against him were serious,
which should have put him on guard from preparing a haphazard explanation. He should
have been mindful that dire consequences would surely befall him should the charges
against him be proven. Lest it be forgotten, the no-book withdrawal was confirmed by the
concerned officers of PNB Ligao, Albay Branch, namely, Quiambao, Gacer, and Letada.
These circumstances, taken together, lead to no other conclusion than that Velasco changed
his explanation from "no-book" to "with book" transaction after realizing that he violated
bank rules and regulations.

Perez v. People,59 is illustrative on this score. Perez, an acting municipal treasurer,

submitted two contradicting answers explaining the location of the missing funds under his
custody and control: the first, reiterating his previous verbal admission before the audit
team that part of the money was used to pay for the loan of his late brother, another
portion was spent for the food of his family, and the rest for his medicine; and the second,
claiming that the alleged missing amount was in the possession and custody of his
accountable personnel at the time of the audit examination.

This Court held that the sudden turnaround of Perez was merely an afterthought. He "only
changed his story to exonerate himself, after realizing that his first Answer put him in a
hole, so to speak"60 Neither did the Court believe that his alleged sickness affected the
preparation of his first Answer. Perez "presented no convincing evidence that his disease
at the time he formulated that Answer diminished his capacity to formulate a true, clear and
coherent response to any query. In fact, its contents merely reiterated his verbal
explanation to the auditing team on January 5, 1989 on how he disposed of the missing
funds"61

We find no cogent reason to depart from Our ruling in Perez. The claim of Velasco that his
initial answer was made under pressing circumstances is too flimsy an excuse. It partakes
of the nature of an alibi. As such, it constitutes a self-serving negative evidence which
cannot he accorded greater evidentiary weight than the declaration of credible witnesses
who testified on affirmative matters. 62 The Court has consistently frowned upon the
defense of alibi, and received it with caution, not only because it is inherently weak
and unreliable but also because it can be easily fabricated.63

Also worth noting is that Velasco never imputed any ill motive on the part of Rexor, Gacer,
and Letada who collectively narrated that the June 30, 1995 withdrawal was a no-book
transaction. They confirmed his earlier version that he did not present his passbook when
he withdrew the US$15,000.00 on June 30, 1995. In any case, the fact that he changed
his stance puts his credibility in doubt. Was he lying when he submitted his sworn letter-
explanation of February 12, 1996, or when he submitted his sworn Answer dated April 30,
1996? Allegans contraria non est audiendus. He is not to be heard who alleges things
contradictory to each other. Hindi dapat pakinggan ang nagsasabi ng mga bagay na
salungat sa isa't-isa.

Velasco did not only violate bank rules and regulations. What compounds his offense was
his unusual silence. He never informed PNB about the huge overstatement of
US$15,000.00 in his account. He updated his passbook on October 6, 1995 by depositing
US$12.78. Thus, as early as that date, he should have known that something was wrong
with the credited balance in his passbook and reported it immediately to the concerned
officers of PNB. What he did, instead, was to keep mum until PNB discovered the incident
and notified him on February 7, 1996, or almost eight (8) months after his no-book
withdrawal on June 30, 1995.

With his silence, he clearly intended to gain at the expense of PNB. The omission to report is
not trivial or inconsequential because it gave him the opportunity to withdraw from his
dollar savings account more than its real balance, as what he actually did. He took
advantage of the overstatement of his account, instead of protecting the interest of the
bank. It would be impossible for him not to detect the error at the time he deposited
US$12.78 on October 6, 1995, because his account had a big balance despite the fact that
no large amount of money was deposited.

His claim that he was satisfied with the updated balance of US$15,486.01 on October 6,
1995, as he thought that the US$15,000.00 in his account was the amount given by his
brother, is simply unbelievable. It is a desperate attempt at exculpation. The deposit of
the money from his brother should have been reflected in the on-line computer of
PNB. The deposit would have also been posted for update upon the presentation of the
passbook on October 6, 1995. No deposit of US$15,000.00 was, however, reflected in the
passbook.

In Aboitiz Shipping Corporation v. Dela Serna,64Tiu v. National Labor Relations

Commission,65Five J Taxi v. National Labor Relations Commission,66 and Falguera v.
Linsangan,67 among other cases, this Court consistently held that factual findings of quasi-
judicial agencies, which have acquired expertise in matters entrusted to their jurisdiction,
are accorded not only respect but also finality if they are supported by substantial
evidence.68 Thus, in the absence of proof that the Labor Arbiter or the NLRC had gravely
abused their discretion, this Court shall deem conclusive and will not overturn their
particular factual findings.69

The Labor Arbiter and the NLRC are in unison that Velasco transacted a no-book withdrawal
and failed to present a letter of introduction at PNB Ligao, Albay Branch on June 30, 1995.
He also forged his passbook to cover up his offense. Being duly supported by substantial
evidence, We sustain said finding. Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct, and ability
separate and independent of each other. A service of irregularities, when combined, may
constitute serious misconduct which is a just cause for dismissal. 70

B. The serious misconduct relates to the performance of duties. The CA ruled that
the offense of Velasco was not work-related and does not warrant dismissal. It likewise
held that there is no proof that his failure to be a good depositor affected his duties or
performance as an employee of PNB.71

At first glance, the acts committed by Velasco pertain only to his being a depositor of PNB.
But he has a dual personality. He was a depositor and, at the same time, an officer of the
bank.

On one hand, he failed to present his passbook and a letter of introduction when he
withdrew US$15,000.00 at PNB Ligao, Albay Branch on June 30, 1995. This serious
misconduct was aggravated when he presented a falsified passbook to make it appear that
he did not commit any misdeed. On the other hand, he worked for PNB for eighteen (18)
long years, his last position having been as Manager 1 of the IAD. As such, he was
involved in the examination of the books of account of PNB. Thus,

when he violated bank rules and regulations and tried to cover up his infractions by
falsifying his passbook, he was not only committing them as a depositor but also, or rather
more so, as an officer of the bank. It is akin to falsification of time cards, 72 and circulation
of fake meal tickets, 73 which this Court held as a just cause for terminating the services of
an employee.

C. Velasco has become unfit to continue working at PNB. Taken together, his acts
render him unfit to remain in the employ of the bank. That it is his first offense is of no
moment because he holds a managerial position. Employers are allowed wide latitude of
discretion in terminating managerial employees who, by virtue of their position, require full
trust and confidence in the performance of their duties. 74 Managerial employees like
Velasco are tasked to perform key and sensitive functions and are bound by more exacting
work ethics.75 Indeed, not even his eighteen (18) years of service could exonerate him.
As this Court held in Equitable PCIBank v. Caguioa:76
The leniency sought by respondent on the basis of her 35 years of service to the
bank must be weighed in conjunction with the other considerations raised by
petitioners. As that service has been amply compensated, her plea for leniency
cannot offset her dishonesty. Even government employees who are validly
 dismissed from the service by reason of timely discovered offenses are deprived
of retirement benefits. Treating respondent in the same manner as the loyal and
code-abiding employees, despite the timely discovery of her Code violations,
may indeed have a demoralizing effect on the entire bank. Be it remembered
that banks thrive on and endeavor to retain public trust and confidence,
every violation of which must thus be accompanied by appropriate sanctions.77
III. The CA erred in directing PNB to pay Velasco separation pay and
backwages. PNB has no other liability to Velasco, except his unpaid wages from
May 27, 1996 to July 31, 1996.

PNB was registered under the Corporation Code under SEC Reg. No. ASO 96-005555 dated
May 27, 1996.78 Thus, on that day, employees of

PNB came under the jurisdiction of the Labor Code, whose Sections 8 and 9 of Rule XXIII,
Book V of the Implementing Rules state:
Section 8. Preventive Suspension. - The employer may place the worker
concerned under preventive suspension if his continued employment poses a
serious and imminent threat to the life or property of the employer or his co-
workers.

Section 9. No preventive suspension shall last longer than thirty (30) days.
The employer shall thereafter reinstate the worker in his former or in a
substantially equivalent position or the employer may extend the period of
suspension provided that during the period of extension, he pays the wages and
other benefits due to the worker. In such case, the worker shall not be bound
to reimburse the amount paid to him during the extension if the employer
decides, after completion of the hearing, to dismiss the worker.
PNB has the right to preventively suspend Velasco during the pendency of the
administrative case against him. It was obviously done as a measure of self-protection. It
was necessary to secure the vital records of PNB which, in view of the position of Velasco as
internal auditor, are easily accessible to him.

Velasco was preventively suspended for more than thirty (30) days as of May 27, 1996,
while the records bear that Velasco was paid his salaries from August 1, 1996 to October
31, 1996.79 Thus, the NLRC is correct in its holding that he may recover his salaries from
May 27, 1996 to July 31, 1996.

He is not entitled to separation and backwages because he was not illegally

80
dismissed. We note though that PNB was not at all insensitive to his plight, considering
(1) his restitution of the amount akin to no actual loss to the bank, and (2) his length of
service of eighteen (18) years. 81 As stated earlier, PNB imposed on Velasco the penalty of
forced resignation with benefits, instead of dismissal. The records bear out that he was
granted P542,110.75 as separation benefits 82 which was used to offset his loan in the bank,
leaving an outstanding balance of P167,625.82 as of May 27, 1997. 83 We find that PNB
acted humanely under the circumstances.
One last word.

The law imposes great burdens on the employer. One needs only to look at the varied
provisions of the Labor Code. Indeed, the law is tilted towards the plight of the working
man. The Labor Code is titled that way and not as "Employer Code." As one American
ruling puts it, the protection of labor is the highest office of our laws. 84

Corollary to this, however, is the right of the employer to expect from the employee no less
than adequate work, diligence and good conduct. 85 As Mr. Justice Joseph McKenna of the
United States Supreme Court said in Arizona Copper Co. v. Hammer,86 "[t]he difference
between the position of the employer and the employee, simply considering the latter as
economically weaker, is not a justification for the violation of the rights of the former" 87

WHEREFORE, the petition is GRANTED and the appealed Decision REVERSED and SET
ASIDE. The Decision of the National Labor Relations Commission is REINSTATED.

SO ORDERED.

FIRST DIVISION

[G.R. No. L-74187. January 28, 1988.]

STANFORD MICROSYSTEMS, INC., Petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION and HENRY TRINIO, Respondents.

SYLLABUS

1. LABOR LAW; LABOR CODE; EMPLOYER-EMPLOYEE RELATIONSHIP; EMPLOYER NOT

CIRCUMSCRIBED BY COMPANY RULES TO IMPOSE PENALTIES HEAVIER THAN THOSE
PRESCRIBED FOR SERIOUS MISCONDUCT OF ITS EMPLOYEES. — The formulation and
promulgation by an employer of roles of conduct and discipline for its employees, inclusive
of those deemed to constitute serious misconduct, cannot and should not operate to
altogether negate his prerogative and responsibility to determine and declare whether or
not facts not explicitly set out in the rules may and do constitute such serious misconduct as
to justify the dismissal of the employee or the imposition of sanctions heavier than those
specifically and expressly prescribed. This is dictated by logic; otherwise, the rules, literally
applied, would result in absurdity; grave offenses, e.g., rape, would be penalized by mere
suspension; this, despite the heavier penalty provided therefor by the Labor Code, or
otherwise dictated by common sense.

2. ID.; ID.; ID.; DISMISSAL OF EMPLOYEE DUE TO THE LATTER’S COMPLETE

INDIFFERENCE TO MORALS, COMPANY RULES, DIGNITY AND RESPONSIBILITY OF HIS
OFFICE. — The evidence does establish the commission by Trinio of the acts with which he
was charged: drinking liquor on company time in company premises; openly and
deliberately sanctioning breach of company rules by persons under his superintendence;
public performance of an adulterous act of sexual intercourse on company time and in
company premises. Here was no mere tolerance or disregard of infringement of company
rules for the enforcement of which Trinio was particularly charged, which would be bad
enough. Here was an open invitation by him for others to violate those rules, and a
transgression even by him of those same rules in a manner that could not but expose his
personal depravity, and betray his contempt and scorn of those rules as well as the
lightness with which he held the responsibility entrusted to him to protect his employer’s
premises, chattels, interests, reputation and integrity. The offenses cannot be excused upon
a plea of their being "first offenses," or have not resulted in prejudice to the company in any
way. No employer may rationally be expected to continue in employment a person whose
lack of morals, respect and loyalty to his employer, regard for his employer’s rules, and
appreciation of the dignity and responsibility of his office, has so plainly and completely
been bared.

3. ID.; ID.; ID.; ID.; EMPLOYER’S OWN RIGHTS AND INTERESTS; NOT OUTWEIGHED
BY THE SYMPATHY AND SOLICITUDE FOR THE RIGHTS AND WELFARE OF THE WORKING
CLASS. — That in controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and writings should be
resolved in the former’s favor, is not an unreasonable or unfair rule. But that disregard of
the employer’s own rights and interests can be justified by that concern and solicitude is
unjust and unacceptable.

DECISION

NARVASA, J.:

This special civil action of certiorari concerns the appropriateness or commensurateness of

the penalty imposed by an employer on an employee found guilty, after due investigation,
of breaches of company regulations.

Henry Trinio was employed by Stanford Microsystems, Inc. as "security coordinator," to

exercise supervision over all guards assigned to secure the latter’s premises by an agency
with which Stanford had a security agreement.

He was dismissed from employment on July 12, 1982, after an investigation conducted by
Stanford established that he had committed serious breaches of company rules in the night
of July 4, 1982. It appears that on that night, at about 11 o’clock, Trinio allowed two female
security guards, Vicky Magaling and Excelsa Mina to come inside the Security Office; he
caused the introduction of intoxicating liquor into the premises of which he imbibed; he
invited and allowed a guard on duty, Marcelino Medrana, to partake of the liquor when the
latter entered the office; and thereafter he, a married man, had sexual intercourse with
Guard Mina, a married woman, on top of the desk of the Security Head, while Magaling
pretended to be asleep during all the time that the lustful act was commenced and
consummated.

Professing innocence, Trinio lost no time in haling his employer before the Ministry of Labor
and Employment. He filed a complaint for unfair labor practice and illegal dismissal against
Stanford on July 16, 1982. After due proceedings, judgment was rendered thereon by the
Labor Arbiter on September 30, 1983, as follows:chanrobles virtual lawlibrary

"IN VIEW OF THE FOREGOING, the charge of unfair labor practice is hereby dismissed for
lack of factual basis. As regards the charge of illegal dismissal, respondent exceeded its
disciplinary authority when it terminated the services of complainant. In accordance with its
rules, a mere suspension should issue and that suspension should not last for more than
thirty (30) days. Effective August 13, 1932, the suspension lapses and complainant
becomes entitled to backwages and other fringe benefits thereafter. The computation of said
monetary award is hereby ordered until complainant is finally reinstated."cralaw virtua1aw
library

Stanford seasonably brought the case to the National Labor Relations Commission on
appeal. The Commission however declined to sustain Stanford’s contention that the Arbiter
had committed grave abuse of discretion in ruling that it had "exceeded its disciplinary
authority when it terminated x x (Trinio’s) services" notwithstanding said Arbiter’s own
findings that Trinio had indeed committed serious misconduct and violations of company
rules and regulations, including what he characterized as an act "repulsive to morality." By
judgment dated March 10, 1986, the Commission affirmed the Arbiter’s direction for Trinio’s
reinstatement but modified the award of back wages by limiting the same to two (2) years,
without deduction or qualification of any kind.

In the special civil action of certiorari instituted by it in this Court, Stanford maintains that
the NLRC was guilty of grave abuse of discretion in affirming the decision of the Labor
Arbiter in light of the latter’s patent

errors —

(1) in ordering reinstatement of Trinio despite his factual finding that Trinio was guilty of
serious misconduct and other infringements of Company rules and regulations; and

(2) in holding the Company to be so bound by its own rules and regulations prescribing
penalties corresponding to specific offenses as to be estopped to discharge an employee on
grounds provided in the Labor Code.

There is merit in the petition, warranting its concession. The writ of certiorari prayed for will
issue.

That there is sufficient evidence proving the acts ascribed to Trinio is not seriously in
dispute. Trinio did violate his employer’s rules: he allowed women into the Security Office;
he allowed liquor to be brought in; he drank that liquor and invited another security guard
to drink it, too; he and his lady friend, both being married but not to each other, satisfied
their carnal passion in a business office and in the known presence of another person. This
last act was, to be sure, one "repulsive to morality," as the Labor Arbiter has put it.

The issue does not therefore lie in the facts, or the sufficiency of the evidence in proof
thereof. The issue posed, rather, is whether or not under the established facts, the penalty
of dismissal is merited, instead of merely that of suspension for not more than 30 days —
which is what the company rules by their literal terms indicate. The respondent
Commission, in the Comment submitted in its behalf by the Solicitor General, concedes that
the formulation and promulgation by an employer of roles of conduct and discipline for its
employees, inclusive of those deemed to constitute serious misconduct, cannot and should
not operate to altogether negate his prerogative and responsibility to determine and declare
whether or not facts not explicitly set out in the rules may and do constitute such serious
misconduct as to justify the dismissal of the employee or the imposition of sanctions heavier
than those specifically and expressly prescribed. The concession is dictated by logic;
otherwise, the rules, literally applied, would result in absurdity: grave offenses, e.g., rape,
would be penalized by mere suspension; this, despite the heavier penalty provided therefor
by the Labor Code, or otherwise dictated by common sense.cralawnad

But said public respondent would minimize the gravity of Trinio’s acts, by pointing out that
the latter was only seen to be kissing his lady friend while embracing her tightly, and that
there was no clear showing that he had been drinking to excess, and hence, the
commensurate penalty for such "first offense" is not separation from employment but
suspension and forfeiture of backwages. The public respondent theorizes that while it was in
truth morality wrong for Trinio to have done what he did, it was not sufficient cause for the
company to lose trust and confidence in him. Implicit in the argument is the
acknowledgment that if the facts were really as described by the employer’s proofs and as
found by the Labor Arbiter, the penalty of dismissal from the service would be otherwise
appropriate.

The evidence has been misread by public Respondent. The evidence does establish the
commission by Trinio of the acts with which he was charged: drinking liquor on company
time in company premises; openly and deliberately sanctioning breach of company rules by
persons under his superintendence; public performance of an adulterous act of sexual
intercourse on company time and in company premises. Here was no mere tolerance or
disregard of infringement of company rules for the enforcement of which Trinio was
particularly charged, which would be bad enough. Here was an open invitation by him for
others to violate those rules, and a transgression even by him of those same rules in a
manner that could not but expose his personal depravity, and betray his contempt and
scorn of those rules as well as the lightness with which he held the responsibility entrusted
to him to protect his employer’s premises, chattels, interests, reputation and integrity. The
offenses cannot be excused upon a plea of their being "first offenses," or have not resulted
in prejudice to the company in any way. No employer may rationally be expected to
continue in employment a person whose lack of morals, respect and loyalty to his employer,
regard for his employer’s rules, and appreciation of the dignity and responsibility of his
office, has so plainly and completely been bared.chanrobles law library : red
That there should be concern, sympathy, and solicitude for the rights and welfare of the
working class, is meet and proper. That in controversies between a laborer and his master,
doubts reasonably arising from the evidence, or in the interpretation of agreements and
writings should be resolved in the former’s favor, is not an unreasonable or unfair rule. But
that disregard of the employer’s own rights and interests can be justified by that concern
and solicitude is unjust and unacceptable. 1

WHEREFORE, the Decision of the National Labor Relations Commission dated March 10,
1986 and that of the Labor Arbiter dated September 30, 1983 are annulled and set aside,
and the complaint of Henry Trinio against the petitioner for unfair labor practice and illegal
termination of employment, dismissed for lack of factual and legal basis. This judgment is
immediately executory, and no motion for extension of time to file a motion for
reconsideration thereof will be entertained.

Teehankee (C.J.), Cruz, Paras and Gancayco, JJ., concur.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 163431 August 28, 2013

NATHANIEL N. DONGON, PETITIONER,

vs.

RAPID MOVERS AND FORWARDERS CO., INC., AND/OR NICANOR E. JAO, JR., RESPONDENTS.

DECISION

BERSAMIN, J.:

The prerogative of the employer to dismiss an employee on the ground of willful disobedience to company
policies must be exercised in good faith and with due regard to the rights of labor.

The Case

By petition for review on certiorari, petitioner appeals the adverse decision promulgated on October 24,
2003,1whereby the Court of Appeals (CA) set aside the decision dated June 17, 2002 of the National
Labor Relations Commission (NLRC) in his favor. 2 The NLRC had thereby reversed the ruling dated
September 10, 2001 of the Labor Arbiter dismissing his complaint for illegal dismissal. 3

Antecedents

The following background facts of this case are stated in the CA’s assailed decision, viz:

From the records, it appears that petitioner Rapid is engaged in the hauling and trucking business while
private respondent Nathaniel T. Dongon is a former truck helper leadman.
Private respondent’s area of assignment is the Tanduay Otis Warehouse where he has a job of facilitating
the loading and unloading [of the] petitioner’s trucks. On 23 April 2001, private respondent and his driver,
Vicente Villaruz, were in the vicinity of Tanduay as they tried to get some goods to be distributed to their
clients.

Tanduay’s security guard called the attention of private respondent as to the fact that Mr. Villaruz’[s] was
not wearing an Identification Card (I.D. Card). Private respondent, then, assured the guard that he will
secure a special permission from the management to warrant the orderly release of goods.

Instead of complying with his compromise, private respondent lent his I.D. Card to Villaruz; and by reason
of such misrepresentation , private respondent and Mr. Villaruz got a clearance from Tanduay for the
release of the goods. However, the security guard, who saw the misrepresentation committed by private
respondent and Mr. Villaruz, accosted them and reported the matter to the management of Tanduay.

On 23 May 2001, after conducting an administrative investigation, private respondent was dismissed from
the petitioning Company.

On 01 June 2001, private respondent filed a Complaint for Illegal Dismissal. x x x 4

In his decision, the Labor Arbiter dismissed the complaint, and ruled that respondent Rapid Movers and
Forwarders Co., Inc. (Rapid Movers) rightly exercised its prerogative to dismiss petitioner, considering
that: (1) he had admitted lending his company ID to driver Vicente Villaruz; (2) his act had constituted
mental dishonesty and deceit amounting to breach of trust; (3) Rapid Movers’ relationship with Tanduay
had been jeopardized by his act; and (4) he had been banned from all the warehouses of Tanduay as a
result, leaving Rapid Movers with no available job for him. 5

On appeal, however, the NLRC reversed the Labor Arbiter, and held that Rapid Movers had not
discharged its burden to prove the validity of petitioner’s dismissal from his employment. It opined that
Rapid Movers did not suffer any pecuniary damage from his act; and that his dismissal was a penalty
disproportionate to the act of petitioner complained of. It awarded him backwages and separation pay in
lieu of reinstatement, to wit:

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new one ENTERED
ordering the payment of his backwages from April 25, 2001 up to the finality of this decision and in lieu of
reinstatement, he should be paid his separation pay from date of hire on May 2, 1994 up to the finality
hereof.

SO ORDERED.6

Rapid Movers brought a petition for certiorari in the CA, averring grave abuse of discretion on the part of
the NLRC, to wit:

I.

x x x IN STRIKING DOWN THE DISMISSAL OF THE PRIVATE RESPONDENT [AS]

ILLEGAL ALLEGEDLY FOR BEING GROSSLY DISPROPORTIONATE TO THE OFFENSE
COMMITTED IN THAT NEITHER THE PETITIONERS NOR ITS CLIENT TANDUAY
SUFFERED ANY PECUNIARY DAMAGE THEREFROM THEREBY IMPLYING THAT FOR
A DISHONEST ACT/MISCONDUCT TO BE A GROUND FOR DISMISSAL OF AN
EMPLOYEE, THE SAME MUST AT LEAST HAVE RESULTED IN PECUNIARY DAMAGE
TO THE EMPLOYER;

II.

x x x IN EXPRESSING RESERVATION ON THE GUILT OF THE PRIVATE RESPONDENT

IN THE LIGHT OF ITS PERCEIVED CONFLICTING DATES OF THE LETTER OF
 TANDUAY TO RAPID MOVERS (JANUARY 25, 2001) AND THE OCCURRENCE OF THE
INCIDENT ON APRIL 25, 2001 WHEN SAID CONFLICT OF DATES CONSIDERING THE
EVIDENCE ON RECORD, WAS MORE APPARENT THAN REAL.7

Ruling of the CA

On October 24, 2003, the CA promulgated its assailed decision reinstating the decision of the Labor
Arbiter, and upholding the right of Rapid Movers to discipline its workers, holding thusly:

There is no dispute that the private respondent lent his I.D. Card to another employee who used the same
in entering the compound of the petitioner customer, Tanduay. Considering that this amounts to
dishonesty and is provided for in the petitioning Company’s Manual of Discipline, its imposition is but
proper and appropriate.

It is basic in any enterprise that an employee has the obligation of following the rules and regulations of its
employer. More basic further is the elementary obligation of an employee to be honest and truthful in his
work. It should be noted that honesty is one of the foremost criteria of an employer when hiring a
prospective employee. Thus, we see employers requiring an NBI clearance or police clearance before
formally accepting an applicant as their employee. Such rules and regulations are necessary for the
efficient operation of the business.

Employees who violate such rules and regulations are liable for the penalties and sanctions so provided,
e.g., the Company’s Manual of Discipline (as in this case) and the Labor Code.

The argument of the respondent commission that no pecuniary damage was sustained is off-tangent with
the facts of the case. The act of lending an ID is an act of dishonesty to which no pecuniary estimate can
be ascribed for the simple reason that no monetary equation is involved. What is involved is plain and
simple adherence to truth and violation of the rules. The act of uttering or the making of a falsehood does
not need any pecuniary estimate for the act to gestate to one punishable under the labor laws. In this
case, the illegal use of the I.D. Card while it may appear to be initially trivial is of crucial relevance to the
petitioner’s customer, Tanduay, which deals with drivers and leadmen withdrawing goods and
merchandise from its warehouse. For those with criminal intentions can use another’s ID to asport goods
and merchandise.

Hence, while it can be conceded that there is no pecuniary damage involved, the fact remains that the
offense does not only constitute dishonesty but also willful disobedience to the lawful order of the
Company, e.g., to observe at all time the terms and conditions of the Manual of Discipline. Article 282 of
the Labor Code provides:

"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;

x x x." (Emphasis, supplied)

The constitutional protection afforded to labor does not condone wrongdoings by the employee; and an
employer’s power to discipline its workers is inherent to it. As honesty is always the best policy, the Court
is convinced that the ruling of the Labor Arbiter is more in accord with the spirit of the Labor Code. "The
Constitutional policy of providing full protection to labor is not intended to oppress or destroy management
(Capili vs. NLRC, 270 SCRA 488[1997]." Also, in Atlas Fertilizer Corporation vs. NLRC, 273 SCRA 549
[1997], the Highest Magistrate declared that "The law, in protecting the rights of the laborers, authorizes
neither oppression nor self-destruction of the employer."

WHEREFORE, premises considered, the Petition is GRANTED. The assailed 17 June 2002 Decision of
respondent Commission in NLRC CA-029937-01 is hereby SET ASIDE and the 10 September 2001
Decision of Labor Arbiter Vicente R. Layawen is ordered REINSTATED. No costs.

SO ORDERED.8

Petitioner moved for a reconsideration, but the CA denied his motion on March 22, 2004. 9

Undaunted, the petitioner is now on appeal.

Issue

Petitioner still asserts the illegality of his dismissal, and denies being guilty of willful disobedience. He
contends that:

THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN SUSTAINING THE
DECISION DATED 10 SEPTEMBER 2001 OF LABOR ARBITER VICENTE R. LAYAWEN WHERE THE
LATTER RULED THAT BY LENDING HIS ID TO VILLARUZ, PETITIONER (COMPLAINANT)
COMMITTED MISREPRESENTATION AND DECEIT CONSTITUTING MENTAL DISHONESTY WHICH
CANNOT BE DISCARDED AS INSIGNIFICANT OR TRIVIAL.10

Petitioner argues that his dismissal was discriminatory because Villaruz was retained in his employment
as driver; and that the CA gravely abused its discretion in disregarding his showing that he did not violate
Rapid Movers’ rules and regulations but simply performed his work in line with the duties entrusted to him,
and in not appreciating his good faith and lack of any intention to willfully disobey the company’s rules.

In its comment,11 Rapid Movers prays that the petition for certiorari be dismissed for being an improper
remedy and apparently resorted to as a substitute for a lost appeal; and insists that the CA did not commit
grave abuse of discretion.1âwphi1

In his reply,12 petitioner submits that his dismissal was a penalty too harsh and disproportionate to his
supposed violation; and that his dismissal was inappropriate due to the violation being his first infraction
that was even committed in good faith and without malice.

Based on the parties’ foregoing submissions, the issues to be resolved are, firstly: Was the petition
improper and dismissible?; and, secondly: If the petition could prosper, was the dismissal of petitioner on
the ground of willful disobedience to the company regulation lawful?

Ruling

The petition has merit.

1.

Petition should not be dismissed

In St. Martin Funeral Home v. National Labor Relations Commission, 13 the Court has clarified that parties
seeking the review of decisions of the NLRC should file a petition for certiorari in the CA on the ground of
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC. Thereafter,
the remedy of the aggrieved party from the CA decision is an appeal via petition for review on certiorari. 14

The petition filed here is self-styled as a petition for review on certiorari, but Rapid Movers points out that
the petition was really one for certiorari under Rule 65 of the Rules of Court due to its basis being the
commission by the CA of a grave abuse of its discretion and because the petition was filed beyond the
reglementary period of appeal under Rule 45. Hence, Rapid Movers insists that the Court should dismiss
the petition because certiorari under Rule 65 could not be a substitute of a lost appeal under Rule 45.

Ordinarily, an original action for certiorari will not prosper if the remedy of appeal is available, for an
appeal by petition for review on certiorari under Rule 45 of the Rules of Court and an original action for
certiorari under Rule 65 of the Rules of Court are mutually exclusive, not alternative nor successive,
remedies.15 On several occasions, however, the Court has treated a petition for certiorari as a petition for
review on certiorari when: (a) the petition has been filed within the 15-day reglementary period; 16 (b)
public welfare and the advancement of public policy dictate such treatment; (c) the broader interests of
justice require such treatment; (d) the writs issued were null and void; or (e) the questioned decision or
order amounts to an oppressive exercise of judicial authority. 17

The Court deems it proper to allow due course to the petition as one for certiorari under Rule 65 in the
broader interest of substantial justice, particularly because the NLRC’s appellate adjudication was set
aside by the CA, and in order to put at rest the doubt that the CA, in so doing, exercised its judicial
authority oppressively. Whether the petition was proper or not should be of less importance than whether
the CA gravely erred in undoing and setting aside the determination of the NLRC as a reviewing forum
vis-à-vis the Labor Arbiter. We note in this regard that the NLRC had declared the dismissal of petitioner
to be harsh and not commensurate to the infraction committed. Given the spirit and intention underlying
our labor laws of resolving a doubtful situation in favor of the working man, we will have to review the
judgment of the CA to ascertain whether the NLRC had really committed grave abuse of its discretion.
This will settle the doubts on the propriety of terminating petitioner, and at the same time ensure that
justice is served to the parties.18

2.

Petitioner was not guilty of willful disobedience; hence, his dismissal was illegal

Petitioner maintains that willful disobedience could not be a ground for his dismissal because he had
acted in good faith and with the sole intention of facilitating deliveries for Rapid Movers when he allowed
Villaruz to use his company ID.

Willful disobedience to the lawful orders of an employer is one of the valid grounds to terminate an
employee under Article 296 (formerly Article 282) of the Labor Code. 19 For willful disobedience to be a
ground, it is required that: (a) the conduct of the employee must be willful or intentional; and (b) the order
the employee violated must have been reasonable, lawful, made known to the employee, and must
pertain to the duties that he had been engaged to discharge. 20 Willfulness must be attended by a wrongful
and perverse mental attitude rendering the employee’s act inconsistent with proper subordination. 21 In any
case, the conduct of the employee that is a valid ground for dismissal under the Labor Code constitutes
harmful behavior against the business interest or person of his employer. 22 It is implied that in every act of
willful disobedience, the erring employee obtains undue advantage detrimental to the business interest of
the employer.

Under the foregoing standards, the disobedience attributed to petitioner could not be justly characterized
as willful within the contemplation of Article 296 of the Labor Code. He neither benefitted from it, nor
thereby prejudiced the business interest of Rapid Movers. His explanation that his deed had been
intended to benefit Rapid Movers was credible. There could be no wrong or perversity on his part that
warranted the termination of his employment based on willful disobedience.

Rapid Movers argues, however, that the strict implementation of company rules and regulations should be
accorded respect as a valid exercise of its management prerogative. It posits that it had the prerogative to
terminate petitioner for violating its following company rules and regulations, to wit:

(a) "Pagpayag sa paggamit ng iba o paggamit ng maling rekord ng kumpanya kaugnay sa

operations, maintenance or materyales o trabaho" (Additional Rules and Regulations No. 2); and

(b) "Pagkutsaba sa pagplano o pagpulong sa ibang tao upang labagin ang anumang alituntunin ng
kumpanya" (Article 5.28).23

We cannot sustain the argument of Rapid Movers.

It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad
discretion includes the implementation of company rules and regulations and the imposition of disciplinary
measures on its employees. But the exercise of a management prerogative like this is not limitless, but
hemmed in by good faith and a due consideration of the rights of the worker. 24 In this light, the
management prerogative will be upheld for as long as it is not wielded as an implement to circumvent the
laws and oppress labor.25

To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant
circumstances have been appreciated and evaluated with the goal of ensuring that the ground for
dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious and
grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in keeping with
the spirit of our Constitution and laws to lean over backwards in favor of the working class, and with the
mandate that every doubt must be resolved in their favor. 26

Although we recognize the inherent right of the employer to discipline its employees, we should still
ensure that the employer exercises the prerogative to discipline humanely and considerately, and that the
sanction imposed is commensurate to the offense involved and to the degree of the infraction. The
discipline exacted by the employer should further consider the employee’s length of service and the
number of infractions during his employment. 27The employer should never forget that always at stake in
disciplining its employee are not only his position but also his livelihood, 28 and that he may also have a
family entirely dependent on his earnings.29

Considering that petitioner’s motive in lending his company ID to Villaruz was to benefit Rapid Movers as
their employer by facilitating the loading of goods at the Tanduay Otis Warehouse for distribution to Rapid
Movers’ clients, and considering also that petitioner had rendered seven long unblemished years of
service to Rapid Movers, his dismissal was plainly unwarranted. The NLRC’s reversal of the decision of
the Labor Arbiter by holding that penalty too harsh and disproportionate to the wrong attributed to him was
legally and factually justified, not arbitrary or whimsical. Consequently, for the CA to pronounce that the
NLRC had thereby gravely abused its discretion was not only erroneous but was itself a grave abuse of
discretion amounting to lack of jurisdiction for not being in conformity with the pertinent laws and
jurisprudence. We have held that a conclusion or finding derived from erroneous considerations is not a
mere error of judgment but one tainted with grave abuse of discretion. 30

WHEREFORE, the Court GRANTS the petition; REVERSES and SETS ASIDE the decision promulgated
by the Court of Appeals on October 24, 2003; REINSTATES the decision of the National Labor Relations
Commission rendered on June 17, 2002; and ORDERS respondents to pay the costs of suit.

SO ORDERED.

SECOND DIVISION

G.R. No. 159738 December 9, 2004

UNION MOTOR CORPORATION, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION and ALEJANDRO A. ETIS, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari filed by petitioner Union Motor Corporation of the April 10, 2003
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 73602 which affirmed the decision of the
National Labor Relations Commission (NLRC) holding that respondent Alejandro A. Etis was illegally
dismissed from his employment.

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

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

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

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

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

Left with no other recourse, the respondent filed, on May 18, 1999, a complaint for illegal dismissal before
the arbitration branch of the NLRC against the petitioner and/or Benito Cua, docketed as NLRC-NCR
Case No. 00-05-05691-99.5

The respondent alleged that he was dismissed from his employment without just and legal basis. For its
part, the petitioner averred that his dismissal was justified by his ten (10) unauthorized absences. It
posited that, under Article 282 of the Labor Code, an employee’s gross and habitual neglect of his duties
is a just cause for termination. It further alleged that the respondent’s repetitive and habitual acts of being
absent without notification constituted nothing less than abandonment, which is a form of neglect of
duties.6

On October 19, 2000, the Labor Arbiter rendered a Decision dismissing the complaint. The Labor Arbiter
ruled that the respondent’s failure to report for work for ten (10) days without an approved leave of
absence was equivalent to gross neglect of duty, and that his claim that he had been absent due to
severe toothache leading to a tooth extraction was unsubstantiated. The Labor Arbiter stressed that
"unnotarized medical certificates were self-serving and had no probative weight."

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

THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING

THE COMPLAINT.

II

THERE ARE SERIOUS ERRORS IN THE FINDINGS OF FACTS WHICH WOULD CAUSE GRAVE OR
IRREPARABLE DAMAGE OR INJURY TO HEREIN COMPLAINANT. 7

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

WHEREFORE, the assailed decision dated October 19, 2000 is SET ASIDE and REVERSED.
Accordingly, the respondent-appellee is hereby ordered to immediately reinstate complainant to his
former position without loss of seniority rights and other benefits and payment of his full backwages from
the time of his actual dismissal up to the time of his reinstatement.

All other claims are dismissed for lack of merit.8

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

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

The petitioner, thereafter, filed a petition for certiorari under Rule 65 of the Rules of Court before the CA,
docketed as CA-G.R. SP No. 73602. It raised the following issues:

Whether or not the public respondent gravely abused it[s] discretion, amounting to lack or excess of
jurisdiction in reversing the decision of the labor arbiter a quo and finding that private respondent
Alejandro A. Etis was illegally dismissed.

Whether or not public respondent gravely abused its discretion in reinstating private respondent Alejandro
A. Etis to his former position without loss of seniority rights and awarding him full backwages. 10

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

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

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

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

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN

GIVING MUCH EVIDENTIARY WEIGHT TO THE MEDICAL CERTIFICATES SUBMITTED BY THE
PRIVATE RESPONDENT.

II

WHETHER OR NOT THE HONORABLE LABOR ARBITER COMMITTED A REVERSIBLE ERROR IN

RULING THAT PRIVATE RESPONDENT WAS ILLEGALLY DISMISSED.12

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

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

An employee who commits unauthorized absences continuously for five (5) consecutive working days
without notice shall be considered as having abandoned his job and shall be terminated for cause with
applicable laws.

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

The contention of the petitioner has no merit.

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

The termination by respondent-appellee of complainant’s service despite knowledge of complainant’s

ailment, as shown by the telephone calls made by the latter to the company nurse and the actual
confirmation made by respondent’s company guard, who personally visited complainant’s residence,
clearly establishes the illegality of complainant’s dismissal. The documentary testimonies of the nurse,
Miss Rosita dela Cruz, regarding complainant’s telephone calls and the confirmation made by
respondent’s security guard, Mr. Dumagan, are evidentiary matters which are relevant and material and
must be considered to the fullest by the Labor Arbiter a quo. These circumstantial facts were miserably
set aside by the Labor Arbiter a quo wherein he concluded that complainant committed gross neglect of
duty on alleged continued absences is to our mind, not fully substantiated and ought not be given
credence by this Commission. Time and again, this Tribunal impresses that, in labor proceedings, in case
of doubt, the doubt must be reasonably in favor of labor. Maybe doubts hang in this case but these doubts
must be resolved in favor of labor as mandated by law and our jurisprudence. From the facts of this case,
it is only but reasonable to conclude that complainant’s service was, indeed, terminated without legal or
valid cause. Where the law protects the right of employer to validly exercise management prerogative
such as to terminate the services of an employee, such exercise must be with legal cause as enumerated
in Article 282 of the Labor Code or by authorized cause as defined in Article 283 of the Labor Code. 15

The CA affirmed the findings of facts of the NLRC.

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

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

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

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

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

xxx. He was dismissed by reason of the fact that the Medical Certificate submitted by the complainant
should not be given credence for not being notarized and that no affidavit was submitted by the nurse to
prove that the complainant, indeed, called the respondent’s office by telephone.

After full scrutiny and judicious evaluation of the records of this case, We find the appeal to be
meritorious. Regrettably, the Labor Arbiter a quo clearly failed to appreciate complainant’s pieces of
evidence. Nowhere in our jurisprudence requires that all medical certificates be notarized to be accepted
as a valid evidence. In this case, there is [neither] difficulty nor an obstacle to claim that the medical
certificates presented by complainant are genuine and authentic. Indeed, the physician and the dentist
who examined the complainant, aside from their respective letterheads, had written their respective
license numbers below their names and signatures. These facts have not been impugned nor rebutted by
respondent-appellee throughout the proceedings of his case. Common sense dictates that an ordinary
worker does not need to have these medical certificates to be notarized for proper presentation to his
company to prove his ailment; hence, the Labor Arbiter a quo, in cognizance with the liberality and the
appreciation on the rules on evidence, must not negate the acceptance of these medical certificates as
valid pieces of evidence.

We believe, as we ought to hold, that the medical certificates can prove clearly and convincingly the
complainant’s allegation that he consulted a physician because of tooth inflammation on September 23,
1997 and a dentist who later advised him to rest and, thus, clinically extended his tooth extraction due to
severe pain and inflammation. Admittingly, it was only on October 4, 1997 that complainant’s tooth was
finally extracted.

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

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

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

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

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

ART. 282. TERMINATION BY EMPLOYER

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

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

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

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

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

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

SECOND DIVISION

[G.R. NO. 140555 : July 14, 2005]

NEW EVER MARKETING, INC., Petitioners, v. HON. COURT OF APPEALS, ESPIRITU

YLANAN, CESAR FULO, and WILFREDO BILASA, Respondents.

DECISION

AZCUNA, J.:

Petitioner New Ever Marketing, Inc. hired respondents Espiritu Ylanan and Cesar Fulo as
drivers and Wilfredo Bilasa as delivery man (pahinante) commencing in February 1987,
November 1988, and June 1989, respectively. Respondents filed against petitioner and
Marcelo Calacday, its General Manager, a complaint for illegal dismissal and sought the
payment of overtime pay, premium pay for services rendered during holidays, service
incentive leave, and 13th month pay for the year 1994. They also filed a separate case
against petitioner with the Social Security System for alleged non-remittance of SSS
premiums.

In their complaints, respondents alleged, as follows:

Respondent Ylanan: That a fine of P500.00 for a traffic violation he committed on

September 12, 1994, supposedly for the account of the petitioner, was deducted from his
salary for September 17, 1994; that for his October 15, 1994 salary, deductions were made
for SSS premiums corresponding to the months of January and February 1993, but
apparently, the same were not accordingly remitted; that from October 17-22, 1994, he did
not report for work because he attended to an errand; that when he reported back for work
on October 24, 1994 and October 25, 1994 (with respondents Fulo and Bilasa), he was
barred from entering the premises and instructed to wait for a certain Ding who later
arrived at noon time, after he had left the premises; that when he called the office the next
day, October 26, 1994, Sally, the office secretary, told him to report for work on October
31, 1994; that when he reported for work on October 31, 1994, petitioner company was
closed and the company guard told him to come back on November 2, 1994; that when he
arrived on November 2, 1994, the company guard again told him to wait for Ding who
arrived at noon time after he had left; and that on November 3, 1994, Calacday informed
him and respondent Fulo that they were considered as "AWOL [absent without official
leave]."

Respondent Fulo: That on October 15, 1994, petitioner asked him to secure a new
Community Tax Certificate; that as October 16, 1994 was a Sunday, he did not report for
work the following day, October 17, 1994, to be able to secure one; that when he reported
for work on October 18, 1994, he was prevented by the company guard from entering the
company premises and asked to wait for Ding who did not arrive until noon that day, so he
went home; that from October 19 to November 2, 1994, he reported for work daily, but was
made to wait for Ding; and that because of the foregoing, he and the two other respondents
were constrained to file a complaint for illegal dismissal against the petitioner and Calacday.

Respondent Bilasa: That on October 17, 1994, he was sent home due to his allergies; that
because of his condition, he informed Calacday that he may not be able to report for work
the following day; that the next day, October 18, 1994, he was absent as his allergy had
not subsided; that after seeking medical attention, the doctor advised him to take a leave of
absence for one week; that when he reported for work on October 24, 1994, he was denied
entry to the premises until Ding arrived; and that he never received any letter from the
petitioner informing him that he had abandoned his work.

For its part, as to respondents Fulo and Ylanan, petitioner countered: That starting October
17, 1994, they failed to report for work without filing a leave of absence; that on October
21, 1994, Calacday sent a letter requiring them to explain why no disciplinary action should
be taken against them for violating company rules on absences and tardiness; that despite
receipt of the said letter, respondents did not submit any written explanation; and that on
November 4, 1994, petitioner sent another letter informing them that they were deemed to
have abandoned their jobs.

As to respondent Bilasa, petitioner averred: That on October 19, 1994, respondent Bilasa
was absent from work without filing a leave of absence; that on October 23, 1994,
petitioner sent him a memorandum, directing him to explain why no disciplinary action
should be taken against him for being absent, but he failed to do so; and that on November
4, 1994, petitioner gave another memorandum informing Bilasa that he was deemed to
have abandoned his job for failure to explain his unexcused absences.

Petitioner also asserted that it validly terminated the services of respondents due to
abandonment of work and that the matter had been reported to the Department of Labor
and Employment. Calacday pointed out that he should be excluded from being a party to
the case as petitioner has a separate and distinct personality.

On May 3, 1996, the Labor Arbiter (LA) rendered a decision dismissing the complaint for
illegal dismissal on the ground that petitioner had a just cause to dismiss respondents, i.e.,
for abandonment of work, and that petitioner had complied with the notice requirement
prior to terminating their employment. However, the labor arbiter ordered petitioner to pay
the monetary claims of respondents for unpaid wages, 13th month pay, and service
incentive leave pay for the year 1994 since there was no proof that the same had been
paid.

Respondents interposed a partial appeal to the National Labor Relations Commission (NLRC)
on the dismissal of the complaint for illegal dismissal and the other monetary claims against
petitioner.

On June 16, 1997, the NLRC modified the decision of the LA. It found petitioner guilty of
constructively dismissing respondents. The NLRC ordered petitioner to reinstate respondents
to their positions without loss of seniority rights and other privileges appurtenant thereto,
with the payment of full backwages from the time they were illegally dismissed until actual
reinstatement. The pertinent portions of the NLRC's decision state:

In his Decision, however, the Labor Arbiter a quo gave undue credence to respondents'
claims that complainants herein abandoned their jobs after memoranda were allegedly sent
to them directing them to explain why no disciplinary action should be taken against them
for having been absent without the necessary leave application (Annexes "1," "3" and "7,"
Respondent's Position Paper).

A close examination of the aforesaid memos, however, readily reveals the absence of proof
that they were indeed sent to, much less received by, the herein complainants. Certainly,
such absence is fatal, more so under complainants' vehement denial that they ever received
such memos. Clearly, under this fact, such memos cannot take the place of notice to comply
with the requisite of a valid notice in administrative due process.

Moreover, in cases of abandonment, the absence of "animus revertendi" must be clearly

proven. Respondent, We find, failed to discharge this burden. It failed to show that
complainants indeed no longer intended to return to their jobs inspite of due notice afforded
to them to do so.
On the contrary, We are convinced that the proximity of the filing of their complaint with
what they perceive to be the unreasonable arrival of "Ding" as they were instructed to wait
for, is concrete proof sufficient to show that they have the least intention to give up their
job, much less abandon the same.

It is not amiss to state at this juncture that during the period they were waiting for the said
"Ding" to arrive, they were not allowed to work and their daily time records would show no
attendance, but such cannot be taken against them.

Suffice it to state that We are far from convinced of respondents' claims that
complainants['] services were terminated for cause. Conversely, we are convinced that
complainants were indeed instructed to wait for a certain "Ding" as a condition precedent for
their resumption of work. The waiting for the said "Ding" for an unreasonable length of time
certainly cannot prevent[,] much less preclude[,] herein complainants from filing the instant
case. They were undoubtedly constructively dismissed at the time of the filing of their
complaint.

WHEREFORE, the decision appealed from is hereby MODIFIED in that Respondents are
hereby declared guilty of illegally and constructively terminating the services of
complainants Espiritu Ylanan, Cesar Fulo and Wilfredo Bilasa. Further, respondents are
ordered to reinstate them to their former position[s] without loss of seniority rights and
other privileges appurtenant thereto with full backwages from the time of their dismissal
until actually reinstated. The other dispositions in the appealed decision are deemed final
and executory.

SO ORDERED.1

On Petition for Review , the Court of Appeals (CA) dismissed petitioner's action and later
denied its motions for reconsideration.

Petitioner seeks to annul the Resolution of the Court of Appeals dismissing its petition,
dated March 16, 1999, and the Resolutions denying reconsiderations, dated September 24,
1999 and October 27, 1999, by "invok[ing] the power of the Court under Rule 65 of the
1997 Rules of Civil Procedure because there is no appeal or any plain, speedy and adequate
remedy in the ordinary course of law" and stating that "this petition is not in any way
intended to delay the decision of the [NLRC] dated June [16], 1997, but the undersigned
new counsel for the petitioner is exhausting all legal remedies available to the petitioner."

A perusal of the antecedents shows that petitioner's Petition for Certiorari (with prayer for
the issuance of a writ of preliminary injunction) filed with the CA was dismissed outright in a
Resolution dated March 16, 1999 on two grounds, namely, failure to attach an affidavit of
service as proof that a copy of its petition had been duly served upon the NLRC and the
respondents, and lack of allegations as to material dates to show the timeliness of the filing
of the petition pursuant to Section 3, Rule 46 in relation to Section 4, Rule 65 of the Rules
of Civil Procedure.

After receiving a copy of the Resolution dated March 16, 1999 on March 26, 1999,
petitioner, on April 7, 1999 (through its former counsel), filed a motion for reconsideration
and supplement to the motion for reconsideration. Petitioner's motion alleged that its failure
to furnish the NLRC and the respondents with copies of the petition was due to "an honest
but excusable mistake in the interpretation and application of Section 6, Rule 65 of the
Rules of Court." It insisted that its interpretation of the provision was that the copies of the
petition would be furnished to the NLRC and the respondents only after the Court of Appeals
finds its petition to be sufficient in form and substance.

On September 24, 1999, the appeals court denied petitioner's motion for reconsideration for
lack of merit, stating that it was bound by the negligence and mistake of its counsel and,
likewise, denied its prayer for the issuance of a temporary restraining order for being moot
and academic. Petitioner received a copy of the said Resolution on October 13, 1999. On
October 21, 1999, petitioner's former counsel filed a notice of withdrawal of appearance. On
the same day, October 21, 1999, petitioner's new counsel filed an entry of appearance and
sought another reconsideration invoking substantial justice and its subsequent compliance
with the procedural rules. On October 27, 1999, the CA denied the second motion for
reconsideration for being a prohibited pleading under Section 2, Rule 52 of the Rules of
Court. Petitioner received a copy of the Resolution on November 8, 1999. On November 17,
1999, petitioner filed with this Court its Petition for Certiorari under Rule 65 of the Rules of
Court.

The petition is based on a misapprehension of procedural rules. It bears stressing that when
petitioner, on October 13, 1999, received a copy of the CA Resolution dated September 24,
1999 denying its motion for reconsideration, it had fifteen (15) days from receipt thereof
within which to file a Petition for Review on Certiorariunder Sections 1 and 2, Rule 45 of the
Rules of Court. Section 2 thereof also allows petitioner to file, within the 15-day period, a
motion for extension of time of thirty (30) days within which to file such petition. This is
because the CA Resolution dated March 16, 1999 which outrightly dismissed its petition for
non-compliance with the procedural rules, and the Resolution dated September 24, 1999,
which denied its motion for reconsideration, partake of the nature of a final disposition of
the case. Hence, the appropriate remedy to this Court is a Petition for Review on
Certiorariunder Rule 45, not a Petition for Certiorariunder Rule 65. In this case, petitioner
filed a second motion for reconsideration which the CA correctly denied for being a
prohibited motion. The filing of a prohibited motion did not interrupt the running of the 15-
day reglementary period2 within which petitioner should have filed the petition under Rule
45.

This Petition for Certiorari under Rule 65 should, therefore, be dismissed for being the
wrong remedy. The rule is that the special civil action of certiorari under Rule 65 is not, and
cannot be, a substitute for a lost remedy of appeal, especially if the loss is occasioned by
the petitioner's own neglect or error in the choice of remedies. 3

Petitioner, however, invokes substantial justice on the reasoning that the failure of its
former counsel to furnish copies of the petition to the NLRC and the private respondents
was not due to an error of law, but to an error in the interpretation of the provision of
Section 6, Rule 65 of the Rules of Court which should be considered as an excusable
mistake.

The submission is untenable. Section 1, Rule 65 in relation to Section 3, Rule 46 of the

Rules of Court, clearly states that in a petition filed originally in the Court of Appeals, the
petitioner is required to serve copies of the petition, together with the annexes thereto, on
the lower court or tribunal concerned, in this case, the NLRC, and on the adverse parties,
the herein respondents, before the filing of said petition. The clear import of the provisions
does not reasonably admit of any other interpretation.

Finally, even if this Court were to treat the present petition as a Petition for Review on
Certiorari under Rule 45 and overlook its procedural infirmity, the same would still be
denied for lack of merit.

First. Petitioner asserts that through its General Manager, Marcelo Calacday, it had sent a
letter requiring the respondents to explain why it should not take disciplinary actions against
them for violation of company rules on absences and tardiness; that despite receipt of the
said letter, respondents did not submit any written explanation thereto; and that,
thereafter, it sent another letter informing them that they were deemed to have abandoned
their jobs.

These allegations have not been sufficiently proven. Under the Labor Code, there are twin
requirements to justify a valid dismissal from employment: (a) the dismissal must be for
any of the causes provided in Article 282 of the Labor Code (substantive aspect) and (b) the
employee must be given an opportunity to be heard and defend himself (procedural
aspect).4 As to procedural aspect, two notices are required: (a) written notice containing a
statement of the cause for termination, to afford the employee an opportunity to be heard
and defend himself with the assistance of his representative, if he desires; and (b) if the
employer decides to terminate the services of the employee, written notice must be given to
the employee stating clearly the reason therefor.5 The records reveal that petitioner did not

adduce evidence that it had served the respondents with copies of the memoranda (re
explanation for their unauthorized absences) and the subsequent memoranda (re its
decision to terminate their employment due to abandonment) and that the same were
actually received by each of the respondents. Petitioner's bare assertion failed to overcome
the declarations of the respondents that they never received copies of the memoranda.

Second. Petitioner maintains that it had validly dismissed the respondents for incurring
absences without filing the application for leave which was tantamount to an abandonment
of work and that the respondents did not report for work after the two memoranda had
been sent to them individually.

This contention has no merit. The substantive aspect for a valid dismissal provides that to
constitute abandonment of work, two (2) requisites must concur: (a) the employee must
have failed to report for work or must have been absent without justifiable reason; and (b)
there must have been a clear intention on the part of the employee to sever the employer-
employee relationship as manifested by overt acts. Abandonment as a just ground for
dismissal requires deliberate, unjustified refusal of the employee to resume his
employment. Mere absence or failure to report for work, after notice to return, is not
enough to amount to abandonment. Moreover, abandonment is a matter of intention; it
cannot be inferred or

presumed from equivocal acts. 6 In this case, respondents had sought permission and had
informed petitioner of their reasons for being absent and had reported back to petitioner's
office the following day. It cannot be said that respondents had abandoned their work
during the period the absences in question were incurred. It became a strange scenario for
them to be reporting for work early in the morning only to be told to wait for Ding who
would arrive at noon time. In the meantime, they were not even allowed to enter the
premises or do their assigned tasks. This being so, respondents sought recourse by filing an
illegal dismissal case against petitioner. Clearly, respondents never intended to sever the
employer-employee relation and abandon their work. On the contrary, they clearly showed
their desire to continue their employment with petitioner and to be reinstated to their
former positions. Indeed, an employee who loses no time in protesting his layoff cannot by
any reasoning be said to have abandoned his work, for it is well-settled that the filing by an
employee of a complaint for illegal dismissal with a prayer for reinstatement is proof enough
of his desire to return to work, thus, negating the employer's charge of abandonment. 7

All the antecedents show that petitioner had constructively dismissed the respondents.
Constructive dismissal is defined as quitting when continued employment is rendered
impossible, unreasonable or unlikely as the offer of employment involves a demotion in rank
and diminution of pay.8 In this case, respondents were deemed constructively dismissed
because whenever they would report for work in the morning, they were barred, without
any
justifiable reason, by petitioner's guard from entering the premises and were made to wait
for Ding who would arrive in the office at around noon, after they had waited for a long time
and had left.

Petitioner, therefore, failed to prove by clear and convincing evidence that there was just
cause for terminating the employment of respondents and that there was compliance with
the two-notice rule. Article 277(b) of the Labor Code places the burden of proving that the
termination of employment was for a valid or authorized cause on the employer. The
employer's failure to discharge this burden means that the dismissal is not justified and the
employee is entitled to reinstatement. In this case, petitioner failed to establish that
respondents deliberately and unjustifiably refused to resume their employment without any
intention of returning thereto.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to
reinstatement, without loss of seniority rights and other privileges, and to the payment of
his full backwages, inclusive of allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld up to the time of his actual
reinstatement.9 Thus, respondents are entitled to reinstatement with the payment of full
backwages from the time their compensations were withheld, i.e., from the time of their
illegal dismissal, up to the time of their actual reinstatement.

WHEREFORE, the petition is DISMISSED, without costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 148241. September 27, 2002

HANTEX TRADING CO., INC., and/or MARIANO CHUA, petitioners, vs. COURT OF
APPEALS, Special Former Tenth Division, and BERNARDO SINGSON, Respondents.

DECISION

BELLOSILLO, J.:

This petition seeks to review the Decision of the Court of Appeals 1 affirming in toto the
decision of the National Labor Relations Commission (NLRC), which in turn sustained the
Labor Arbiter's finding that respondent was illegally dismissed and therefore entitled to
reinstatement, backwages and 13th month pay.

Private respondent Bernardo Singson was employed by petitioner Hantex Trading Co., Inc.
(HANTEX) on 8 November 1994 as sales representative. HANTEX was engaged in selling
laminating machines and ID supplies. He was paid a regular salary of P165.00/day in
addition to P500.00 travelling allowance and a 3% - 5% commission from his sales.
Sometime in February 1996 the management of HANTEX called the attention of Singson
regarding his deteriorating sales performance. Despite thereof, Singson's performance
showed no sign of improvement as it remained inadequate and unsatisfactory. Thus,
HANTEX, through its president, petitioner Mariano Chua, held a "one-on-one" conference
with him on 5 August 1996.

The parties presented conflicting versions of what actually transpired during the conference.
Singson alleged that petitioner Mariano Chua asked for his resignation from the company,
and required him to submit a resignation letter otherwise his separation pay, 13th month
pay and other monetary benefits would not be paid. When he refused, petitioner Mariano
Chua ejected him from the premises of HANTEX and left instructions to the guards on-duty
to refuse him admittance.

On the other hand, petitioners denied that they dismissed Singson and maintained that the
conference was merely intended to motivate him "to exert more effort in his job and mend
his work attitude;" and that Singson apparently resented petitioner Chua for it that he never
reported back for work after the conference.

On 8 August 1996 Singson filed a complaint with the Labor Arbiter for illegal dismissal with
prayer for reinstatement asserting that he was dismissed from his employment without prior
notice and hearing.2 On the contrary, HANTEX averred that Singson was not dismissed but
abandoned his job after he was reprimanded.

On 5 May 1998 the Labor Arbiter rendered a decision finding private respondent Singson to
have been illegally dismissed and ordering HANTEX to reinstate him to his former or
substantially equivalent position, as well as to pay him P234,848.38 as backwages and
P8,992.60 as 13th month pay.3cräläwvirtualibräry

HANTEX appealed to the National Labor Relations Commission (NLRC), which affirmed the
Labor Arbiter's finding of illegal dismissal but ordered the reduction of backwages, holding
that the computation thereof should start not from the date complainant was hired in 1994
as held by the Labor Arbiter, but from the date he was illegally dismissed in 1996. The NLRC
observed -

The respondents would want us to believe that on August 5, 1996, they merely
reprimanded complainant for his poor performance (p. 10, Appeal, p. 109, Record).
However, they have not submitted any proof thereon, unlike on November 21, 1995 when
they sent him a memorandum, which he duly received, calling attention to his work
deportment x x x x Just because respondent asked him to assume duties during the hearing
before the Labor Arbiter on September 30, 1996 (p. 7, Record) does not necessarily prove
that they in fact did not dismiss him in the first place. On the contrary, that offer could be a
tacit admission of respondents that they erred in dismissing him verbally and without
observance of both substantive and procedural due process x x x x On the matter of
complainants alleged abandonment x x x x suffice it to say that his mere filing of a case for
illegal dismissal already negates the theory of abandonment x x x x However, we find merit
in respondents argument regarding the award of backwages. Indeed, it was glaring error to
base the computation thereof from the date complainant was hired in 1994. Rather, the
computation should start from the date he was found to have been illegally dismissed x x x
x 4cräläwvirtualibräry

On 8 June 2000 HANTEX and/or Mariano Chua, undaunted by reverses, elevated the case to
the Court of Appeals on a petition for certiorari 5 arguing that: (a) the complaint for illegal
dismissal was a mere ploy of private respondent to get back at them; (b) there was no
termination letter which is the best evidence of the alleged illegal dismissal, consequently,
the NLRC should have adjudged that private respondent was not dismissed but had
voluntarily abandoned his employment; and, (c) private respondent's rejection of
petitioners' offer for him to resume his employment during the preliminary conference
before the Labor Arbiter was an overt act of abandonment. The appellate court, however,
likewise ruled against petitioners -

An ordinary member of the working class will not put at stake his primary source of income
just to satisfy his egoistic feeling of revenge. The expense of a protracted legal battle
against a well-equipped employer coupled with the uncertainty of winning and the prospect
of a prolonged unemployment are factors that negate petitioners supposition. Furthermore,
a letter of dismissal is not the only material evidence to establish the fact of termination.
For in cases of constructive dismissal, as when the employee was compelled to resign
because continued employment has become impossible, unreasonable and unlikely, his
quitting his job amounts to constructive discharge or illegal dismissal. Likewise, we find
petitioners argument in support of their abandonment theory as misplaced x x x that offer
could be a tacit admission of petitioners that they erred in dismissing him verbally and
without observance of both substantive and procedural due process x x x x

Its motion for reconsideration having been denied by the Court of Appeals on 10 May 2001,
petitioners now hope to secure relief from this Court. Relying once more on their defense of
abandonment, petitioners insist that other than the bare allegations of private respondent
that he was illegally dismissed, the records are bereft of any evidence to prove that
petitioners indeed terminated his services; that moreover, no notice or letter of dismissal
was ever issued by petitioners to private respondent, as there was no intent to dismiss him
when he was called to a conference on 5 August 1996; and, that he was not prevented from
returning to work as in fact he was asked repeatedly to return to work, but he defiantly
refused to do so.

To avoid delay in the disposition of the case, it appearing from the records that the parties
had already fully ventilated and exhaustively argued their respective positions before the
Labor Arbiter, the NLRC and the Court of Appeals, and even before this Court, through their
respective petition, comment and reply, we dispensed with the usual practice of requiring
the parties to submit their memoranda and would now proceed to decide the case.

The pivotal issue in the present recourse is whether private respondent Bernardo Singson
deliberately abandoned his employment, or was illegally dismissed by the management of
petitioner HANTEX.

We deny the petition. Plainly, the petition raises a fundamentally factual issue, which we are
not at liberty to review because our jurisdiction is limited to reviewing errors of law that
may have been committed by the lower court. The resolution of factual questions is the
primary and often the final task of lower courts. This Court is not a trier of facts and it is not
our function to examine and evaluate all over again the probative value of all evidence
presented to the concerned tribunal which formed the basis of its impugned decision,
resolution or order.6cräläwvirtualibräry

We reiterate time and again the much-repeated but not so well-heeded rule that findings of
fact of the Court of Appeals, particularly where it is in absolute agreement with that of the
NLRC and the Labor Arbiter, as in this case, are accorded not only respect but even finality
and are deemed binding upon this Court so long as they are supported by substantial
evidence.7cräläwvirtualibräry

In any event, we waded into the records of this case and found no compelling reason to
disturb the unanimous findings and conclusions of the Court of Appeals, NLRC and the Labor
Arbiter. Indeed, petitioners' persistent refrain, ad nauseam,that private respondent Singson
was not dismissed but voluntarily abandoned his employment, fails to persuade.

Considering the hard times in which we are in, it is incongruous for respondent to simply
give up his work after receiving a mere reprimand from his employer. No employee would
recklessly abandon his job knowing fully well the acute unemployment problem and the
difficulty of looking for a means of livelihood nowadays. With a family to support, we doubt
very much that respondent would so easily sacrifice his only source of income and unduly
expose his family to hunger and untold hardships. Certainly, no man in his right mind would
do such thing.

What is more telling is that on 8 June 1996, or three (3) days after his employment was
terminated, respondent immediately instituted the instant case for illegal dismissal with a
prayer for reinstatement against his employer. An employee who loses no time in protesting
his layoff cannot by any reasoning be said to have abandoned his work, for it is already a
well-settled doctrine that the filing by an employee of a complaint for illegal dismissal with a
prayer for reinstatement is proof enough of his desire to return to work, thus negating the
employer's charge of abandonment. Verily, it would be illogical for respondent Singson to
have left his job and thereafter file the complaint against his employer. As we held in Villar
v. National Labor Relations Commission 8 -

x x x x It is clear from the records that sometime in August 1994, immediately after
petitioners supposedly refused to work having lost earlier in the certification election,
several complaints for illegal dismissal against HI-TECH were filed by petitioners. These are
sufficient proofs that they were never guilty of leaving their jobs. The concept of
abandonment of work is inconsistent with the immediate filing of complaints for illegal
dismissal. An employee who took steps to protest his layoff could not by any logic be said to
have abandoned his work.

Abandonment is a matter of intention and cannot lightly be presumed from certain equivocal
acts. For abandonment to exist, it is essential (a) that the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and, (b) that
there must have been a clear intention to sever the employer-employee relationship
manifested by some overt acts - the second element is the more determinative factor. Mere
absence of the employee is not sufficient. The burden of proof is on the employer to show a
clear and deliberate intent on the part of the employee to discontinue employment without
any intention of returning.

Petitioners dismally failed to discharge their burden. Their evidence, consisting entirely of
cash vouchers of respondent SINGSON and his co-salesman Raul Hista, for the months of
May, June and July 1996,9 is grossly anemic - if not totally irrelevant - to establish that
respondent Singson indeed deliberately and unjustifiably abandoned his job. At best, these
cash vouchers merely show respondent's lackluster performance during those months, and
that he paled in comparison with his co-salesman Raul Hista in terms of sales output. As
astutely observed by the Court of Appeals -

x x x x Neither can we see any evidentiary relevance of the vouchers of Raul Hista in
comparison with that of private respondent. They do not in any way vouch petitioners claim
of abandonment nor do they refute the fact that private respondent was illegally dismissed
because of petitioners failure to observe the substantive as well as the procedural
requirements of the law. If at all, they merely show the unsatisfactory performance of
private respondent which does not in any way authorizes the abrupt dismissal of private
respondent sans observance of due process.

At any rate, petitioners undoubtedly could have presented better evidence to buttress their
claim of abandonment. After all, being the employers, they are in possession of documents
relevant to this case. For instance, they could have at least presented in evidence copies of
respondent's daily time records, which are on-file in its office, to prove the dates respondent
was on AWOL (absence without leave); or any letter wherein they required respondent to
report for work and explain his unauthorized absences. But, as it is, petitioners' defense of
abandonment cannot be given credence for lack of evidentiary support.

Petitioners maintain that during the initial hearing before Labor Arbiter Bugarin on 30
September 1996 they made an offer to reinstate private respondent to his former position,
but he "defiantly" refused the offer despite the fact that in his complaint he was asking for
reinstatement. Again, petitioners extended the offer in their position paper filed with the
Labor Arbiter but was likewise rejected by respondent. They assert that these circumstances
are clear indications of respondent's lack of further interest to work and effectively negate
respondent's claim of illegal dismissal.

We hold otherwise. As we see it, respondent's refusal to be reinstated is more of a symptom

of strained relations between the parties, rather than an indicium of abandonment of work
as obstinately insisted by petitioners. While respondent desires to have his job back, it must
have later dawned on him that the filing of the complaint for illegal dismissal and the bitter
incidents that followed have sundered the erstwhile harmonious relationship between the
parties. Respondent must have surely realized that even if reinstated, he will find it
uncomfortable to continue working under the hostile eyes of the employer who had been
forced to reinstate him. He had every reason to fear that if he accepted petitioners' offer,
their watchful eyes would thereafter be focused on him, to detect every small shortcoming
of his as a ground for vindictive disciplinary action. 10 In such instance, reinstatement would
no longer be beneficial to him.

Neither does the fact that petitioners made offers to reinstaterespondent legally disproves
illegal dismissal. We agree with the observation of the Court of Appeals that the offer may
very well be "a tacit admission of petitioners that they erred in dismissing him verbally and
without observance of both substantive and procedural due process." Curiously, petitioners'
offer of reinstatement was made only after more than one (1) month from the date of the
filing of the illegal dismissal case. Their belated gesture of goodwill is highly suspect. If
petitioners were indeed sincere in inviting respondent back to work in the company, they
could have made the offer much sooner. In any case, their intentions in making the offer
are immaterial, for the offer to re-employ respondent could not have the effect of validating
an otherwise arbitrary dismissal.

In sum, we are convinced that respondent did not quit his job as insisted by petitioners, but
was unceremoniously dismissed therefrom without observing the twin requirements of due
process, i.e., due notice and hearing. While we recognize the right of the employer to
terminate the services of an employee for a just or authorized cause, nevertheless, the
dismissal of employees must be made within the parameters of law and pursuant to the
tenets of equity and fair play. Truly, the employer's power to discipline its workers may not
be exercised in an arbitrary manner as to erode the constitutional guarantee of security of
tenure.

Whatever doubts, uncertainties or ambiguities remain in this case should ultimately be

resolved in favor of the worker in line with the social justice policy of our labor laws and the
Constitution. The consistent rule is that the employer must affirmatively show rationally
adequate evidence that the dismissal was for a justifiable cause, failing in which makes the
termination illegal.

Upon the foregoing considerations, the normal consequences of respondent's illegal

dismissal are reinstatement without loss of seniority rights, and payment of back wages
computed from the time his compensation was withheld from him, that is, 5 August 1996,
up to the date of his actual reinstatement. These remedies give life to the workers'
constitutional right to security of tenure. However, under the circumstances, reinstatement
would be impractical and would hardly promote the best interest of the parties. As
heretofore discussed, the resentment and enmity between HANTEX and Singson which
culminated in and was compounded by the illegal dismissal suit necessarily strained the
relationship between them or even provoked antipathy and antagonism. 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. This has been our
consistent ruling in the award of separation pay to illegally dismissed employees in lieu of
reinstatement.11cräläwvirtualibräry

WHEREFORE, the petition is DENIED and the assailed decision dated 23 October 2000 of
the Court of Appeals is AFFIRMED. Petitioners Hantex Trading Co., Inc., and Mariano Chua
are directed jointly and severally to pay respondent Bernardo Singson separation pay in lieu
of reinstatement in the amount equivalent to one (1) month pay for every year of service,
backwages computed from 5 August 2002, the time his compensation was withheld from
him, up to the finality of this decision, plus the accrued 13th month pay.

SO ORDERED.

THIRD DIVISION

G. R. No. 145800 - January 22, 2003

CENTRAL PANGASINAN ELECTRIC COOPERATIVE, INC., Petitioner, vs.GERONIMA

MACARAEG and MARIBETH DE VERA, Respondents.

PUNO, J.:

In this petition for review on certiorari, petitioner Central Pangasinan Electric Cooperative,
Inc. challenges the decision of the Court of Appeals in CA-G.R. SP No. 55128 affirming the
decision of the voluntary arbitrator in NCMB-RBI-PM-VA-5-03-99 ordering the reinstatement
of respondents to petitioners employ and payment of their backwages.

Petitioner is an electric cooperative duly organized and existing under Philippine laws.
Respondent Geronima Macaraeg and Maribeth de Vera are employees of petitioner at its
office in Area V, Bayambang, Pangasinan. Respondent de Vera was employed as teller
whose primary duty was to accept payments from petitioners consumers in Bayambang and
remit her collections to the cashier, herein co-respondent Geronima Macaraeg. Respondent
Macaraegs duty was to deposit the daily collections of the office to petitioners account at the
Rural Bank of Central Pangasinan in Bayambang.

From January 1998 to January 1999, respondent de Vera accommodated and encashed the
crossed checks of her sister, Evelyn Joy Estrada. Evelyn issued two hundred eleven (211)
crossed checks amounting to P6,945,128.95 payable to petitioner cooperative despite the
absence of any transaction or any outstanding obligation with petitioner. In turn,
respondent de Vera, with the knowledge and consent of respondent Macaraeg, paid the full
value of these checks from the cash collections of petitioner. At the end of the day,
respondents credited the checks as part of their collection and deposited the same together
with their cash collection to the account of petitioner at the Rural Bank of Central
Pangasinan.

Sometime in January 1999, petitioner, through its Finance Department, noticed that several
checks payable to petitioner from the collections in the Area V office were returned due to
insufficiency of funds.
On January 19, 1999, Josefina Mandapat, Sandra Frias and Marites Radac, petitioners
Finance Manager, Chief Accountant and Legal Assistant, respectively, confronted
respondents with their discovery. Respondent de Vera admitted that the checks were issued
by her sister and that she encashed them from the money collected from petitioners
customers.

On January 21, 1999, Mrs. Josefina Mandapat submitted a memorandum to petitioners

General Manager, Salvador M. de Guzman, detailing their findings about the bounced
checks. On February 2, 1999, she submitted an addendum to her memorandum.

On February 4, 1999, petitioner, through de Guzman, issued a memorandum to

respondents placing them under preventive suspension and requiring them to explain in
writing within forty-eight (48) hours why they misappropriated cooperative funds. In the
same communication, a hearing was set on February 13, 1999 at 9:30 a.m. at the Board
Room of petitioner before Atty. Teodoro Fernandez.

In their respective Answers/Explanations, respondents denied having misappropriated the

funds of petitioner cooperative. They alleged that: (1) the checks that bounced were
redeposited with the Rural Bank of Central Pangasinan; (2) the amount representing the
face value of the checks had been used by petitioner as of December 15, 1998; (3) there
was never any shortage in the cooperative money or funds in their possession; and (4) they
never violated any policy of the cooperative and on the contrary, they have been very
religious in remitting the funds and money of petitioner.1

At the scheduled hearing on February 13, 1999, respondents, with assistance of counsel,
appeared before Atty. Teodoro Fernandez. Respondent de Vera testified and admitted that
she encashed the checks of Evelyn Joy Estrada because the latter is her older sister and
that she has a soft spot for her; that Mrs. Estrada owns a sash factory and that she merely
wanted to help her sister meet her business obligations; that sometime in November 1998,
Mrs. Marites Radoc, Chief Accountant of petitioner, called her attention to one check which
bounced thrice; that this check was eventually replaced by her sister with cash; that despite
the bouncing of some other checks, all checks were eventually funded and paid to
petitioner, hence, petitioner incurred no losses in its collections; that she has worked for
petitioner for nineteen (19) years and this is the first time she has been charged
administratively by petitioner.

Respondent Macaraeg admitted that she knew of the accommodations given by respondent
de Vera to her sister; that she allowed her subordinate to do it because respondent de Vera
is her kumare, and that she knew that Mrs. Estradas checks were sufficiently funded. She
worked for petitioner for twenty-two (22) years and has never had an administrative
charge.

Mrs. Josefina Mandapat, Finance Manager of petitioner, testified as petitioners witness. She
stated that she prepared a report on the findings of their accountant regarding the
encashment of Evelyn Joy Estradas checks, and that the encashment of said checks is
prohibited under an office memorandum.

On March 10, 1999, Atty. Fernandez submitted his findings to the General Manager of
petitioner. On March 19, 1999, on the basis of said findings and recommendation, the
General Manager issued to respondents separate notices of termination, effective April 9,
1999, for "serious misconduct, and breach of trust and confidence reposed on them by
management."2

Respondents, with the help of the President and representative of the Union, Central
Pangasinan Electric Cooperative (CENPELCO) Employees Association-Tupas Local Chapter
No. R01-0012, questioned their dismissal before the National Conciliation and Mediation
Board (NCMB). They claimed that their dismissal was without just cause and in violation of
the Collective Bargaining Agreement (CBA), which requires that the case should first be
brought before a grievance committee. Eventually, the parties agreed to submit the case to
a voluntary arbitrator for arbitration.

On August 12, 1999, the voluntary arbitrator rendered a decision in favor of respondents,
viz.:

"WHEREFORE, in view of the foregoing, the undersigned arbitrator finds and so

holds:

(1) That the parties failed to comply with the provisions of the
GRIEVANCE PROCEDURE of the Collective Bargaining Agreement;

(2) Reinstate immediately upon receipt of the Decision complainants

GERONIMA MACARAEG and MARIBETH DE VERA to their former
positions without loss of seniority rights;

(3) Pay complainants their backwages to be reckoned from the time

their employment has been [sic] illegally terminated up to their
actual reinstatement based on their last salary.

Parties are hereby enjoined to be faithful with their commitment to abide by this
Decision which under their Collective Bargaining Agreement is final, executory
and not subject to appeal.

SO ORDERED."3

Petitioner appealed to the Court of Appeals via a petition for review. On August 17, 2000,
the Court of Appeals rendered a decision dismissing the petition and affirming the decision
of the voluntary arbitrator. Hence, the present course of action.

Petitioner claims that:

"(1) The Honorable Court of Appeals gravely abused its discretion in finding that
the procedure leading to the termination of respondents Maribeth de Vera and
Geronima Macaraeg was in violation of the provisions of the Collective
Bargaining Agreement (CBA) particularly Steps 1-4, Article XIII of the said
Agreement.

(2) The Honorable Court of Appeals gravely abused its discretion in holding that
petitioner illegally terminated the services of herein private respondents." 4

The petition is impressed with merit.

At the outset, we hold that the first issue raised in the petition pertaining to the alleged
violation of the CBA grievance procedure is moot and academic. The parties active
participation in the voluntary arbitration proceedings, and their failure to insist that the case
be remanded to the grievance machinery, shows a clear intention on their part to have the
issue of respondents illegal dismissal directly resolved by the voluntary arbitrator. We
therefore find it unnecessary to rule on the matter in light of their preference to bring the
illegal dismissal dispute to voluntary arbitration without passing through the grievance
machinery.

This leads us to the next issue of whether respondents were validly dismissed. To constitute
a valid dismissal from employment, two requisites must be met, namely: (1) it must be for
a just or authorized cause, and (2) the employee must be afforded due process. 5

We hold that there exist a valid reason to dismiss both employees. Article 282(c) of the
Labor Code allows an employer to dismiss employees for willful breach of trust or loss of
confidence.6 Proof beyond reasonable doubt of their misconduct is not required, it being
sufficient that there is some basis for the same or that the employer has reasonable ground
to believe that they are responsible for the misconduct and their participation therein
rendered them unworthy of the trust and confidence demanded of their position. 7

To be sure, the acts of the respondents were clearly inimical to the financial interest of the
petitioner. During the investigation, they admitted accommodating Evelyn Joy Estrada by
encashing her checks from its funds. They did so without petitioners knowledge, much less
its permission. These inimical acts lasted for more than a year, and probably would have
continued had it not been discovered in time. All along, they were aware that these acts
were prohibited by the Coop Checks Policy. 8Clearly, there was willful breach of trust on the
respondents part, as they took advantage of their highly sensitive positions to violate their
duties.

Moreover, the acts of the respondents caused damage to the petitioner. During those times
the checks were illegally encashed, petitioner was not able to fully utilize the collections,
primarily in servicing its debts. In her memorandum 9 dated January 21, 1999, Finance
Manager Josefina Mandapat reported how petitioner is prejudiced, thus:

"Though the checks were funded, it constitutes a violation of Coop Policy.

Checks that are covered even by local clearing only take three days to be
converted to cash and when returned another three (3) days to retry clearing.
The cooperative is deprived of the privilege to maximize use of its collections
primarily in servicing its debts considering the state of calamity and even at the
moment wherein we worry every time if we can payoff (sic) our NAPOCOR
power bill."10

It is not material that they did not "misappropriate any amount of money, nor incur any
shortage relative to the funds in their possession."11 The basic premise for dismissal on the
ground of loss of confidence is that the employees concerned hold positions of trust. The
betrayal of this trust is the essence of the offence for which an employee is penalized. 12 In
the case at bar, the respondents held positions of utmost trust and confidence. As teller 13
and cashier,14 respectively, they are expected to possess a high degree of fidelity. They are
entrusted with a considerable amount of cash. Respondent de Vera accepted payments from
petitioners consumers while respondent Macaraeg received remittances for deposit at
petitioners bank. They did not live up to their duties and obligations.

Nor is there any doubt that petitioner observed procedural due process in dismissing the
respondents. In separate memoranda dated February 4, 1999 and signed by the General
Manager ( de Guzman), the respondents were both appraised of the particular acts or
omissions constituting the charges against them. They gave their own "answer/explanation"
to the charges. They participated in the investigation conducted at petitioners board room
on February 13, 1999 at 11:30 a.m. They were represented by counsel during the
investigation. Finally, notices were sent to them on March 19, 1999, informing them of the
basis of their termination. In fine, private respondents were given due process before they
were dismissed. Time and again, we have stressed that due process is simply an
opportunity to be heard.15

We are aware that the respondents Macaraeg and de Vera have been employed with the
petitioner for 22 and 19 years of continuous service, respectively, and this is the first time
that either of them has been administratively charged. Nonetheless, it is our considered
view that their dismissal is justified considering the breach of trust they have committed.
Well to emphasize, the longer an employee stays in the service of the company, the greater
is his responsibility for knowledge and compliance with the norms of conduct and the code
of discipline in the company. 16Considering that they have mishandled the funds of the
cooperative and the danger they have posed to its members, their reinstatement is neither
sound in reason nor just in principle. It is irreconcilable with trust and confidence that has
been irretrievably lost.17

IN VIEW WHEREOF, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 55128 (affirming the decision of the voluntary arbitrator in
NCMB-RBI-PM-VA-5-03-99) are reversed and set aside.

SO ORDERED

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 184011 September 18, 2013

REYNALDO HAYAN MOYA, Petitioner,

vs.

FIRST SOLID RUBBER INDUSTRIES, INC., Respondent.

DECISION

PEREZ, J.:

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

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

The facts as gathered by this Court follow:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In justifying his decision, the Labor Arbiter explained that the length of time during which the complainant
was deprived of employment was sufficient penalty for the act he had committed against the company. As
a result, his reinstatement without backwages to his former position was in order. However, since the
employment was already strained and Moya was no longer seeking to be reinstated, he decided that it
was for the best interest of both parties to award instead a separation pay of one (1) month salary for
every year of credited service less the total of cash advances of the complainant amounting to
₱19,000.00.20

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

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

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

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

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

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

In his Comment28 and Memorandum,29 Moya capitalized on the pronouncement of the Labor Arbiter that
his alleged infraction does not merit a penalty of dismissal from service given his length of service to the
company as well as the failure of the company to prove that he acted maliciously and with the intention to
cause damage.

First Solid, in its Reply 30 and Memorandum,31 argued that Moya, being a supervisor, the company reposed
on him its trust and confidence. He was expected to remain loyal and trustworthy and promote the best
interest of the company. His act of concealing, by making a fraudulent report to the company regarding
the transgression of the machine operator under him, is a valid basis for dismissal based on breach of
trust and confidence. The company further contended that the award of separation pay made by the labor
tribunals was contrary to law and jurisprudence.

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

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

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

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

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

The Court’s Ruling

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

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

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

In a number of cases,34 this Court put emphasis on the right of an employer to exercise its management
prerogative in dealing with its company’s affairs including its right to dismiss its erring employees. We
recognized the right of the employer to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline, and dismissal and recall of workers. 35 It is a
general principle of labor law to discourage interference with an employer’s judgment in the conduct of his
business. As already noted, even as the law is solicitous of the welfare of the employees, it also
recognizes employer’s exercise of management prerogatives. As long as the company’s exercise of
judgment is in good faith to advance its interest and not for the purpose of defeating or circumventing the
rights of employees under the laws or valid agreements, such exercise will be upheld. 36
Following the ruling in The Coca-Cola Export Corporation v. Gacayan, 37 the employers have a right to
impose a penalty of dismissal on employees by reason of loss of trust and confidence. More so, in the
case of supervisors or personnel occupying positions of responsibility, does loss of trust justify
termination. Loss of confidence as a just cause for termination of employment is premised on the fact that
an employee concerned holds a position of trust and confidence. This situation holds where a person is
entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the
employer’s property. But, in order to constitute a just cause for dismissal, the act complained of must be
"work-related" such as would show the employee concerned to be unfit to continue working for the
employer.38

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

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

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

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

The PLDT case further elucidates why an erring employee could not benefit under the cloak of social
justice in the award of separation pay, we quote:

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

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

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

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

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

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 167727 July 30, 2007

CRAYONS PROCESSING, INC., Petitioner,

vs.

FELIPE PULA and COURT OF APPEALS (Fifth Division), Respondents.

DECISION

Tinga, J.:

The key facts are undisputed.

Petitioner Crayons Processing, Inc. (Crayons) employed respondent Felipe Pula (Pula) as a Preparation
Machine Operator beginning June 1993. On 27 November 1999, Pula, then aged 34,

suffered a heart attack and was rushed to the hospital, where he was confined for around a week. Pula’s
wife duly notified Crayons of her husband’s medical condition. 1

Upon his discharge from the hospital, Pula was advised by his attending physician to take a leave of
absence from work and rest for three (3) months. Subsequently, on 25 February 2000, Pula underwent an
Angiogram Test at the Philippine Heart Center under the supervision of a Dr. Recto, who advised him to
take a two-week leave from work.2

Following the angiogram procedure, respondent was certified as "fit to work" by Dr. Recto. On 11 April
2000, Pula returned to work, but 13 days later, he was taken to the company clinic after complaining of
dizziness. Diagnosed as having suffered a relapse, he was advised by his physician to take a leave of
absence from work for one (1) month.

Pula reported back for work on 13 June 2000, armed with a certification from his physician that he was "fit
to work." However, Pula claimed that he was not given any post or assignment, but instead, on 20 June
2000, he was asked to resign with an offer from Crayons of ₱12,000 as financial assistance. 3 Pula
refused the offer and instead filed a complaint for illegal dismissal with prayer for damages and the
payment of holiday premium, 5 days service incentive leave pay, and 13th month pay for 1999. The
complaint was filed against Crayons, Clothman Knitting Corp., Nixon Lee, Paul Lee, Peter Su, and Ellen
Caluag.4

It appears that Crayons and the other named respondents in the complaint, except one, failed to appear
during the preliminary conferences and the hearings. Only Nixon Lee appeared before the National Labor
Relations Commission (NLRC) but only to manifest that he should be excluded from the complaint as he
had no hand in the management of the employees and that there was an intra-corporate squabble
between him and his co-respondents Peter Su and Paul Lee, who had denied him access to the company
premises. Despite their previous non-appearance, the other respondents belatedly filed a Position Paper
alleging that Pula had not been dismissed at all, but had only been offered a less strenuous job. They
prayed that Pula be ordered to report for work without loss of seniority rights. 5

In a Decision6 dated 20 November 2001, Labor Arbiter Marita V. Padolina ruled that Pula had been
illegally dismissed and ordered reinstatement to his former position without loss of seniority rights. Pula
was awarded backwages computed from the time of his dismissal on 20 June 2000, as well as service
incentive leave pay, 13th month pay, and attorney’s fees.

The Labor Arbiter took Crayons and its co-respondents to task for failing to participate in the proceedings
despite notice, and for belatedly filing their Position Paper which contained "bare denials and
unsubstantiated allegations."7She described their claim of non-dismissal as "a deleterious scheme" and a
"last-ditch effort…in order for [the Labor Arbiter] to treat the case as water under the bridge." 8 Instead, the
Labor Arbiter concluded as evident from the facts that Pula was illegally dismissed and "denied his right to
security of tenure when he was not allowed to work on 13 June 2000." 9 Rejecting Crayons’ contention that
Pula’s ailment was a proper reason to dismiss him, the Labor Arbiter stressed that no evidence was
presented to show that his illness could not be cured within the period of six months. It was pointed out
that under Section 8, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code, implementing
in particular Article 284 of the Labor Code, termination on the ground of disease is prohibited 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 months even with proper medical treatment. 10

On appeal, the NLRC ruled, in a Decision dated 18 March 2003, 11 that there was indeed valid cause to
terminate Pula’s employment considering that he had a heart attack that kept him out of work for more
than six (6) months. According to the NLRC, the fact that Pula was on leave for more than six months due
to his illness rendered unnecessary the certification from a public health authority as required under the
Omnibus Implementing Rules. As a result, the Labor Arbiter ruled that the dismissal was valid, although
respondent was entitled to separation pay in accordance with Article 284 of the Labor Code.

Pula assailed the NLRC Decision by way of a special civil action for certiorari before the Court of Appeals.
In a Decision12 dated 25 October 2004, the Court of Appeals annulled the NLRC Decision and reinstated
the ruling of the Labor Arbiter.

In favoring Pula, the appellate court gave credence to his claims over that of Crayons, particularly
stressing that Crayons failed to specifically deny respondent’s allegations that he was no longer given any
assignment by Crayons after he had reported back for work on 13 June 2000, and that he was asked to
resign on 20 June 2000. The Court of Appeals thus engaged the suppletory application of Section 11,
Rule 8 of the 1997 Rules of Civil Procedure, which provides in essence that material allegations in the
complaint which are not specifically denied are deemed admitted.

The Court of Appeals did observe that Crayons, in its Comment 13 before the appellate court, attached a
report14prepared by Ellen Caluag, Crayons’ HRD Head. The report narrated that during the time Pula was
purportedly dismissed, Crayons had told him that it was willing to allow him to return to work, provided
that he undergo a medical examination by a certain Dr. Ting, who was to prepare a certification as to his
fitness to return to work. Allegedly, after Pula had an initial consultation with Dr. Ting, he failed to submit
the medical findings prepared by the Philippine Heart Center which would serve as basis for the medical
certification. Instead, Pula filed the instant complaint for illegal dismissal. Nonetheless, the Court of
Appeals refused to give weight to the report prepared by Caluag, noting that not having been
acknowledged before a notary public, it was hearsay and of nil probative value. 15

Before this Court, Crayons argues that the Court of Appeals erred in dismissing the Caluag Report,
saying that the refusal to entertain the same was prejudicial to its substantial rights. 16 Crayons also claims
that "[it] was merely exercising prudence in not giving [Pula] work on June 13, 2000;" 17 that the medical
certification attesting to his fitness to return to work then "did not guarantee [Pula’s] fitness to work," 18 and;
that the situation dictated that it exercise prudence and exert every effort "to ascertain the health condition
of [Pula], thus prompting [Crayon’s] referral to its company doctor, Dr. Ting." 19 Assuming arguendo that
Pula was indeed terminated on 13 June 2000, Crayons argues that the NLRC correctly ruled that there
was valid cause to terminate respondent’s employment 20owing to his medical condition, in accordance
with Article 284 of the Labor Code and its implementing rules. Betraying its real motivation behind the
"assuming arguendo" ploy, Crayons prays for the reinstatement of the NLRC decision upholding the
termination of Pula under Article 284 of the Labor Code. 21

We begin first by upholding the Court of Appeals when it refused to give credence to the Caluag report. It
appears that this report emerged at first instance only in the proceedings before the Court of Appeals. No
reference was made to it before the Labor Arbiter or the NLRC. The report, as attached to Crayons’
Comment before the Court of Appeals, is undated and unverified. It is addressed to no one in particular,
certainly not to any court or tribunal, and is not accompanied by any motion or pleading seeking its
admission as evidence. It is, as the Court of Appeals ruled, hearsay in character. It could have easily been
introduced in evidence before the Labor Arbiter. Caluag herself could have likewise easily appeared
before the Labor Arbiter herself to give testimony or otherwise verify under oath the contents of such
report, especially since she herself was named as a respondent in the complaint. Yet Crayons and Caluag
did neither, limiting their participation before the Labor Arbiter to a three (3)-page, seven (7)-paragraph
Position Paper22 that stands out as a classic example of a pro forma pleading, and which was, to boot,
filed five (5) months late.

Before this Court, Crayons is all too willing to stress the neglect in the handling of the case by the former
counsel of [Crayons] who represented it before the Labor Arbiter. Yet the general rule is that the client is
bound by the mistakes of his counsel, save when the negligence of counsel is so gross, reckless and
inexcusable that the client is deprived of his day in court. 23 Espinosa v. Court of Appeals 24 explicates the
requisite character of counsel’s negligence that would be sufficient to excuse the client from the
consequences thereof.

Citing the cases of Legarda v. Court of Appeals and Alabanzas v. IAC[,] Espinosa invokes the exception
to the general rule that a client need not be bound by the actions of counsel who is grossly and palpably
negligent. These very cases cited demonstrate why Atty. Castillon's acts hardly constitute gross or
palpable negligence. Legardaprovides a textbook example of gross negligence on the part of the counsel.
The Court therein noted the following negligent acts of lawyer Antonio Coronel:

Petitioner's counsel is a well-known practicing lawyer and dean of a law school. It is to be expected that
he would extend the highest quality of service as a lawyer to the petitioner. Unfortunately, counsel
appears to have abandoned the cause of petitioner. After agreeing to defend the petitioner in the civil
case filed against her by private respondent, said counsel did nothing more than enter his appearance
and seek for an extension of time to file the answer. Nevertheless, he failed to file the answer. Hence,
petitioner was declared in default on motion of private respondent's counsel. After the evidence of private
respondent was received ex-parte, a judgment, was rendered by the trial court.

Said counsel for petitioner received a copy of the judgment but took no steps to have the same set aside
or to appeal therefrom. Thus, the judgment became final and executory.

Gross negligence on the part of the counsel in Legarda is clearly established, characterized by a series of
negligent omissions that led to a final executory judgment against the client, who never once got her side
aired before the court of law before finality of judgment set in. The actions of Atty. Castillon hardly
measure up to this standard of gross negligence exhibited in the Legarda case.lawphi1
On the other hand, in Alabanzas counsel failed to file an appellant's brief, thereby causing the dismissal
of the appeal before the Court of Appeals. Despite such inexcusable and fatal lapse, the Court ruled that it
was not sufficient to establish such gross or palpable negligence that justified a deviation from the rule
that clients should be bound by the acts and mistakes of their counsel. It strikes as odd that Espinosa
should cite Alabanzas in the first place, considering that the lapse of the counsel therein was far worse
than that imputed to Atty. Castillon, yet the Court anyway still refused to apply the exception to the general
rule.25

The failure of Crayons to submit any evidence worthy of credence to bolster its factual allegations stands
independent of the failures of its former counsel before the Labor Arbiter. It may have been a different
story had the Caluag report been verified under oath or submitted as an affidavit. Even if questions on its
admissibility past the Labor Arbiter stage of proceedings would linger, at least it would manifest some
good faith or earnest effort on the part of Crayons to submit credible evidence in support of its bare
allegations. Such a showing may be cause to mitigate the damage wrought by the negligence of its
former counsel. But instead, Crayons submitted a report with utterly no probative value.

As such, the factual version presented by Pula remains unrefuted, particularly the claim that he was no
longer given work after 13 June 2000 and that he was asked to resign seven (7) days later. Notably
though, even in the face of the foregoing facts, the NLRC still concluded that Pula’s termination was
proper. The NLRC was in error.

The termination as upheld by the NLRC was grounded on Article 284 of the Labor Code, which reads:

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: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of
at least six (6) months being considered as one (1) whole year.

The particular manner by which it is determined that the employee is suffering from the disease of such
character as expressed in Article 284 is in turn spelled out in Section 8, Rule I, Book VI of the Omnibus
Rules Implementing the Labor Code, which provides:

Sec. 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 co-
employees, 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.1awphi1 (Emphasis supplied)

For a dismissal on the ground of disease to be considered valid, two requisites must concur: (a) the
employee must be suffering from a disease which cannot be cured within six months and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees; and (b) a
certification to that effect must be issued by a competent public health authority. 26 The burden falls upon
the employer to establish these requisites, 27and in the absence of such certification, the dismissal must
necessarily be declared illegal.28 As succinctly stressed in Tan v. NLRC, 29 "it is only where there is a prior
certification from a competent public authority that the disease afflicting the employee sought to be
dismissed is of such nature or at such stage that it cannot be cured within six (6) months even with proper
medical treatment that the latter could be validly terminated from his job." 30

Without the required certification, the characterization or even diagnosis of the disease would primarily be
shaped according to the interests of the parties rather than the studied analysis of the appropriate medical
professionals. The requirement of a medical certificate under Article 284 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 in the protection of labor. 31

The NLRC’s conclusion that no such certification was required since Pula had effectively been absented
due to illness for more than six (6) months is unsupported by jurisprudence and plainly contrary to the
language of the Implementing Rules. The indefensibility of such conclusion is further heightened by the
fact that Pula was able to obtain two different medical certifications attesting to his fitness to resume

work. Assuming that the burden did fall on Pula to establish that he was fit to return to work, those two
medical certifications stand as incontestable in the absence of contrary evidence of similar nature from
Crayons. Then again, the burden lies solely on Crayons to prove that Pula was unfit to return to work. 32
Even absent the certifications favorable to Pula, Crayons would still be unable to justify his dismissal on
the ground of ill health or disease, without the necessary certificate from a competent public health
authority.

All told, we agree with the Court of Appeals that the reinstatement of the Decision of the Labor Arbiter is in
order.

WHEREFORE, the petition is DENIED. Costs against petitioner.

SO ORDERED.

DANTE O. TINGA

Associate Justice

WE CONCUR: