Arbiter, and the NLRC to exercise its appel-late jurisdiction, the

VOL. 535, OCTOBER 5, 2007 133

allegations in the complaint should show prima facie the concurrence of two
things, namely: (1) gross violation of the CBA; AND (2) the violation
San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-
pertains to the economic provisions of the CBA. (Emphasis and
PTWGO italics supplied) As reflected in the above-quoted allegations of the Union
in its Position Paper, the Union charges SMFI to have violated the
G.R. No. 168569. October 5, 2007. *

grievance machinery provision in the CBA. The grievance machinery

SAN MIGUEL FOODS, INC., petitioner, vs. SAN MIGUEL provision in the CBA is not an economic provision, however, hence, the
CORPORATION EMPLOYEES UNION-PTWGO, respondent. second requirement for a Labor Arbiter to exercise jurisdiction of a ULP is
not present.
Labor Law; Unfair Labor Practice; Jurisdictions; Pleadings and
Practice; In determining jurisdiction over a case, allegations made in the Same; Same; Same; Since the seniority rule in the promotion of
complaint, as well as those in the position paper, may be considered.—A employees has a bearing on salary and benefits, it may, following a liberal
perusal of the complaint shows that, indeed, the particular acts of ULP construction of Article 261 of the Labor Code, be considered an “economic
alleged to have been committed by SMFI were not specified; neither were provision” of the Collective Bargaining Agreement (CBA), an unfair labor
the ultimate facts in support thereof. In practice (ULP) over which the Labor Arbiter has jurisdiction.—Article 4 of
_______________
the Labor Code provides that “All doubts in the implementation and
interpretation of the provisions of this Code, including implementing rules
* SECOND DIVISION.
and regulations, shall be resolved in favor of labor.” Since the seniority rule
134
in the promotion of
135
134 SUPREME COURT REPORTS ANNOTATED
VOL. 535, OCTOBER 5, 2007 135
San Miguel Foods, Inc. vs. San Miguel Corporation Employees
Union-PTWGO San Miguel Foods, Inc. vs. San Miguel Corporation Employees
its Position Paper, however, the Union detailed the particular acts of Union-PTWGO
ULP attributed to SMFI and the ultimate facts in support thereof. Section
employees has a bearing on salary and benefits, it may, following a
7, Rule V of the New Rules of Procedure of the NLRC provides: Nature of
liberal construction of Article 261 of the Labor Code, be considered an
Proceedings.—The proceedings before the Labor Arbiter shall be
“economic provision” of the CBA. As above-stated, the Union charges SMFI
non-litigious in nature. Subject to the requirements of due process, the
to have promoted less senior employees, thus bypassing others who were
technicalities of law and procedure and the rules obtaining in the
more senior and equally or more qualified. It may not be seriously disputed
courts of law shall not strictly apply thereto. The Labor Arbiter may
that this charge is a gross or flagrant violation of the seniority rule under
avail himself of all reasonable means to ascertain the facts of the
the CBA, a ULP over which the Labor Arbiter has jurisdiction.
controversy speedily, including ocular inspection and examination of well-
informed persons. (Emphasis and italics supplied) Section 1 of Rule 8 of PETITION for review on certiorari of a decision of the Court of
the Rules of Court should thus not be strictly applied to a case filed before Appeals.
a Labor Arbiter. In determining jurisdiction over a case, allegations made
The facts are stated in the opinion of the Court.
in the complaint, as well as those in the position paper, may thus be
considered. De Lima and Meñez Law Offices for petitioner.
Same; Same; Same; The grievance machinery provision in the Jaime D. Lauron for respondent.
Collective Bargaining Agreement (CBA) is not an economic provision, hence,
CARPIO-MORALES, J.:
the second requirement for a Labor Arbiter to exercise jurisdiction of an
unfair labor practice (ULP) is not present.—In Silva v. NLRC, 274 SCRA
159 (1997), instructs that for a ULP case to be cognizable by the Labor
The present petition for review on certiorari raises the issue of whether against SMFI, its President Amadeo P. Veloso, and its Finance
5

respondent’s complaint is one for unfair labor practice (ULP) over Manager Montesa for “unfair labor practice, [and] unjust
which a Labor Arbiter has jurisdiction. discrimination in matters of promotion . . . ” It prayed that SMFI et al.
6

At the time material to the case, respondent, San Miguel be ordered to promote the therein named employees “with the
Corporation Employees Union—PTWGO (the Union), was the sole corresponding pay increases or adjustment including payment of salary
bargaining agent of all the monthly paid employees of petitioner San differentials plus attorney’s fees[,] and to cease and desist from
Miguel Foods, Incorporated (SMFI). On November 9, 1992, some committing the same unjust discrimination in matters of promo-tion.” 7

employees of SMFI’s Finance Department, through the Union _______________

represented by Edgar Moraleda, brought a grievance against Finance 2 Ibid.
Manager Gideon Montesa (Montesa), for “discrimination, favoritism, 3 Id., at pp. 35-39.
unfair labor practices, not flexible [sic], harassment, promoting 4 Id., at pp. 65-66.
divisiveness and sectarianism, etc.,” before SMFI Plant Operations
1
5 NLRC-NCR No. 00-10-06543-93; Records at pp. 2-4.
Manager George Nava in accordance with Step 1 of the grievance
Id., at p. 3.
machinery adopted in the Collective Bargaining Agreement (CBA)
6

forged by SMFI and the Union. 7 Ibid.

_______________ 137

Records, p. 33.
VOL. 535, OCTOBER 5, 2007 137
1

136
San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-
136 SUPREME COURT REPORTS ANNOTATED PTWGO
San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union- Instead of filing a position paper as required by the Labor Arbiter,
PTWGO SMFI et al. filed a motion to dismiss, contending that the issues raised
8

in the complaint were grievance issues and, therefore, “should be

The Union sought the “1. review, evaluat[ion] & upgrad[ing of] all resolved in the grievance machinery provided in [the] collective
Finance staff and 2. promot[ion of] G.Q. Montesa to other SMC bargaining agreements [sic]of the parties or in the mandated provision
affiliate[s] & subsidiaries.” 2

of voluntary arbitration which is also provided in the CBA.” The Union

9

At the grievance meeting held on January 14, 1993, SMFI informed opposed the motion to dismiss.
the Union that it planned to address the grievance through a “work In its Position Paper, the Union specified acts of ULP of SMFI, et al.
management review” which would be completed by March 1993, hence, under Article 248, paragraphs (e) and (i) of the Labor Code which 10

it asked the finance personnel to give it their attention and cooperation. Article reads:
The “work management review” was not completed by March 1993, “Art. 248. Unfair labor practices of employers.—It shall be unlawful for an
however, prompting the Union to, on March 26, 1993, elevate the employer to commit any of the following unfair labor practices:
grievance to Step 2. 3

xxxx
Almost nine months after the grievance meeting was held or on
(e) To discriminate in regard to wages, hours of work, and other terms
October 6, 1993, SMFI rendered a “Decision on Step 1 Grievance”
and conditions of employment in order to encourage or discourage
stating that it was still in the process of completing the “work
membership in any labor organization. x x x
management review,” hence, the Union’s requests could not be granted.
4

xxxx
The Union thereupon filed a complaint on October 20, 1993 before
the National Labor Relations Commission (NLRC), Arbitration Branch, (i) To violate a collective bargaining agreement.
 x x x x” . . . FINDING THAT SMFI’S ALLEGED VIOLATION OF THE CBA
CONSTITUTES UNFAIR LABOR PRACTICE.
By Order of February 18, 1994, the Labor Arbiter granted SMFI et al.’s
motion to dismiss and ordered the remand of the case to the grievance The jurisdiction of Labor Arbiters, enumerated in Article 217 of the
machinery for completion of the proceed-ings. The Union appealed the
11 Labor Code, includes complaints for ULP.
said order to the NLRC by “Motion for Reconsideration/Appeal” which
12
SMFI argues that the allegations in the Union’s complaint filed
its Second Division granted and accordingly ordered the Labor Arbiter before the Labor Arbiter do not establish a cause of ac-
to continue the proceedings on the Union’s complaint. SMFI, et
13

_______________
_______________
14G.R. No. 130866, September 16, 1998, 295 SCRA 494. [T]he Court En Bancdeclared that
8 Id., at pp. 20-29. all appeals from the NLRC to the Supreme Court [petition for certiorari under Rule 65 of the
9 Id., at pp. 26-27. 1997 Rules of Civil Procedure] should henceforth be initially filed in the Court of Appeals as
the appropriate forum for the relief desired in strict observance of the doctrine on the
10 Id., at pp. 46-54. hierarchy of courts.
11 Id., at pp. 81-82. Penned by Justice Roberto A. Barrios, and concurred in by Justices Bienvenido L. Reyes
15

and Edgardo F. Sundiam, CA Rollo, pp. 259-267.

12 Id., at pp. 87-89.
16 Rollo, pp. 47-50.
13 CA Rollo, pp. 32-35.
139
138

138 SUPREME COURT REPORTS ANNOTATED VOL. 535, OCTOBER 5, 2007 139

San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union- San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-
PTWGO PTWGO

al. filed a Motion for Reconsideration of the NLRC order but it was
denied, hence, they filed a petition for certiorari with this Court. After
the parties and the Solicitor General had filed their respective
pleadings, this Court, by Resolution of January 25, 1999, referred the
case to the Court of Appeals pursuant to St. Martin Funeral Home v.
NLRC. 14
By Decision of July 31, 2002, the Court of Appeals denied SMFI et
15
tion for ULP, the Union having merely contended that SMFI was guilty
thereof without specifying the ultimate facts upon which it was based.
It cites Section 1 of Rule 8 of the Rules of Court as applying suppletorily
to the proceedings before the Labor Arbiter, which Section reads:
“Section 1. In general.—Every pleading shall contain in a methodical and
logical form, a plain concise and direct statement of the ultimate facts on
which the party pleading relies for his claim . . .”

al.’s petition for certiorari, it holding that the Labor Arbiter has
jurisdiction over the complaint of the Union, they having violated the
seniority rule under the CBA by appointing and promoting certain
employees which amounted to a ULP. 16
Before this Court, SMFI lodged the present petition for review on
certiorari, faulting the appellate court in
A.
Alleging that the Union failed to comply with this Rule, SMFI concludes
that the Labor Arbiter has no jurisdiction over its complaint.
A perusal of the complaint shows that, indeed, the particular acts of
ULP alleged to have been committed by SMFI were not specified;
neither were the ultimate facts in support thereof. In its Position Paper,
however, the Union detailed the particular acts of ULP attributed to
SMFI and the ultimate facts in support thereof.

. . . FINDING THAT THE LABOR ARBITER HAS JURISDICTION OVER Section 7, Rule V of the New Rules of Procedure of the NLRC
THE COMPLAINT OF RESPONDENT UNION provides:

B. Nature of Proceedings.—The proceedings before the Labor Arbiter

shall be non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and procedure and the rules
obtaining in the courts of law shall not strictly apply thereto. The
Labor Arbiter may avail himself of all reasonable means to ascertain the
facts of the controversy speedily, including ocular inspection and
examination of well-informed persons.” (Emphasis and italics supplied)
Section 1 of Rule 8 of the Rules of Court should thus not be strictly
applied to a case filed before a Labor Arbiter. In determining
jurisdiction over a case, allegations made in the complaint, as well as
those in the position paper, may thus be considered.
140
140 SUPREME COURT REPORTS ANNOTATED 141
San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-
PTWGO
As stated above, the Union, in its Position Paper, mentioned the
particular acts of ULP and the ultimate facts in support thereof. Thus
it alleged:
“This is a complaint for unfair labor practices pursuant to Article 248 (e)
and (i) of the Labor Code, as amended, which reads:
Art. 248. Unfair labor practices of employers.—It shall be unlawful for an employer to commit
any of the following unfair labor practices:
xxxx
(e) To discriminate in regard to wages, hours of work, and other terms and
conditions of employment in order to encourage or discourage membership in any
labor organization.
xxxx
(i) to violate a collective bargaining agreement.
and which was committed by herein respondents as follows:
1. 1.large scale and wanton unjust discrimination in
matters of promotion, particularly upon the following
members of complainant: Ellen Ventura, Julie Geronimo,
Ronnie Cruz, Rita Calasin, Romy de Peralta, Malou Alano,
And E. M. Moraleda, all assigned with the Finance
Department or respondent SMFI.
2. 2.gross and blatant violations by respondent SMFI of
Section 5, Article III (Job Security) and Section 4,
Article VIII (Grievance Machinery) of the current
collective bargaining agreement (CBA) between
complainant and respondent SMFI, which provisions of said
CBA are hereunder quoted for easy reference.” (Emphasis and
italics supplied)
On the questioned promotions, the Union did not allege that they were
done to encourage or discourage membership in a labor organization.
In fact, those promoted were members of the complaining Union. The
promotions do not thus amount to ULP under Article 248(e) of the
Labor Code.
As for the alleged ULP committed under Article 248(i), for violation
of a CBA, this Article is qualified by Article 261 of
VOL. 535, OCTOBER 5, 2007 141
San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-
PTWGO
the Labor Code, the pertinent portion of which latter Article reads:
“x x x violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of
Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such
agreement.” (Emphasis and italics supplied)
Silva v. NLRC instructs that for a
“ULP case to be cognizable by the Labor Arbiter, and the NLRC to exercise
its appellate jurisdiction, the allegations in the complaint should
show prima facie the concurrence of two things, namely: (1) gross
violation of the CBA; AND (2) the violation pertains to the
economic provisions of the CBA.” (Emphasis and italics supplied)
17
As reflected in the above-quoted allegations of the Union in its Position
Paper, the Union charges SMFI to have violated the grievance
machinery provision in the CBA. The grievance machinery provision in
the CBA is not an economic provision, however, hence, the second
requirement for a Labor Arbiter to exercise jurisdiction of a ULP is not
present.
The Union likewise charges SMFI, however, to have violated the Job
Security provision in the CBA, specifically the seniority rule, in that
SMFI “appointed less senior employees to positions at its Finance
Department, consequently intentionally by-passing more senior
employees who are deserving of said appointment.”
Article 4 of the Labor Code provides that “All doubts in the
implementation and interpretation of the provisions of this Code,
including implementing rules and regulations, shall be
_______________
17 G.R. No. 110226, June 19, 1997, 274 SCRA 159, 173.
142
allegations made by the plaintiff. (Tamano vs. Ortiz, 291 SCRA
584[1998])
The right to self-organization of employees must not be interfered
with by the employer on the pretext of exercising management
prerogative of disciplining its employees. (Cole-
143
VOL. 535, OCTOBER 5, 2007 143

142 SUPREME COURT REPORTS ANNOTATED Albay Electric Cooperative, Incorporated, vs. Security Pacific Assurance
Corporation
San Miguel Foods, Inc. vs. San Miguel Corporation Employees Union-
PTWGO gio de San Juan de Letran vs. Association of Employees and Faculty of
Letran, 340 SCRA 587 [2000])
resolved in favor of labor.” Since the seniority rule in the promotion of ——o0o——
employees has a bearing on salary and benefits, it may, following a
© Copyright 2016 Central Book Supply, Inc. All rights reserved.
liberal construction of Article 261 of the Labor Code, be considered an
“economic provision” of the CBA.
As above-stated, the Union charges SMFI to have promoted less
senior employees, thus bypassing others who were more senior and
equally or more qualified. It may not be seriously disputed that this
charge is a gross or flagrant violation of the seniority rule under the
CBA, a ULP over which the Labor Arbiter has jurisdiction.
SMFI, at all events, questions why the Court of Appeals came out
with a finding that it (SMFI) disregarded the seniority rule under the
CBA when its petition before said court merely raised a question of
jurisdiction. The Court of Appeals having affirmed the NLRC decision
finding that the Labor Arbiter has jurisdiction over the Union’s
complaint and thus remanding it to the Labor Arbiter for continuation
of proceedings thereon, the appellate court’s said finding may be taken
to have been made only for the purpose of determining jurisdiction.
WHEREFORE, the Petition is DENIED.
SO ORDERED.
Quisumbing (Chairperson), Carpio, Tinga and Velasco, Jr., JJ.,
concur.
Petition denied.
Notes.—What determines the nature of an action and
correspondingly the court which has jurisdiction over it are the

VOL. 409, AUGUST 15, 2003 267
Reyes vs. Court of Appeals
G.R. No. 154448. August 15, 2003. *
DR. PEDRITO F. REYES, petitioner, vs. COURT OF APPEALS, PHIL.
MALAY POULTRY BREEDERS, INC. and LEONG HUP POULTRY
FARM SDN, BHD., Mr. Francis T.N. Lau, President and Chairman of
the Board and Mr. Chor Tee Lim, Director, respondents.
Actions; Pleadings and Practice; Certiorari; Allowance of the petition
on the ground of substantial compliance with the rules is not a novel
occurrence in our jurisdiction.—The allowance of the petition on the ground
of substantial compliance with the Rules is not a novel occurrence in our
jurisdiction. As consistently held by the Court, rules of procedure should
not be applied in a very technical sense, for they are adopted to help secure,
not override, substantial justice.
Labor Law; Labor Code; Labor laws mandate the speedy disposition
of cases, with the least attention to technicalities but without sacrificing the
fundamental requisites of due process.—Labor laws mandate the speedy
disposition of cases, with the least attention to technicalities but without
sacrificing the fundamental requisites of due process. Remanding the case
to the Court of Appeals will only frustrate speedy justice and, in any event,
would be a futile exercise, as in all probability the case would end up with
this Court.
_______________
* FIRST DIVISION.
268
268 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Court of Appeals
Same; Same; Attorney's Fees; In awarding attorney's fees, there need
only be a showing that the lawful wages were not paid accordingly.—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.
Same; Same; In carrying out and interpreting the labor codes
provisions and its implementing regulations, the employees welfare should
be the primordial and paramount consideration.—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.”
PETITION for review on certiorari of the resolutions of the Court of
Appeals.
The facts are stated in the opinion of the Court.
George L. Howard for petitioner.
Quasha, Ancheta, Peña and Nolasco Law Offices for private
respondents.
YNARES-SANTIAGO, J.:
Assailed in this petition for review under Rule 45 of the Revised Rules
of Court are the January 28, 2002 and July 22, 2002 Resolutions of the
1 2 3
Court of Appeals in CA-G.R. SP No. 67431, which dismissed the
petition for certiorari filed by petitioner for failure to
_______________
1 Rollo, p. 42.
2 Rollo, p. 124.
3Penned by Associate Justice Andres B. Reyes and concurred in by Associate Justices
Conrado M. Vasquez, Jr. and Amelita G. Tolentino.
269
VOL. 409, AUGUST 15, 2003 269
Reyes vs. Court of Appeals
attach to the petition the duplicate original or certified true copy of the
Labor Arbiter’s decision as well as the relevant pleadings.
The facts show that on August 24, 1989, respondent Leong Hup
Poultry Farms SDN. BHD (Leung Hup) of Malaysia, thru its Managing
Director Francis T. Lau, appointed petitioner Pedrito F. Reyes as
Technical/Sales Manager with a net salary of US$4,500.00 a month.
His duties consisted of selling parent stock day-old chicks and providing
technical assistance to clients of the company in Malaysia and other In a letter dated January 19, 1998, respondent Philmalay retrenched
Asian countries. Sometime in 1992, the company formed Philippine
4 petitioner effective January 20, 1998 and promised to pay him
Malay Poultry Breeders, Inc., (Philmalay) in the Philippines. Petitioner separation benefits pursuant to the provisions of the Labor Code. He 7

was appointed General Manager thereof with a monthly salary of
US$5,500.00.
In 1996-1997, respondents suffered losses which caused them to
reduce production and retrench employees in Philmalay. On June 30,
1997, petitioner gave verbal notice to respondent Francis T. Lau that
was, however, offered a separation pay equivalent to four months only,
or the total amount of P578,600.00 (P144,650 x 4). The offer was not
accepted by petitioner and efforts to settle the impasse proved futile.
Petitioner filed with the Arbitration Branch of the National Labor
Relations Commission a complaint for underpayment of wages and
8

he will serve as General Manager of Philmalay until December 31, 1997 nonpayment of separation pay, sick leave, vacation leave and other
only. In a letter dated January 12, 1998, petitioner confirmed his
5 benefits against respondents.
verbal notice of resignation and requested that he be given the same On December 22, 1999, the Labor Arbiter rendered a decision in 9

benefits granted to retrenched and resigned employees of the company, favor of petitioner, the dispositive portion of which reads:
consisting of separation pay equivalent to 1 month salary for every year
of service and the monetary equivalent of his sick leave and vacation “PREMISES CONSIDERED, judgment is hereby rendered in favor of the
leave. He likewise requested for the following: complainant and against the respondents, as follows:

1. 1.payment of underpaid salary for the period December 1989— 1. 1.To order respondents to pay jointly and severally the
complainant, the following:
December 31, 1997 together with the additional one month
salary payable in December of every year which was paid at 1. (a)Unpaid salary from January 1, 1998 to January 19, 1998, the
the rate of P26.00 instead of the floating rate; same to be computed in the following manner:
19 = days % 31 days of January ‘98
2. 2.brand new car (Galant Super Saloon) or its equivalent;
= 0.613 month x US$5,500.00
3. 3.life insurance policy in the amount of US$100,000.00 from = US$3,370.00
December 1, 1989 to December 31, 1997, or the premiums due 2. (b)Underpayment of salary, the same to be computed at net
thereon; US$5,500.00 or its peso-equivalent from July 1, 1997 to December
4. 4.office rentals at the rate of US$300.00 or its peso equivalent 31, 1997, together with the additional one (1) salary payable every
for the use of his residence as office of Philmalay for the period year, the same to be paid at the rate of P26.30 instead of the
December 1, 1989 to July 1996; and following rate computed as follows:

5. 5.retention of the services of the law firm Quasha Ancheta Pena
and Nolasco Law Firm, which was hired by respondents to
defend him in
_______________
4 Employment Contract, Rollo, p. 73.
5 Letter of petitioner to Philmalay and Leong Hup, Rollo, p. 76.
270
270 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Court of Appeals 6
1. the illegal recruitment case filed against him in connection with
his employment with respondents. 6
July 1997 - P27.66 - P1.36 - P7, 480.00
August 1997 - 29.33 - 3.02 - 16,665.00
September - 32.39 - 6.09 - 33,495.00
October 1997 - 34.46 - 8.16 - 44,880.00
November 1997 - 34.51 - 8.21 - 45,155.00
_______________
Id.
7 Rollo, p. 72.
8 Docketed as NLRC NCR Case No. 00-06-04519-98.
 9 Penned by Labor Arbiter Ariel Cadiente Santos. 3. c)Life insurance policy for US$100,000.00 from December 1, 1989
271 to December 31, 1997, or if the same was not secured the
premiums due thereon for the above period, the same to be
VOL. 409, AUGUST 15, 2003 271 computed as follows:
US$2,736.50 x 9 years = US$24,628.50
Reyes vs. Court of Appeals
4. d)The services of the Law firm of Quasha Ancheta Peña and
Nolasco be continued to be retained by the two (2) companies to
December 1997 - 37.17 - 10.57 - 59,785.00
rep
P207,460.00 272

1. (c)13th month pay for December 1997 computed as follows: 272 SUPREME COURT REPORTS ANNOTATED
December 1997 - P37.17 - P10.57 - P59,785.00.
Reyes vs. Court of Appeals
1. 2.To order respondents to pay jointly and severally the
complainant the following: 1. resent complainant in the illegal recruitment case before the
1. (a)Unused vacation and sick leaves from December 01, 1989 to Regional Trial Court of Quezon City, Branch 96, docketed as
December 31, 1997 based on the same salary, to be computed as Crim. Case No. Q-93-46421, entitled “People of the Philippines vs.
follows: Dr. Antonio B. Mangahas, et al.,” filed against . . . him in
connection with his employment by Leong Hup, or in default
1. i)Vacation Leave - Fifteen (15) days for every year of services x 9
thereof to pay the attorney’s fees of the new counsel, that may be
years =135 days
hired by the complainant to defend him in the said case estimated
135 days % 26 working days a month
in the sum of P800,000.00, more or less;
= 5.2 months = US$28,600.00
1. 5)To order the respondents to pay jointly and
2. ii)Sick Leave - Fifteen (15) Days for every [year] of service x 9 years
severally thecomplainant moral damages in the sum of P2.5
= 135 days
million and exemplary damages of P2.5 million;
135 days % 26 working days a month
= 5.2 months x US$5,500.00/month 2. 6)To order the respondents to pay jointly and severally the
= US$28,600.00 complainant in the sum equivalent to ten percent (10%) of the
total claim as and for attorney’s fees.
1. 3)To order respondents to pay jointly and severally the
complainant his separation pay equivalent to one (1) month pay 3. 7)Respondents’ counterclaims are hereby dismissed for lack of
for very year of service at the rate of US $5,500.00 or its peso merit.
equivalent from December 1, 1989 to January 19, 1998, computed SO ORDERED.” 10

as follows:
9 years x US$5,500.00 - US$49,500.00
1. 4)To order respondents to pay jointly and severally the
complainant’s other claims and benefits:
1. a)A brand new car (Galant super saloon) or its equivalent in the
sum of P945,100.00;
2. b)Office rentals for the use of his residence situated at No. 38 Don
Wilfredo St., Don Enrique Heights Diliman, Quezon City, [from]
01 December 1989 to July 1996 at the rate of US$300.00 or its
peso equivalent to US$23,700.00;
On appeal by respondents to the National Labor Relations Commission
(NLRC), the Decision of the Labor Arbiter was modified by deleting the
awards of—(1) US$3,370.00 representing unpaid salary for the period
January 1, 1998 to January 19, 1998; (2) US$28,600.00 as vacation
leave; (3) brand new car or its equivalent in the sum of P945,100.00; (4)
US$23,700.00 as office rentals for the period of December 1, 1989 to
July 1996; (5) US$100,000.00 life insurance policy or the equivalent
premium in the amount of US$24,628.50; (6) P2.5 million as moral
damages; and (7) P2.5 million as exemplary damages. The NLRC
likewise reduced the amount of petitioner’s separation pay to
US$44,400.00 after adjusting its computation based on the length of
service of petitioner which it lowered from 9 years to 8 years; and by
limiting the basis of the 10% attorneys fees to the total of the awards of
underpayment of salary (P207,460.00), 13th month pay differential
(P59,785.00) and cash equivalent of sick leave (US$28,600.00) only, and
excluding therefrom the award of separation pay in the amount of
US$44,400.00. The decretal portion of the said decision states: 11
_______________
10 Rollo, pp. 141-145.
11Penned by Presiding Commissioner Lourdes C. Javier and concurred in by
Commissioners lreneo B. Bernardo and Tito F. Genilo.
273
VOL. 409, AUGUST 15, 2003 273 thereof. The Court of Appeals must be referring to the Respondents’ Memorandum of Appeal,
Reyes vs. Court of Appeals 274
“WHEREORE, premises considered, the Decision dated December 22, 1999
is hereby MODIFIED as follows:
Respondents are hereby ordered to pay jointly and severally the
complainant, the following:
1. (a)underpayment of salary as computed in the appealed Decision
in the amount of P207, 460.00;
2. (b)13th month pay differential as computed in the, appealed
Decision in the amount of P59,785.00;
3. (c)monetary equivalent of complainant’s sick leave as computed in
the appealed Decision in the amount of US$28,600.00;
4. (d)separation pay in the amount of US$44,000.00 as earlier
computed in this Decision;
5. (e)attorney’s fees equivalent to ten (10%) percent of the total award
based on the awards representing underpayment of salary, 13th
month pay, [and] cash equivalent of sick leave.
Respondents are likewise directed to provide legal counsel to
complainant as defendant in Criminal Case No. Q-93-46421.
The awards of unpaid wages from June 1-19, 1998, vacation leave in
the amount of US$28,600, P945,000 for car, US23,700.00, for office rentals,
life insurance policy in me amount of US$100,000.00 and moral and
exemplary damages in the amount of 2.5 million pesos arc hereby
DELETED on grounds above-discussed.
SO ORDERED.” 12
Petitioner filed a motion for reconsideration, however, the same was
denied. Undaunted, petitioner filed a petition for certiorari with the
13
Court of Appeals, which was dismissed on January 28, 2002 for failure
to attach to the petition the following: “(1) complainant’s (petitioner)
Position Paper filed before the Labor Arbiter; (2) Decision dated 22
December 1992 penned by Labor Arbiter Ariel Cadiente Santos; and (3)
Memorandum of Appeal filed by the petitioner.” 14
_______________
12 Rollo, pp. 211-213.
13 Resolution dated September 28, 2001, Rollo, p. 221.
14 See Rollo, p. 42. Under Article 223 of the Labor Code, on appeal of the decision of the
Labor Arbiter to the NLRC, the appellant shall furnish a copy of the memorandum of appeal
to the other party who shall file an answer not later than 10 calendar days from receipt
as it was the latter who appealed to the NLRC questioning the decision of the
274 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Court of Appeals
On February 21, 2002, petitioner filed a motion for reconsideration,
attaching thereto a copy of the Labor Arbiter’s decision and the
pleadings he failed to attach to the petition. The Court of Appeals,
however, denied petitioner’s motion for reconsideration. Hence, the
instant petition based on the following grounds:
1. COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION, IN ISSUING THE QUESTIONED RESOLUTION
DISMISSING THE PETITION FOR CERTIORARI BASED ON
TECHNICALITIES, THAT PETITIONER FAILED TO COMPLY WITH
SEC. 1, RULE 65, RULES OF CIVIL PROCEDURE FOR FAILURE TO
ATTACH THREE (3) DOCUMENTS CONSISTING OF:
Complainant’s (petitioner) Position Paper filed before the labor arbiter;
Decision dated 22 December 1999 penned by Labor Arbiter Ariel Cadiente Santos; and
Memorandum of Appeal filed by the petitioner.
WHICH RESPONDENT COURT OF APPEALS CONSIDERED AS
MATERIAL PORTIONS OF THE RECORD DESPITE THE FACT THAT
THE SUBJECT DOCUMENTS SOUGHT TO BE PRODUCED HAVE
ACTUALLY BEEN REPRODUCED OR SUBSTANTIALLY COVERED
BY THE QUESTIONED JUDGMENT, ORDER OR RESOLUTION
FILED/SUBMITTED BEFORE IT.
 2. COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION IN DISMISSING THE PETITION, AND IN DENYING
THE MOTION FOR RECONSIDERATION THEREOF ON THE
GROUND THAT THERE IS NO COGENT REASON FOR IT TO
OVERTURN ITS DISMISSAL, DESPITE CLEAR AND CONVINCING
EVIDENCE, EXTANT ON THE RECORDS SHOWING THAT THE
NATIONAL LABOR RELATIONS COMMISSION’S (NLRC) DECISION
AND RESOLUTION WERE FLAWED, A PALPABLE OR PATENT
ERROR, WHICH MAY BE SUMMARIZED, TO WIT:
1. (A)IN DECLARING THAT PETITIONER HAD RESIGNED
FROM HIS EMPLOYMENT, AND NOT RETRENCHED OR
TERMINATED DESPITE A DOCUMENTARY EVIDENCE
EXTANT ON THE RECORD ISSUED BY PRIVATE
RESPONDENTS DATED
_______________
Labor Arbiter. At any rate, said Memorandum of Appeal filed by respondents was already
submitted by petitioner together with his motion for reconsideration.
275
VOL. 409, AUGUST 15, 2003 275 TO PROVIDE LEGAL COUNSEL TO PETITIONER IN CRIM.
Reyes vs. Court of Appeals ALREADY BEEN DISMISSED AT THE EXPENSE OF
1. JANUARY 19, 1998 GIVING “FORMAL NOTICE-TO YOU
(PETITIONER) OF YOUR TERMINATION DUE TO
RETRENCHMENT EFFECTIVE JANUARY 20, 1998”.
2. (B)IN HOLDING AGAIN, AND DENYING PETITIONER’S
VALID CLAIMS DESPITE DOCUMENTARY EVIDENCE OR
THE EXISTENCE OF A CONTRACT OF EMPLOYMENT
STATING THAT:
1. (1)EMPLOYEES (INCLUDING PETITIONER AS GENERAL
MANAGER) AS A MATTER OF COMPANY POLICY AND/OR
PRACTICE) WHO ARE RETRENCHED ARE ENTITLED TO
INCENTIVES INCLUDING 15-DAYS VACATION LEAVE AND
15-DAYS SICK LEAVE WITH PAY; A FACT ADMITTED NO
LESS BY PRIVATE RESPONDENTS’ OWN WITNESS, MS. MA.
ROWENA LOPEZ (FORMER PERSONNEL MANAGER OR
PHILMALAY) WHO EXECUTED AN AFFIDAVIT ADMITTING
THE SAME.
2. (2)PETITIONER’S ENTITLEMENT AS PER CONTRACT TO A
BRAND NEW CAR (OR AT LEAST TO THE CASH
EQUIVALENT THEREOF); $100,000.00 LIFE INSURANCE
POLICY (OR IN DEFAULT THEREOF AT LEAST TO THE
PREMIUMS THEREIN), AND OFFICE RENTALS FOR THE
USE OF THE PETITIONER’S PRIVATE RESIDENCE AS
OFFICE OF RESPONDENTS.
3. (3)PETITIONER IS ENTITLED, TO MORAL AND EXEMPLARY
DAMAGES DUE TO PRIVATE RESPONDENTS ACTS OF BAD
FAITH IN REQUIRING PETITIONER TO EXECUTE A
LETTER OF RESIGNATION, WHEN IN FACT HE WAS
ADMITTEDLY TERMINATED THRU RETRENCHMENT, AND
ITS REFUSAL TO PAY HIM HIS VALID CLAIMS, DESPITE
HIS CONTRACT OF EMPLOYMENT, COMPANY POLICY,
AND LETTER OF TERMINATION ISSUED BY PRIVATE
RESPONDENTS.
4. (4)PETITIONER’S ENTITLEMENT TO 10% OF THE TOTAL
AMOUNT OF THE AWARD OF ATTORNEY’S FEES AS
PROVIDED FOR BY LAW AND AS PER PETITIONER’S
CONTRACT WITH COUNSEL, AND NOT ONLY 10% OF THE
TOTAL AWARD REPRESENTING UNDER PAYMENT OF
SALARY, 13th MONTH PAY, AND CASH EQUIVALENT OF
SICK LEAVE AND IN ORDERING PRIVATE RESPONDENT
CASE NO. Q-93-46421, WHEN THE SUBJECT CASE HAD
276
276 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Court of Appeals
1. PETITIONER WHO HAD PREVIOUSLY HIRED HIS OWN
COUNSEL OF CHOICE FOR THE PURPOSE.
The issues for resolution are: (1) whether or not the Court of Appeals
erred in dismissing the petition; and (2) whether or not the decision of
the Labor Arbiter should be reinstated.
The allowance of the petition on the ground of substantial
compliance with the Rules is not a novel occurrence in our jurisdiction.
As consistently held by the Court, rules of procedure should not be
applied in a very technical sense, for they are adopted to help secure,
not override, substantial justice. In Ramos v. Court of Appeals, the
15 16
Court of Appeals dismissed a petition for review of the decision of the
Regional Trial Court because the petitioner failed to attach to the
petition a certified true copy of the Metropolitan Trial Court’s decision
in addition to the certified true copy of the assailed decision of the RTC.
Holding that the Court of Appeals should have given due course to the
petition considering that petitioner subsequently submitted a certified
true copy of the decision of the MeTC, we held:
Petitioner is right that the MeTC’s decision cannot be considered a
“disputed decision.” The phrase is the equivalent of “ruling, order or
decision appealed from” in Rule 32, §2 of the 1964 Rules made applicable
to appeals from decisions of the then Courts of First Instance to the Court
of Appeals by R.A. No. 296, as amended by R.A. No. 5433. Since petitioner
was not appealing from the decision of the MeTC in her favor, she was not
required to attach a certified true copy—but only a true or plain copy—of
the aforesaid decision of the MeTC. The reason is that inclusion of the
decision is part of the requirement to attach to the petition for review
“other material portion of the record as would support the allegations of
the petition.” Indeed, petitioner referred to the MeTC decision in many
_______________
15Piglas-Kamao v. National Labor Relations Commission, G.R. No. 138556, 9 May 2001,357
SCRA 640, 648-649, citing Pacific Life Assurance Corp. v. Sison, 359 Phil. 333; 299 SCRA
16 (1998); Parañaque Kings Enterprises, Inc. v. Court of Appeals, 335 Phil. 1184, 268 SCRA
727 (1997); Empire Insurance Company v. National Labor Relations Commission, 355 Phil. 694; 294
SCRA 263 (1998); People’s Security v. National Labor Relations Commission,G.R. No. 96451, 8
September 1993, 226 SCRA 146; Soriano v. Court of Appeals, G.R. No. 100525, 25 May 1993, 222
SCRA 545.
16 341 Phil. 157; 275 SCRA 167 (1997).
277
VOL. 409, AUGUST 15, 2003 277 19
Reyes vs. Court of Appeals
parts of her petition for review in the Court of Appeals for support of her
theory.
Nonetheless, the Court of Appeals should have reconsidered its
dismissal of petitioner’s appeal after petitioner submitted a certified true
copy of the MeTC’s decision. It was clear from the petition for review that
the RTC incurred serious errors in awarding damages to private
respondents which were made without evidence to support the award and
without any explanation . . . 17
In Jaro v. Court of Appeals, we applied the rule on substantial
18
compliance because the petitioner amended his defective petition and
attached thereto the relevant annexes certified according to the rules.
Thus—
There is ample jurisprudence holding that the subsequent and substantial
compliance of an appellant may call for the relaxation of the rules of
procedure. In Cusi-Hernandez vs. Diaz and Piglas-Kamao vs. National
Labor Relations Commission, we ruled that the subsequent submission of
the missing documents with the motion for reconsideration amounts to
substantial compliance. The reasons behind the failure of the petitioners
in these two cases to comply with the required attachments were no longer
scrutinized. What we found noteworthy in each case was the fact that the
petitioners therein substantially complied with the formal requirements .
..19
The same leniency should be applied to the instant case considering
that petitioner subsequently submitted with his motion for
reconsideration the certified true copy of the Labor Arbiter’s decision,
the complainant’s position paper and the respondent’s memorandum of
appeal. Clearly, petitioner had demonstrated willingness to comply
with the requirements set by the rules. If we are to apply the rules of
procedure in a very rigid and technical sense, as the Court of Appeals
did in this case, the ends of justice would be defeated.
The pleadings and documents filed extensively discussed the issues
raised by the parties. Such being the case, there is sufficient
_______________
17 Id., p. 163.
G.R. No. 127536, 19 February 2002, 377 SCRA 282, citing Cusi-Hernandez v. Diaz, G.R.
18
No. 140436, 18 July 2000, 336 SCRA 113; Piglas-Kamao v. National Labor Relations
Commission, supra.
Id.
278
278 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Court of Appeals
basis to resolve the instant controversy. Labor laws mandate the
20
speedy disposition of cases, with the least attention to technicalities but
without sacrificing the fundamental requisites of due
process. Remanding the case to the Court of Appeals will only frustrate
21
speedy justice and, in any event, would be a futile exercise, as in all
probability the case would end up with this Court. We shall thus rule
22
on the substantial claims of the parties.
Was the termination of petitioner’s employment caused by
retrenchment or by voluntary resignation?
 The Court finds that petitioner’s dismissal from service was due to
retrenchment. This is evident from the termination letter sent by
Philmalay to petitioner, to wit—
We regret to inform you that in view of the prevailing market conditions
and the continuous losses being incurred by the company, the management
has decided to cut down on expenses and prevent further losses through
retrenchment of some of our personnel effective January 19, 1998.
In compliance with the requirement of the law, this will serve as a
formal notice to you of your termination due to retrenchment effective
January 20, 1998. To provide you with sufficient time to seek alternative
employment, you need not report for work (unless otherwise requested)
starting January 20, 1998. Notwithstanding the above mentioned
effectivity date, you may come down to the office and receive your
separation benefits pursuant to the Labor Code . . . 23
While it is true that petitioner tendered his resignation letter to
respondents requesting that he be given the same benefits granted by
the company to resigned/retrenched employees, there is no showing
that respondents accepted his resignation. Acceptance of a resignation
tendered by an employee is necessary to make the
_______________
Baylon v. Fact-Finding Intelligence Bureau, G.R. No. 150870, 11 December 2002, 394
20
SCRA 21.
21Caurdanetaan Piece Workers Union v. Undersecretary Laguesma, G.R. No. 113542, 24
February 1998, 286 SCRA 401, 432, citing Domasig v. National Labor Relations
Commission, 330 Phil. 518; 261 SCRA 779 (1996); Sigma Personnel Services v. National Labor
Relations Commission, G.R. No. 108284, 30 June 1993,224 SCRA 181; Cagampan, et al. v.
National Labor Relations Commission, G.R. Nos. 85122-24, 22 March 1991, 195 SCRA
533 (1991).
22Fernandez v. National Labor Relations Commission, G.R. No. 105892, 28 January
1998, 285 SCRA 149, 170.
23 Rollo, p. 72.
279
VOL. 409, AUGUST 15, 2003 279 96488, 27 September 1993, 226 SCRA 723.
Reyes vs. Court of Appeals
resignation effective. No such acceptance, however, was shown in the
24
instant case. What appears in the record is a letter terminating the
services of petitioner due to retrenchment effective January 20, 1998.
Verily, said letter should be interpreted as a non-acceptance of
petitioner’s resignation effective December 31, 1997. As correctly
pointed out by the Labor Arbiter, if respondents considered petitioner
resigned as of December 31, 1997, then there would be no need to
retrench him.
The length of service of petitioner, which the NLRC correctly
reduced to 8 years, as well as the solidary liability of respondent
corporations are no longer assailed here. Whether petitioner is
considered resigned on December 31, 1997 or retrenched on January
20, 1998, his length of employment reckoned from August 24, 1989
would still be 8 years. Moreover, respondents did not appeal from the
decision of the NLRC and in fact sought its affirmance in their
Opposition to the motion for reconsideration and Comment to the
25
motion for reconsideration filed before the NLRC and the Court of
26
Appeals, respectively. So also, petitioner is estopped from claiming that
he was illegally dismissed and that his retrenchment was without
basis. His request for benefits granted to retrenched employees during
such time when respondent was in the process of retrenching its
employees is tantamount to a recognition of the existence of a valid
cause for retrenchment. What remains to be resolved by the Court is
the validity of the NLRC’s deletion/modification of the awards of—(1)
unpaid salary; (2) vacation leave; (3) car and insurance
policy/premiums; (4) moral and exemplary damages; (5) reimbursement
for expenses for legal services; (6) rental payment; and (7) attorney’s
fees.
As regards the award of unpaid salary, the NLRC was correct in
holding that petitioner is not entitled to compensation from January 1,
1998 to January 19, 1998, because he was not able to prove that he
rendered services during said period. In the same vein, there is no basis
in awarding moral and exemplary damages, inasmuch as respondents
were not shown to have acted in bad faith in initially refusing to award
separation pay equivalent to 1 month salary for every year of service.
Respondents even offered to pay
_______________
24Indophil Acrylic MFG Corporation v. National Labor Relations Commission,G.R. No.
25 Rollo, p. 117.
26 Rollo, p. 102.
280
280 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Court of Appeals
petitioner separation pay, albeit in an amount not acceptable to
petitioner. Moral damages are recoverable only where the act
complained of is tainted by bad faith or fraud, or where it is oppressive
to labor, and done in a manner contrary to morals, good customs, or
public policy. Exemplary damages may be awarded only if the act was
done in a wanton, oppressive, or malevolent manner. None of these 27
circumstances exist in the present case.
The NLRC also correctly ruled that the car and insurance benefits
are granted only during the course of employment; hence, they should
not be part of petitioner’s separation package. Likewise, petitioner’s
claim for payment of rental for the use of his house as office of
Philmalay should be denied for having been ventilated in the wrong
forum. Not all money claims that may be asserted by an employee
against his employer are within the jurisdiction of the NLRC. Money
claims of workers which fall within the jurisdiction of Labor Arbiters
are those which arise out of employer-employee relationship.
Obviously, the demand for rental payment is not a labor dispute;
rather, it is based on contractual relations independent of employer-
employee relationship. Hence, the jurisdiction thereon is with the
regular courts. 28
Since respondents did not appeal from the decision of the NLRC, it
is presumed that they are satisfied with the adjudications therein,
including the order of NLRC directing them to provide legal services to
petitioner in the illegal recruitment case filed against the latter while
he was still employed by respondents. This is in accord with the
doctrine that a party who has not appealed cannot obtain from the
appellate court any affirmative relief other than the ones granted in the
appealed decision. Nonetheless,
29
_______________
27Permex, Inc. v. National Labor Relations Commission, 380 Phil. 79, 88; 323 SCRA
121 (2000), citing Consolidated Rural Bank (Cagayan Valley), Inc. v. National Labor Relations
Commission, 301 SCRA 223, 235 (1999); Garcia v. National Labor Relations
Commission, G.R. No. 110518, 1 August 1994, 234 SCRA 632.
San Miguel Corporation v. National Labor Relations Commission, G.R. No. L-80774, 3
28
May 1988, 161 SCRA 719, 724 and 727.
29 Filflex Industrial & Manufacturing Corporation v. National Labor Relations
Commission, G.R. No. 115395, 12 February 1998, 286 SCRA 245, 256, citing SMI Fish
Industries v. National Labor Relations Commission, G.R. Nos. 96952-56, 2 September
1992, 213 SCRA 444; Caliguia v. National Labor Relations Commission,332 Phil. 128; 264
SCRA 110 (1996);
281
VOL. 409, AUGUST 15, 2003 281
Reyes vs. Court of Appeals
respondents cannot be ordered to reimburse the amount of P200,000.00
for the legal services of the law firm allegedly hired by petitioner
because he failed to establish that he indeed hired the services of a law
firm and that he spent P200,000.00 as a consequence thereof.
Petitioner is, however, entitled to the award of vacation leave as
part of respondents’ retrenchment incentives. In granting sick leave but
deleting vacation leave benefits, the NLRC based its ruling on the
affidavit of one Ms. Rowena Lopez, a former personnel of
Philmalay, viz:
1. 3.That based on company policy and/or practice the rank- and-
file employees are entitled to 15-days vacation leave and 15-
days sick leaves. However, the vacation leave must be availed
of within the year or applied to the remaining period of
employment for those who resigned or go on terminal leave. In
case of sick leaves all unused sick leaves are also commutable
to cash;
2. 4.That employees who were retrenched are entitled to the
following incentives:
1. (a)One (1) month additional leave with pay effective after their
last day of employment to enable them to look for a new job;
2. (b)Plus one (1) month separation pay for every year of service;
and
3. (c)15-days vacation leave and 15-days sick leave with pay as
stated in paragraph 3 hereof.30
The foregoing expressly states that a retrenched employee is entitled
to 15-day vacation leave. Paragraph 4 is the retrenchment package
granted to retrenched employees, whereas paragraph 3 refers to the
feasibility of commutation of unused sick and vacation leaves. Except
for the sentence entitling employees to vacation and sick leaves, the
last 2 sentences in paragraph 3 have nothing to do with the
retrenchment benefits in paragraph 4. Note that the 15-day vacation
and sick leave with pay in paragraph 4(c) are not qualified by the word
“unused”. The 15-day vacation and sick leaves are granted to
retrenched employees as part of the retrenchment benefits regardless
of whether or not they have unused
_______________ _______________
Teodoro v. Court of Appeals, 328 Phil. 116; 258 SCRA 603 (1996); Spouses Carrion v. 31 Villanueva v. NLRC, G.R. No. 127448, 10 September 1998, 295 SCRA 326, 333,
Court of Appeals, 329 Phil. 698; 260 SCRA 862 (1996). citing BPI Credit Corporation v. Court of Appeals, G.R. No. 96755, 4 December 1991, 204
SCRA 601; Philippine Integrated Labor Assistance Corp. v. National Labor Relations
30 Petition, Rollo, p. 31.
Commission, 332 Phil. 458; 264 SCRA 418 (1996).
282
336 Phil. 705, 712; 269 SCRA 733 (1997), citing Pineda E.L, Legal and Judicial Ethics,
32

1994 ed., 220.

282 SUPREME COURT REPORTS ANNOTATED
283

Reyes vs. Court of Appeals VOL. 409, AUGUST 15, 2003 283
sick and vacation leaves at the time of the retrenchment. Moreover, the Reyes vs. Court of Appeals
applicability of the said provisions to petitioner was not disputed by
respondents. They even invoked the same in manifesting conformity to concept of attorney’s fees is the one contemplated in Article 111 of the
the deletion by the NLRC of the award of 15-day vacation leave for Labor Code, which provides:
every year of service. At any rate, any ambiguity therein must be
resolved strictly against the respondents, who drafted these 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
provisions. Hence, petitioner is entitled not only to 15 days sick leave
31

percent of the amount of wages recovered . . .

but also to 15 days vacation leave with pay.
The afore-quoted Article 111 is an exception to the declared policy of
The Labor Arbiter’s computation of petitioner’s 15-day sick leave
strict construction in the awarding of attorney’s fees. Although an
pay must be modified. The NLRC, which affirmed the Labor Arbiter’s
express finding of facts and law is still necessary to prove the merit of
decision, reduced petitioner’s number of years of service from 9 to 8
the award, there need not be any showing that the employer acted
years but it did not mak6 the corresponding adjustment in the
maliciously or in bad faith when it withheld the wages. There need only
determination of petitioner’s sick leave pay which used 9 years as the
be a showing that the lawful wages were not paid accordingly, as in this
basis in the computation thereof. Accordingly, the awards of 15-day sick
case. 33

leave and 15-day vacation leave for every year of service must be
computed using 8 years as its basis. In carrying out and interpreting the Labor Code’s provisions and its
implementing regulations, the employee’s welfare should be the
Finally, the award of attorney’s fees must also be modified.
primordial and paramount consideration. This kind of interpretation
InTraders Royal Bank Employees Union-Independent v. National
gives meaning and substance to the liberal and compassionate spirit of
Labor Relations Commission, it was held that there are two commonly
32

the law as provided in Article 4 of the Labor Code which states that
accepted concepts of attorney’s fees, the so-called ordinary and
“[a]ll doubts in the implementation and interpretation of the provisions
extraordinary. In its ordinary concept, an attorney’s fee is the
of [the Labor] Code including its implementing rules and regulations,
reasonable compensation paid to a lawyer by his client for the legal
shall be resolved in favor of labor”, and Article 1702 of the Civil Code
services he has rendered to the latter. The basis of this compensation
which provides that “[i]n case of doubt, all labor legislation and all labor
is the fact of his employment by and his agreement with the client. In
contracts shall be construed in favor of the safety and decent living for
its extraordinary concept, attorney’s fees are deemed indemnity for
the laborer.”
damages ordered by the court to be paid by the losing party in a
34

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
In the case at bar, what was withheld from petitioner was not only
his salary, vacation and sick leave pay, and 13th month pay differential,
but also his separation pay. Hence, pursuant to current jurisprudence,
separation pay must be included in the basis
_______________
 33CMP Federal Security Agency, Inc. v. National Labor Relations Commission,367 Phil. Commission, 373 Phil. 950, 961; 315 SCRA 316 (1999);Gonzales v. National Labor Relations
304, 310; 308 SCRA 36 (1999), citing Valiant Machinery and Metal Corp. v. National Labor Commission, 372 Phil. 39, 46; 313 SCRA 169(1999); Consolidated Rural Bank (Cagayan
Relations Commission, 322 Phil. 407; 252 SCRA 369 (1996). Valley) v. National Labor Relations Commission, G.R. No. 123810, 20 January 1999, 361
SCRA 172, 185; Surima v. National Labor Relations Commission, 353 Phil. 461, 472; 291
34
Songco v. National Labor Relations Commission, G.R. Nos. 50999-51000, 23 March
SCRA 260 (1998);Damasco v. National Labor Relations Commission, G.R. No. 115755, 4
1990, 183 SCRA 611, 619, citing Abella v. National Labor Relations Commission, G.R. No.
December 2000, 346 SCRA 714 (2000); Yu v. National Labor Relations Commission, G.R. No.
71812, 30 July 1987, 152 SCRA 140; Manila Electric Company v. National Labor Relations
97212, 30 June 1993, 224 SCRA 75.
Commission, G.R. No. 78763, 12 July 1989,175 SCRA 277.
285
284
© Copyright 2016 Central Book Supply, Inc. All rights reserved.
284 SUPREME COURT REPORTS ANNOTATED

Reyes vs. Court of Appeals

for the computation of attorney’s fees. Petitioner is entitled to

attorney’s fees equivalent to 10% of his total monetary award. 35

WHEREFORE, in view of all the foregoing, the instant petition is

GRANTED. The assailed Resolutions dated January 28, 2002 and July
22, 2002 of the Court of Appeals in CA-G.R. SP No. 67431, are
REVERSED and SET ASIDE. The Decision of the National Labor
Relations Commission in NLRC NCR CA 023679-2000, is MODIFIED.
In addition to the awards of underpayment of salary, 13th month pay
differential, sick leave pay and separation pay, respondents are ordered
to pay petitioner vacation leave pay and 10% attorney’s fees, the basis
of which shall be the total monetary award. Petitioner’s vacation leave
and sick leave pay shall be computed on the basis of his 8 years of
service with respondents. For this purpose, the case is ordered
REMANDED to the Labor Arbiter for the computation of the amounts
due petitioner.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Vitug, Carpio and Azcuna,
JJ.,concur.
Petition granted, resolutions reversed and set aside. Judgment
modified. Case remanded to NLRC.
Note.—The law, in protecting the rights of labor, authorized neither
oppression nor self-destruction of an employer company which itself is
possessed of rights that must be entitled to recognition and respect
(Dayan vs. Bank of Philippine Islands, 369 SCRA 712 [2001])
——o0o——
_______________
35Permex, Inc. v. National Labor Relations Commission, 380 Phil. 79, 88; 323 SCRA
121 (2000); Abasolo v. National Labor Relations Commission, G.R. No. 118475, 29 November
2000, 346 SCRA 293, 307; KAMS, International, Inc. v. National Labor Relations
 G.R. No. 158084. August 29, 2008.*
J.K. MERCADO & SONS AGRICULTURAL ENTERPRISES, INC.,
petitioner, vs. HON. PATRICIA A. STO. TOMAS, in her capacity as
Secretary of Labor and Employment, ANICETO S. TORREJOS, SR.,
JOHNNY MANGARIN, ZOSIMO ALBASIN, ALBERTO ABAD,
RONALD ABAD, EDGARDO FLORES, JOSEPH COSIDO,
MAYORMITO VELCHES, EDUARDO BIGNO, BENEDICTO
NOTARTE, CARLOS LIBRE, DIOSDADO ORE, LITO DAGUPAN,
EPIFANIO BULILAWA, JUSTINIANO BADIANA, VALERIO VIADO,
LORENZO GRAPA, LEONARDO BULILAWA, RUBEN BAYANSAW,
LUISITO DOCUSIN, CARLO MAGNO CANO, JOSEPH
DUMAYANOS, FELIX BAYANG, NILO PROCURATO, REY
LACABO, ALEJANDRO NAGAYO, JR., DOMINADOR QUIBO,
RICHARD TAMPARONG, MANUEL LEOCADIO, GERSON PENA,
REY MENDEZ, FERNANDO VALLEJO, TOMAS DAHUNOG,
DIONESIO FERNIS, ESTITIA PAQUERA, JOEL JAMOROL,
GERSON RECTO, ELADIO JAECTIN, JUDE PROCURATO,
ERNESTO SOTTO, FAUSTINO MONTECILLO, RUDY QUIBO,
JUSTINIANO CAL, JR., ROSELITO GONZALES, CLET QUETE,
ELDIE DAGUPAN, HENIA PROCURATO, BIENVENIDO
BORROMEO and CRISANTO MORALES, respondents.
Labor Law; Labor Code; Wage Orders; Prescription; Article 291 of the
Labor Code applies to money claims in general and provides for a 3-year
prescriptive period to file them; A claimant has three years to press a money
claim; Once a judgment is rendered in her favor, she has five years to ask
for execution of the judgment, counted from its finality.—Art. 291 of the
Labor Code applies to money claims in general and provides for a 3-year
prescriptive period to file them. On the other hand, respondent employees’
money claims in this case had been reduced to a judgment, in the form of a
Wage Order, which has become final and executory. The prescription
applicable, therefore, is
_______________
* FIRST DIVISION.
675
VOL. 563, AUGUST 29, 2008 675
J.K. Mercado & Sons Agricultural Enterprises, Inc. vs. Sto. Tomas Department of Labor and Employment, Region XI to cause the
not the general one that applies to money claims, but the specific one
applying to judgments. Thus, the right to enforce the judgment, having
been exercised within five years, has not yet prescribed. Stated otherwise,
a claimant has three years to press a money claim. Once judgment is
rendered in her favor, she has five years to ask for execution of the
judgment, counted from its finality. This is consistent with the rule on
statutory construction that a general provision should yield to a specific
one and with the mandate of social justice that doubts should be resolved
in favor of labor.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Alcantara & Alcantara Law Office for petitioner.
Eduardo C. De Vera for respondents.
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court.
The facts are stated in the Decision of the Court of Appeals in CA-
G.R. SP No. 70003 dated March 10, 2003:
“On December 3, 1993, the Regional Tripartite Wages and Productivity
Board, Region XI, issued Wage Order No. RTWPB-XI-03, granting a Cost
of Living Allowance (COLA) to covered workers.
On January 28, 1994, petitioner filed an application for exemption from
the coverage of the aforesaid wage order. Thus, however, was denied by the
regional wage board in an Order dated April 11, 1994, the dispositive
portion of which states:
“WHEREFORE, premises considered, the application for
exemption from compliance with Wage Order No. RTWPB-XI-03 is
DENIED for Lack of Merit. Applicant J.K. MERCADO AND SONS
AGRICULTURAL ENTERPRISES, INCORPORATED is hereby
ordered to pay its covered workers the allowance prescribed under
said Wage Order plus interest of one percent (1%) per month
retroactive December 1, 1993.676
676 SUPREME COURT REPORTS ANNOTATED
J.K. Mercado & Sons Agricultural Enterprises, Inc. vs. Sto. Tomas
Let copies of the Order be furnished the Regional Director of the
computation of the award and the issuance of writ of execution, the
parties concerned and the National Wages Productivity Commission
for their information and guidance.
 Notwithstanding the said order, private respondents were not given the
benefits due them under Wage Order No. RTWPB-XI-03. On July 10, 1998,
private respondents filed an Urgent Motion for Writ of Execution, and Writ
of Garnishment in RTWPB-XI-03-CBBE-94 NWPBC Case No. E-95-087
Case No. R1100 seeking the enforcement of subject wage order against
several entities including herein petitioner.
In reaction thereto, petitioner submitted an Inquiry dated August 13,
1998, stating that it is not a party to the aforesaid case and has not entered
appearance therein.
On October 7, 1998, the OIC-Regional Director, Region XI, issued aWrit
of Execution for the enforcement of the Order dated April 11, 1994 of the
Regional Tripartite Wages and Productivity Board.
On November 17, 1998 and November 23, 1998, respectively, petitioner
filed a Motion to Quash the Writ of Execution and a Supplemental Motion
to the Motion to Quash. Petitioner argued that herein private respondents’
right had already prescribed due to their failure to move for the execution
of the April 11, 1994 Order within the period provided under Article 291 of
the Labor Code, as amended, or within three (3) years from the finality of
the said order.
Ruling that the benefits which remained unpaid have not prescribed
and that the private respondents need not file a claim to be entitled thereto,
the Regional Director denied the Motion to Quash in an Order dated
January 7, 1999.
Not satisfied with the denial of its motion to quash, petitioner filed
aNotice of Appeal on January 29, 1999.
Petitioner argued on appeal that the Regional Director abused his
discretion in issuing the writ of execution since it was not a party to
RTWPB-XI-03-CBBE-97-NWPC Case No. E-95-087. Petitioner likewise
argued that the Regional Director abused his discretion in issuing the writ
of execution in the absence of any motion filed by private respondents.
Petitioner likewise claimed that since more than three (3) years have
already elapsed from the time of the final-677
VOL. 563, AUGUST 29, 2008 677
J.K. Mercado & Sons Agricultural Enterprises, Inc. vs. Sto. Tomas
ity of the order dated April 11, 1994, the right of private respondents to
claim the benefits under the same had already prescribed.
Denying the appeal, the dispositive portion of the assailed order dated
February 2, 2001 reads:
“WHEREFORE, the Appeal is denied for lack of merit and the
order dated January 7, 1999, is affirmed.”
On March 2, 2001, petitioner filed a Motion for Reconsideration but the
same was denied for lack of merit by public respondent in an Order dated
March 14, 2002.
The Court of Appeals stated the issues, thus:
Before us petitioner contends that:
“x x x the Honorable Undersecretary and Hon. Secretary of Labor
and Employment committed grave abuse of discretion amounting to
lack or excess of jurisdiction in issuing the assailed Orders [Annexes
“A” & “B”], as the same are contrary to Law and Jurisprudence, in:
1. Declaring that an application for exemption from compliance
with Wage Orders before the Wage Board is equivalent to ‘money
claims’ provided for under Article 291 of the Labor Code.
2. Deliberately refusing and failing to recognize that the
prescriptive period to file money claims under Article 291 of the
Labor Code applies to money claims for COLA granted under Wage
Order No. RTWPB-XI-03.
3. Ruling that DOLE Regional Directors can legally issue writs
of execution to enforce Wage Orders pursuant to Policy Instruction
No. 55, beyond the 3-year prescriptive period provided under Article
291 of the Labor Code, pursuant to Section 1, Rule 39 of the Revised
Rules of Court.”
The assailed Decision resolved the issues, as follows:
“The petition is not meritorious.
It must be stressed at the outset that while the filing by herein private
respondents of the Urgent Motion for Writ of Execution and Writ of
Garnishment refer to recovery of benefits under the subject Wage Order
No. RTWPB-XI-03, which entitled respondents to a cost678
678 SUPREME COURT REPORTS ANNOTATED
J.K. Mercado & Sons Agricultural Enterprises, Inc. vs. Sto. Tomas
of living allowance (COLA), Article 291 of the Labor Code finds no
application in the case at bar since what is being enforced is the final order
dated April 11, 1994 denying petitioner’s application for exemption under
the wage order. Being a final order, the same may be the subject of
execution motu proprio or upon motion by any of the parties concerned.
 The law is equivocal that a judgment may be executed on motion within
five (5) years from the date of its entry or from the date it becomes final
and executory. Hence, we see no basis for petitioner’s insistence on the
applicability of Article 291 of the Labor Code in the instant case.
Arguing that a money claim must be filed by herein private respondents
to avail of the wage differential or COLA granted under Wage Order No. 3,
petitioner avers:
“The crux of the controversy in the case at bar is not when the
writ of execution issued by the Regional Director of Region XI can be
enforced, but rather, whether a money claim must be filed first by
private respondents against petitioner for the latter’s refusal to pay
the COLA granted under WO 03.”
We are not persuaded.
Clearly, petitioner’s contention is premised on the mistaken belief that
the right of private respondents to recover their wage differential or COLA
under Wage Order No. 03 is still a contestable issue.
It must be emphasized that the order dated April 11, 1994 had long
become final and executory. Petitioner did not appeal the said order.
Having failed to avail of the remedy of appeal of the said order, petitioner
cannot belatedly avoid its duty to comply with the said order by insisting
that a money claim must first be filed by herein private respondents. A
contrary ruling would result to absurdity and would even unjustly benefit
petitioner who for quite sometime had exerted every effort to avoid the
obligation of giving the wage differential or COLA granted under Wage
Order No. 3.”
Petitioner now presents the following issues:
“1. Whether or not the Honorable Court of Appeals committed an
error in holding that Article 291 of the Labor Code is not applicable to
recovery of benefits under the subject Wage Order No. RTWPB-XI-03,
which entitled respondents to a cost of living allowance (COLA).679
VOL. 563, AUGUST 29, 2008 679
J.K. Mercado & Sons Agricultural Enterprises, Inc. vs. Sto. Tomas
2. Whether or not the Court of Appeals committed an error in holding
that the cost of living allowance (COLA) granted by Wage Order No.
RTWPB-XI-03 can be enforced without the appropriate case having been
filed by herein private respondents within the three (3) year prescriptive
period.
3. Whether or not the claim of the private respondents for cost of living
allowance (COLA) pursuant to Wage Order No. RTWPB-XI-03 has already
prescribed because of the failure of the respondents to make the
appropriate claim within the three (3) year prescriptive period provided by
Article 291 of the Labor Code, as amended.”
The Court sees no error on the part of the Court of Appeals.
Art. 291 of the Labor Code applies to money claims in general and
provides for a 3-year prescriptive period to file them.
On the other hand, respondent employees’ money claims in this case
had been reduced to a judgment, in the form of a Wage Order, which
has become final and executory. The prescription applicable, therefore,
is not the general one that applies to money claims, but the specific one
applying to judgments. Thus, the right to enforce the judgment, having
been exercised within five years, has not yet prescribed.
Stated otherwise, a claimant has three years to press a money claim.
Once judgment is rendered in her favor, she has five years to ask for
execution of the judgment, counted from its finality. This is consistent
with the rule on statutory construction that a general provision should
yield to a specific one and with the mandate of social justice that doubts
should be resolved in favor of labor.
WHEREFORE, the petition is DENIED.
No costs.
SO ORDERED.
Puno (C.J., Chairperson), Carpio, Corona and Leonardo-De
Castro, JJ., concur.
Petition denied.
© Copyright 2016 Central Book Supply, Inc. All rights reserved.
 [No. L-8975. June 29, 1957]
PEDRO P. TAMAYO, ET AL., plaintiffs and appellants, vs.MANILA
HOTEL COMPANY, defendant and appellee.
811
VOL. 101, JUNE 29, 1957 811
Tamayo, et al. vs. Manila Hotel Co.
1. 1.STATUTES; RETROACTIVITY; VACATION AND SICK LEAVE
OF OFFICERS AND EMPLOYEES.—Article 4 of the New Civil
Code provides that laws shall have no retroactive effect unless the
contrary is provided. As Republic Act No. 1081 amending section
286 of the Revised Administrative Code as amended by Republic
Act 611 providing among other things that the total vacation
leave and sick leave that may accumulate to the credit of any
officer or employee shall in no case, exceed ten months, does not
provide that it is to have retroactive effect, it can only be given
effect from the date of its approval June 15, 1954.
1. 2.ID.; CONTEMPORANEOUS CONSTRUCTION BY
EXECUTIVE OFFICERS; SHOULD BE RESPECTED BY
COURT.—It is a rule of statutory construction that "courts will
and should respect the contemporaneous construction placed
upon a statute by the executive officers, whose duty it is to enforce
it and unless such interpretation is clearly erroneous will
ordinarily be controlled thereby." (Molina vs. Rafferty, 37 Phil.,
545; see also in re Allen, 2 Phil., 630; Everett vs. Bautista, 69
Phil., 137.)
APPEAL from an order of the Court of First Instance of Manila. Jose, J.
The facts are stated in the opinion of the Court.
Gregorio E. Fajardo for appellants.
Maximo J. Sabelano and Simeon M. Gopengco for appellee.
REYES, A., J.:
Two hundred sixty-five (265) employees of the Manila Hotel Co., who
had to be dismissed and paid the value of their accumulated leave
under section 286 of the Administrative Code, as amended by Republic
Act No. 611, when the hotel was leased to a private concern on June 30,
1954, brought the present action to recover from the company an
additional amount for accrued leave alleged to be due them under the
same section of the Administrative Code, as later amended by Republic
Act No. 1081, approved on June 15, 1954, that is to say, fifteen days
before they were separated from the service.
812
812 PHILIPPINE REPORTS ANNOTATED
Tamayo, et al. vs. Manila Hotel Co.
On defendant's motion, the lower court ordered the complaint
dismissed on the ground that it did not state a cause of action in that
Republic Act No. 1081 did not have a retroactive effect. From that order
plaintiffs appealed directly to this Court, the total amount claimed
being more than P50,000.
We find the appeal to be without merit.
As already stated, plaintiffs have already been paid the value of
their accrued leave under section 286 of the Revised Administrative
Code, as amended by Republic Act No. 611, which reads:
"SEC. 286. When vacation leave and sick leave may be taken.—Vacation
leave and sick leave shall be cumulative and any part thereof which may
not be taken within the calendar year in which earned may be carried over
to the succeeding years, but whenever any officer, employee, or laborer of
the Government of the Philippines shall voluntarily resign or be separated
from the service through no fault of his own, he shall be entitled to the
commutation of all accumulated vacation and/or sick leave to his
credit:Provided, That the total vacation leave and sick leave that can
accumulate to the credit of any officer or employee shall, in no case, exceed
five months: Provided, further, That the proper Department Head may in
his discretion authorize the commutation of the salary that would be
received during the period of vacation and sick leave of any appointed
officer or employee or teacher or laborer of the Philippine Government and
direct its payment on or before the beginning of such leave from the fund
out of which the salary would have been paid: Provided, furthermore, That
no person whose leave has been commuted following his separation from
the service shall be reappointed or reemployed under the Government of
the Philippines before the expiration of the leave commuted unless he first
refunds the money value of the unexpired portion of the leave commuted."
(Italics supplied.)
Plaintiffs, however, claim that they were entitled to ten months'
accrued leave because the aforementioned section of the Administrative
Code was, several days before their dismissal, amended by Republic Act
No. 1081, to read as f ollows:
"SEC. 286. When vacation leave and sick leave may be taken—Vacation
leave and sick leave shall be cumulative and any part
813
VOL. 101, JUNE 29, 1957 813 Tamayo, et al. vs. Manila Hotel Co.
Tamayo, et al. vs. Manila Hotel 60. Confirmatory of that ruling is the opinion rendered by the Secretary of
thereof which may not be taken within the calendar year in which earned
may be carried over to the succeeding years, but whenever any officer,
employee, or laborer of the Government of the Philippines shall voluntarily
resign or be separated from the service through no fault of his own, he shall
be entitled to the commutation of all accumulated vacation and/or sick
leave to his credit: Provided, That the total vacation leave and sick leave
that can accumulate to the credit of any officers or employee shall, in no
case, exceed ten months: Provided, further, That the proper Department
Head may in his discretion authorize the commutation of the salary that
would be received during the period of vacation and sick leave of any
appointed officer or employee or teacher or laborer of the Philippine
Government and direct its payment on or before the beginning of such
leave from the fund out of which the salary would have been paid: Provided,
furthermore, That no person whose leave has been commuted following his
separation from the service shall be reappointed or reemployed under the
Government of the Philippines before the expiration of the leave commuted
unless he first refunds the money value of the unexpired portion of the
leave commuted." (Italics supplied.)
The question to determine is whether this latter amendment applies
retroactively to employees whose length of service prior to its approval
would give them an accumulated leave in excess of five months, the
limit fixed by law before the last amendment.
Article 4 of the new Civil Code provides that laws shall have no
retroactive effect unless the contrary is provided. As Republic Act No.
1081 does not provide that it is to have retroactive effect, it can only be
given effect from the date of its approval.
As a matter of fact, this is the construction that has been placed
upon that Act by the department of the Government charged with its
enforcement. Thus, when the Commissioner of Civil Service, on August
10, 1954, passed upon the claim of the present plaintiffs against the
Manila Hotel management, he ruled that "the accumulation of the
additional five months' total vacation and sick leave (to the original five
months allowed under Republic Act No. 611) should begin only from
June 15, 1954" "
814
814 PHILIPPINE REPORTS ANNOTATED
Justice, Hon. Pedro Tuason, at the request of the Executive Secretary,
which reads:
November 27, 1954
The EXECUTIVE SECRETARY
Malacañang, Manila
Sir:
This is with reference to your request for opinion on whether or not
Republic Act No. 1081, which has increased the maximum accumulable
leave of a government officer or employee from 5 months to 10 months,
applies retroactively to those whose length of service prior to its
approval would have entitled them to an accumulated leave in excess
of five months.
Prior to the enactment of Republic Act No. 1081, section 286 of the Revised
Administrative Code provides as follows: 'SEC. 286. When vacation leave
and sick leave may be taken.—Vacation leave and sick leave shall be
cumulative and any part thereof which may not be taken within the
calendar year in which earned may be carried over to the succeeding years,
but whenever any officer, employee, or laborer of the Government of the
Philippines shall voluntarily resign or be, separated from the service
through no fault of his own, he shall be entitled to the commutation of all
accumulated vacation and/or sick leave to his credit: Provided, That the
total vacation leave and sick leave that can accumulate to the credit of any
officers or employee shall, in no case, exceed five months. * * *.' (As amended
by Rep. Act No. 611.)
We are informed that the Bureau of Civil Service had construed and
enforced the above-quoted provision in the sense that after an officer or
employee had accumulated more than five months' vacation and sick
leave, any leave accruing during the calendar year but not taken within
that year was automatically forfeited.
The Congress is deemed to have been aware of this long-continued,
contemporaneous and practical interpretation of the statute by the
administrative officer charged with its administration and
enforcement, when Republic Act. No. 1081 was enacted, and to have
sanctioned that interpretation as the legislative intent. The result then
is that upon the approval of the amendatory law, no leave already specifically based on a circular issued by the manager of the railroad
earned in excess of the five-month maximum stood to the credit of any company relative to the "grant of monetary
officer or employee. Totally and absolutely lost and legally nonexistent, 816
such excess could only be validated or restored by an express or clear
declaration by the law-maker. There is nothing in 816 PHILIPPINE REPORTS ANNOTATED
815
People vs. Incierto
VOL. 101, JUNE 29, 1957 815
aid to former employees and/or to the latter's dependents, who could
Tamayo, et al. vs. Manila Hotel Co. not be reinstated on account of illness or death" and also on the "long-
standing policy of the railroad company to pay vacation and sick leave
Republic Act No. 1081 from which an intention of this sort can be duly acquired by its employees and laborers effective upon separation
gathered. from the service." Such portion of the decision as mentions Republic Act
I am, therefore. constrained to answer the query in the negative. No. 611 was mere dictum and cannot, therefore, be taken as the ratio
decidendi of the case.
Respectfully,
(Sgd.) PEDRO TUASON Lastly, plaintiffs-appellants cite article 1702 of the new Civil Code,
Secretary of Justice" which provides that in case of doubt, labor legislation shall be construed
in favor of the laborer. As the article is expressly intended to apply in
It is a rule of statutory construction that "courts will and should respect case of doubt, it can have no application where, as in the present case,
the contemporaneous construction placed upon a statute by the no doubt exists.
executive officers, whose duty it is to enforce it and unless such
interpretation is clearly erroneous will ordinarily be controlled In view of the foregoing, the order of dismissal is affirmed, with costs
thereby." (Molina vs. Rafferty, 37 Phil. 545; see also In re Allen, 2 Phil. against the appellants.
630, Everett vs. Bautista, 69 Phil. 137.) Paras, C. J., Bengzon, Montemayor, Bautista
But it is not only the executive branch of the Government that has Angelo,Labrador, Concepcion, Reyes, J. B. L. and Felix, JJ., concur.
construed Republic Act No. 1081 as having only a prospective effect. Order affirmed.
For Congress itself so construed that Act when in 1955 it approved a ————————
bill (House Bill No. 3097) to give the Act retroactive effect, for the
reason—so it was explained—that though its proponent had intended © Copyright 2016 Central Book Supply, Inc. All rights reserved.
it to have a retroactive effect, it "has (in fact) prospective effect" in the
sense that "leave earned but not enjoyed prior to its approval was not
counted." The bill, however, never became law because it was vetoed for
lack of funds.
Plaintiffs-appellants invoke the ruling of this Court in the case of
Manila Railroad Co. vs. CIR et al., G. R. No. L-4616, July 31, 1952,
where the heirs of an employee of the Manila Railroad Company who
died in 1945 were awarded the money equivalent of his unused vacation
and sick leave although the law then in force provided for the forfeiture
thereof upon the employee's separation from the service, for the reason,
it is alleged, that Republic Act 611, effective only on May 5, 1951, which
suppressed that part of the law relating to forfeiture, was applied. But
a careful reading of the decision will show that the ruling was

VOL. 132, OCTOBER 23, 1984 663
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
No. L-52415. October 23, 1984. *
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES’ UNION
(IBAAEU), petitioner, vs. HON. AMADO G. INCIONG, Deputy
Minister, Ministry of Labor and INSULAR BANK OF ASIA AND
AMERICA, respondents.
Labor Law; Administrative Law; Statutes; A labor regulation which
in effect amends the Labor Code is null and void.—WE agree with the
petitioner’s contention that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9 issued by the then
Secretary of Labor are null and void since in the guise of clarifying the
Labor Code’s provisions on holiday pay, they in effect amended them by
enlarging the scope of their exclusion.
Same; Same; Same; The nullity of the labor regulation on holiday pay
lies in its exclusion of monthly paid employees from the coverage of holiday
pay contrary to what the Labor Code provides.—From the above-cited
provisions, it is clear that monthly paid employees are not excluded from
the benefits of holiday pay. However, the implementing rules on holiday
pay promulgated by the then Secretary of Labor excludes monthly paid
employees from the said benefits by inserting, under Rule IV, Book III of
the implementing rules, Section 2, which provides that: “employees who
are uniformly paid by the month, irrespective of the number of working
days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month
whether worked or not.”
Same; Same; Same; Same.—It is elementary in the rules of statutory
construction that when the language of the law is clear and unequivocal
the law must be taken to mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement
_______________
* SECOND DIVISION.
664
664 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
Inciong
to the benefits of holiday pay are clear and explicit—it provides for
both the coverage of and exclusion from the benefits. In Policy Instruction
No. 9, the then Secretary of Labor went as far as to categorically state that
the benefit is principally intended for daily paid employees, when the law
clearly states that every worker shall be paid their regular holiday pay.
This is a flagrant violation of the mandatory directive of Article 4 of the
Labor Code, which states that “All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing
rules and regulations,shall be resolved in favor of labor.” Moreover, it shall
always be presumed that the legislature intended to enact a valid and
permanent statute which would have the most beneficial effect that its
language permits (Orlosky vs. Haskell, 155 A. 112).
Same; Same; Same; Courts; The judiciary’s role invokes the work of
making a correct interpretation of the actions of the three branches of
government.—While it is true that the contemporaneous construction
placed upon a statute by executive officers whose duty is to enforce it
should be given great weight by the courts, still if such construction is so
erroneous, as in the instant case, the same must be declared as null and
void. It is the role of the Judiciary to refine and, when necessary, correct
constitutional (and/or statutory) interpretation, in the context of the
interactions of the three branches of the government, almost always in
situations where some agency of the State has engaged in action that stems
ultimately from some legitimate area of governmental power (The
Supreme Court in Modern Role, C. B. Swisher, 1958, p. 36).
Same; Judgment; Ruling in De Luna vs. Kayanan, 61 SCRA 49, not
being a labor case, cannot be invoked by the herein public respondents.
Labor is constitutionally protected.—To start with, unlike the instant case,
the case of De Luna relied upon by the public respondent is not a labor case
wherein the express mandate of the Constitution on the protection to labor
is applied. Thus Article 4 of the Labor Code provides that, “All doubts in
the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor
of labor”; and Article 1702 of the Civil Code provides that, “In case of doubt,
all labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer.”
665
VOL. 132, OCTOBER 23, 1984 665
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs.
 Same; Same; A judgment in a labor case that has become executory
can no longer be revoked or its execution estopped by virtue of a law passed
after finality of judgment.—Consequently, contrary to public respondent’s
allegations, it is patently unjust to deprive the members of petitioner union
of their vested right acquired by virtue of a final judgment on the basis of
a labor statute promulgated following the acquisition of the “right”.
Same; Same; Partial execution of judgment is acceptance of its
correctness.—Respondent bank counters with the argument that its partial
compliance was involuntary because it did so under pain of levy and
execution of its assets (p. 138, rec.). WE find no merit in this argument.
Respondent bank clearly manifested its voluntariness in complying with
the decision of the labor arbiter by not appealing to the National Labor
Relations Commission as provided for under the Labor Code under Article
223. A party who waives his right to appeal is deemed to have accepted the
judgment, adverse or not, as correct, especially if such party readily
acquiesced in the judgment by starting to execute said judgment even
before a writ of execution was issued, as in this case. Under these
circumstances, to permit a party to appeal from the said partially executed
final judgment would make a mockery of the doctrine of finality of
judgments long enshrined in this jurisdiction.
Same; Same; A final judgment confers a vested interest that should be
protected.—A final judgment vests in the prevailing party a right
recognized and protected by law under the due process clause of the
Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila,
63 Phil. 324). A final judgment is “a vested interest which it is right and
equitable that the government should recognize and protect, and of which
the individual could not be deprived arbitrarily without injustice”
(Rookledge v. Garwood, 65 N.W. 2d 785, 791).
PETITION for certiorari to review the order of the Deputy Minister of
Labor.
The facts are stated in the opinion of the Court.
Sisenando R. Villaluz, Jr. for petitioner.
Abdulmaid Kiram Muin colloborating counsel for petitioner.
666
666 SUPREME COURT REPORTS ANNOTATED Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong ‘Art. 208. Right to holiday pay.—
The Solicitor General, Caparas, Tabios, Ilagan, Alcantara &
Gatmaytan Law Office and Sycip, Salazar, Feliciano & Hernandez Law
Office for respondents.
MAKASIAR, J.:
This is a petition for certiorari to set aside the order dated November
10, 1979, of respondent Deputy Minister of Labor, Amado G. Inciong,
in NLRC case No. RB-IV-1561-76 entitled “Insular Bank of Asia and
America Employees’ Union (complainant-appellee), vs. Insular Bank of
Asia and America” (respondent-appellant), the dispositive portion of
which reads as follows:
“xx xx.
“ALL THE FOREGOING CONSIDERED, let the appealed
Resolutionen banc of the National Labor Relations Commission dated 20
June 1978 be, as it is hereby, set aside and a new judgment promulgated
dismissing the instant case for lack of merit” (p. 109, rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the
respondent bank for the payment of holiday pay before the then
Department of Labor, National Labor Relations Commission, Regional
Office No. IV in Manila. Conciliation having failed, and upon the
request of both parties, the case was certified for arbitration on July 7,
1975 (p. 18, NLRC rec.).
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a
decision in the above-entitled case, granting petitioner’s complaint for
payment of holiday pay. Pertinent portions of the decision read:
“xx xx.
“The records disclosed that employees of respondent bank were not paid
their wages on unworked regular holidays as mandated by the Code,
particularly Article 208, to wit:
667
VOL. 132, OCTOBER 23, 1984 667
1. ‘(a)Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than 10
workers.
 2. ‘(b)The term “holiday” as used in this chapter, shall include: New Year’s Day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty-fifth and
thirtieth of December and the day designated by law for holding a general
election.
‘xx xx.’
“This conclusion is deduced from the fact that the daily rate of pay of the
bank employees was computed in the past with the unworked regular
holidays as excluded for purposes of determining the deductible amount for
absences incurred. Thus, if the employer uses the factor 303 days as a
divisor in determining the daily rate of monthly paid employee, this gives
rise to a presumption that the monthly rate does not include payments for
unworked regular holidays. The use of the factor 303 indicates the number
of ordinary working days in a year (which normally has 365 calendar days),
excluding the 52 Sundays and the 10 regular holidays. The use of 251 as a
factor (365 calendar days less 52 Saturdays, 52 Sundays, and 10 regular
holidays) gives rise likewise to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid. This being the case,
it is not amiss to state with certainty that the instant claim for wages on
regular unworked holidays is found to be tenable and meritorious.
“WHEREFORE, judgment is hereby rendered:
1. “(a)xx xx.
2. “(b)Ordering respondent to pay wages to all its employees for all
regular holidays since November 1, 1974” (pp. 97-99, rec.,
underscoring supplied).
Respondent bank did not appeal from the said decision. Instead, it
complied with the order of Arbiter Ricarte T. Soriano by paying their
holiday pay up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was
promulgated amending, among others, the provisions of the Labor Code
on the right to holiday pay to read as follows:
668
668 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
“Art. 94. Right to holiday pay.—(a) Every worker shall be paid his regular
daily wages during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
1. “(b)The employer may require an employee to work on any holiday
but such employee shall be paid a compensation equivalent to
twice his regular rate; and
2. “(c)As used in this Article, ‘holiday’ includes: New Year’s Day,
Maundy Thursday, Good Friday, the ninth of April, the first of
May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and the thirtieth of December, and
the day designated by law for holding a general election.”
Accordingly, on February 16, 1976, by authority of Article 5 of the same
Code, the Department of Labor (now Ministry of Labor) promulgated
the rules and regulations for the implementation of holidays with pay.
The controversial section thereof reads:
“Sec. 2. Status of employees paid by the month.—Employees who are
uniformly paid by the month, irrespective of the number of working days
therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month
whether worked or not.
“For this purpose, the monthly minimum wage shall not be less than
the statutory minimum wage multiplied by 365 days divided by twelve”
(italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then
Secretary of Labor (now Minister) interpreting the above-quoted rule,
pertinent portions of which read:
“xx xx.
“The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose
monthly salary did not yet include payment for the ten (10) paid legal
holidays are entitled to the benefit.
“Under the rules implementing P.D. 850, this policy has been fully
clarified to eliminate controversies on the entitlement of
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Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
monthly paid employees. The new determining rule is this: If the monthly
paid employee is receiving not less than P240, the maximum monthly
minimum wage, and his monthly pray is uniform from January to
December, he is presumed to be already paid the ten (10) paid legal
holidays. However, if deductions are made from his monthly salary on
account of holidays in months where they occur, then he is still entitled to
the ten (10) paid legal holidays. x x x” (italics supplied).
Respondent bank, by reason of the ruling laid down by the aforecited
rule implementing Article 94 of the Labor Code and by Policy
Instruction No. 9, stopped the payment of holiday pay to all its
employees.
On August 30, 1976, petitioner filed a motion for a writ of execution
to enforce the arbiter’s decision of August 25, 1975, whereby the
respondent bank was ordered to pay its employees their daily wage for
the unworked regular holidays.
On September 10, 1975, respondent bank filed an opposition to the
motion for a writ of execution alleging, among others, that: (a) its
refusal to pay the corresponding unworked holiday pay in accordance
with the award of Labor Arbiter Ricarte T. Soriano dated August 25,
1975, is based on and justified by Policy Instruction No. 9 which
interpreted the rules implementing P. D. 850; and (b) that the said
award is already repealed by P.D. 850 which took effect on December
16, 1975, and by said Policy Instruction No. 9 of the Department of
Labor, considering that its monthly paid employees are not receiving
less than P240.00 and their monthly pay is uniform from January to
December, and that no deductions are made from the monthly salaries
of its employees on account of holidays in months where they occur (pp.
64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of
issuing a writ of execution, issued an order enjoining the respondent
bank to continue paying its employees their regular holiday pay on the
following grounds: (a) that the judgment is already final and the
findings which is found in the body of the decision as well as the
dispotive portion thereof is res judicata or is the law of the case between
the parties; and
670
670 SUPREME COURT REPORTS ANNOTATED (a) that the office of the Minister of Labor has no jurisdiction to
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong (b) that the labor arbiter’s decision being final, executory and
(b) that since the decision had been partially implemented by the
respondent bank, appeal from the said decision is no longer available
(pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the above-
cited order of Labor Arbiter Soriano to the National Labor Relations
Commission, reiterating therein its contentions averred in its
opposition to the motion for writ of execution. Respondent bank further
alleged for the first time that the questioned order is not supported by
evidence insofar as it finds that respondent bank discontinued payment
of holiday pay beginning January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission
promulgated its resolution en banc dismissing respondent bank’s
appeal, the dispositive portion of which reads as follows:
“In view of the foregoing, we hereby resolve to dismiss, as we hereby
dismiss, respondent’s appeal; to set aside Labor Arbiter Ricarte T.
Soriano’s order of 18 October 1976 and, as prayed for by complainant, to
order the issuance of the proper writ of execution” (p. 244, NLRC rec.).
Copies of the above resolution were served on the petitioner only on
February 9, 1979 or almost eight. (8) months after it was promulgated,
while copies were served on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of the
Minister of Labor a motion for reconsideration/appeal with urgent
prayer to stay execution, alleging therein the following: (a) that there
is prima facie evidence of grave abuse of discretion, amounting to lack
of jurisdiction on the part of the National Labor Relations Commission,
in dismissing the respondent’s appeal on pure technicalities without
passing upon the merits of the appeal; and (b) that the resolution
appealed from is contrary to the law and jurisprudence (pp. 260-274,
NLRC rec.).
On March 19, 1979, petitioner filed its opposition to the respondent
bank’s appeal and alleged the following grounds:
671
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Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
entertain the instant appeal pursuant to the provisions of P. D. 1391;
unappealable, execution is a matter of right for the petitioner; and (c)
that the decision of the labor arbiter dated August 25, 1975 is supported
by the law and the evidence in the case (p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for execution
pending appeal, praying that a writ of execution be issued by the
National Labor Relations Commission pending appeal of the case with
the Office of the Minister of Labor. Respondent bank filed its opposition
thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations Commission
issued an order which states:
“The Chief, Research and Information Division of this Commission is
hereby directed to designate a Socio-Economic Analyst to compute the
holiday pay of the employees of the Insular Bank of Asia and America from
April 1976 to the present, in accordance with the Decision of the Labor
Arbiter dated August 25, 1975” (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through
Deputy Minister Amado G. Inciong, issued an order, the dispositive
portion of which states:
“ALL THE FOREGOING CONSIDERED, let the appealed Resolution en
banc of the National Labor Relations Commission dated 20 June 1978 be,
as it is hereby, set aside and a new judgment promulgated dismissing the
instant case for lack of merit” (p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent Amado G.
Inciong with abuse of discretion amounting to lack or excess of
jurisdiction.
The issue in this case is: whether or not the decision of a Labor
Arbiter awarding payment of regular holiday pay can still be set aside
on appeal by the Deputy Minister of Labor
672
672 SUPREME COURT REPORTS ANNOTATED the then Secretary of Labor excludes monthly paid employees from the
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong rules, Section 2, which provides that: “employees who are uniformly
even though it has already become final and had been partially
executed, the finality of which was affirmed by the National Labor
Relations Commission sitting en banc, on the basis of an Implementing
Rule and Policy Instruction promulgated by the Ministry of Labor long
after the said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner’s contention that Section 2, Rule IV, Book
III of the implementing rules and Policy Instruction No. 9 issued by the
then Secretary of Labor are null and void since in the guise of clarifying
the Labor Code’s provisions on holiday pay, they in effect amended
them by enlarging the scope of their exclusion (p. 11, rec.).
Article 94 of the Labor Code, as amended by P.D. 850, provides:
“Art. 94. Right to holiday pay.—(a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers. x x x x.”
The coverage and scope of exclusion of the Labor Code’s holiday pay
provisions is spelled out under Article 82 thereof which reads:
“Art. 82. Coverage.—The provision of this Title shall apply to employees in
all establishments and undertakings, whether for profit or not, but not to
government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in appropriate
regulations.
“xx xx” (italics supplied).
From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday
673
VOL. 132, OCTOBER 23, 1984 673
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
pay. However, the implementing rules on holiday pay promulgated by
said benefits by inserting, under Rule IV, Book III of the implementing
paid by the month, irrespective of the number of working days therein,
with a salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month whether
worked or not.”
Public respondent maintains that “(T)he rules implementing P. D.
850 and Policy Instruction No. 9 were issued to clarify the policy in the
implementation of the ten (10) paid legal holidays. As interpreted,
‘unworked’ legal holidays are deemed paid insofar as monthly paid
employees are concerned if (a) they are receiving not less than the
statutory minimum wage, (b) their monthly pay is uniform from
January to December, and (c) no deduction is made from their monthly
salary on account of holidays in months where they occur. As explained
in Policy Instruction No. 9, ‘The ten (10) paid legal holidays law, to start
with, is intended to benefit principally daily paid employees. In case of
monthly, only those whose monthly salary did not yet include payment
for the ten (10) paid legal holidays are entitled to the benefit’ ” (pp. 340-
341, rec.). This contention is untenable.
It is elementary in the rules of statutory construction that when the
language of the law is clear and unequivocal the law must be taken to
mean exactly what it says. In the case at bar, the provisions of the
Labor Code on the entitlement to the benefits of holiday pay are clear
and explicit—it provides for both the coverage of and exclusion from the
benefits. In Policy Instruction No. 9, the then Secretary of Labor went
as far as to categorically state that the benefit is principally intended
for daily paid employees, when the law clearly states that every worker
shall be paid their regular holiday pay. This is a flagrant violation of
the mandatory directive of Article 4 of the Labor Code, which states
that “All doubts in the implementation and interpretation of the
provisions of this Code, in-
674
674 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
cluding its implementing rules and regulations, shall be resolved in
favor of labor.” Moreover, it shall always be presumed that the
legislature intended to enact a valid and permanent statute which
would have the most beneficial effect that its language permits
(Orlosky vs. Haskell, 155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his
statutory authority granted by Article 5 of the Labor Code authorizing
him to promulgate the necessary implementing rules and regulations.
Public respondent vehemently argues that the intent and spirit of
the holiday pay law, as expressed by the Secretary of Labor in the case
of Chartered Bank Employees Association v. The Chartered
Bank (NLRC Case No. RB-1789-75, March 24, 1976), is to correct the
disadvantages inherent in the daily compensation system of
employment—holiday pay is primarily intended to benefit the daily
paid workers whose employment and income are circumscribed by the
principle of “no work, no pay.” This argument may sound meritorious;
but, until the provisions of the Labor Code on holiday pay is amended
by another law, monthly paid employees are definitely included in the
benefits of regular holiday pay. As earlier stated, the presumption is
always in favor of law, negatively put, the Labor Code is always strictly
construed against management.
While it is true that the contemporaneous construction placed upon
a statute by executive officers whose duty is to enforce it should be
given great weight by the courts, still if such construction is so
erroneous, as in the instant case, the same must be declared as null
and void. It is the role of the Judiciary to refine and, when necessary,
correct constitutional (and/or statutory) interpretation, in the context
of the interactions of the three branches of the government, almost
always in situations where some agency of the State has engaged in
action that stems ultimately from some legitimate area of
governmental power (The Supreme Court in Modern Role, C. B.
Swisher, 1958, p. 36).
Thus, in the case of Philippine Apparel Workers Union vs. National
Labor Relations Commission (106 SCRA 444, July
675
VOL. 132, OCTOBER 23, 1984 675
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
31, 1981) where the Secretary of Labor enlarged the scope of exemption
from the coverage of a Presidential Decree granting increase in
emergency allowance, this Court ruled that:
“x x xx the Secretary of Labor has-exceeded his authority when he included
paragraph (k) in Section 1 of the Rules implementing P.D. 1123.
“xx xx xx.
“Clearly, the inclusion of paragraph k contravenes the statutory
authority granted to the Secretary of Labor, and the same is therefore void,
as ruled by this Court in a long line of cases x x x x.
“ ‘The recognition of the power of administrative officials to promulgate rules in the
administration of the statute, necessarily limited to what is provided for in the legislative
enactment, may be found in the early case of United States vs. Barriosdecided in 1908. Then
came in a 1914 decision, United States vs. Tupasi Molina (29 Phil. 119) delineation of the
scope of such competence. Thus: ‘Of course the regulations adopted under legislative authority
by a particular department must be in harmony with the provisions of the law, and for the
sole purpose of carrying into effect its general provisions. By such regulations, of course, the
law itself cannot be extended. So long, however, as the regulations relate solely to carrying
into effect the provisions of the law, they are valid.’ In 1936, in People vs. Santos, this Court
expressed its disapproval of an administrative order that would amount to an excess of the
regulatory power vested in an administrative official. We reaffirmed such a doctrine in a 1951
decision, where we again made clear that where an administrative order betrays
inconsistency or repugnancy to the provisions of the Act, ‘the mandate of the Act must prevail
and must be followed.’ Justice Barrera, speaking for the Court in Victorias Milling Inc. vs.
Social Security Commission, citing Parker as well as Davis did tersely sum up the matter
thus: ‘A rule is binding on the Courts so long as the procedure fixed for its promulgation is
followed and its scope is within the statutory authority granted by the legislature, even if the
courts are not in agreement with the policy stated therein or its innate wisdom x x x. On the
other hand, administrative interpretation of the law is at best merely advisory, for it is the
courts that finally determine what the law means.’
676
676 SUPREME COURT REPORTS ANNOTATED circumstances that transpired subsequent to the promulgation of the
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong decision impossible and unjust on the part of herein respondent bank
“ ‘It cannot be otherwise as the Constitution limits the authority of the President, in whom
all executive power resides, to take care that the laws be faithfully executed. No lesser
administrative executive office or agency then can, contrary to the express language of the
Constitution, assert for itself a more extensive prerogative. Necessarily, it is bound to observe
the constitutional mandate. There must be strict compliance with the legislative enactment.
Its terms must be followed. The statute requires adherence to, not departure from its
provisions. No deviation is allowable. In the terse language of the present Chief Justice, an
administrative agency ‘cannot amend an act of Congress.’ Respondents can be sustained,
therefore, only if it could be shown that the rules and regulations promulgated by them were
in accordance with what the Veterans Bill of Rights provides’ ” (Phil. Apparel Workers Union
vs. National Labor Relations Commission, supra, 463, 464, citing Teozon vs. Members of the
Board of Administrators, PVA, 33 SCRA 585; see also Santos vs. Hon. Estenzo, et al., 109
Phil. 419; Hilado vs. Collector of Internal Revenue, 100 Phil. 295; Sy Man vs. Jacinto &
Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and Trinidad, 43 Phil. 259).
This ruling of the Court was recently reiterated in the case ofAmerican
Wire & Cable Workers Union (TUPAS) vs. The National Labor
Relations Commission and American Wire & Cable Co., Inc.,G.R. No.
53337, promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to
implement the Labor Code and Policy Instruction No. 9 issued by the
then Secretary of Labor must be declared null and void. Accordingly,
public respondent Deputy Minister of Labor Amado G. Inciong had no
basis at all to deny the members of petitioner union their regular
holiday pay as directed by the Labor Code.
II
It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano
dated August 25, 1975, had already become final, and was, in fact,
partially executed by the respondent bank.
677
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Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
However, public respondent maintains that on the authority of De
Luna vs. Kayanan, 61 SCRA 49, November 13, 1974, he can annul the
final decision of Labor Arbiter Soriano since the ensuing promulgation
of the integrated implementing rules of the Labor Code pursuant to
P.D. 850 on February 16, 1976, and the issuance of Policy Instruction
No. 9 on April 23, 1976 by the then Secretary of Labor are facts and
decision of the labor arbiter, which renders the execution of the said
(pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied
upon by the public respondent is not a labor case wherein the express
mandate of the Constitution on the protection to labor is applied. Thus
Article 4 of the Labor Code provides that, “All doubts in the
implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in
favor of labor”; and Article 1702 of the Civil Code provides that, “In case
of doubt, all labor legislation and all labor contracts shall be construed
in favor of the safety and decent living for the laborer.”
Consequently, contrary to public respondent’s allegations, it is
patently unjust to deprive the members of petitioner union of their
vested right acquired by virtue of a final judgment on the basis of a
labor statute promulgated following the acquisition of the “right”.
On the question of whether or not a law or statute can annul or
modify a judicial order issued prior to its promulgation, this Court,
through Associate Justice Claro M. Recto, said:
“xx xx xx.
“We are decidedly of the opinion that they did not. Said order, being
unappealable, became final on the date of its issuance and the parties who
acquired rights thereunder cannot be deprived thereof by a constitutional
provision enacted or promulgated subsequent thereto. Neither the
Constitution nor the statutes, except penal laws
678
678 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong execute said judgment even before a writ of execution was issued, as in
favorable to the accused, have retroactive effect in the sense of annulling or
modifying vested rights, or altering contractual obligations” (China Ins. &
Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324, italics
supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this
Court said: “x x x when a court renders a decision or promulgates a
resolution or order on the basis of and in accordance with a certain law
or rule then in force, the subsequent amendment or even repeal of said
law or rule may not affect the final decision, order, or resolution already
promulgated, in the sense of revoking or rendering it void and of no
effect.” Thus, the amendatory rule (Rule IV, Book III of the Rules to
Implement the Labor Code) cannot be given retroactive effect as to
modify final judgments. Not even a law can validly annul final decisions
(In re: Cunanan, et al., Ibid.).
Furthermore, the facts of the case relied upon by the public
respondent are not analogous to that of the case at bar. The case of De
Luna speaks of final and executory judgment, while in the instant case,
the final judgment is partially executed. Just as the court is ousted of
its jurisdiction to annul or modify a judgment the moment it becomes
final, the court also loses its jurisdiction to annul or modify a writ of
execution upon its service or execution; for, otherwise, we will have a
situation wherein a final and executed judgment can still be annulled
or modified by the court upon mere motion of a party. This would
certainly result in endless litigations thereby rendering inutile the rule
of law.
Respondent bank counters with the argument that its partial
compliance was involuntary because it did so under pain of levy and
execution of its assets (p. 138, rec.). WE find no merit in this argument.
Respondent bank clearly manifested its voluntariness in complying
with the decision of the labor arbiter by not appealing to the National
Labor Relations Commission as provided for under the Labor Code
under Article 223. A party who waives his right to appeal is deemed to
have accepted the judgment, adverse or not, as correct, especially if
such party readily acquiesced in the judgment by starting to
679
VOL. 132, OCTOBER 23, 1984 679 Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
this case. Under these circumstances, to permit a party to appeal from
the said partially executed final judgment would make a mockery of the
doctrine of finality of judgments long enshrined in this jurisdiction.
Section 1 of Rule 39 of the Revised Rules of Court provides that “x x
x execution shall issue as a matter of right upon the expiration of the
period to appeal x x x or if no appeal has been duly perfected.” This rule
applies to decisions or orders of labor arbiters who are exercising quasi-
judicial functions since; “x x x the rule of execution of judgments under
the rules should govern all kinds of execution of judgment, unless it is
otherwise provided in other laws” (Sagucio vs. Bulos, 5 SCRA 803) and
Article 223 of the Labor Code provides that “x x x decisions, awards, or
orders of the Labor Arbiter or compulsory arbitrators are final and
executory unless appealed to the Commission by any or both of the
parties within ten (10) days from receipt of such awards, orders, or
decisions. x x .”
Thus, under the aforecited rule, the lapse of the appeal period
deprives the courts of jurisdiction to alter the final judgment and the
judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143,
citing Cruz vs. WCC, 2 PHILAJUR 436, 440, January 31, 1978; see
also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and Regala vs.
WCC, decided jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA
436; Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422,
423, October 31, 1961, where the lower court modified a final order, this
Court ruled thus:
“xx xx xx.
“The lower court was thus aware of the fact that it was thereby altering
or modifying its order of January 8, 1959. Regardless of the excellence of
the motive for acting as it did, we are constrained to hold, however, that
the lower court had no authority to make said alteration or modification. x
x x.
“xxx xx xx.
680
680 SUPREME COURT REPORTS ANNOTATED
“The equitable considerations that led the lower court to take the action
complained of cannot offset the demands of public policy and public
interest—which are also responsive to the tenets of equity—requiring that
all issues passed upon in decisions or final orders that have become
executory, be deemed conclusively disposed of and definitely closed, for,
otherwise, there would be no end to litigations, thus setting at naught the
main role of courts of justice, which is to assist in the enforcement of the
rule of law and the maintenance of peace and order, by settling justiciable
controversies with finality.
“xx xx xx.”
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March
30, 1982, this Court said:
“xx xx xx.
“In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated
that the rule is absolute that after a judgment becomes final, by the
expiration of the period provided by the rules within which it so becomes,
no further amendment or correction can be made by the court except for
clerical errors or mistakes. And such final judgment is conclusive not only
as to every matter which was offered and received to sustain or defeat the
claim or demand but as to any other admissible matter which must have
been offered for that purpose (L-7044, 96 Phil. 526). In the earlier case
ofContreras and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G.
4306), it was stated that the rule must be adhered to regardless of any
possible injustice in a particular case for ‘(W)e have to subordinate the
equity of a particular situation to the over-mastering need of certainty and
immutability of judicial pronouncements.’
“xx xx xx.”
III
The despotic manner by which public respondent Amado G. Inciong
divested the members of the petitioner union of their rights acquired
by virtue of a final judgment is tantamount to a deprivation of property
without due process of law. Public respondent completely ignored the
rights of the petitioner union’s members in dismissing their complaint
since he knew for a fact that the judgment of the labor arbiter had long
681
VOL. 132, OCTOBER 23, 1984 681 682 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong People vs. Padilla
become final and was even partially executed by the respondent bank.
A final judgment vests in the prevailing party a right recognized and
protected by law under the due process clause of the Constitution
(China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil.
324). A final judgment is “a vested interest which it is right and
equitable that the government should recognize and protect, and of
which the individual could not be deprived arbitrarily without
injustice” (Rookledge v. Garwood, 65 N.W. 2d 785, 791).
It is by this guiding principle that the due process clause is
interpreted. Thus, in the pithy language of then Justice, later Chief
Justice, Concepcion: “x x x acts of Congress, as well as those of the
Executive, can deny due process only under pain of nullity, and judicial
proceedings suffering from the same flaw are subject to the same
sanction, any statutory provision to the contrary notwithstanding” (Vda.
de Cuaycong vs. Vda. de Sengbengco, 110 Phil. 118, italics supplied).
And “(I)t has been likewise established that a violation of a
constitutional right divests the court of jurisdiction; and as a
consequence its judgment is null and void and confers no rights” (Phil.
Blooming Mills Employees Organization vs. Phil. Blooming Mills Co.,
Inc., 51 SCRA 211, June 5, 1973).
Tested by and pitted against this broad concept of the constitutional
guarantee of due process, the action of public respondent Amado G.
Inciong is a clear example of deprivation of property without due
process of law and constituted grave abuse of discretion, amounting to
lack or excess of jurisdiction in issuing the order dated November 10,
1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE
ORDER OF PUBLIC RESPONDENT IS SET ASIDE, AND THE
DECISION OF LABOR ARBITER RICARTE T. SORIANO DATED
AUGUST 25, 1975, IS HEREBY REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF
ASIA AND AMERICA.
SO ORDERED.
682
Guerrero, Escolin and Cuevas, JJ., concur.
Aquino and Abad Santos, JJ., in the result.

VOL. 132, OCTOBER 23, 1984 663
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
No. L-52415. October 23, 1984. *
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES’ UNION
(IBAAEU), petitioner, vs. HON. AMADO G. INCIONG, Deputy
Minister, Ministry of Labor and INSULAR BANK OF ASIA AND
AMERICA, respondents.
Labor Law; Administrative Law; Statutes; A labor regulation which
in effect amends the Labor Code is null and void.—WE agree with the
petitioner’s contention that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9 issued by the then
Secretary of Labor are null and void since in the guise of clarifying the
Labor Code’s provisions on holiday pay, they in effect amended them by
enlarging the scope of their exclusion.
Same; Same; Same; The nullity of the labor regulation on holiday pay
lies in its exclusion of monthly paid employees from the coverage of holiday
pay contrary to what the Labor Code provides.—From the above-cited
provisions, it is clear that monthly paid employees are not excluded from
the benefits of holiday pay. However, the implementing rules on holiday
pay promulgated by the then Secretary of Labor excludes monthly paid
employees from the said benefits by inserting, under Rule IV, Book III of
the implementing rules, Section 2, which provides that: “employees who
are uniformly paid by the month, irrespective of the number of working
days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month
whether worked or not.”
Same; Same; Same; Same.—It is elementary in the rules of statutory
construction that when the language of the law is clear and unequivocal
the law must be taken to mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement
_______________
* SECOND DIVISION.
664
664 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
Inciong
to the benefits of holiday pay are clear and explicit—it provides for
both the coverage of and exclusion from the benefits. In Policy Instruction
No. 9, the then Secretary of Labor went as far as to categorically state that
the benefit is principally intended for daily paid employees, when the law
clearly states that every worker shall be paid their regular holiday pay.
This is a flagrant violation of the mandatory directive of Article 4 of the
Labor Code, which states that “All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing
rules and regulations,shall be resolved in favor of labor.” Moreover, it shall
always be presumed that the legislature intended to enact a valid and
permanent statute which would have the most beneficial effect that its
language permits (Orlosky vs. Haskell, 155 A. 112).
Same; Same; Same; Courts; The judiciary’s role invokes the work of
making a correct interpretation of the actions of the three branches of
government.—While it is true that the contemporaneous construction
placed upon a statute by executive officers whose duty is to enforce it
should be given great weight by the courts, still if such construction is so
erroneous, as in the instant case, the same must be declared as null and
void. It is the role of the Judiciary to refine and, when necessary, correct
constitutional (and/or statutory) interpretation, in the context of the
interactions of the three branches of the government, almost always in
situations where some agency of the State has engaged in action that stems
ultimately from some legitimate area of governmental power (The
Supreme Court in Modern Role, C. B. Swisher, 1958, p. 36).
Same; Judgment; Ruling in De Luna vs. Kayanan, 61 SCRA 49, not
being a labor case, cannot be invoked by the herein public respondents.
Labor is constitutionally protected.—To start with, unlike the instant case,
the case of De Luna relied upon by the public respondent is not a labor case
wherein the express mandate of the Constitution on the protection to labor
is applied. Thus Article 4 of the Labor Code provides that, “All doubts in
the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor
of labor”; and Article 1702 of the Civil Code provides that, “In case of doubt,
all labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer.”
665
VOL. 132, OCTOBER 23, 1984 665
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs.
 Same; Same; A judgment in a labor case that has become executory
can no longer be revoked or its execution estopped by virtue of a law passed
after finality of judgment.—Consequently, contrary to public respondent’s
allegations, it is patently unjust to deprive the members of petitioner union
of their vested right acquired by virtue of a final judgment on the basis of
a labor statute promulgated following the acquisition of the “right”.
Same; Same; Partial execution of judgment is acceptance of its
correctness.—Respondent bank counters with the argument that its partial
compliance was involuntary because it did so under pain of levy and
execution of its assets (p. 138, rec.). WE find no merit in this argument.
Respondent bank clearly manifested its voluntariness in complying with
the decision of the labor arbiter by not appealing to the National Labor
Relations Commission as provided for under the Labor Code under Article
223. A party who waives his right to appeal is deemed to have accepted the
judgment, adverse or not, as correct, especially if such party readily
acquiesced in the judgment by starting to execute said judgment even
before a writ of execution was issued, as in this case. Under these
circumstances, to permit a party to appeal from the said partially executed
final judgment would make a mockery of the doctrine of finality of
judgments long enshrined in this jurisdiction.
Same; Same; A final judgment confers a vested interest that should be
protected.—A final judgment vests in the prevailing party a right
recognized and protected by law under the due process clause of the
Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila,
63 Phil. 324). A final judgment is “a vested interest which it is right and
equitable that the government should recognize and protect, and of which
the individual could not be deprived arbitrarily without injustice”
(Rookledge v. Garwood, 65 N.W. 2d 785, 791).
PETITION for certiorari to review the order of the Deputy Minister of
Labor.
The facts are stated in the opinion of the Court.
Sisenando R. Villaluz, Jr. for petitioner.
Abdulmaid Kiram Muin colloborating counsel for petitioner.
666
666 SUPREME COURT REPORTS ANNOTATED Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong ‘Art. 208. Right to holiday pay.—
The Solicitor General, Caparas, Tabios, Ilagan, Alcantara &
Gatmaytan Law Office and Sycip, Salazar, Feliciano & Hernandez Law
Office for respondents.
MAKASIAR, J.:
This is a petition for certiorari to set aside the order dated November
10, 1979, of respondent Deputy Minister of Labor, Amado G. Inciong,
in NLRC case No. RB-IV-1561-76 entitled “Insular Bank of Asia and
America Employees’ Union (complainant-appellee), vs. Insular Bank of
Asia and America” (respondent-appellant), the dispositive portion of
which reads as follows:
“xx xx.
“ALL THE FOREGOING CONSIDERED, let the appealed
Resolutionen banc of the National Labor Relations Commission dated 20
June 1978 be, as it is hereby, set aside and a new judgment promulgated
dismissing the instant case for lack of merit” (p. 109, rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the
respondent bank for the payment of holiday pay before the then
Department of Labor, National Labor Relations Commission, Regional
Office No. IV in Manila. Conciliation having failed, and upon the
request of both parties, the case was certified for arbitration on July 7,
1975 (p. 18, NLRC rec.).
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a
decision in the above-entitled case, granting petitioner’s complaint for
payment of holiday pay. Pertinent portions of the decision read:
“xx xx.
“The records disclosed that employees of respondent bank were not paid
their wages on unworked regular holidays as mandated by the Code,
particularly Article 208, to wit:
667
VOL. 132, OCTOBER 23, 1984 667
1. ‘(a)Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than 10
workers.
 2. ‘(b)The term “holiday” as used in this chapter, shall include: New Year’s Day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty-fifth and
thirtieth of December and the day designated by law for holding a general
election.
‘xx xx.’
“This conclusion is deduced from the fact that the daily rate of pay of the
bank employees was computed in the past with the unworked regular
holidays as excluded for purposes of determining the deductible amount for
absences incurred. Thus, if the employer uses the factor 303 days as a
divisor in determining the daily rate of monthly paid employee, this gives
rise to a presumption that the monthly rate does not include payments for
unworked regular holidays. The use of the factor 303 indicates the number
of ordinary working days in a year (which normally has 365 calendar days),
excluding the 52 Sundays and the 10 regular holidays. The use of 251 as a
factor (365 calendar days less 52 Saturdays, 52 Sundays, and 10 regular
holidays) gives rise likewise to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid. This being the case,
it is not amiss to state with certainty that the instant claim for wages on
regular unworked holidays is found to be tenable and meritorious.
“WHEREFORE, judgment is hereby rendered:
1. “(a)xx xx.
2. “(b)Ordering respondent to pay wages to all its employees for all
regular holidays since November 1, 1974” (pp. 97-99, rec.,
underscoring supplied).
Respondent bank did not appeal from the said decision. Instead, it
complied with the order of Arbiter Ricarte T. Soriano by paying their
holiday pay up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was
promulgated amending, among others, the provisions of the Labor Code
on the right to holiday pay to read as follows:
668
668 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
“Art. 94. Right to holiday pay.—(a) Every worker shall be paid his regular
daily wages during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
1. “(b)The employer may require an employee to work on any holiday
but such employee shall be paid a compensation equivalent to
twice his regular rate; and
2. “(c)As used in this Article, ‘holiday’ includes: New Year’s Day,
Maundy Thursday, Good Friday, the ninth of April, the first of
May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and the thirtieth of December, and
the day designated by law for holding a general election.”
Accordingly, on February 16, 1976, by authority of Article 5 of the same
Code, the Department of Labor (now Ministry of Labor) promulgated
the rules and regulations for the implementation of holidays with pay.
The controversial section thereof reads:
“Sec. 2. Status of employees paid by the month.—Employees who are
uniformly paid by the month, irrespective of the number of working days
therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month
whether worked or not.
“For this purpose, the monthly minimum wage shall not be less than
the statutory minimum wage multiplied by 365 days divided by twelve”
(italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then
Secretary of Labor (now Minister) interpreting the above-quoted rule,
pertinent portions of which read:
“xx xx.
“The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose
monthly salary did not yet include payment for the ten (10) paid legal
holidays are entitled to the benefit.
“Under the rules implementing P.D. 850, this policy has been fully
clarified to eliminate controversies on the entitlement of
669
VOL. 132, OCTOBER 23, 1984 669
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
monthly paid employees. The new determining rule is this: If the monthly
paid employee is receiving not less than P240, the maximum monthly
minimum wage, and his monthly pray is uniform from January to
December, he is presumed to be already paid the ten (10) paid legal
holidays. However, if deductions are made from his monthly salary on
account of holidays in months where they occur, then he is still entitled to
the ten (10) paid legal holidays. x x x” (italics supplied).
Respondent bank, by reason of the ruling laid down by the aforecited
rule implementing Article 94 of the Labor Code and by Policy
Instruction No. 9, stopped the payment of holiday pay to all its
employees.
On August 30, 1976, petitioner filed a motion for a writ of execution
to enforce the arbiter’s decision of August 25, 1975, whereby the
respondent bank was ordered to pay its employees their daily wage for
the unworked regular holidays.
On September 10, 1975, respondent bank filed an opposition to the
motion for a writ of execution alleging, among others, that: (a) its
refusal to pay the corresponding unworked holiday pay in accordance
with the award of Labor Arbiter Ricarte T. Soriano dated August 25,
1975, is based on and justified by Policy Instruction No. 9 which
interpreted the rules implementing P. D. 850; and (b) that the said
award is already repealed by P.D. 850 which took effect on December
16, 1975, and by said Policy Instruction No. 9 of the Department of
Labor, considering that its monthly paid employees are not receiving
less than P240.00 and their monthly pay is uniform from January to
December, and that no deductions are made from the monthly salaries
of its employees on account of holidays in months where they occur (pp.
64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of
issuing a writ of execution, issued an order enjoining the respondent
bank to continue paying its employees their regular holiday pay on the
following grounds: (a) that the judgment is already final and the
findings which is found in the body of the decision as well as the
dispotive portion thereof is res judicata or is the law of the case between
the parties; and
670
670 SUPREME COURT REPORTS ANNOTATED (a) that the office of the Minister of Labor has no jurisdiction to
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong (b) that the labor arbiter’s decision being final, executory and
(b) that since the decision had been partially implemented by the
respondent bank, appeal from the said decision is no longer available
(pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the above-
cited order of Labor Arbiter Soriano to the National Labor Relations
Commission, reiterating therein its contentions averred in its
opposition to the motion for writ of execution. Respondent bank further
alleged for the first time that the questioned order is not supported by
evidence insofar as it finds that respondent bank discontinued payment
of holiday pay beginning January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission
promulgated its resolution en banc dismissing respondent bank’s
appeal, the dispositive portion of which reads as follows:
“In view of the foregoing, we hereby resolve to dismiss, as we hereby
dismiss, respondent’s appeal; to set aside Labor Arbiter Ricarte T.
Soriano’s order of 18 October 1976 and, as prayed for by complainant, to
order the issuance of the proper writ of execution” (p. 244, NLRC rec.).
Copies of the above resolution were served on the petitioner only on
February 9, 1979 or almost eight. (8) months after it was promulgated,
while copies were served on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of the
Minister of Labor a motion for reconsideration/appeal with urgent
prayer to stay execution, alleging therein the following: (a) that there
is prima facie evidence of grave abuse of discretion, amounting to lack
of jurisdiction on the part of the National Labor Relations Commission,
in dismissing the respondent’s appeal on pure technicalities without
passing upon the merits of the appeal; and (b) that the resolution
appealed from is contrary to the law and jurisprudence (pp. 260-274,
NLRC rec.).
On March 19, 1979, petitioner filed its opposition to the respondent
bank’s appeal and alleged the following grounds:
671
VOL. 132, OCTOBER 23, 1984 671
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
entertain the instant appeal pursuant to the provisions of P. D. 1391;
unappealable, execution is a matter of right for the petitioner; and (c)
that the decision of the labor arbiter dated August 25, 1975 is supported
by the law and the evidence in the case (p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for execution
pending appeal, praying that a writ of execution be issued by the
National Labor Relations Commission pending appeal of the case with
the Office of the Minister of Labor. Respondent bank filed its opposition
thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations Commission
issued an order which states:
“The Chief, Research and Information Division of this Commission is
hereby directed to designate a Socio-Economic Analyst to compute the
holiday pay of the employees of the Insular Bank of Asia and America from
April 1976 to the present, in accordance with the Decision of the Labor
Arbiter dated August 25, 1975” (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through
Deputy Minister Amado G. Inciong, issued an order, the dispositive
portion of which states:
“ALL THE FOREGOING CONSIDERED, let the appealed Resolution en
banc of the National Labor Relations Commission dated 20 June 1978 be,
as it is hereby, set aside and a new judgment promulgated dismissing the
instant case for lack of merit” (p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent Amado G.
Inciong with abuse of discretion amounting to lack or excess of
jurisdiction.
The issue in this case is: whether or not the decision of a Labor
Arbiter awarding payment of regular holiday pay can still be set aside
on appeal by the Deputy Minister of Labor
672
672 SUPREME COURT REPORTS ANNOTATED the then Secretary of Labor excludes monthly paid employees from the
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong rules, Section 2, which provides that: “employees who are uniformly
even though it has already become final and had been partially
executed, the finality of which was affirmed by the National Labor
Relations Commission sitting en banc, on the basis of an Implementing
Rule and Policy Instruction promulgated by the Ministry of Labor long
after the said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner’s contention that Section 2, Rule IV, Book
III of the implementing rules and Policy Instruction No. 9 issued by the
then Secretary of Labor are null and void since in the guise of clarifying
the Labor Code’s provisions on holiday pay, they in effect amended
them by enlarging the scope of their exclusion (p. 11, rec.).
Article 94 of the Labor Code, as amended by P.D. 850, provides:
“Art. 94. Right to holiday pay.—(a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers. x x x x.”
The coverage and scope of exclusion of the Labor Code’s holiday pay
provisions is spelled out under Article 82 thereof which reads:
“Art. 82. Coverage.—The provision of this Title shall apply to employees in
all establishments and undertakings, whether for profit or not, but not to
government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in appropriate
regulations.
“xx xx” (italics supplied).
From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday
673
VOL. 132, OCTOBER 23, 1984 673
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
pay. However, the implementing rules on holiday pay promulgated by
said benefits by inserting, under Rule IV, Book III of the implementing
paid by the month, irrespective of the number of working days therein,
with a salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month whether
worked or not.”
Public respondent maintains that “(T)he rules implementing P. D.
850 and Policy Instruction No. 9 were issued to clarify the policy in the
implementation of the ten (10) paid legal holidays. As interpreted,
‘unworked’ legal holidays are deemed paid insofar as monthly paid
employees are concerned if (a) they are receiving not less than the
statutory minimum wage, (b) their monthly pay is uniform from
January to December, and (c) no deduction is made from their monthly
salary on account of holidays in months where they occur. As explained
in Policy Instruction No. 9, ‘The ten (10) paid legal holidays law, to start
with, is intended to benefit principally daily paid employees. In case of
monthly, only those whose monthly salary did not yet include payment
for the ten (10) paid legal holidays are entitled to the benefit’ ” (pp. 340-
341, rec.). This contention is untenable.
It is elementary in the rules of statutory construction that when the
language of the law is clear and unequivocal the law must be taken to
mean exactly what it says. In the case at bar, the provisions of the
Labor Code on the entitlement to the benefits of holiday pay are clear
and explicit—it provides for both the coverage of and exclusion from the
benefits. In Policy Instruction No. 9, the then Secretary of Labor went
as far as to categorically state that the benefit is principally intended
for daily paid employees, when the law clearly states that every worker
shall be paid their regular holiday pay. This is a flagrant violation of
the mandatory directive of Article 4 of the Labor Code, which states
that “All doubts in the implementation and interpretation of the
provisions of this Code, in-
674
674 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
cluding its implementing rules and regulations, shall be resolved in
favor of labor.” Moreover, it shall always be presumed that the
legislature intended to enact a valid and permanent statute which
would have the most beneficial effect that its language permits
(Orlosky vs. Haskell, 155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his
statutory authority granted by Article 5 of the Labor Code authorizing
him to promulgate the necessary implementing rules and regulations.
Public respondent vehemently argues that the intent and spirit of
the holiday pay law, as expressed by the Secretary of Labor in the case
of Chartered Bank Employees Association v. The Chartered
Bank (NLRC Case No. RB-1789-75, March 24, 1976), is to correct the
disadvantages inherent in the daily compensation system of
employment—holiday pay is primarily intended to benefit the daily
paid workers whose employment and income are circumscribed by the
principle of “no work, no pay.” This argument may sound meritorious;
but, until the provisions of the Labor Code on holiday pay is amended
by another law, monthly paid employees are definitely included in the
benefits of regular holiday pay. As earlier stated, the presumption is
always in favor of law, negatively put, the Labor Code is always strictly
construed against management.
While it is true that the contemporaneous construction placed upon
a statute by executive officers whose duty is to enforce it should be
given great weight by the courts, still if such construction is so
erroneous, as in the instant case, the same must be declared as null
and void. It is the role of the Judiciary to refine and, when necessary,
correct constitutional (and/or statutory) interpretation, in the context
of the interactions of the three branches of the government, almost
always in situations where some agency of the State has engaged in
action that stems ultimately from some legitimate area of
governmental power (The Supreme Court in Modern Role, C. B.
Swisher, 1958, p. 36).
Thus, in the case of Philippine Apparel Workers Union vs. National
Labor Relations Commission (106 SCRA 444, July
675
VOL. 132, OCTOBER 23, 1984 675
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
31, 1981) where the Secretary of Labor enlarged the scope of exemption
from the coverage of a Presidential Decree granting increase in
emergency allowance, this Court ruled that:
“x x xx the Secretary of Labor has-exceeded his authority when he included
paragraph (k) in Section 1 of the Rules implementing P.D. 1123.
“xx xx xx.
“Clearly, the inclusion of paragraph k contravenes the statutory
authority granted to the Secretary of Labor, and the same is therefore void,
as ruled by this Court in a long line of cases x x x x.
“ ‘The recognition of the power of administrative officials to promulgate rules in the
administration of the statute, necessarily limited to what is provided for in the legislative
enactment, may be found in the early case of United States vs. Barriosdecided in 1908. Then
came in a 1914 decision, United States vs. Tupasi Molina (29 Phil. 119) delineation of the
scope of such competence. Thus: ‘Of course the regulations adopted under legislative authority
by a particular department must be in harmony with the provisions of the law, and for the
sole purpose of carrying into effect its general provisions. By such regulations, of course, the
law itself cannot be extended. So long, however, as the regulations relate solely to carrying
into effect the provisions of the law, they are valid.’ In 1936, in People vs. Santos, this Court
expressed its disapproval of an administrative order that would amount to an excess of the
regulatory power vested in an administrative official. We reaffirmed such a doctrine in a 1951
decision, where we again made clear that where an administrative order betrays
inconsistency or repugnancy to the provisions of the Act, ‘the mandate of the Act must prevail
and must be followed.’ Justice Barrera, speaking for the Court in Victorias Milling Inc. vs.
Social Security Commission, citing Parker as well as Davis did tersely sum up the matter
thus: ‘A rule is binding on the Courts so long as the procedure fixed for its promulgation is
followed and its scope is within the statutory authority granted by the legislature, even if the
courts are not in agreement with the policy stated therein or its innate wisdom x x x. On the
other hand, administrative interpretation of the law is at best merely advisory, for it is the
courts that finally determine what the law means.’
676
676 SUPREME COURT REPORTS ANNOTATED circumstances that transpired subsequent to the promulgation of the
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong decision impossible and unjust on the part of herein respondent bank
“ ‘It cannot be otherwise as the Constitution limits the authority of the President, in whom
all executive power resides, to take care that the laws be faithfully executed. No lesser
administrative executive office or agency then can, contrary to the express language of the
Constitution, assert for itself a more extensive prerogative. Necessarily, it is bound to observe
the constitutional mandate. There must be strict compliance with the legislative enactment.
Its terms must be followed. The statute requires adherence to, not departure from its
provisions. No deviation is allowable. In the terse language of the present Chief Justice, an
administrative agency ‘cannot amend an act of Congress.’ Respondents can be sustained,
therefore, only if it could be shown that the rules and regulations promulgated by them were
in accordance with what the Veterans Bill of Rights provides’ ” (Phil. Apparel Workers Union
vs. National Labor Relations Commission, supra, 463, 464, citing Teozon vs. Members of the
Board of Administrators, PVA, 33 SCRA 585; see also Santos vs. Hon. Estenzo, et al., 109
Phil. 419; Hilado vs. Collector of Internal Revenue, 100 Phil. 295; Sy Man vs. Jacinto &
Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and Trinidad, 43 Phil. 259).
This ruling of the Court was recently reiterated in the case ofAmerican
Wire & Cable Workers Union (TUPAS) vs. The National Labor
Relations Commission and American Wire & Cable Co., Inc.,G.R. No.
53337, promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to
implement the Labor Code and Policy Instruction No. 9 issued by the
then Secretary of Labor must be declared null and void. Accordingly,
public respondent Deputy Minister of Labor Amado G. Inciong had no
basis at all to deny the members of petitioner union their regular
holiday pay as directed by the Labor Code.
II
It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano
dated August 25, 1975, had already become final, and was, in fact,
partially executed by the respondent bank.
677
VOL. 132, OCTOBER 23, 1984 677
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
However, public respondent maintains that on the authority of De
Luna vs. Kayanan, 61 SCRA 49, November 13, 1974, he can annul the
final decision of Labor Arbiter Soriano since the ensuing promulgation
of the integrated implementing rules of the Labor Code pursuant to
P.D. 850 on February 16, 1976, and the issuance of Policy Instruction
No. 9 on April 23, 1976 by the then Secretary of Labor are facts and
decision of the labor arbiter, which renders the execution of the said
(pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied
upon by the public respondent is not a labor case wherein the express
mandate of the Constitution on the protection to labor is applied. Thus
Article 4 of the Labor Code provides that, “All doubts in the
implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in
favor of labor”; and Article 1702 of the Civil Code provides that, “In case
of doubt, all labor legislation and all labor contracts shall be construed
in favor of the safety and decent living for the laborer.”
Consequently, contrary to public respondent’s allegations, it is
patently unjust to deprive the members of petitioner union of their
vested right acquired by virtue of a final judgment on the basis of a
labor statute promulgated following the acquisition of the “right”.
On the question of whether or not a law or statute can annul or
modify a judicial order issued prior to its promulgation, this Court,
through Associate Justice Claro M. Recto, said:
“xx xx xx.
“We are decidedly of the opinion that they did not. Said order, being
unappealable, became final on the date of its issuance and the parties who
acquired rights thereunder cannot be deprived thereof by a constitutional
provision enacted or promulgated subsequent thereto. Neither the
Constitution nor the statutes, except penal laws
678
678 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong execute said judgment even before a writ of execution was issued, as in
favorable to the accused, have retroactive effect in the sense of annulling or
modifying vested rights, or altering contractual obligations” (China Ins. &
Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324, italics
supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this
Court said: “x x x when a court renders a decision or promulgates a
resolution or order on the basis of and in accordance with a certain law
or rule then in force, the subsequent amendment or even repeal of said
law or rule may not affect the final decision, order, or resolution already
promulgated, in the sense of revoking or rendering it void and of no
effect.” Thus, the amendatory rule (Rule IV, Book III of the Rules to
Implement the Labor Code) cannot be given retroactive effect as to
modify final judgments. Not even a law can validly annul final decisions
(In re: Cunanan, et al., Ibid.).
Furthermore, the facts of the case relied upon by the public
respondent are not analogous to that of the case at bar. The case of De
Luna speaks of final and executory judgment, while in the instant case,
the final judgment is partially executed. Just as the court is ousted of
its jurisdiction to annul or modify a judgment the moment it becomes
final, the court also loses its jurisdiction to annul or modify a writ of
execution upon its service or execution; for, otherwise, we will have a
situation wherein a final and executed judgment can still be annulled
or modified by the court upon mere motion of a party. This would
certainly result in endless litigations thereby rendering inutile the rule
of law.
Respondent bank counters with the argument that its partial
compliance was involuntary because it did so under pain of levy and
execution of its assets (p. 138, rec.). WE find no merit in this argument.
Respondent bank clearly manifested its voluntariness in complying
with the decision of the labor arbiter by not appealing to the National
Labor Relations Commission as provided for under the Labor Code
under Article 223. A party who waives his right to appeal is deemed to
have accepted the judgment, adverse or not, as correct, especially if
such party readily acquiesced in the judgment by starting to
679
VOL. 132, OCTOBER 23, 1984 679 Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong
this case. Under these circumstances, to permit a party to appeal from
the said partially executed final judgment would make a mockery of the
doctrine of finality of judgments long enshrined in this jurisdiction.
Section 1 of Rule 39 of the Revised Rules of Court provides that “x x
x execution shall issue as a matter of right upon the expiration of the
period to appeal x x x or if no appeal has been duly perfected.” This rule
applies to decisions or orders of labor arbiters who are exercising quasi-
judicial functions since; “x x x the rule of execution of judgments under
the rules should govern all kinds of execution of judgment, unless it is
otherwise provided in other laws” (Sagucio vs. Bulos, 5 SCRA 803) and
Article 223 of the Labor Code provides that “x x x decisions, awards, or
orders of the Labor Arbiter or compulsory arbitrators are final and
executory unless appealed to the Commission by any or both of the
parties within ten (10) days from receipt of such awards, orders, or
decisions. x x .”
Thus, under the aforecited rule, the lapse of the appeal period
deprives the courts of jurisdiction to alter the final judgment and the
judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143,
citing Cruz vs. WCC, 2 PHILAJUR 436, 440, January 31, 1978; see
also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and Regala vs.
WCC, decided jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA
436; Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422,
423, October 31, 1961, where the lower court modified a final order, this
Court ruled thus:
“xx xx xx.
“The lower court was thus aware of the fact that it was thereby altering
or modifying its order of January 8, 1959. Regardless of the excellence of
the motive for acting as it did, we are constrained to hold, however, that
the lower court had no authority to make said alteration or modification. x
x x.
“xxx xx xx.
680
680 SUPREME COURT REPORTS ANNOTATED
“The equitable considerations that led the lower court to take the action
complained of cannot offset the demands of public policy and public
interest—which are also responsive to the tenets of equity—requiring that
all issues passed upon in decisions or final orders that have become
executory, be deemed conclusively disposed of and definitely closed, for,
otherwise, there would be no end to litigations, thus setting at naught the
main role of courts of justice, which is to assist in the enforcement of the
rule of law and the maintenance of peace and order, by settling justiciable
controversies with finality.
“xx xx xx.”
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March
30, 1982, this Court said:
“xx xx xx.
“In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated
that the rule is absolute that after a judgment becomes final, by the
expiration of the period provided by the rules within which it so becomes,
no further amendment or correction can be made by the court except for
clerical errors or mistakes. And such final judgment is conclusive not only
as to every matter which was offered and received to sustain or defeat the
claim or demand but as to any other admissible matter which must have
been offered for that purpose (L-7044, 96 Phil. 526). In the earlier case
ofContreras and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G.
4306), it was stated that the rule must be adhered to regardless of any
possible injustice in a particular case for ‘(W)e have to subordinate the
equity of a particular situation to the over-mastering need of certainty and
immutability of judicial pronouncements.’
“xx xx xx.”
III
The despotic manner by which public respondent Amado G. Inciong
divested the members of the petitioner union of their rights acquired
by virtue of a final judgment is tantamount to a deprivation of property
without due process of law. Public respondent completely ignored the
rights of the petitioner union’s members in dismissing their complaint
since he knew for a fact that the judgment of the labor arbiter had long
681
VOL. 132, OCTOBER 23, 1984 681 682 SUPREME COURT REPORTS ANNOTATED
Insular Bank of Asia and America Employees’ Union (IBAAEU) vs. Inciong People vs. Padilla
become final and was even partially executed by the respondent bank.
A final judgment vests in the prevailing party a right recognized and
protected by law under the due process clause of the Constitution
(China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil.
324). A final judgment is “a vested interest which it is right and
equitable that the government should recognize and protect, and of
which the individual could not be deprived arbitrarily without
injustice” (Rookledge v. Garwood, 65 N.W. 2d 785, 791).
It is by this guiding principle that the due process clause is
interpreted. Thus, in the pithy language of then Justice, later Chief
Justice, Concepcion: “x x x acts of Congress, as well as those of the
Executive, can deny due process only under pain of nullity, and judicial
proceedings suffering from the same flaw are subject to the same
sanction, any statutory provision to the contrary notwithstanding” (Vda.
de Cuaycong vs. Vda. de Sengbengco, 110 Phil. 118, italics supplied).
And “(I)t has been likewise established that a violation of a
constitutional right divests the court of jurisdiction; and as a
consequence its judgment is null and void and confers no rights” (Phil.
Blooming Mills Employees Organization vs. Phil. Blooming Mills Co.,
Inc., 51 SCRA 211, June 5, 1973).
Tested by and pitted against this broad concept of the constitutional
guarantee of due process, the action of public respondent Amado G.
Inciong is a clear example of deprivation of property without due
process of law and constituted grave abuse of discretion, amounting to
lack or excess of jurisdiction in issuing the order dated November 10,
1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE
ORDER OF PUBLIC RESPONDENT IS SET ASIDE, AND THE
DECISION OF LABOR ARBITER RICARTE T. SORIANO DATED
AUGUST 25, 1975, IS HEREBY REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF
ASIA AND AMERICA.
SO ORDERED.
682
Guerrero, Escolin and Cuevas, JJ., concur.
Aquino and Abad Santos, JJ., in the result.
 G.R. No. 192531. November 12, 2014. *
BERNARDINA P. BARTOLOME, petitioner, vs. SOCIAL SECURITY
SYSTEM and SCANMAR MARITIME SERVICES, INC., respondents.
Administrative Agencies; Appeals; Generally, findings of fact by
administrative agencies are generally accorded great respect, if not finality,
by the courts by reason of the special knowledge and expertise of said
administrative agencies over matters falling under their jurisdiction.—
Generally, findings of fact by administrative agencies are generally
accorded great respect, if not finality, by the courts by reason of the special
knowledge and expertise of said administrative agencies over matters
falling under their jurisdiction. However, in the extant case, the ECC had
overlooked a crucial piece of evidence offered by the petitioner — Cornelio’s
death certificate. Based on Cornelio’s death certificate, it appears that
John’s adoptive father died on October 26, 1987, or only less than three (3)
years since the decree of adoption on February 4, 1985, which attained
finality. As such, it was error for the ECC to have ruled that it was not duly
proven that the adoptive parent, Cornelio, has already passed away.
Administrative Regulations; Administrative regulations must always
be in harmony with the provisions of the law because any resulting
discrepancy between the two will always be resolved in favor of the basic
law.—This Court held in Commissioner of Internal Revenue v. Fortune
Tobacco Corporation, 559 SCRA 160 (2008) that: As we have previously
declared, rule-making power must be confined to details for regulating the
mode or proceedings in order to carry into effect the law as it has been
enacted, and it cannot be extended to amend or expand the statutory
requirements or to embrace matters not covered by the
statute. Administrative regulations must always be in harmony
with the provisions of the law because any resulting discrepancy
between the two will always be resolved in favor of the basic law.
(Emphasis supplied) Guided by this doctrine, We find that Rule XV of the
Amended Rules on Employees’ Compensation is patently a wayward
restriction of and a
_______________
* THIRD DIVISION.
79
VOL. 740, NOVEMBER 12, 2014 79
Bartolome vs. Social Security System Legitimate Parents; Nowhere in the law nor in the rules does it say
substantial deviation from Article 167(j) of the Labor Code when it
interpreted the phrase “dependent parents” to refer to “legitimate parents.”
Dependent Parents; Words and Phrases; Plainly, “dependent parents”
are parents, whether legitimate or illegitimate, biological or by adoption,
who are in need of support or assistance.—The term “parents” in the phrase
“dependent parents” in the aforequoted Article 167(j) of the Labor Code is
used and ought to be taken in its general sense and cannot be unduly
limited to “legitimate parents” as what the ECC did. The phrase
“dependent parents” should, therefore, include all parents, whether
legitimate or illegitimate and whether by nature or by adoption. When the
law does not distinguish, one should not distinguish. Plainly, “dependent
parents” are parents, whether legitimate or illegitimate, biological or by
adoption, who are in need of support or assistance.
Constitutional Law; Equal Protection of the Laws; As jurisprudence
elucidates, equal protection simply requires that all persons or things
similarly situated should be treated alike, both as to rights conferred and
responsibilities imposed.—As jurisprudence elucidates, equal protection
simply requires that all persons or things similarly situated should be
treated alike, both as to rights conferred and responsibilities imposed. It
requires public bodies and institutions to treat similarly situated
individuals in a similar manner. In other words, the concept of equal justice
under the law requires the state to govern impartially, and it may not draw
distinctions between individuals solely on differences that are irrelevant to
a legitimate governmental objective. The concept of equal protection,
however, does not require the universal application of the laws to all
persons or things without distinction. What it simply requires is equality
among equals as determined according to a valid classification. Indeed, the
equal protection clause permits classification. Such classification, however,
to be valid must pass the test of reasonableness. The test has four
requisites: (1) The classification rests on substantial distinctions; (2) It is
germane to the purpose of the law; (3) It is not limited to existing conditions
only; and (4) It applies equally to all members of the same class.
“Superficial differences do not make for a valid classification.”
80
80 SUPREME COURT REPORTS ANNOTATED
Bartolome vs. Social Security System
that “legitimate parents” pertain to those who exercise parental authority
over the employee enrolled under the Employees’ Compensation Program
(ECP).—Nowhere in the law nor in the rules does it say that “legitimate Otherwise, the adopted child’s quality of life might have been better
parents” pertain to those who exercise parental authority over the off not being adopted at all if he would only find himself orphaned in the
employee enrolled under the ECP. It was only in the assailed Decision end. Thus, We hold that Cornelio’s death at the time of John’s minority
wherein such qualification was made. In addition, assuming arguendo that resulted in the restoration of petitioner’s parental authority over the
the ECC did not overstep its boundaries in limiting the adverted Labor adopted child.
Code provision to the deceased’s legitimate parents, and that the
PETITION for review of a decision of the Employees’ Compensation
commission properly equated legitimacy to parental authority, petitioner
Commission.
can still qualify as John’s secondary beneficiary. True, when Cornelio, in
1985, adopted John, then about two (2) years old, petitioner’s parental The facts are stated in the opinion of the Court.
authority over John was severed. However, lest it be overlooked, one key
Michael D. Domingo for petitioner.
detail the ECC missed, aside from Cornelio’s death, was that when the
adoptive parent died less than three (3) years after the adoption Mary G. Miranda for respondent SSS.
decree, John was still a minor, at about four (4) years of age. John’s
minority at the time of his adopter’s death is a significant factor in the case
at bar. Under such circumstance, parental authority should be deemed to VELASCO, JR., J.:
have reverted in favor of the biological parents. Otherwise, taking into
account Our consistent ruling that adoption is a personal relationship and
that there are no collateral relatives by virtue of adoption, who was then Nature of the Case
left to care for the minor adopted child if the adopter passed away?
Civil Law; Adoption; Succession; Biological Parents; It is apparent This Appeal, filed under Rule 43 of the Rules of Court, seeks to
that the biological parents retain their rights of succession to the estate of annul the March 17, 2010 Decision1 of the Employees’ Compensation
their child who was the subject of adoption.—It is apparent that the Commission (ECC) in ECC Case No. SL-18483-0218-10,
biological parents retain their rights of succession to the estate of their
entitled Bernardina P. Bartolome v. Social Security System (SSS)
child who was the subject of adoption. While the benefits arising from the
[Scanmar Maritime Services, Inc.], declaring that petitioner is not a
death of an SSS covered employee do not form part of the estate of the
beneficiary of the deceased employee under Presidential Decree No.
adopted child, the pertinent provision on legal or intestate succession at
least reveals the policy on the rights of the biological parents and those by
(PD) 442, otherwise known as the Labor Code of the Philippines, as
adoption vis-à-vis the right to receive benefits from the adopted. In the amended by PD 626.2
same way that certain rights still attach by virtue of the blood relation, so
too should certain obligations, which, We rule, include the exercise of
The Facts
parental authority, in the event of the untimely passing of their minor
offspring’s adoptive parent. We cannot leave undetermined the fate of a
minor child whose second chance at a better life under the care of the
John Colcol (John), born on June 9, 1983, was employed as
adoptive parents was snatched from him by death’s cruel grasp.
electrician by Scanmar Maritime Services, Inc., onboard the
81
vesselMaersk Danville, since February 2008. As such, he was enrolled
under the government’s Employees’ Compensation
VOL. 740, NOVEMBER 12, 2014 81
_______________
Bartolome vs. Social Security System 1 Rollo, pp. 59-64.
2 Further Amending Certain Articles Of Presidential Decree No. 442 Entitled “Labor
Code Of The Philippines.”
82
82 SUPREME COURT REPORTS ANNOTATED VOL. 740, NOVEMBER 12, 2014 83
Bartolome vs. Social Security System Bartolome vs. Social Security System
Program (ECP).3 Unfortunately, on June 2, 2008, an accident
occurred onboard the vessel whereby steel plates fell on John, which
led to his untimely death the following day.4
John was, at the time of his death, childless and unmarried. Thus,
petitioner Bernardina P. Bartolome, John’s biological mother and,
allegedly, sole remaining beneficiary, filed a claim for death benefits
under PD 626 with the Social Security System (SSS) at San Fernando
City, La Union. However, the SSS La Union office, in a letter dated
June 10, 20095 addressed to petitioner, denied the claim, stating:
We regret to inform you that we cannot give due course to your claim
because you are no longer considered as the parent of JOHN COLCOL as
he was legally adopted by CORNELIO COLCOL based on documents you
submitted to us.
The denial was appealed to the Employees’ Compensation
Commission (ECC), which affirmed the ruling of the SSS La Union
Branch through the assailed Decision, the dispositive portion of which
reads:
WHEREFORE, the appealed decision is AFFIRMED and the claim is
hereby dismissed for lack of merit.
SO ORDERED. 6
In denying the claim, both the SSS La Union branch and the ECC
ruled against petitioner’s entitlement to the death benefits sought after
under PD 626 on the ground she can no longer be considered John’s
primary beneficiary. As culled from the records, John and his sister
Elizabeth were adopted
_______________
3 Rollo, p. 59.
4 Id., at p. 60.
5 Id., at p. 53.
6 Id., at p. 64.
83
by their great grandfather, petitioner’s grandfather, Cornelio Colcol
(Cornelio), by virtue of the Decision7 in Spec. Proc. No. 8220-XII of the
Regional Trial Court in Laoag City dated February 4, 1985, which
decree of adoption attained finality.8 Consequently, as argued by the
agencies, it is Cornelio who qualifies as John’s primary beneficiary, not
petitioner.
Neither, the ECC reasoned, would petitioner qualify as John’s
secondary beneficiary even if it were proven that Cornelio has already
passed away. As the ECC ratiocinated:
Under Article 167(j) of P.D. 626, as amended, provides (sic) that
beneficiaries are the “dependent spouse until he remarries and dependent
children, who are the primary beneficiaries. In their absence, the
dependent parents and subject to the restrictions imposed on dependent
children, the illegitimate children and legitimate descendants who are the
secondary beneficiaries; Provided, that the dependent acknowledged
natural child shall be considered as a primary beneficiary when there are
no other dependent children who are qualified and eligible for monthly
income benefit.”
The dependent parent referred to by the above provision relates to
thelegitimate parent of the covered member, as provided for by Rule XV,
Section 1(c)(1) of the Amended Rules on Employees’ Compensation. This
Commission believes that the appellant is not considered a
legitimate parent of the deceased, having given up the latter for
adoption to Mr. Cornelio C. Colcol. Thus, in effect, the adoption
divested her of the status as the legitimate parent of the deceased.
xxxx
In effect, the rights which previously belong [sic] to the biological parent
of the adopted child shall now be upon the adopting parent. Hence, in this
case, the legal parent referred to by P.D. 626, as amended, as the bene-
_______________
7 Id., at p. 31.
8 Id., at p. 34.
84
84 SUPREME COURT REPORTS ANNOTATED
 Bartolome vs. Social Security System VOL. 740, NOVEMBER 12, 2014 85

Bartolome vs. Social Security System

ficiary, who has the right to file the claim, is the adoptive father of the
deceased and not herein appellant. (Emphasis supplied)
9

The ECC’s factual findings

are not consistent with the
Aggrieved, petitioner filed a Motion for Reconsideration, which was evidence on record
likewise denied by the ECC.10 Hence, the instant petition.

To recall, one of the primary reasons why the ECC denied

The Issues
Petitioner raises the following issues in the petition:
ASSIGNMENT OF ERRORS
I. The Honorable ECC’s Decision is contrary to evidence on record.
II. The Honorable ECC committed grave abuse in denying the just, due and
lawful claims of the petitioner as a lawful beneficiary of her deceased
biological son.
III. The Honorable ECC committed grave abuse of discretion in not giving
due course/denying petitioner’s otherwise meritorious motion for
reconsideration. 11
petitioner’s claim for death benefits is that even though she is John’s
biological mother, it was allegedly not proven that his adoptive parent,
Cornelio, was no longer alive. As intimated by the ECC:
Moreover, there had been no allegation in the records as to whether the
legally adoptive parent, Mr. Colcol, is dead, which would immediately
qualify the appellant [petitioner] for Social Security benefits. Hence,
absent such proof of death of the adoptive father, this Commission will
presume him to be alive and well, and as such, is the one entitled to claim
the benefit being the primary beneficiary of the deaceased. Thus, assuming
that appellant is indeed a qualified beneficiary under the Social Security
law, in view of her status as other beneficiary, she cannot claim the benefit
legally provided by law to the primary beneficiary, in this case the adoptive
father since he is still alive.

We disagree with the factual finding of the ECC on this point.

In resolving the case, the pivotal issue is this: Are the biological Generally, findings of fact by administrative agencies are generally
parents of the covered, but legally adopted, employee considered accorded great respect, if not finality, by the courts by reason of the
secondary beneficiaries and, thus, entitled, in appropriate cases, to special knowledge and expertise of said administrative agencies over
receive the benefits under the ECP? matters falling under their jurisdiction.12 However, in the extant case,
the ECC had overlooked a crucial piece of evidence offered by the
petitioner — Cornelio’s death certificate.13
The Court’s Ruling
_______________
12 Hipolito, Jr. v. Cinco, G.R. No. 174143, November 28, 2011, 661 SCRA 211, 326-327.
The petition is meritorious. 13 Rollo, p. 74.
_______________ 86
9 Id., at pp. 62-64.
86 SUPREME COURT REPORTS ANNOTATED
10 Id., at p. 73.
11 Id., at pp. 15-16. Bartolome vs. Social Security System
85

Based on Cornelio’s death certificate, it appears that John’s
adoptive father died on October 26, 1987,14 or only less than three (3)
years since the decree of adoption on February 4, 1985, which attained
finality.15 As such, it was error for the ECC to have ruled that it was not
duly proven that the adoptive parent, Cornelio, has already passed
away.
The rule limiting death benefits claims to the legitimate parents
is contrary to law
This brings us to the question of whether or not petitioner is entitled
to the death benefits claim in view of John’s work-related demise. The
pertinent provision, in this regard, is Article 167(j) of the Labor Code,
as amended, which reads:
ART. 167. Definition of terms.—As used in this Title unless the
context indicates otherwise:
xxxx
(j) ‘Beneficiaries’ means the dependent spouse until he remarries and
dependent children, who are the primary beneficiaries. In their
absence, the dependent parents and subject to the restrictions imposed
on dependent children, the illegitimate children and legitimate
descendants who are thesecondary beneficiaries; Provided, that the
dependent acknowledged natural child shall be considered as a primary
beneficiary when there are no other dependent children who are qualified
and eligible for monthly income benefit. (Emphasis supplied)
Concurrently, pursuant to the succeeding Article 177(c) supervising
the ECC “[T]o approve rules and regulations governing the processing
of claims and the settlement of disputes arising therefrom as prescribed
by the System,” the ECC has issued the Amended Rules on Employees’
Compensation, interpreting the above cited provision as follows:
_______________
14 Id., at p. 37.
15 Id., at p. 34.
87
VOL. 740, NOVEMBER 12, 2014 87 required by the implementing rules. As held by the ECC, the adoption
Bartolome vs. Social Security System
RULE XV – BENEFICIARIES
SECTION 1. Definition.—(a) Beneficiaries shall be either primary or
secondary, and determined at the time of employee’s death.
(b) The following beneficiaries shall be considered primary:
(1) The legitimate spouse living with the employee at the time of the
employee’s death until he remarries; and
(2) Legitimate, legitimated, legally adopted or acknowledged natural
children, who are unmarried not gainfully employed, not over 21 years of
age, or over 21 years of age provided, that he is incapacitated and incapable
of self-support due to physical or mental defect which is congenital or
acquired during minority; Provided, further, that a dependent
acknowledged natural child shall be considered as a primary beneficiary
only when there are no other dependent children who are qualified and
eligible for monthly income benefit; provided, finally, that if there are two
or more acknowledged natural children, they shall be counted from the
youngest and without substitution, but not exceeding five.
(c) The following beneficiaries shall be considered secondary:
(1) The legitimate parents wholly dependent upon the employee for
regular support;
(2) The legitimate descendants and illegitimate children who are
unmarried, not gainfully employed, and not over 21 years of age, or over 21
years of age provided that he is incapacitated and incapable of self-support
due to physical or mental defect which is congenital or acquired during
minority. (Emphasis supplied)
88
88 SUPREME COURT REPORTS ANNOTATED
Bartolome vs. Social Security System
Guilty of reiteration, the ECC denied petitioner’s claim on the
ground that she is no longer the deceased’s legitimate parent, as
decree severed the relation between John and petitioner, effectively
divesting her of the status of a legitimate parent, and, consequently,
that of being a secondary beneficiary.
We disagree.
a. Rule XV, Sec. 1(c)(1) of the Amended Rules on Employees’
Compensation deviates from the clear language of Art. 167(j) of
the Labor Code, as amended
Examining the Amended Rules on Employees’ Compensation in
light of the Labor Code, as amended, it is at once apparent that the
ECC indulged in an unauthorized administrative legislation. In net
effect, the ECC read into Art. 167 of the Code an interpretation not
contemplated by the provision. Pertinent in elucidating on this point is
Article 7 of the Civil Code of the Philippines, which reads:
Article 7. Laws are repealed only by subsequent ones, and their
violation or nonobservance shall not be excused by disuse, or custom or
practice to the contrary.
When the courts declared a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall
be valid only when they are not contrary to the laws or the
Constitution.(Emphasis supplied)
89
VOL. 740, NOVEMBER 12, 2014 89
Bartolome vs. Social Security System
As applied, this Court held in Commissioner of Internal Revenue v.
Fortune Tobacco Corporation16 that:
As we have previously declared, rule-making power must be confined
to details for regulating the mode or proceedings in order to carry into effect
the law as it has been enacted, and it cannot be extended to amend or
expand the statutory requirements or to embrace matters not covered by
the statute. Administrative regulations must always be in harmony
with the provisions of the law because any resulting discrepancy
between the two will always be resolved in favor of the basic law.
(Emphasis supplied)
Guided by this doctrine, We find that Rule XV of the Amended Rules
on Employees’ Compensation is patently a wayward restriction of and
a substantial deviation from Article 167(j) of the Labor Code when it
interpreted the phrase “dependent parents” to refer to “legitimate
parents.”
It bears stressing that a similar issue in statutory construction was
resolved by this Court in Diaz v. Intermediate Appellate Court17 in this
wise:
It is Our shared view that the word “relatives” should be construed in
its general acceptation. Amicus curiae Prof. Ruben Balane has this to say:
The term relatives, although used many times in the Code, is not
defined by it. In accordance therefore with the canons of statutory
interpretation, it should be understood to have a general and inclusive
scope, inasmuch as the term is a general one. Generalia verba sunt
generaliter intelligenda. That the law does not make a distinction prevents
us from making one: Ubi lex non distinguit, nec nos distinguera debemus.
xxx
_______________
16 G.R. Nos. 167274-75, July 21, 2008, 559 SCRA 160, 179.
17 No. L-66574, February 21, 1990, 182 SCRA 427, 435.
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90 SUPREME COURT REPORTS ANNOTATED
Bartolome vs. Social Security System
According to Prof. Balane, to interpret the term relatives in Article 992
in a more restrictive sense than it is used and intended is not warranted
by any rule of interpretation. Besides, he further states that when the law
intends to use the term in a more restrictive sense, it qualifies the term
with the word collateral, as in Articles 1003 and 1009 of the New Civil
Code.
Thus, the word “relatives” is a general term and when used in a
statute it embraces not only collateral relatives but also all the
kindred of the person spoken of, unless the context indicates that
it was used in a more restrictive or limited sense — which as
already discussed earlier, is not so in the case at bar. (Emphasis
supplied)
In the same vein, the term “parents” in the phrase “dependent
parents” in the aforequoted Article 167(j) of the Labor Code is used and
ought to be taken in its general sense and cannot be unduly limited to
“legitimate parents” as what the ECC did. The phrase “dependent
parents” should, therefore, include all parents, whether legitimate or
illegitimate and whether by nature or by adoption. When the law does
not distinguish, one should not distinguish. Plainly, “dependent
parents” are parents, whether legitimate or illegitimate, biological or
by adoption, who are in need of support or assistance.
Moreover, the same Article 167(j), as couched, clearly shows that
Congress did not intend to limit the phrase “dependent parents” to
solely legitimate parents. At the risk of being repetitive, Article 167
provides that “in their absence, the dependent parents and subject to
the restrictions imposed on dependent children, the illegitimate
children and legitimate descendants who are secondary
beneficiaries.” Had the lawmakers contemplated “dependent parents”
to mean legitimate parents, then it would have simply said descendants
and not “legitimate descendants.” The manner by which the provision
in question was crafted undeniably show that the91
VOL. 740, NOVEMBER 12, 2014 91 92 SUPREME COURT REPORTS ANNOTATED
Bartolome vs. Social Security System Bartolome vs. Social Security System
phrase “dependent parents” was intended to cover all parents —
legitimate, illegitimate or parents by nature or adoption.
b. Rule XV, Section 1(c)(1) of the Amended Rules on
Employees’ Compensation is in contravention of the equal
protection clause
To insist that the ECC validly interpreted the Labor Code provision
is an affront to the Constitutional guarantee of equal protection under
the laws for the rule, as worded, prevents the parents of an
illegitimate child from claiming benefits under Art. 167(j) of the
Labor Code, as amended by PD 626. To Our mind, such postulation
cannot be countenanced.
As jurisprudence elucidates, equal protection simply requires that
all persons or things similarly situated should be treated alike, both as
to rights conferred and responsibilities imposed. It requires public
bodies and institutions to treat similarly situated individuals in a
similar manner.18 In other words, the concept of equal justice under the
law requires the state to govern impartially, and it may not draw
distinctions between individuals solely on differences that are
irrelevant to a legitimate governmental objective.19
The concept of equal protection, however, does not require the
universal application of the laws to all persons or things without
distinction. What it simply requires is equality among equals as
determined according to a valid classification. Indeed, the equal
protection clause permits classification. Such classification, however,
to be valid must pass the test of reasonableness. The test has four
requisites: (1) The
_______________
18 Biraogo v. The Philippine Truth Commission of 2010, G.R. Nos. 192935 and 193036,
December 7, 2010, 637 SCRA 78, 167.
19 Id.
92
classification rests on substantial distinctions; (2) It is germane to
the purpose of the law; (3) It is not limited to existing conditions only;
and (4) It applies equally to all members of the same class. “Superficial
differences do not make for a valid classification.”20
In the instant case, there is no compelling reasonable basis to
discriminate against illegitimate parents. Simply put, the above cited
rule promulgated by the ECC that limits the claim of benefits to the
legitimate parents miserably failed the test of reasonableness since the
classification is not germane to the law being implemented. We see no
pressing government concern or interest that requires protection so as
to warrant balancing the rights of unmarried parents on one hand and
the rationale behind the law on the other. On the contrary, the SSS can
better fulfill its mandate, and the policy of PD 626 — that employees
and their dependents may promptly secure adequate benefits in the
event of work-connected disability or death — will be better served if
Article 167(j) of the Labor Code is not so narrowly interpreted.
There being no justification for limiting secondary parent
beneficiaries to the legitimate ones, there can be no other course of
action to take other than to strike down as unconstitutional the phrase
“illegitimate” as appearing in Rule XV, Section 1(c)(1) of the Amended
Rules on Employees’ Compensation.
Petitioner qualifies as John’s dependent parent
In attempting to cure the glaring constitutional violation of the
adverted rule, the ECC extended illegitimate parents an opportunity to
file claims for and receive death benefits by equating dependency and
legitimacy to the exercise of parental authority. Thus, as insinuated by
the ECC in its assailed
_______________
20 Id., at p. 168.
93
VOL. 740, NOVEMBER 12, 2014 93
Bartolome vs. Social Security System
Decision, had petitioner not given up John for adoption, she could
have still claimed death benefits under the law.
To begin with, nowhere in the law nor in the rules does it say that
“legitimate parents” pertain to those who exercise parental authority
over the employee enrolled under the ECP. It was only in the assailed
Decision wherein such qualification was made. In addition,
assuming arguendo that the ECC did not overstep its boundaries in
limiting the adverted Labor Code provision to the deceased’s legitimate
parents, and that the commission properly equated legitimacy to
parental authority, petitioner can still qualify as John’s secondary
beneficiary.
True, when Cornelio, in 1985, adopted John, then about two (2)
years old, petitioner’s parental authority over John was severed.
However, lest it be overlooked, one key detail the ECC missed, aside
from Cornelio’s death, was that when the adoptive parent died less
than three (3) years after the adoption decree, John was still a
minor, at about four (4) years of age.
John’s minority at the time of his adopter’s death is a significant
factor in the case at bar. Under such circumstance, parental authority
should be deemed to have reverted in favor of the biological parents.
Otherwise, taking into account Our consistent ruling that adoption is a
personal relationship and that there are no collateral relatives by
virtue of adoption,21 who was then left to care for the minor adopted
child if the adopter passed away?
To be sure, reversion of parental authority and legal custody in favor
of the biological parents is not a novel concept. Section 20 of Republic
Act No. 855222 (RA 8552), otherwise known as the Domestic Adoption
Act, provides:
_______________
21 Johnston v. Republic, No. L-18284, April 30, 1963, 7 SCRA 1040, 1042.
22 An Act Establishing the Rules and Policies on the Domestic Adoption of Filipino
Children and for Other Purposes.
94
94 SUPREME COURT REPORTS ANNOTATED
Bartolome vs. Social Security System
Section 20. Effects of Rescission.—If the petition [for rescission of
adoption] is granted, the parental authority of the adoptee’s
biological parent(s), if known, or the legal custody of the
Department shall be restored if the adoptee is still a minor or
incapacitated. The reciprocal rights and obligations of the adopter(s) and
the adoptee to each other shall be extinguished. (emphasis added)
The provision adverted to is applicable herein by analogy insofar as
the restoration of custody is concerned. The manner herein of
terminating the adopter’s parental authority, unlike the grounds for
rescission,23 justifies the retention of vested rights and obligations
between the adopter and the adoptee, while the consequent restoration
of parental authority in favor of the biological parents, simultaneously,
ensures that the adoptee, who is still a minor, is not left to fend for
himself at such a tender age.
 To emphasize, We can only apply the rule by analogy, especially
since RA 8552 was enacted after Cornelio’s death. Truth be told, there
is a lacuna in the law as to which provision shall govern contingencies
in all fours with the factual milieu of the instant petition. Nevertheless,
We are guided by the catena of cases and the state policies behind RA
855224
_______________
23 Sec. 19, RA 8552.
24 Section 2. Declaration of Policies.—(a) It is hereby declared the policy of the
State to ensure that every child remains under the care and custody of his/her parent(s) and
be provided with love, care, understanding and security towards the full and harmonious
development of his/her personality. Only when such efforts prove insufficient and no
appropriate placement or adoption within the child’s extended family is available shall
adoption by an unrelated person be considered.
(b) In all matters relating to the care, custody and adoption of a child, his/her interest
shall be the paramount consideration in accordance with the tenets set forth in the United
Nations (UN) Convention on the Rights of the Child; UN Declaration on Social and
95
VOL. 740, NOVEMBER 12, 2014 95
Bartolome vs. Social Security System xxx
wherein the paramount consideration is the best interest of the
child, which We invoke to justify this disposition. It is, after all, for the
best interest of the child that someone will remain charged for his
welfare and upbringing should his or her adopter fail or is rendered
incapacitated to perform his duties as a parent at a time the adoptee is
still in his formative years, and, to Our mind, in the absence or, as in
this case, death of the adopter, no one else could reasonably be expected
to perform the role of a parent other than the adoptee’s biological one.
Moreover, this ruling finds support on the fact that even though
parental authority is severed by virtue of adoption, the ties between the
adoptee and the biological parents are not entirely eliminated. To
demonstrate, the biological parents, in some instances, are able to
inherit from the adopted, as can be gleaned from Art. 190 of the Family
Code:
Art. 190. Legal or intestate succession to the estate of the adopted shall
be governed by the following rules:
xxx
(2) When the parents, legitimate or illegitimate, or the legitimate
ascendants of the adopted concur with the adopter, they shall divide the
entire estate, one-half to be inherited by the parents or ascendants and the
other half, by the adopters;
_______________
Legal Principles Relating to the Protection and Welfare of Children with Special
Reference to Foster Placement and Adoption, Nationally and Internationally; and the Hague
Convention on the Protection of Children and Cooperation in Respect of Intercountry
Adoption. Toward this end, the State shall provide alternative protection and assistance
through foster care or adoption for every child who is neglected, orphaned, or abandoned.
(c) It shall also be a State policy to:
xxx
(ii) Prevent the child from unnecessary separation from his/her biological parent(s).
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96 SUPREME COURT REPORTS ANNOTATED
Bartolome vs. Social Security System
(6) When only collateral blood relatives of the adopted survive, then the
ordinary rules of legal or intestate succession shall apply.
Similarly, at the time of Cornelio Colcol’s death, which was prior to
the effectivity of the Family Code, the governing provision is Art. 984
of the New Civil Code, which provides:
Art. 984. In case of the death of an adopted child, leaving no children or
descendants, his parents and relatives by consanguinity and not by
adoption, shall be his legal heirs.
From the foregoing, it is apparent that the biological parents retain
their rights of succession to the estate of their child who was the subject
of adoption. While the benefits arising from the death of an SSS covered
employee do not form part of the estate of the adopted child, the
pertinent provision on legal or intestate succession at least reveals the
policy on the rights of the biological parents and those by adoption vis-
à-vis the right to receive benefits from the adopted.
 In the same way that certain rights still attach by virtue of the blood
relation, so too should certain obligations, which, We rule, include the
exercise of parental authority, in the event of the untimely passing of
their minor offspring’s adoptive parent. We cannot leave undetermined
the fate of a minor child whose second chance at a better life under the
care of the adoptive parents was snatched from him by death’s cruel
grasp. Otherwise, the adopted child’s quality of life might have been
better off not being adopted at all if he would only find himself
orphaned in the end. Thus, We hold that Cornelio’s death at the time
of John’s minority resulted in the restoration of petitioner’s parental
authority over the adopted child.
On top of this restoration of parental authority, the fact of
petitioner’s dependence on John can be established from the
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VOL. 740, NOVEMBER 12, 2014 97 Bartolome vs. Social Security System
Bartolome vs. Social Security System
documentary evidence submitted to the ECC. As it appears in the
records, petitioner, prior to John’s adoption, was a housekeeper. Her
late husband died in 1984, leaving her to care for their seven (7)
children. But since she was unable to “give a bright future to her
growing children” as a housekeeper, she consented to Cornelio’s
adoption of John and Elizabeth in 1985.
Following Cornelio’s death in 1987, so records reveal, both petitioner
and John repeatedly reported “Brgy. Capurictan, Solsona, Ilocos Norte”
as their residence. In fact, this very address was used in John’s Death
Certificate25 executed in Brazil, and in the Report of Personal Injury or
Loss of Life accomplished by the master of the vessel boarded by
John.26 Likewise, this is John’s known address as per the ECC’s assailed
Decision.27 Similarly, this same address was used by petitioner in filing
her claim before the SSS La Union branch and, thereafter, in her
appeal with the ECC. Hence, it can be assumed that aside from having
been restored parental authority over John, petitioner indeed actually
exercised the same, and that they lived together under one roof.
Moreover, John, in his SSS application, named petitioner as one of
28
his beneficiaries for his benefits under RA 8282, otherwise known as
the “Social Security Law.” While RA 8282 does not cover compensation
for work-related deaths or injury and expressly allows the designation
of beneficiaries who are not related by blood to the member unlike in
PD 626, John’s deliberate act of indicating petitioner as his beneficiary
at least evinces that he, in a way, considered petitioner as his
dependent. Consequently, the confluence of circumstances — from
Cornelio’s death during John’s minority, the restoration of petitioner’s
parental authority, the documents showing
_______________
25 Rollo, p. 41.
26 Id., at p. 44.
27 Id., at p. 59.
28 Id., at p. 40.
98
98 SUPREME COURT REPORTS ANNOTATED
singularity of address, and John’s clear intention to designate
petitioner as a beneficiary — effectively made petitioner, to Our mind,
entitled to death benefit claims as a secondary beneficiary under PD
626 as a dependent parent.
All told, the Decision of the ECC dated March 17, 2010 is bereft of
legal basis. Cornelio’s adoption of John, without more, does not deprive
petitioner of the right to receive the benefits stemming from John’s
death as a dependent parent given Cornelio’s untimely demise during
John’s minority. Since the parent by adoption already died, then the
death benefits under the Employees’ Compensation Program shall
accrue solely to herein petitioner, John’s sole remaining beneficiary.
WHEREFORE, the petition is hereby GRANTED. The March 17,
2010 Decision of the Employees’ Compensation Commission, in ECC
Case No. SL-18483-0218-10, is REVERSED and SET ASIDE. The
ECC is hereby directed to release the benefits due to a secondary
beneficiary of the deceased covered employee John Colcol to petitioner
Bernardina P. Bartolome.
No costs.
SO ORDERED.
Villarama, Jr., Reyes, Perlas-Bernabe** and Jardeleza, JJ.,
concur.

VOL. 534, OCTOBER 2, 2007 515
Sim vs. National Labor Relations Commission
G.R. No. 157376. October 2, 2007. *
CORAZON C. SIM, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and EQUITABLE PCI-BANK, respondents. **
Certiorari; Motions for Reconsideration; A prior motion for
reconsideration is an indispensable condition to the filing of a special civil
action for certiorari; Exceptions.—Under Rule 65, Rules of
_______________
* THIRD DIVISION.
**The Court of Appeals, impleaded as respondent, is deleted from the caption per Section 4,
Rule 45 of the RULES OF COURT.
516
516 SUPREME COURT REPORTS ANNOTATED VOL. 534, OCTOBER 2, 2007 517
Sim vs. National Labor Relations Commission Sim vs. National Labor Relations Commission
Court, the remedy of filing a special civil action for certiorari is
available only when there is no appeal; or any plain, speedy, and adequate
remedy in the ordinary course of law. A “plain” and “adequate remedy” is
a motion for reconsideration of the assailed order or resolution, the filing
of which is an indispensable condition to the filing of a special civil action
for certiorari. This is to give the lower court the opportunity to correct itself.
There are, of course, exceptions to the foregoing rule, to wit: (a) where the
order is a patent nullity, as where the court a quo has no jurisdiction; (b)
where the questions raised in the certiorari proceedings have been duly
raised and passed upon by the lower court, or are the same as those raised
and passed upon in the lower court; (c) where there is an urgent necessity
for the resolution of the question and any further delay would prejudice the
interests of the Government or of the petitioner or the subject matter of the
action is perishable; (d) where, under the circumstances, a motion for
reconsideration would be useless; (e) where petitioner was deprived of due
process and there is extreme urgency for relief; (f) where, in a criminal case,
relief from an order of arrest is urgent and the granting of such relief by
the trial court is improbable; (g) where the proceedings in the lower court
are a nullity for lack of due process; (h) where the proceeding was ex
parte or in which the petitioner had no opportunity to object; and (i) where
the issue raised is one purely of law or public interest is involved.
Same; Same; The petitioner may not arrogate to himself the
determination of whether a motion for reconsideration is necessary or not—
to dispense with the requirement of filing a motion for reconsideration,
petitioner must show a concrete, compelling, and valid reason for doing
so.—Petitioner argues that filing a motion for reconsideration with the
NLRC would be merely an exercise in futility and useless. But it is not for
petitioner to determine whether it is so. As stressed in Cervantes v. Court
of Appeals, 475 SCRA 562 (2005): It must be emphasized that a writ
ofcertiorari is a prerogative writ, never demandable as a matter of right,
never issued except in the exercise of judicial discretion. Hence, he who
seeks a writ of certiorari must apply for it only in the manner and strictly
in accordance with the provisions of the law and the Rules. Petitioner
may not arrogate to himself the determination of whether a motion
for reconsideration is necessary or not. To dispense with the
requirement of filing a motion for reconsideration, petitioner must
show a concrete, compelling, and valid reason for doing
517
so, which petitioner failed to do. Thus, the Court of Appeals
correctly dismissed the petition. (Emphasis supplied)
Same; Same; Words and Phrases; Questions of Law and Questions of
Fact; There is a question of fact when doubt or difference arises as to the
truth or falsehood of the alleged facts, and there is a question of law where
the doubt or difference arises as to what the law is on a certain state of
facts.—Petitioner also contends that the issue at bench is purely a question
of law, hence, an exception to the rule. A reading of the petition filed with
the CA shows otherwise. The issues raised in this case are mixed questions
of fact and law. There is a question of fact when doubt or difference arises
as to the truth or falsehood of the alleged facts, and there is a question of
law where the doubt or difference arises as to what the law is on a certain
state of facts.
Labor Law; Dismissals; Loss of Trust and Confidence; Managerial
Employees; When an employee accepts a promotion to a managerial position
or to an office requiring full trust and confidence, she gives up some of the
rigid guaranties available to ordinary workers—infractions which if
committed by others would be overlooked or condoned or penalties mitigated
may be visited with more severe disciplinary action.—Petitioner does not
deny having withdrawn the amount of P3,000,000.00 lire from the bank’s
account. What petitioner submits is that she used said amount for
theRadio Pilipinas sa Roma radio program of the company. Respondent,
however, countered that at the time she withdrew said amount, the radio
program was already off the air. Respondent is a managerial employee.
Thus, loss of trust and confidence is a valid ground for her dismissal. The
mere existence of a basis for believing that a managerial employee has
breached the trust of the employer would suffice for his/her dismissal.
[w]hen an employee accepts a promotion to a managerial position or to an
office requiring full trust and confidence, she gives up some of the rigid
guaranties available to ordinary workers. Infractions which if committed
by others would be overlooked or condoned or penalties mitigated may be
visited with more severe disciplinary action. A company’s resort to acts of
self-defense would be more easily justified.
Same; Same; Jurisdictions; It was wrong for the Labor Arbiter to rule
that “labor relations system in the Philippines has no extraterritorial
jurisdiction.”—The Court notes, however, a palpable error
518
“which have for their object public order, public policy and good customs
shall not be rendered ineffective by laws or judgments promulgated, or by
determination or conventions agreed upon in a foreign country.” (Emphasis
supplied)
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Salomon, Gonong, Dela Cruz Law Offices for petitioner.
Sycip, Salazar, Hernandez and Gatmaitan for respondent.
519
VOL. 534, OCTOBER 2, 2007 519
Sim vs. National Labor Relations Commission

518 SUPREME COURT REPORTS ANNOTATED
Sim vs. National Labor Relations Commission Arbiter, alleging that she was initially employed by Equitable PCI-
in the Labor Arbiter’s disposition of the case, which was affirmed by
the NLRC, with regard to the issue on jurisdiction. It was wrong for the
Labor Arbiter to rule that “labor relations system in the Philippines has no
extra-territorial jurisdiction.”
Same; Same; Same; Labor arbiters have original and exclusive
jurisdiction over claims arising from employer-employee relations,
including termination disputes involving all workers, among whom are
overseas Filipino workers.—Under these provisions, it is clear that labor
arbiters have original and exclusive jurisdiction over claims arising from
employer-employee relations, including termination disputes involving all
workers, among whom are overseas Filipino workers. In Philippine
National Bank v. Cabansag, 460 SCRA 514 (2005), the Court pronounced:
AUSTRIA-MARTINEZ, J.:
Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor
Bank (respondent) in 1990 as Italian Remittance Marketing
Consultant to the Frankfurt Representative Office. Eventually, she was
promoted to Manager position, until September 1999, when she
received a letter from Remegio David—the Senior Officer, European
Head of PCI-Bank, and Managing Director of PCIB-Europe—informing
her that she was being dismissed due to loss of trust and confidence
based on alleged mismanagement and misappropriation of funds.
Respondent denied any employer-employee relationship between
them, and sought the dismissal of the complaint.
On September 3, 2001, the Labor Arbiter rendered its Decision
dismissing the case for want of jurisdiction and/or lack of
merit. According to the Labor Arbiter:
1

x x x Whether employed locally or overseas, all Filipino workers

“It should be stressed at this juncture that the labor relations system in
enjoy the protective mantle of Philippine labor and social
the Philippines has no extra-territorial jurisdiction. It is limited to the
legislation, contract stipulations to the contrary
relationship between labor and capital within the Philippines. Since
notwithstanding. This pronouncement is in keeping with the basic public
complainant was hired and assigned in a foreign land, although by a
policy of the State to afford protection to labor, promote full employment,
Philippine Corporation, it follows that the law that govern their
ensure equal work opportunities regardless of sex, race or creed, and
relationship is the law of the place where the employment was executed
regulate the relations between workers and employers. For the State
and her place of work or assignment. On this premise, the Italian law
assures the basic rights of all workers to self-organization, collective
allegedly provides severance pay which was applied and extended to herein
bargaining, security of tenure, and just and humane conditions of work
complainant (Annex “P”, respondent’s position paper).
[Article 3 of the Labor Code of the Philippines; See alsoSection 18, Article
II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which states that laws
 As can be gleaned from the foregoing, a further elucidation on the
matter would be an exercise in futility. Hence, this case should be
dismissed for want of jurisdiction.
Assuming for the sake of argument that this Office has jurisdiction over
this case, still, this Office is inclined to rule in favor of the respondent.
_______________
1 CA Rollo, p. 66.
520
520 SUPREME COURT REPORTS ANNOTATED
Sim vs. National Labor Relations Commission
Complainant, as General Manager is an employee whom the respondent
company reposed its trust and confidence. In other words, she held a
position of trust. It is well-settled doctrine that the basic premise for
dismissal on the ground of loss of confidence is that the employee concerned
holds a position of trust and confidence. (National Sugar Refineries
Corporation vs. NLRC, 286 SCRA 478.)
xxx
In this case, the respondent company had strong reason to believe that
the complainant was guilty of the offense charged against her.” 2
On appeal, the National Labor Relations Commission (NLRC) affirmed
the Labor Arbiter’s Decision and dismissed petitioner’s appeal for lack
of merit. 3
Without filing a motion for reconsideration with the NLRC,
petitioner went to the Court of Appeals (CA) via a petition
forcertiorari under Rule 65 of the Rules of Court.
In a Resolution dated October 29, 2002, the CA dismissed the 4
petition due to petitioner’s non-filing of a motion for reconsideration
with the NLRC. 5
Petitioner filed a motion for reconsideration but it was nonetheless
denied by the CA per Resolution dated February 26, 2003.
Hence, the present recourse under Rule 45 of the Rules of Court.
Petitioner alleges that:
1. I.The Court of Appeals departed from the accepted and usual
concepts of remedial law when it ruled that the petitioner
should have first filed a Motion for Reconsideration with the
National Labor Relations Commission.
_______________
2 Id., at pp. 64-65.
3 Id., at p. 23.
4Rendered by Associate Justice Buenaventura J. Guerrero (now retired), with Associate
Justices Teodoro P. Regino (also retired) and Mariano C. Del Castillo, concurring.
5 CA Rollo, p. 69.
521
VOL. 534, OCTOBER 2, 2007 521
Sim vs. National Labor Relations Commission
1. II.The National Labor Relations Commission decided a question
of jurisdiction heretofore not yet determined by the Court and
decided the same in a manner not in accord with law when it
ruled that it had no jurisdiction over a labor dispute between
a Philippine corporation and its employee which it assigned to
work for a foreign land.” 6
The pivotal question that needs to be resolved is whether or not a prior
motion for reconsideration is indispensable for the filing of a petition
for certiorari under Rule 65 of the Rules of Court with the CA.
Under Rule 65, the remedy of filing a special civil action
forcertiorari is available only when there is no appeal; or any plain,
speedy, and adequate remedy in the ordinary course of law. A “plain” 7
and “adequate remedy” is a motion for reconsideration of the assailed
order or resolution, the filing of which is an indispensable condition to
the filing of a special civil action for certiorari. This is to give the lower
8
court the opportunity to correct itself. 9
There are, of course, exceptions to the foregoing rule, to wit:
1. (a)where the order is a patent nullity, as where the court a
quohas no jurisdiction;
2. (b)where the questions raised in the certiorari proceedings have
been duly raised and passed upon by the lower court, or are
the same as those raised and passed upon in the lower court;
3. (c)where there is an urgent necessity for the resolution of the
question and any further delay would prejudice the interests
of the Government or of the petitioner or the subject matter of
the action is perishable;
_______________
6 Id., at p. 15.
 7 RULES OF COURT, Rule 65, Section 1.
8 Cervantes v. Court of Appeals, G.R. No. 166755, November 18, 2005, 475 SCRA 562, 569.
9 Abacan v. Northwestern University, Inc., G.R. No. 140777, April 8, 2005, 455 SCRA 136,
148.
522
522 SUPREME COURT REPORTS ANNOTATED
Sim vs. National Labor Relations Commission
1. (d)where, under the circumstances, a motion for reconsideration
would be useless;
2. (e)where petitioner was deprived of due process and there is
extreme urgency for relief;
3. (f)where, in a criminal case, relief from an order of arrest is
urgent and the granting of such relief by the trial court is
improbable;
4. (g)where the proceedings in the lower court are a nullity for lack
of due process;
5. (h)where the proceeding was ex parte or in which the petitioner
had no opportunity to object; and
6. (i)where the issue raised is one purely of law or public interest
is involved.” 10
Petitioner, however, failed to qualify her case as among the few
exceptions. In fact, the Court notes that the petition filed before the CA
failed to allege any reason why a motion for reconsideration was
dispensed with by petitioner. It was only in her motion for
reconsideration of the CA’s resolution of dismissal and in the petition
filed in this case that petitioner justified her non-filing of a motion for
reconsideration.
Petitioner argues that filing a motion for reconsideration with the
NLRC would be merely an exercise in futility and useless. But it is not
for petitioner to determine whether it is so. As stressed inCervantes v.
Court of Appeals:
“It must be emphasized that a writ of certiorari is a prerogative writ, never
demandable as a matter of right, never issued except in the exercise of
judicial discretion. Hence, he who seeks a writ of certiorari must apply for
it only in the manner and strictly in accordance with the provisions of the
law and the Rules. Petitioner may not arrogate to himself the
determination of whether a motion for reconsideration is
necessary or not. To dispense with the requirement of filing a
motion for reconsideration, petitioner must show a concrete,
compelling, and valid reason
_______________
10 Abacan v. Northwestern University, Inc., id., at p. 149.
523
VOL. 534, OCTOBER 2, 2007 523
Sim vs. National Labor Relations Commission
for doing so, which petitioner failed to do. Thus, the Court of Appeals
correctly dismissed the petition.” (Emphasis supplied)
11
Petitioner also contends that the issue at bench is purely a question of
law, hence, an exception to the rule. A reading of the petition filed with
the CA shows otherwise. The issues raised in this case are mixed
questions of fact and law. There is a question of fact when doubt or
difference arises as to the truth or falsehood of the alleged facts, and
there is a question of law where the doubt or difference arises as to
what the law is on a certain state of facts. 12
Petitioner, aside from questioning the ruling of the NLRC
sustaining the Labor Arbiter’s view that it does not have any
jurisdiction over the case, also questions the NLRC’s ruling affirming
the Labor Arbiter’s conclusion that she was validly dismissed by
respondent. The legality of petitioner’s dismissal hinges on the question
of whether there was an employeremployee relationship, which was
denied by respondent; and, if in the affirmative, whether petitioner,
indeed, committed a breach of trust and confidence justifying her
dismissal. These are mixed questions of fact and law and, as such, do
not fall within the exception from the filing of a motion for
reconsideration.
Consequently, the CA was not in error when it dismissed the
petition. More so since petitioner failed to show any error on the part of
the Labor Arbiter and the NLRC in ruling that she was dismissed for
cause.
The rule is that the Court is bound by the findings of facts of the
Labor Arbiter or the NLRC, unless it is shown that grave abuse of
discretion or lack or excess of jurisdiction has
_______________
11 Cervantes v. Court of Appeals, supra note 8, at p. 570.
 12 Cano v. Galvante, 440 Phil. 821, 825-826; 392 SCRA 299, 302-303 (2002).
524
524 SUPREME COURT REPORTS ANNOTATED Sim vs. National Labor Relations Commission
Sim vs. National Labor Relations Commission
been committed by said quasi-judicial bodies. The Court will not 13
deviate from said doctrine without any clear showing that the findings
of the Labor Arbiter, as affirmed by the NLRC, are bereft of sufficient
substantiation.
Petitioner does not deny having withdrawn the amount of
P3,000,000.00 lire from the bank’s account. What petitioner submits is
that she used said amount for the Radio Pilipinas sa Roma radio
program of the company. Respondent, however, countered that at the
time she withdrew said amount, the radio program was already off the
air. Respondent is a managerial employee. Thus, loss of trust and
confidence is a valid ground for her dismissal. The mere existence of a
14
basis for believing that a managerial employee has breached the trust
of the employer would suffice for his/her dismissal. 15
“[w]hen an employee accepts a promotion to a managerial position or to an
office requiring full trust and confidence, she gives up some of the rigid
guaranties available to ordinary workers. Infractions which if committed
by others would be overlooked or condoned or penalties mitigated may be
visited with more severe disciplinary action. A company’s resort to acts of
self-defense would be more easily justified.” 16
The Court notes, however, a palpable error in the Labor Arbiter’s
disposition of the case, which was affirmed by the NLRC, with regard
to the issue on jurisdiction. It was wrong for the Labor Arbiter to rule
that “labor relations system in the Philippines has no extra-territorial
jurisdiction.” 17
_______________
Nueva Ecija Electric Cooperative II v. National Labor Relations Commission,G.R. No.
13
157603, June 23, 2005, 461 SCRA 169, 182
14Philippine Long Distance Company v. Tolentino, G.R. No. 143171, September 21,
2004, 438 SCRA 555, 560.
15Community Rural Bank of San Isidro (N.E.), Inc. v. Paez, G.R. No. 158707, November
27, 2006, 508 SCRA 245, 259.
16 Philippine Long Distance Company case, supra note 14, at p. 560.
17 CA Rollo, p. 64.
525
VOL. 534, OCTOBER 2, 2007 525
Article 217 of the Labor Code provides for the jurisdiction of the Labor
Arbiter and the National Labor Relations Commission, viz.:
“ART. 217. Jurisdiction of Labor Arbiters and the Commission.—(a) Except
as otherwise provided under this Code the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. 1.Unfair labor practice cases;
2. 2.Termination disputes;
3. 3.If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work and
other terms and conditions of employment;
4. 4.Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. 5.Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
6. 6.Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount of exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
(b) The commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant
Workers and Overseas Filipinos Act of 1995, provides: 18
“SECTION 10. Money Claims.—Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
_______________
18 Effective July 15, 1995.
526
526 SUPREME COURT REPORTS ANNOTATED VOL. 534, OCTOBER 2, 2007 527

Sim vs. National Labor Relations Commission Sim vs. National Labor Relations Commission

jurisdiction to hear and decide, within ninety (90) calendar days after the rendered ineffective by laws or judgments promulgated, or by
filing of the complaint, the claims arising out of an employer-employee determination or conventions agreed upon in a foreign
relationship or by virtue of any law or contract involving Filipino workers country.” (Emphasis supplied)
21

for overseas deployment including claims for actual, moral, exemplary and
other forms of damages.”
Also, Section 62 of the Omnibus Rules and Regulations Implementing
R.A. No. 8042 provides that the Labor Arbiters of the NLRC shall have
19
the original and exclusive jurisdiction to hear and decide all claims
arising out of employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of
damages, subject to the rules and procedures of the NLRC.
Under these provisions, it is clear that labor arbiters have original
and exclusive jurisdiction over claims arising from employer-employee
relations, including termination disputes involving all workers, among
whom are overseas Filipino workers. In Philippine National Bank v.
20
Cabansag, the Court pronounced:
“x x x Whether employed locally or overseas, all Filipino workers
enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the basic public
policy of the State to afford protection to labor, promote full employment,
ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers. For the State
assures the basic rights of all workers to selforganization, collective
bargaining, security of tenure, and just and humane conditions of work
[Article 3 of the Labor Code of the Philippines;See also Section 18, Article
II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which states that laws
“which have for their object public order, public policy and good customs
shall not be
_______________
19 Published in the April 7, 1996 issue of the Manila Bulletin.
20 Philippine National Bank v. Cabansag, G.R. No. 157010, June 21, 2005, 460 SCRA 514, 526-
527.
527
In any event, since the CA did not commit any error in dismissing the
petition before it for failure to file a prior motion for reconsideration
with the NLRC, and considering that the Labor Arbiter and the NLRC’s
factual findings as regards the validity of petitioner’s dismissal are
accorded great weight and respect and even finality when the same are
supported by substantial evidence, the Court finds no compelling
reason to relax the rule on the filing of a motion for reconsideration
prior to the filing of a petition forcertiorari.
WHEREFORE, the petition is DENIED.
Costs against petitioner.
SO ORDERED.
Ynares-Santiago (Chairperson), Chico-
Nazario, Nachuraand Reyes, JJ., concur.
Petition denied.
Notes.—A managerial employee commits a transgression that
betrays the trust and confidence of his employer when he reimburses
his family’s personal travel expenses out of company funds. (Dela Cruz,
Jr. vs. National Labor Relations Commission, 418 SCRA 226[2003])
The term “trust and confidence” is restricted to managerial
employees; A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done
careless, thoughtlessly, heedlessly or inadvertently. (Fujitsu Computer
Products Corporation of the Philippines vs. Court of Appeals, 454 SCRA
737 [2005])
——o0o——
_______________
21 Id., at pp. 528-529.
528
© Copyright 2016 Central Book Supply, Inc. All rights reserved.
 VOL. 527, JULY 10, 2007 165 petitioner been actually deployed from the point of hire. Thus, even
Santiago vs. CF Sharp Crew Management, Inc. contemporaneous with the perfection of the employment contract was
G.R. No. 162419. July 10, 2007. *
PAUL V. SANTIAGO, petitioner, vs. CF SHARP CREW
MANAGEMENT, INC., respondent.
Labor Law; Employer-Employee
Relationships; Seafarers;Considering that petitioner was not able to
depart from the airport or seaport in the point of hire, the employment
contract did not commence and no employer-employee relationship was
created between the parties.—There is no question that the parties
entered into an employment contract on 3 February 1998, whereby
petitioner was contracted by respondent to render services on board
“MSV Seaspread” for the consideration of US$515.00 per month for
nine (9) months, plus overtime pay. However, respondent failed to
deploy petitioner from the port of Manila to Canada. Considering that
petitioner was not able to depart from the airport or seaport in the point
of hire, the employment contract did not commence, and no employer-
employee relationship was created between the parties.
Same; Same; Distinction must be made between the perfection of the
employment contract and the commencement of the employeremployee
relationship; Even before the start of any employer-employee
relationship, contemporaneous with the perfection of the employment
contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party.—A
distinction must be made between the perfection of the employment
contract and the commencement of the employer-employee relation-
_______________
* SECOND DIVISION.
166
166 SUPREME COURT REPORTS ANNOTATED 167
Santiago vs. CF Sharp Crew Management, Inc. VOL. 527, JULY 10, 2007 167
ship. The perfection of the contract, which in this case coincided with
the date of execution thereof, occurred when petitioner and respondent
agreed on the object and the cause, as well as the rest of the terms and
conditions therein. The commencement of the employeremployee
relationship, as earlier discussed, would have taken place had
before the start of any employer-employee relationship,
the birth of certain rights and obligations, the breach of which may give
rise to a cause of action against the erring party. Thus, if the reverse
had happened, that is the seafarer failed or refused to be deployed as
agreed upon, he would be liable for damages.
Same; Same; Seafarers; Neither the manning agent nor the employer
can simply prevent a seafarer from being deployed without a valid
reason; Respondent unilaterally and unreasonably reneged on its
obligation to deploy petitioner and must therefore answer for the actual
damages he suffered.—While the POEA Standard Contract must be
recognized and respected, neither the manning agent nor the employer
can simply prevent a seafarer from being deployed without a valid
reason. Respondent’s act of preventing petitioner from departing the
port of Manila and boarding “MSV Seaspread” constitutes a breach of
contract, giving rise to petitioner’s cause of action. Respondent
unilaterally and unreasonably reneged on its obligation to deploy
petitioner and must therefore answer for the actual damages he
suffered.
Same; Same; Same; The fact that the Philippine Overseas
Employment Administration (POEA) Rules are silent as to the payment
of damages to the affected seafarer does not mean that the seafarer is
precluded from claiming the same.—We take exception to the Court of
Appeals’ conclusion that damages are not recoverable by a worker who
was not deployed by his agency. The fact that the POEA Rules are silent
as to the payment of damages to the affected seafarer does not mean
that the seafarer is precluded from claiming the same. The sanctions
provided for non-deployment do not end with the suspension or
cancellation of license or fine and the return of all documents at no cost
to the worker. They do not forfend a seafarer from instituting an action
for damages against the employer or agency which has failed to deploy
him.
Santiago vs. CF Sharp Crew Management, Inc.
Same; Same; Despite the absence of an employer-employee
relationship between petitioner and respondent, the Court rules that the
National Labor Relations Commission (NLRC) has jurisdiction over
petitioner’s complaint.—Despite the absence of an employeremployee
relationship between petitioner and respondent, the Court rules that
the NLRC has jurisdiction over petitioner’s complaint. The jurisdiction
of labor arbiters is not limited to claims arising from employer-
employee relationships. Section 10 of R.A. No. 8042 (Migrant Workers
Act), provides that: Sec.10.Money Claims.—Notwithstanding any
provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of
damages. x x x [Emphasis supplied] Since the present petition involves
the employment contract entered into by petitioner for overseas
employment, his claims are cognizable by the labor arbiters of the
NLRC.
Same; Same; Seafarers; Respondent liable to pay petitioner actual
damages in the form of the loss of nine (9) months’ worth of salary as
provided in the contract, petitioner is not entitled to overtime pay.—
Respondent is thus liable to pay petitioner actual damages in the form
of the loss of nine (9) months’ worth of salary as provided in the
contract. He is not, however, entitled to overtime pay. While the
contract indicated a fixed overtime pay, it is not a guarantee that he
would receive said amount regardless of whether or not he rendered
overtime work. Even though petitioner was “prevented without valid
reason from rendering regular much less overtime service,” the fact
remains that there is no certainty that petitioner will perform overtime
work had he been allowed to board the vessel. The amount of
US$286.00 stipulated in the contract will be paid only if and when the
employee rendered overtime work. This has been the tenor of our
rulings in the case of Stolt-Nielsen Marine Services (Phils.), Inc. v.
National Labor Relations Commission, 258 SCRA 643 (1996), where we
discussed the matter in this light: The contract provision means that
the fixed overtime pay of 30% would be the basis for computing the
overtime pay if and when overtime work would be rendered. Simply
stated, the rendition of overtime
168
168 SUPREME COURT REPORTS ANNOTATED SCRA 306 (2002), the Court ruled that seafarers are considered
Santiago vs. CF Sharp Crew Management, Inc.
work and the submission of sufficient proof that said work was actually
performed are conditions to be satisfied before a seaman could be
entitled to overtime pay which should be computed on the basis of 30%
of the basic monthly salary. In short, the contract provision guarantees
the right to overtime pay but the entitlement to such benefit must first
be established. Realistically speaking, a seaman, by the very nature of
his job, stays on board a ship or vessel beyond the regular eight-hour
work schedule. For the employer to give him overtime pay for the extra
hours when he might be sleeping or attending to his personal chores or
even just lulling away his time would be extremely unfair and
unreasonable.
Same; Same; Attorney’s Fees; Respondent’s failure to deploy
petitioner is unfounded and unreasonable, forcing petitioner to institute
the suit below; Award of attorney’s fees is thus warranted.—The Court
also holds that petitioner is entitled to attorney’s fees in the concept of
damages and expenses of litigation. Attorney’s fees are recoverable
when the defendant’s act or omission has compelled the plaintiff to
incur expenses to protect his interest. We note that respondent’s basis
for not deploying petitioner is the belief that he will jump ship just like
his brother, a mere suspicion that is based on alleged phone calls of
several persons whose identities were not even confirmed. Time and
again, this Court has upheld management prerogatives so 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.
Respondent’s failure to deploy petitioner is unfounded and
unreasonable, forcing petitioner to institute the suit below. The award
of attorney’s fees is thus warranted.
Same; Same; Seafarers; Nature of Employment; Seafarers are
considered contractual employees and cannot be considered as regular
employees under the Labor Code.—We likewise do not see respondent’s
failure to deploy petitioner as an act designed to prevent the latter from
attaining the status of a regular employee. Even if petitioner was able
to depart the port of Manila, he still cannot be considered a regular
employee, regardless of his previous contracts of employment with
respondent. In Millares v. National Labor Relations Commission, 385
contractual employees and cannot be considered as regular employees
under the Labor Code. Their employment is governed by the contracts
they sign every time they are rehired
169
VOL. 527, JULY 10, 2007 169 February 1998, petitioner signed a new contract of employment with
Santiago vs. CF Sharp Crew Management, Inc. monthly salary of US$515.00, overtime pay and other benefits. The
and their employment is terminated when the contract expires. The
exigencies of their work necessitates that they be employed on a
contractual basis.
PETITION for review on certiorari of the decision and resolution of
the Court of Appeals.
The facts are stated in the opinion of the Court.
Santiago, Agbayani and Talao for petitioner.
Singson, Valdez and Associates for respondent.
TINGA, J.:
At the heart of this case involving a contract between a seafarer, on one
hand, and the manning agent and the foreign principal, on the other, is
this erstwhile unsettled legal quandary: whether the seafarer, who was
prevented from leaving the port of Manila and refused deployment
without valid reason but whose POEA-approved employment contract
provides that the employer-employee relationship shall commence only
upon the seafarer’s actual departure from the port in the point of hire,
is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago
(petitioner) assailing the Decision and Resolution of the Court of
Appeals dated 16 October 2003 and 19 February 2004, respectively,
in CA-G.R. SP No. 68404. 1
Petitioner had been working as a seafarer for Smith Bell
Management, Inc. (respondent) for about five (5) years. On 3 2
_______________
1 Entitled Paul V. Santiago v. National Labor Relations Commission, et al.
2Smith Bell Management, Inc. was substituted by present respondent, CF Sharp Crew
Management, Inc. which had assumed all the contractual obligations of Cable and Wireless
(Marine) Ltd. while the case was pending before the Court of Appeals. See respondent’s
Comment dated 4 April 2002, Records, p. 140. Hence, it should be understood that from that
time on, the appellation “respondent” in
170
170 SUPREME COURT REPORTS ANNOTATED
Santiago vs. CF Sharp Crew Management, Inc.
respondent, with the duration of nine (9) months. He was assured of a
following day or on 4 February 1998, the contract was approved by the
Philippine Overseas Employment Administration (POEA). Petitioner
was to be deployed on board the “MSV Seaspread” which was scheduled
to leave the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico
Fernandez, respondent’s Vice President, sent a facsimile message to the
captain of “MSV Seaspread,” which reads:
“I received a phone call today from the wife of Paul Santiago in Masbate
asking me not to send her husband to MSV Seaspread anymore. Other
callers who did not reveal their identity gave me some feedbacks that Paul
Santiago this time if allowed to depart will jump ship in Canada like his
brother Christopher Santiago, O/S who jumped ship from the C.S. Nexus
in Kita-kyushu, Japan last December, 1997.
We do not want this to happen again and have the vessel penalized like
the C.S. Nexus in Japan.
Forewarned is forearmed like his brother when his brother when he
was applying he behaved like a Saint but in his heart he was a serpent. If
you agree with me then we will send his replacement.
Kindly advise.” 3
To this message the captain of “MSV Seaspread” replied:
“Many thanks for your advice concerning P. Santiago, A/B. Please cancel
plans for him to return to Seaspread.” 4
_______________
this Decision refers to CF Sharp Crew Management, Inc. instead of Smith Bell,
Management, Inc.
3 Rollo, pp. 29-30.
4 Id., at p. 30.
171
VOL. 527, JULY 10, 2007 171
Santiago vs. CF Sharp Crew Management, Inc.
On 9 February 1998, petitioner was thus told that he would not be
leaving for Canada anymore, but he was reassured that he might be
considered for deployment at some future date.
Petitioner filed a complaint for illegal dismissal, damages, and
airport or seaport at the point of hire and with a POEAapproved
contract. In the absence of an employer-employee relationship between
the parties, the claims for illegal dismissal, actual damages, and
attorney’s fees should be dismissed. On the other hand, the NLRC
7

attorney’s fees against respondent and its foreign principal, Cable and found respondent’s decision not to deploy petitioner to be a valid
Wireless (Marine) Ltd. The case was raffled to Labor Arbiter Teresita
5
exercise of its management prerogative. The NLRC disposed of the8

Castillon-Lora, who ruled that the employment contract remained valid
but had not commenced since petitioner was not deployed. According to
her, respondent violated the rules and regulations governing overseas
employment when it did not deploy petitioner, causing petitioner to
suffer actual damages representing lost salary income for nine (9)
months and fixed overtime fee, all amounting to US$7,209.00.
appeal in this wise:
“WHEREFORE, in the light of the foregoing, the assailed Decision dated
January 29, 1999 is hereby AFFIRMED in so far as other claims are
concerned and with MODIFICATION by VACATING the award of actual
damages and attorney’s fees as well as excluding Pacifico Fernandez as
party respondent.

The labor arbiter held respondent liable. The dispositive portion of SO ORDERED.” 9

her Decision dated 29 January 1999 reads: Petitioner moved for the reconsideration of the NLRC’s Decision but his
“WHEREFORE, premises considered, respondent is hereby Ordered to pay motion was denied for lack of merit. He elevated the case to the Court
10

complainant actual damages in the amount of US$7,209.00 plus 10% of Appeals through a petition for certiorari.
attorney’s fees, payable in Philippine peso at the rate of exchange In its Decision dated 16 October 2003, the Court of Appeals noted
11

prevailing at the time of payment. that there is an ambiguity in the NLRC’s Decision
All the other claims are hereby DISMISSED for lack of merit. _______________
_______________ 6 Rollo, at p. 88.
5 The caption of the complaint docketed as NCR-OFW-(M) 9807-0788, reads PaulV. 7 Id., at pp. 72-73.
Santiago v. Smith Bell Management, Inc. and/or Cable and Wireless (Marine) Ltd./Mr. Jose
Pueio/Pacifico T. Fernandez. From the inception of the case before the labor arbiter until it
8 Id., at p. 73.
reached the Court of Appeals, Smith Bell Management, Inc., the foreign principal Cable and 9 Id., at p. 76.
Wireless (Marine) Ltd. and the officers of Smith Bell Management, Inc. were named as
respondents. When the case reached this Court, petitioner deleted Smith Bell Management,
10 Resolution dated 9 October 2001; id., at p. 78.
Inc., Cable and Wireless (Marine) Ltd. and the two officers from the caption of the case in all 11 Id., at pp. 27-39.
its pleadings filed with the Court, retaining only C.F. Sharp Crew Management, Inc. as
respondent. For its part, CF Sharp Crew Management, Inc. also referred to itself as the only 173
respondent in all his pleadings before the Court.
172
VOL. 527, JULY 10, 2007 173

172 SUPREME COURT REPORTS ANNOTATED Santiago vs. CF Sharp Crew Management, Inc.

Santiago vs. CF Sharp Crew Management, Inc. when it affirmed with modification the labor arbiter’s Decision, because
by the very modification introduced by the Commission (vacating the
SO ORDERED.” 6 award of actual damages and attorney’s fees), there is nothing more left
in the labor arbiter’s Decision to affirm.
On appeal by respondent, the National Labor Relations Commission
12

(NLRC) ruled that there is no employeremployee relationship between
petitioner and respondent because under the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board
Ocean Going Vessels (POEA Standard Contract), the employment
According to the appellate court, petitioner is not entitled to actual
damages because damages are not recoverable by a worker who was not
deployed by his agency within the period prescribed in the POEA
Rules. It agreed with the NLRC’s finding that petitioner’s non-
13

contract shall commence upon actual departure of the seafarer from the deployment was a valid exercise of respondent’s management
prerogative. It added that since petitioner had not departed from the
14
Port of Manila, no employer-employee relationship between the parties
arose and any claim for damages against the so-called employer could
have no leg to stand on. 15
Petitioner’s subsequent motion for reconsideration was denied on 19
February 2004. 16
The present petition is anchored on two grounds, to wit:
1. A.The Honorable Court of Appeals committed a serious error of
law when it ignored [S]ection 10 of Republic Act [R.A.] No.
8042 otherwise known as the Migrant Worker’s Act of 1995 as
well as Section 29 of the Standard Terms and Conditions
Governing the Employment of Filipino Seafarers On-Board
Ocean-Going Vessels (which is deemed incorporated under the
petitioner’s POEA approved Employment Contract) that the
claims or disputes of the Overseas Filipino Worker by virtue of
a contract fall within the jurisdiction of the Labor Arbiter of
the NLRC.
2. B.The Honorable Court of Appeals committed a serious error
when it disregarded the required quantum of proof in labor
cases,
_______________
12 Id., at p. 35.
Interpreting Sec. 4, par. (b), Rule II, Book II, POEA Rules and Regulations Governing
13
Overseas Employment; id., at p. 36.
14 Id., at p. 36.
15 Id., at p. 38.
Id., at p. 41.
16
174
174 SUPREME COURT REPORTS ANNOTATED
Santiago vs. CF Sharp Crew Management, Inc. Appeals to adopt the unfounded conclusion of the NLRC, as the same
1. which is substantial evidence, thus a total departure from
established jurisprudence on the matter.” 17
Petitioner maintains that respondent violated the Migrant Workers Act
and the POEA Rules when it failed to deploy him within thirty (30)
calendar days without a valid reason. In doing so, it had unilaterally
and arbitrarily prevented the consummation of the POEA-approved
contract. Since it prevented his deployment without valid basis, said
deployment being a condition to the consummation of the POEA
contract, the contract is deemed consummated, and therefore he should
be awarded actual damages, consisting of the stipulated salary and
fixed overtime pay. Petitioner adds that since the contract is deemed
18
consummated, he should be considered an employee for all intents and
purposes, and thus the labor arbiter and/or the NLRC has jurisdiction
to take cognizance of his claims. 19
Petitioner additionally claims that he should be considered a
regular employee, having worked for five (5) years on board the same
vessel owned by the same principal and manned by the same local
agent. He argues that respondent’s act of not deploying him was a
scheme designed to prevent him from attaining the status of a regular
employee. 20
Petitioner submits that respondent had no valid and sufficient cause
to abandon the employment contract, as it merely relied upon alleged
phone calls from his wife and other unnamed callers in arriving at the
conclusion that he would jump ship like his brother. He points out that
his wife had executed an affidavit strongly denying having called
21
respondent, and that the other alleged callers did not even disclose
_______________
17 Id., at pp. 11 and 19.
18 Id., at pp. 12-14.
19 Id., at pp. 15-17.
20 Id., at pp. 17-18.
21 Attached as an annex to petitioner’s Reply to respondent’s Position Paper.
175
VOL. 527, JULY 10, 2007 175
Santiago vs. CF Sharp Crew Management, Inc.
their identities to respondent. Thus, it was error for the Court of
22
was not based on substantial evidence. 23
On the other hand, respondent argues that the Labor Arbiter has no
jurisdiction to award petitioner’s monetary claims. His employment
with respondent did not commence because his deployment was
withheld for a valid reason. Consequently, the labor arbiter and/or the
NLRC cannot entertain adjudication of petitioner’s case much less
award damages to him. The controversy involves a breach of
contractual obligations and as such is cognizable by civil courts. On 24
another matter, respondent claims that the second issue posed by
petitioner involves a recalibration of facts which is outside the
jurisdiction of this Court. 25
There is some merit in the petition.
There is no question that the parties entered into an employment
contract on 3 February 1998, whereby petitioner was contracted by
respondent to render services on board “MSV Seaspread” for the
consideration of US$515.00 per month for nine (9) months, plus
overtime pay. However, respondent failed to deploy petitioner from the
port of Manila to Canada. Considering that petitioner was not able to
depart from the airport or seaport in the point of hire, the employment
contract did not commence, and no employer-employee relationship
was created between the parties. 26
_______________
22 Rollo, pp. 19-20.
23 Id., at p. 21.
24 Id., at pp. 230-235.
25 Id., at p. 237.
26Sec. 2 of the POEA Standard Contract lays down the rule as to when the employment
contract commences, thus:
A. The Employment contract between the employer and the seafarer shall commence
upon actual departure of the seafarer from the airport or seaport in the point of hire and with
a POEA approved contract. It shall be effective until the seafarer’s date of arrival at the point of
hire
176
176 SUPREME COURT REPORTS ANNOTATED
Santiago vs. CF Sharp Crew Management, Inc.
However, a distinction must be made between the perfection of the
employment contract and the commencement of the employer-employee
relationship. The perfection of the contract, which in this case coincided
with the date of execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well as the rest of the
terms and conditions therein. The commencement of the
employeremployee relationship, as earlier discussed, would have taken
place had petitioner been actually deployed from the point of hire. Thus,
even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was
the birth of certain rights and obligations, the breach of which may give
rise to a cause of action against the erring party. Thus, if the reverse
had happened, that is the seafarer failed or refused to be deployed as
agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized
and respected, neither the manning agent nor the employer can simply
prevent a seafarer from being deployed without a valid reason.
Respondent’s act of preventing petitioner from departing the port of
Manila and boarding “MSV Seaspread” constitutes a breach of contract,
giving rise to petitioner’s cause of action. Respondent unilaterally and
unreasonably reneged on its obligation to deploy petitioner and must
therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals’ conclusion that damages
are not recoverable by a worker who was not deployed by his agency.
The fact that the POEA Rules are 27
_______________
upon termination of his employment pursuant to Section 18 of this Contract. [Emphasis supplied]
Sec. 4, par. (b), Rule II, Book III of the POEA Rules and Regulations Governing Overseas
27
Employment dated 31 May 1999 reads:
177
VOL. 527, JULY 10, 2007 177
Santiago vs. CF Sharp Crew Management, Inc.
silent as to the payment of damages to the affected seafarer does not
mean that the seafarer is precluded from claiming the same. The
sanctions provided for non-deployment do not end with the suspension
or cancellation of license or fine and the return of all documents at no
cost to the worker. They do not forfend a seafarer from instituting an
action for damages against the employer or agency which has failed to
deploy him.
The POEA Rules only provide sanctions which the POEA can
impose on erring agencies. It does not provide for damages and money
claims recoverable by aggrieved employees because it is not the POEA,
but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between
petitioner and respondent, the Court rules that the NLRC has
jurisdiction over petitioner’s complaint. The jurisdiction of labor
arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act),
provides that:
“Sec. 10. Money Claims.—Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive
_______________
Section 4. Worker’s Deployment.—An agency shall deploy its recruits within the deployment period
as indicated below:
1. a.One hundred twenty (120) calendar days from the date of signing of employment
contract for all landbased workers;
2. b.Thirty (30) calendar days from the date of processing by the administration of the
employment contracts of seafarers.
Failure of the agency to deploy a worker within the prescribed period without valid reasons
shall be a cause for suspension or cancellation of license or fine. In addition, the agency shall return
all documents at no cost to the worker.
178
178 SUPREME COURT REPORTS ANNOTATED Santiago vs. CF Sharp Crew Management, Inc.
Santiago vs. CF Sharp Crew Management, Inc. the basis of 30% of the basic monthly salary. In short, the contract
jurisdiction to hear and decide, within ninety (90) calendar days after the
filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages. x x x” [Emphasis
supplied]
Since the present petition involves the employment contract entered
into by petitioner for overseas employment, his claims are cognizable
by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as
he has duly proved. Respondent is thus liable to pay petitioner actual
damages in the form of the loss of nine (9) months’ worth of salary as
provided in the contract. He is not, however, entitled to overtime pay.
While the contract indicated a fixed overtime pay, it is not a guarantee
that he would receive said amount regardless of whether or not he
rendered overtime work. Even though petitioner was “prevented
without valid reason from rendering regular much less overtime
service,” the fact remains that there is no certainty that petitioner will
28
perform overtime work had he been allowed to board the vessel. The
amount of US$286.00 stipulated in the contract will be paid only if and
when the employee rendered overtime work. This has been the tenor of
our rulings in the case ofStolt-Nielsen Marine Services (Phils.), Inc. v.
National Labor Relations Commission where we discussed the matter
29
in this light:
“The contract provision means that the fixed overtime pay of 30% would be
the basis for computing the overtime pay if and when overtime work would
be rendered. Simply stated, the rendition of overtime work and the
submission of sufficient proof that said work was actually performed are
conditions to be satisfied before a seaman could be entitled to overtime pay
which should be computed on
_______________
28 Labor Arbiter’s Decision; Rollo, p. 87.
29 328 Phil. 161; 258 SCRA 643 (1996).
179
VOL. 527, JULY 10, 2007 179
provision guarantees the right to overtime pay but the entitlement to such
benefit must first be established. Realistically speaking, a seaman, by the
very nature of his job, stays on board a ship or vessel beyond the regular
eight-hour work schedule. For the employer to give him overtime pay for
the extra hours when he might be sleeping or attending to his personal
chores or even just lulling away his time would be extremely unfair and
unreasonable.” 30
The Court also holds that petitioner is entitled to attorney’s fees in the
concept of damages and expenses of litigation. Attorney’s fees are
recoverable when the defendant’s act or omission has compelled the
plaintiff to incur expenses to protect his interest. We note that
31
respondent’s basis for not deploying petitioner is the belief that he will
jump ship just like his brother, a mere suspicion that is based on alleged
phone calls of several persons whose identities were not even
confirmed. Time and again, this Court has upheld management
prerogatives so 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. Respondent’s failure to deploy
32
petitioner is unfounded and unreasonable, forcing petitioner to
institute the suit below. The award of attorney’s fees is thus warranted.
 However, moral damages cannot be awarded in this case. While SO ORDERED.
respondent’s failure to deploy petitioner seems baseless and Carpio (Actg. Chairperson), Carpio-Morales and Velasco, Jr.,
unreasonable, we cannot qualify such action as being tainted with bad JJ., concur.
faith, or done deliberately to defeat petitioner’s rights, as to justify the
_______________
award of moral damages. At most, respondent was being overzealous in
protecting its 33 434 Phil. 524, 537-538; 385 SCRA 306, 318 (2002).

_______________ This ruling was reiterated in Pentagon International Shipping, Inc. v. Adelantar, G.R.
34

No. 157373, 27 July 2004, 435 SCRA 342; Gu-Miro v. Adorable,G.R. No. 160952, 20 August
Id., at pp. 169-170; p. 650, citing Cagampan v. National Labor Relations
30
2004, 437 SCRA 162, 169; and Petroleum Shipping Ltd. v. National Labor Relations
Commission, 195 SCRA 533 (1991). Commission, G.R. No. 148130, 16 June 2006, 491 SCRA 35, 42.
Remigio v. National Labor Relations Commission, G.R. No. 159887, 12 April 2006, 487
31
181
SCRA 190, 215.
32 San Miguel Corporation v. Ubaldo, G.R. No. 92859, 1 Feburary 1993, 218 SCRA 293, VOL. 527, JULY 10, 2007 181
301.
180 Land Bank of the Philippines vs. Estanislao

180 SUPREME COURT REPORTS ANNOTATED Quisumbing (Chairperson), J., On Official Leave.
Petition granted in part, judgment and resolution reversed and set
Santiago vs. CF Sharp Crew Management, Inc.
aside.
interest when it became too hasty in making its conclusion that Note.—Extreme caution should be exercised in terminating the
petitioner will jump ship like his brother. services of a worker for his job may be the only lifeline on which he and
We likewise do not see respondent’s failure to deploy petitioner as his family depend for survival in these difficult times. (Gutierrez vs.
an act designed to prevent the latter from attaining the status of a Singer Sewing Machine Company, 411 SCRA 512 [2003])
regular employee. Even if petitioner was able to depart the port of ——o0o——
Manila, he still cannot be considered a regular employee, regardless of © Copyright 2016 Central Book Supply, Inc. All rights reserved.
his previous contracts of employment with respondent. InMillares v.
National Labor Relations Commission, the Court ruled that seafarers
33

are considered contractual employees and cannot be considered as
regular employees under the Labor Code. Their employment is
governed by the contracts they sign every time they are rehired and
their employment is terminated when the contract expires. The
exigencies of their work necessitates that they be employed on a
contractual basis. 34

WHEREFORE, petition is GRANTED IN PART. The Decision dated

16 October 2003 and the Resolution dated 19 February 2004 of the
Court of Appeals are REVERSED and SET ASIDE. The Decision of
Labor Arbiter Teresita D. CastillonLora dated 29 January 1999 is
REINSTATED with the MODIFICATION that respondent CF Sharp
Crew Management, Inc. is ordered to pay actual or compensatory
damages in the amount of US$4,635.00 representing salary for nine (9)
months as stated in the contract, and attorney’s fees at the reasonable
rate of 10% of the recoverable amount.
122 SUPREME COURT REPORTS ANNOTATED VOL. 168, NOVEMBER 29, 1988 123
National Service Corporation vs. NLRC National Service Corporation vs. NLRC
No. L-69870. November 29, 1988. * Credo was not given ample opportunity to be heard and to defend
NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L.
PEREZ, petitioners, vs. THE HONORABLE THIRD DIVISION,
NATIONAL LABOR RELATIONS COMMISSION, MINISTRY OF
LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO,
respondents.
No. L-70295. November 29, 1988. *
EUGENIA C. CREDO, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, NATIONAL SERVICES
CORPORATION AND ARTURO L. PEREZ, respondents.
Labor Law; Dismissal; The guidelines for dismissal requires two (2)
written notices of dismissal before a termination of employment can be
legally effected.—These guidelines mandate that the employer furnish an
employee sought to be dismissed two (2) written notices of dismissal before
a termination of employment can be legally effected. These are the notice
which apprises the employee of the particular acts or omissions for which
his dismissal is sought and the subsequent notice which informs the
employee of the employer’s decision to dismiss him.
Same; Same; Same; Employer must afford the employee concerned
ample opportunity to be heard and to defend himself.—Likewise, a reading
of the guidelines in consonance with the express provisions of law on
protection to labor (which encompasses the right to security of tenure) and
the broader dictates of procedural due process necessarily mandate that
notice of the employer’s decision to dismiss an employee, with reasons
therefor, can only be issued after the employer has afforded the employee
concerned ample opportunity to be heard and to defend himself.
Same; Same; Same; Same; NASECO did not comply with the
guidelines in effecting Credo’s dismissal.—In the case at bar, NASECO did
not comply with these guidelines in effecting Credo’s dismissal. Although
she was apprised and “given the chance to explain her side” of the charges
filed against her, this chance was given so perfunctorily, thus rendering
illusory Credo’s right to security of tenure. That
_______________
* EN BANC.
123
herself is evident from the fact that the compliance with the injunction to
apprise her of the charges filed against her and to afford her a chance to
prepare for her defense was dispensed in only a day. This is not effective
compliance with the legal requirements aforementioned.
Same; Same; Same; Same; Same; NASECO was already bent on
terminating her services when she was informed on 1 December 1983 of the
charges against her.—The fact also that the Notice of Termination of
Credo’s employment (or the decision to dismiss her) was dated 24
November 1983 and made effective 1 December 1983 shows that NASECO
was already bent on terminating her services when she was informed on 1
December 1983 of the charges against her, and that any hearing which
NASECO thought of affording her after 24 November 1983 would merely
be pro forma or an exercise in futility.
Same; Same; Same; Same; Same; Same; Credo’s non-compliance with
Loren’s memorandum did not warrant the severe penalty of dismissal.—
Besides, Credo’s mere non-compliance with Loren’s memorandum
regarding the entry procedures in the company’s Statement of Billings
Adjustment did not warrant the severe penalty of dismissal.
Same; Same; Same; Same; Same; Same; Same; Same; Credo’s
previous and repeated acts of insubordination, discourtesy and sarcasm
towards her superior officers are deemed to have been condoned by
NASECO.—Of course, in justifying Credo’s termination of employment,
NASECO claims as additional lawful causes for dismissal Credo’s previous
and repeated acts of insubordination, discourtesy and sarcasm towards her
superior officers, alleged to have been committed from 1980 to July 1983.
If such acts of misconduct were indeed committed by Credo, they are
deemed to have been condoned by NASECO. For instance, sometime in
1980, when Credo allegedly “reacted in a scandalous manner and raised
her voice” in a discussion with NASECO’s Acting head of the Personnel
Administration, no disciplinary measure was taken or meted against her.
Nor was she even reprimanded when she allegedly talked “in a shouting or
yelling manner” with the Acting Manager of NASECO’s Building
Maintenance and Services Department in 1980, or when she allegedly
“shouted” at NASECO’s Corporate Auditor “in front of his subordinates
displaying arrogance and unruly behavior” in 1980, or when she allegedly
shouted at NASECO’s Internal Control Consultant in 1981. But then, in
sharp contrast to NASECO’s penchant for ignoring the aforesaid acts of
misconduct, when Credo committed frequent
 124
124 SUPREME COURT REPORTS ANNOTATED
National Service Corporation vs. NLRC
tardiness in August and September 1983, she was reprimanded.
Same; Same; Same; Same; Same; Same; Same; Same; Same;Reinstat
ement is proper for the acts or omissions for which Credo’s employment was
sought to be legally terminated were insufficiently proved.—Considering
that the acts or omissions for which Credo’s employment was sought to be
legally terminated were insufficiently proved, as to justify dismissal,
reinstatement is proper. For “absent the reason which gave rise to [the
employee’s] separation from employment, there is no intention on the part
of the employer to dismiss the employee concerned.” And, as a result of
having been wrongfully dismissed, Credo is entitled to three (3) years of
backwages without deduction and qualification.
Same; Same; Jurisdiction; Ruling in National Housing Corporation
vs. Juco that employees of government-owned or controlled corporations are
governed by the civil service law should not be given retroactive effect.—It
would appear that, in the interest of justice, the holding in said case should
not be given retroactive effect, that is, to cases that arose before its
promulgation on 17 January 1985. To do otherwise would be oppressive to
Credo and other employees similarly situated, because under the same
1973 Constitution but prior to the ruling in National Housing Corporation
vs. Juco, this Court had recognized the applicability of the Labor Code to,
and the authority of the NLRC to exercise jurisdiction over, disputes
involving terms and conditions of employment in government-owned or
controlled corporations, among them, the National Service Corporation
(NASECO).
Same; Same; Same; Same; The NLRC has jurisdiction to accord relief
to the parties.—On the premise that it is the 1987 Constitution that
governs the instant case because it is the Constitution in place at the time
of decision thereof, the NLRC has jurisdiction to accord relief to the parties.
As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB,
the NASECO is a government-owned or controlled corporation without
original charter.
SPECIAL CIVIL ACTIONS for certiorari to review the decision of the
National Labor Relations Commission.
The facts are stated in the opinion of the Court.
The Chief Legal Counsel for respondents NASECO and Arturo L.
Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.
125
VOL. 168, NOVEMBER 29, 1988 125
National Service Corporation vs. NLRC
PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the
decision of the Third Division, National Labor Relations Commission
**
in Case No. 11-4944-83 dated 28 November 1984 and its resolution
dated 16 January 1985 denying motions for reconsideration of said
decision.
Eugenia C. Credo was an employee of the National Service
Corporation (NASECO), a domestic corporation which provides
security guards as well as messengerial, janitorial and other similar
manpower services to the Philippine National Bank (PNB) and its
agencies. She was first employed with NASECO as a lady guard on 18
July 1975. Through the years, she was promoted to Clerk Typist, then
Personnel Clerk until she became Chief of Property and Records, on 10
March 1980. 1
Sometime before 7 November 1983, Credo was administratively
charged by Sisinio S. Lloren, Manager of Finance and Special Project
and Evaluation Department of NASECO, stemming from her non-
compliance with Lloren’s memorandum, dated 11 October 1983,
regarding certain entry procedures in the company’s Statement of
Billings Adjustment. Said charges alleged that Credo “did not comply
with Lloren’s instructions to place some corrections/additional remarks
in the Statement of Billings Adjustment; and when [Credo] was called
by Lloren to his office—to explain further the said instructions, [Credo]
showed resentment and behaved in a scandalous manner by shouting
and uttering remarks of disrespect in the presence of her co-
employees.” 2
On 7 November 1983, Credo was called to meet Arturo L. Perez,
then Acting General Manager of NASECO, to explain her side before
Perez and NASECO’s Committee on Personnel Affairs in connection
with the administrative charges filed against her. After said meeting,
on the same date, Credo was placed on “Forced Leave” status for 15
days, effective 8 Novem-
_______________
 **Signed by Guillermo C. Medina, Presiding Commissioner, Gabriel M. Gatchalian and
Miguel B. Varela, Commissioners; the last one concurring in the result.
1 Rollo (G.R. No. 69870), p. 122
2 Ibid., p. 123.
126
126 SUPREME COURT REPORTS ANNOTATED 6
National Service Corporation vs. NLRC
ber 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983,
Credo filed a complaint, docketed as Case No. 11-4944-83, with the
Arbitration Branch, National Capital Region, Ministry of Labor and
Employment, Manila, against NASECO for placing her on forced leave,
without due process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983,
NASECO’s Committee on Personnel Affairs deliberated and evaluated
a number of past acts of misconduct or infractions attributed to her. As
a result of this deliberation, said committee resolved:
1. “1.That, respondent [Credo] committed the following offenses in
the Code of Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3—Any discourteous act to customer, officer and employee of client
company or officer of the Corporation.
OFFENSE vs. Public Moral
No. 7—Exhibit marked discourtesy in the course of official duties or use
of profane or insulting language to any superior officer.
OFFENSE vs. Authority
No. 3—Failure to comply with any lawful order or any instructions of a
superior officer.”
1. “2.That, Management has already given due consideration to
respondent’s [Credo] scandalous actuations for several times in
the past. Records also show that she was reprimanded for some
offense and did not question it. Management at this juncture, has
already met its maximum tolerance point so it has decided to put
an end to respondent’s [Credo] being an undesirable employee.”
The committee recommended Credo’s termination, with forfeiture of
benefits. 7
On 1 December 1983, Credo was called again to the office of
_______________
3 Ibid.
4 Ibid., p. 22.
5 Ibid., p. 62.
Ibid., p. 63.
7 Ibid.
127
VOL. 168, NOVEMBER 29, 1988 127
National Service Corporation vs. NLRC
Perez to be informed that she was being charged with certain offenses.
Notably, these offenses were those which NASECO’s Committee on
Personnel Affairs already resolved, on 22 November 1983 to have been
committed by Credo.
5
In Perez’s office, and in the presence of NASECO’s Committee on
Personnel Affairs, Credo was made to explain her side in connection
with the charges filed against her; however, due to her failure to do
so, she was handed a Notice of Termination, dated 24 November 1983,
8
and made effective 1 December 1983. 9
Hence, on 6 December 1983, Credo filed a supplemental complaint
for illegal dismissal in Case No. 11-4944-83, alleging absence of just or
authorized cause for her dismissal and lack of opportunity to be heard. 10
After both parties had submitted their respective position papers,
affidavits and other documentary evidence in support of their claims
and defenses, on 9 May 1984, the labor arbiter rendered a decision: 1)
dismissing Credo’s complaint, and 2) directing NASECO to pay Credo
separation pay equivalent to one half month’s pay for every year of
service. 11
Both parties appealed to respondent National Labor Relations
Commission (NLRC) which, on 28 November 1984, rendered a decision:
1) directing NASECO to reinstate Credo to her former position, or
substantially equivalent position, with six (6) months’ backwages and
without loss of seniority rights and other privileges appertaining
thereto, and 2) dismissing Credo’s claim for attorney’s fees, moral and
6
exemplary damages. As a consequence, both parties filed their
respective motions for reconsideration, which the NLRC denied in a
12
resolution of 16 January 1985. 13
 Hence, the present recourse by both parties.
In G.R. No. 68970, petitioners challenge as grave abuse of discretion
the dispositive portion of the 28 November 1984
_______________
8 Ibid., p. 66.
Ibid., p. 65.
9
10 Ibid., p. 25.
11 Ibid., p. 104.
12 Ibid., p. 126.
13 Ibid., p. 148.
128
128 SUPREME COURT REPORTS ANNOTATED
National Service Corporation vs. NLRC
decision which ordered Credo’s reinstatement with
backwages. Petitioners contend that in arriving at said questioned
14
order, the NLRC acted with grave abuse of discretion in finding that:
1) petitioners violated the requirements mandated by law on
termination, 2) petitioners failed in the burden of proving that the
termination of Credo was for a valid or authorized cause, 3) the alleged
infractions committed by Credo were not proven or, even if proved,
could be considered to have been condoned by petitioners, and 4) the
termination of Credo was not for a valid or authorized cause. 15
On the other hand, in G.R. No. 70295, petitioner Credo challenges
as grave abuse of discretion the dispositive portion of the 28 November
1984 decision which dismissed her claim for attorney’s fees, moral and
exemplary damages and limited her right to backwages to only six (6)
months. 16
As guidelines for employers in the exercise of their power to dismiss
employees for just causes, the law provides that:
“Section 2. Notice of dismissal.—Any employer who seeks to dismiss a
worker shall furnish him a written notice stating the particular acts or
omission constituting the grounds for his dismissal. xxx
“Section 5. Answer and Hearing.—The worker may answer the
allegations stated against him in the notice of dismissal within a
reasonable period from receipt of such notice. The employer shall afford the
worker ample opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
“Section 6. Decision to dismiss.—The employer shall immediately notify
a worker in writing of a decision to dismiss him stating clearly the reasons
therefor.” 17
These guidelines mandate that the employer furnish an employee
sought to be dismissed two (2) written notices of dismissal before a
termination of employment can be legally effected. These are the notice
which apprises the employee of the particular acts or omissions for
which his dismissal is
_______________
14 Ibid., p. 8.
15 Ibid.
16 Rollo, (G.R. No. 70295), p. 8.
Rule XIV, Book V, Implementing Rules and Regulations.
17
129
VOL. 168, NOVEMBER 29, 1988 129
National Service Corporation vs. NLRC
sought and the subsequent notice which informs the employee of the
employer’s decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express
provisions of law on protection to labor (which encompasses the right
18
to security of tenure) and the broader dictates of procedural due process
necessarily mandate that notice of the employer’s decision to dismiss
an employee, with reasons therefor, can only be issued after the
employer has afforded the employee concerned ample opportunity to be
heard and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in
effecting Credo’s dismissal. Although she was apprised and “given the
chance to explain her side” of the charges filed against her, this chance
was given so perfunctorily, thus rendering illusory Credo’s right to
security of tenure. That Credo was not given ample opportunity to be
heard and to defend herself is evident from the fact that the compliance
with the injunction to apprise her of the charges filed against her and
to afford her a chance to prepare for her defense was dispensed in only
a day. This is not effective compliance with the legal requirements
aforementioned.
The fact also that the Notice of Termination of Credo’s employment
(or the decision to dismiss her) was dated 24 November 1983 and made
effective 1 December 1983 shows that NASECO was already bent on
terminating her services when she was informed on 1 December 1983
of the charges against her, and that any hearing which NASECO
thought of affording her after 24 November 1983 would merely be pro
forma or an exercise in futility.
Besides, Credo’s mere non-compliance with Loren’s memorandum
regarding the entry procedures in the company’s Statement of Billings
Adjustment did not warrant the severe penalty of dismissal. The NLRC
correctly held that:
“x x x, on the charge of gross discourtesy, the CPA found in its Report,
dated 22 November 1983 that, ‘In the process of her
testimony/explanations she again exhibited a conduct unbecoming in
________________
18 Constitution (1973), Art. II, Sec. 9; Constitution (1987), Art. II, Sec. 18; Labor Code, Art. III.
130
130 SUPREME COURT REPORTS ANNOTATED
National Service Corporation vs. NLRC
front of NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic and
discourteous manner, notwithstanding, the fact that she was inside the
office of the Acctg. General Manager.’ Let it be noted, however, that the
Report did not even describe how the so called ‘conduct unbecoming’ or
‘discourteous manner’ was done by complainant. Anent the ‘sarcastic’
argument of complainant, the purported transcript of the meeting held on 19
7 November 1983 does not indicate any sarcasm on the part of complainant.
At the most, complainant may have sounded insistent or emphatic about
her work being more complete than the work of Ms. de Castro, yet, the
complaining officer signed the work of Ms. de Castro and did not sign hers.
“As to the charge of insubordination, it may be conceded, albeit unclear,
that complainant failed ‘to place some corrections/additional remarks in
the Statement of Billings Adjustments’ as instructed. However, under the
circumstances obtaining, where complainant strongly felt that she was
being discriminated against by her superior in relation to other employees,
we are of the considered view and so hold, that a reprimand would have
sufficed for the infraction, but certainly not termination from services.
20
As this Court has ruled:
“x x x where a penalty less punitive would suffice, whatever missteps may
be committed by labor ought not to be visited with a consequence so severe.
It is not only because of the law’s concern for the workingman. There is, in
addition, his family to consider. Unemployment brings untold hardships
and sorrows on those dependent on the wage-earner.” 21
Of course, in justifying Credo’s termination of employment, NASECO
claims as additional lawful causes for dismissal Credo’s previous and
repeated acts of insubordination, discourtesy and sarcasm towards her
superior officers, alleged to have been committed from 1980 to July
1983. 22
If such acts of misconduct were indeed committed by Credo, they are
deemed to have been condoned by NASECO. For
_______________
19 Rollo, (G.R. No. 69870), p. 57-59.
20 Ibid., p. 125.
21 Almira vs. B.F. Goodrich Philippine, Inc., 58 SCRA 120.
22 Rollo, (G.R. No. 69870), p. 2-5.
131
VOL. 168, NOVEMBER 29, 1988 131
National Service Corporation vs. NLRC
instance, sometime in 1980, when Credo allegedly “reacted in a
scandalous manner and raised her voice” in a discussion with
NASECO’s Acting head of the Personnel Administration, no 23
disciplinary measure was taken or meted against her. Nor was she even
reprimanded when she allegedly talked “in a shouting or yelling
manner” with the Acting Manager of NASECO’s Building Maintenance
and Services Department in 1980, or when she allegedly “shouted” at
24
NASECO’s Corporate Auditor “in front of his subordinates displaying
arrogance and unruly behavior” in 1980, or when she allegedly shouted
at NASECO’s Internal Control Consultant in 1981. But then, in sharp
25
contrast to NASECO’s penchant for ignoring the aforesaid acts of
misconduct, when Credo committed frequent tardiness in August and
September 1983, she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to
superiors) were satisfactorily proven, NASECO’s condonation thereof
is gleaned from the fact that on 4 October 1983, Credo was given a
salary adjustment for having performed in the job “at least
[satisfactorily],” and she was then rated “Very Satisfactory” as
27 28
regards job performance, particularly in terms of quality of work,
quantity of work, dependability, cooperation, resourcefulness and
attendance.
 Considering that the acts or omissions for which Credo’s
employment was sought to be legally terminated were insufficiently
proved, as to justify dismissal, reinstatement is proper. For “absent the
reason which gave rise to [the employee’s] separation from
employment, there is no intention on the part of the employer to dismiss
the employee concerned.” And, as a result of having been wrongfully
29
dismissed, Credo is entitled to three (3) years of backwages without
deduction and qualification. 30
________________
23 Ibid., p. 13.
24 Ibid.
25 Ibid.
26 Ibid.
Ibid., p. 91.
27
28 Ibid., p. 78.
29 Pepito vs. Secretary of Labor, 98 SCRA 454.
30 Ibid.
132
132 SUPREME COURT REPORTS ANNOTATED 133
National Service Corporation vs. NLRC VOL. 168, NOVEMBER 29, 1988 133
However, while Credo’s dismissal was effected without procedural
fairness, an award of exemplary damages in her favor can only be
justified if her dismissal was effected in a wanton, fraudulent,
oppressive or malevolent manner. A judicious examination of the
31
record manifests no such conduct on the part of management. However,
in view of the attendant circumstances in the case, i.e., lack of due
process in effecting her dismissal, it is reasonable to award her moral
damages. And, for having been compelled to litigate because of the
unlawful actuations of NASECO, a reasonable award for attorney’s fees
in her favor is in order.
In NASECO’s comment in G.R. No. 70295, it is belatedly argued
32
that the NLRC has no jurisdiction to order Credo’s reinstatement.
NASECO claims that, as a government corporation (by virtue of its
being a subsidiary of the National Investment and Development
Corporation (NIDC), a subsidiary wholly owned by the Philippine
National Bank (PNB), which in turn is a government owned
corporation), the terms and conditions of employment of its employees
are governed by the Civil Service Law, rules and regulations. In
support of this argument, NASECO cites National Housing
Corporation vs. Juco, where this Court held that “There should no
33
longer be any question at this time that employees of government-
owned or controlled corporations are governed by the civil service law
and civil service rules and regulations.”
It would appear that, in the interest of justice, the holding in said
case should not be given retroactive effect, that is, to cases that arose
before its promulgation on 17 January 1985. To do otherwise would be
oppressive to Credo and other employees similarly situated, because
under the same 1973 Constitution but prior to the ruling in National
Housing Corporation vs. Juco, this Court had recognized the
applicability of the Labor Code to, and the authority of the NLRC to
exercise jurisdiction over, disputes involving terms and conditions of
employment in government-owned or controlled corporations, among
them,
_______________
31 Civil Code, Art. 2232.
32 Rollo (G.R. No. 70295), p. 125.
33 134 SCRA 172.
National Service Corporation vs. NLRC
the National Service Corporation (NASECO). 34
Furthermore, in the matter of coverage by the civil service of
government-owned or controlled corporations, the 1987 Constitution
starkly varies from the 1973 Constitution, upon which National
Housing Corporation vs. Juco is based. Under the 1973 Constitution, it
was provided that:
“The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation. x x x” 35
On the other hand, the 1987 Constitution provides that:
“The civil service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including governmentowned or controlled
corporations with original charter.” (Italics supplied)
36
Thus, the situations sought to be avoided by the 1973 Constitution and
expressed by the Court in the National Housing Corporation case in the
following manner—
“The infirmity of the respondents’ position lies in its permitting a
circumvention or emasculation of Section 1, Article XII-B of the
Constitution. It would be possible for a regular ministry of government to
create a host of subsidiary corporations under the Corporation Code funded
by a willing legislature. A government-owned corporation could create
several subsidiary corporations. These subsidiary corporations would enjoy
the best of two worlds. Their officials and employees would be privileged
individuals, free from the strict accountability required by the Civil Service
Decree and the regulations of the Commission on Audit. Their incomes
would not be subject to the competitive restrains of the open market nor to
the terms and conditions of civil service employment. Conceivably, all
governmentowned or controlled corporations could be created, no longer by
special charters, but through incorporations under the general law.
_______________
Philippine Air Line, Inc. vs. NLRC, 124 SCRA 583; Philippine Air Lines, Inc. vs. NLRC,126
34
SCRA 223 and National Service Corporation vs. Leogardo, Jr., 130 SCRA 502.
35 Constitution, 1973, Art. II-B, Sec. I(1).
36 Constitution (1987), Art. IX-B, Sec. 2(1).
134
134 SUPREME COURT REPORTS ANNOTATED 135
National Service Corporation vs. NLRC VOL. 168, NOVEMBER 29, 1988 135
The Constitutional amendment including such corporations in the embrace
of the civil service would cease to have application. Certainly, such a
situation cannot be allowed to exist.” 37
appear relegated to relative insignificance by the 1987 Constitutional
provision that the Civil Service embraces governmentowned or
controlled corporations with original charter; and, therefore, by clear
implication, the Civil Service does not include government-owned or
controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general
corporation law.
The proceedings in the 1986 Constitutional Commission also shed
light on the Constitutional intent and meaning in the use of the phrase
“with original charter.” Thus
“THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was reading
the wrong provision.
I refer to Section 1, subparagraph l which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the
government, including government-owned or controlled corporations.
My query: Is Philippine Airlines covered by this provision?
MR. FOZ. Will the Commissioner please state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1,
under the Civil Service Commission, says: “including government-owned
or controlled corporations.” Does that include a corporation, like the
Philippine Airlines which is government-owned or controlled?
MR. FOZ. I would like to throw a question to the Commissioner. Is the
Philippine Airlines controlled by the government in the sense that the
majority of stocks are owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is what we might call
a tertiary corporation. The GSIS is owned by the government. Would this
be covered because the provision says “including government-owned or
controlled corporations.”
MR. FOZ. The Philippine Airlines was established as a private
_______________
37 134 SCRA 182-183.
National Service Corporation vs. NLRC
corporation. Later on, the government, through the GSIS, acquired the
controlling stocks. Is that not the correct situation?
MR. ROMULO. That is true as Commissioner Ople is about to explain.
There was apparently a Supreme Court decision that destroyed that
distinction between a government-owned corporation created under the
Corporation Law and a government-owned corporation created by its own
charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA
vs. Juco to the effect that all government corporations irrespective of the
manner of creation, whether by special charter or by the private
Corporation Law, are deemed to be covered by the civil service because of
the wide-embracing definition made in this section of the existing 1973
Constitution. But we recall the response to the question of Commissioner
Ople that our intendment in this provision is just to give a general
description of the civil service. We are not here to make any declaration as
to whether employees of government-owned or controlled corporations are
barred from the operation of laws, such as the Labor Code of the
Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name
has been mentioned by both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER ( Mr. Trenas). Commissioner Ople is
recognized.
MR. OPLE. In connection with the coverage of the Civil Service Law in
Section 1 (1), may I volunteer some information that may be helpful both
to the interpellator and to the Committee. Following the proclamation of
martial law on September 21, 1972, this issue of the coverage of the Labor
Code of the Philippines and of the Civil Service Law almost immediately
arose. I am, in particular, referring to the period following the coming into
force and effect of the Constitution of 1973, where the Article on the Civil
Service was supposed to take immediate force and effect. In the case of
LUZTEVECO, there was a strike at the time. This was a government-
controlled and government-owned corporation. I think it was owned by the
PNOC with just the minuscule private shares left. So, the Secretary of
Justice at that time, Secretary Abad Santos, and myself sat down, and the
result of that meeting was an opinion of the Secretary of Justice—which
became binding immediately on the government—that government
corporations with original charters, such as the GSIS, were covered by the
Civil Service Law and corporations spun off from the GSIS, which we called
secondgeneration corporations functioning as private subsidiaries, were
covered by the Labor Code. Samples of such secondgeneration corporations
were the Philippine Airlines, the Manila
136
136 SUPREME COURT REPORTS ANNOTATED it does not preclude a distinction of the rules between the two types of
National Service Corporation vs. NLRC MR. FOZ. In other words, it is something that should be left to the
Hotel and the Hyatt. And that demarcation worked very well. In fact, all
of these companies I have mentioned as examples, except for the Manila
Hotel, had collective bargaining agreements. In the Philippine Airlines,
there were, in fact, three collective bargaining agreements; one, for the
ground people or the PALIA; one, for the flight attendants or the PASAC;
and one for the pilots of the ALPAC. How then could a corporation like that
be covered by the Civil Service law? But, as the Chairman of the Committee
pointed out, the Supreme Court decision in the case of NHA vs. Juco
unrobed the whole thing. Accordingly, the Philippine Airlines, the Manila
Hotel and the Hyatt are now considered under that decision covered by the
Civil Service Law. I also recall that in the emergency meeting of the
Cabinet convened for this purpose at the initiative of the Chairman of the
Reorganization Commission, Armand Fabella, they agreed to allow the
CBAs to lapse before applying the full force and effect of the Supreme Court
decision. So, we were in the awkward situation when the new government
took over. I can agree with Commissioner Romulo when he said that this
is a problem which I am not exactly sure we should address in the
deliberations on the Civil Service Law or whether we should be content
with what the Chairman said—that Section 1 (1) of the Article on the Civil
Service is just a general description of the coverage of the Civil Service and
no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the moment, I would be
satisfied if the Committee puts on records that it is not their intent by this
provision and the phrase “including government-owned or controlled
corporations” to cover such companies as the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when this
draft was made, my proposal was really to eliminate, to drop from the
provision, the phrase “including government-owned or controlled
corporations.”
MR. ROMULO. Would the Committee indicate that that is the intent
of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can
make such a statement in the face of an absolute exclusion of government-
owned or controlled corporations. However, this does not preclude the Civil
Service Law to prescribe different rules and procedures, including
emoluments for employees of proprietary corporations, taking into
consideration the nature of their operations. So, it is a general coverage but
enterprises.
legislature to decide. As I said before, this is just a general
137
VOL. 168, NOVEMBER 29, 1988 137
National Service Corporation vs. NLRC
description and we are not making any declaration whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a
definitive understanding of the coverage and the Gentleman wants to
exclude government-owned or controlled corporations like Philippine
Airlines, then the recourse is to offer an amendment as to the coverage, if
the Commissioner does not accept the explanation that there could be a
distinction of the rules, including salaries and emoluments.
MR. ROMULO. So as not to delay the proceedings, I will reserve my
right to submit such an amendment.
x x x MR. ROMULO. That is correct. Mr. Presiding Officer.
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. On page 2, line 5, I suggest the following amendment
after “corporations”: Add a comma (,) and the phrase EXCEPT THOSE
EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee
say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original
proposed amendment to now read as follows: “including government-owned
or controlled corporations WITH ORIGINAL CHARTERS.” The purpose of
this amendment is to indicate that government corporations such as the
GSIS and SSS, which have original charters, fall within the ambit of the
civil service. However, corporations which are subsidiaries of these
chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt
are excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee
say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term
“original charters,” what exactly do we mean?
MR. ROMULO. We mean that they were created by law, by an
138
138 SUPREME COURT REPORTS ANNOTATED
National Service Corporation vs. NLRC
act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. FOZ. With that understanding and clarification, the Committee
accepts the amendment.
MR. NATIVIDAD. Mr. Presiding Officer, so those created by the
general corporation law are out.
MR. ROMULO. That is correct.” 38
On the premise that it is the 1987 Constitution that governs the instant
case because it is the Constitution in place at the time of decision
thereof, the NLRC has jurisdiction to accord relief to the parties. As an
admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the
NASECO is a government-owned or controlled corporation without
original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice
Perfecto in his concurring opinion in Gomez vs. Government Insurance
Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also
published in 78 Phil. 221) on the effectivity of the principle of social
justice embodied in the 1935 Constitution, said:
“Certainly, this principle of social justice in our Constitution as generously
conceived and so tersely phrased, was not included in the fundamental law
as a mere popular gesture. It was meant to (be) a vital, articulate,
compelling principle of public policy. It should be observed in the
interpretation not only of future legislation, but also of all laws already
existing on November 15, 1935. It was intended to change the spirit of our
laws, present and future. Thus, all the laws which on the great historic
event when the Commonwealth of the Philippines was born, were
susceptible of two interpretations—strict or liberal, against or in favor of
social justice, now have to be construed broadly in order to promote and
achieve social justice. This may seem novel to our friends, the advocates of
legalism, but it is the only way to give life and significance to the above-
quoted principle of the Constitution. If it was not designed to apply to these
existing laws, then it would be necessary to wait for generations until all
our codes and all our statutes shall have been completely changed by
removing every provision inimical to social justice, before the policy of
social justice can become really effective. That would be an absurd
________________
38 Record of the Constitutional Commission, Vol. I, pp. 583-585.
139
VOL. 168, NOVEMBER 29, 1988 139
National Service Corporation vs. NLRC 140 SUPREME COURT REPORTS ANNOTATED
conclusion. It is more reasonable to hold that this constitutional principle
applies to all legislation in force on November 15, 1935, and all laws
thereafter passed.”
WHEREFORE, in view of the foregoing, the challenged decision of the
NLRC is AFFIRMED with modifications. Petitioners in G.R. No. 69870,
who are the private respondents in G.R. No. 70295, are ordered to: 1)
reinstate Eugenia C. Credo to her former position at the time of her
termination, or if such reinstatement is not possible, to place her in a
substantially equivalent position, with three (3) years backwages, from
1 December 1983, without qualification or deduction, and without loss
of seniority rights and other privileges appertaining thereto, and 2) pay
Eugenia C. Credo P5,000.00 for moral damages and P5,000.00 for
attorney’s fees.
If reinstatement in any event is no longer possible because of
supervening events, petitioners in G.R. No. 69870, who are the private
respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo, in
addition to her backwages and damages as above described, separation
pay equivalent to one-half month’s salary for every year of service, to
be computed on her monthly salary at the time of her termination on 1
December 1983.
SO ORDERED.
Fernan (C.J.), Melencio-
Herrera, Paras, Feliciano,Gancayco, Bidin, Sarmiento, Cortes, Griño-
Aquino, Medialdea andRegalado, JJ., concur.
Narvasa, J., on leave.
Gutierrez, Jr., J., in the result.
Cruz, J., see separate concurrence.
CRUZ, J., concurring:
While concurring with Mr. Justice Padilla’s well-researched ponencia,
I have to express once again my disappointment over still another
avoidable ambiguity in the 1987 Constitution.
It is clear now from the debates of the Constitutional Commission
that the government-owned or controlled corporations included in the
Civil Service are those with legislative charters. Excluded are its
subsidiaries organized under the Corporation Code.
140
Cruz vs. Commission on Audit
If that was the intention, the logical thing, I should imagine, would
have been to simply say so. This would have avoided the suggestion
that there are corporations with duplicate charters as distinguished
from those with original charters.
All charters are original regardless of source unless they are
amended. That is the acceptable distinction. Under the provision,
however, the charter is still and always original even if amended as
long it was granted by the legislature.
It would have been clearer, I think, to say “including government
owned or controlled corporations with legislative charters.” Why this
thought did not occur to the Constitutional Commission places one—
again—in needless puzzlement.
Decision affirmed with modifications.
Notes.—Prerogative of management to dismiss or lay off an
employee must be done without abuse of discretion, for what is at stake
is not only petitioner’s position but also his means of livelihood.
(Kapisanan ng Manggagawa sa Camara Shoes vs. Camara Shoes, 111
SCRA 477)
While petitioner was never notified nor heard in a case decided
against him, remand of records below is necessary to afford him a full
and fair hearing. (Alvarez vs. Ople, 119 SCRA 378.)
——o0o——
© Copyright 2016 Central Book Supply, Inc. All rights reserved.

700 SUPREME COURT REPORTS ANNOTATED
Department of Health vs. National Labor Relations Commission
G.R. No. 113212. December 29, 1995. *
THE DEPARTMENT OF HEALTH (DR. JOSE N. RODRIGUEZ
MEMORIAL HOSPITAL) and CESAR J. VIARDO, M.D., in his
capacity as Director of the Dr. Jose N. Rodriguez Memorial Hospital,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER CORNELIO L. LINSANGAN and CEFERINO R.
LAUR, respondents.
Civil Service Law; Civil Service Commission; DJRMH as an agency of
the government falls within the scope and/or coverage of the Civil Service
Law of the Philippines.—The petitioner-hospital, the DJRMH, originally
known as the Tala Leprosarium, was one of three leper colonies established
under Commonwealth Act No. 161. Maintained to this day as a public
medical center and health facility attached to the Department of Health,
the DJRMH exercises strictly governmental functions relating to the
management and control of the dreaded communicable Hansen’s disease,
commonly known as leprosy. As it is clearly an agency of the Government,
the DJRMH falls well within the scope and/or coverage of the Civil Service
Law in accordance
_______________
* FIRST DIVISION.
701
VOL. 251, DECEMBER 29, 1995 701
Department of Health vs. National Labor Relations Commission
with paragraph 1, Section 2, Article IX B, 1987 Constitution and the
provisions of Executive Order No. 292, otherwise known as the
Administrative Code of 1987 and Presidential Decree No. 807, otherwise
known as the Civil Service Decree of the Philippines.
Same; Same; Appeals; With the issuance of Civil Service Commission
Resolution No. 93-2387 on June 29, 1993, appeals shall now be filed with
the Civil Service Commission.—As the central personnel agency of the
Government, the Civil Service Commission administers the Civil Service
Law. It is, therefore, the single arbiter of all contests relating to the civil
service. The discharge of this particular function was formerly lodged in
one of its offices, the Merit Systems Protection Board (MSPB) which was
vested with the power, among others, “to hear and decide on appeal
administrative cases involving officials and employees of the civil service
and its decision shall be final except those involving dismissal or
separation from the service which may be appealed to the Commission.”
However, with the issuance of Civil Service Commission Resolution No. 93-
2387 on June 29, 1993, such appeals shall now be filed directly with the
Civil Service Commission.
Same; Same; Same; Civil Service Commission’s decisions are subject
to review by the Supreme Court.—Worthy to note in this connection is the
fact that the Labor Code itself provides that “the terms and conditions of
employment of government employees shall be governed by the Civil
Service Law, rules and regulations.” Conformably to the foregoing, it is,
indeed, the Civil Service Commission which has jurisdiction over the
present controversy. Its decisions are subject to review by the Supreme
Court.
Courts; Jurisdiction; Jurisdiction is conferred by law. Where there is
none, no agreement of the parties can provide one.—Jurisdiction is
conferred by law. Where there is none, no agreement of the parties can
provide one. Consequently, it was incorrect for the respondent labor arbiter
to have proceeded to hear the case, simply because private respondent
Ceferino Laur happened to lodge his complaint before his office, or to hold
that petitioners are estopped from assailing the respondent labor
authorities’ jurisdiction over the present case simply because the
petitioners have earlier submitted themselves to the said jurisdiction by
virtue of their participation in all the stages of the proceedings in the office
of respondent Labor Arbiter Linsangan and in the NLRC, and that they
failed to raise the issue of jurisdiction in the said proceedings.
702
702 SUPREME COURT REPORTS ANNOTATED
Department of Health vs. National Labor Relations Commission
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Office of Legal Aid for private respondent.
HERMOSISIMA, JR., J.:
The eternal problem of jurisdiction over Government employees is
again posed in this case: Which Government agency—the National
Labor Relations Commission or the Civil Service Commission—has
jurisdiction over contests relating to the civil service?
 This is a Petition for Certiorari and Prohibition filed by the
Department of Health in behalf of the Dr. Jose N. Rodriguez Memorial
Hospital (DJRMH) and its Director, Cesar J. Viardo, seeking to review
and set aside the Resolution of the National Labor Relations
Commission in NLRC NCR CA No. 002864-92 (NLRC Case No. 00-09-
05194-90), dated September 7, 1993, which dismissed herein
petitioners’ appeal from the January 2, 1992 Decision of Labor Arbiter
Cornelio L. Linsangan.
The antecedent facts, culled from the assailed Decision rendered by
Labor Arbiter Cornelio Linsangan and that of the NLRC, respectively,
as well as from the pleadings of the parties, are not in dispute:
Private respondent Ceferino R. Laur was a patient of the then Tala
Leprosarium (now Jose N. Rodriguez Memorial Hospital), having been
admitted thereto in 1951 for treatment of Hansen’s disease, commonly
termed leprosy. He was discharged in 1956 after he was deemed to have
been cured of his affliction.
In 1975, he was employed at the DJRMH as a patient-assistant by
the then Hospital Director, Dr. Artemio F. Runez, upon the
recommendation of the Barangay Captain of Tala. Specifically assigned
as a member of the Patient-Assistant Police Force, he was accorded a
compensation/salary, initially, in the amount of P110.00. This was
gradually increased through the years, depending upon the availability
of funds. His salary was chargeable to the maintenance and operating
expenses of the hospital.
703
VOL. 251, DECEMBER 29, 1995 703
Department of Health vs. National Labor Relations Commission
On September 15, 1989, complaints for Alarm and Scandal, Oral
Defamation, Grave Threats, Concealment of Deadly Weapon, Violation
of the Code of Ethics of Policemen, and Conduct Unbecoming of a Police
Officer were filed against said private respondent, pursuant to a report
made by his Chief of Police. Upon a finding of guilt of the aforesaid
offenses, the said private respondent was meted the penalty of
suspension for sixty (60) days, with a stern warning that a repetition of
the same would result in his outright dismissal by petitioner Dr. Cesar
J. Viardo in his capacity as Chief of Hospital.
1
On July 15, 1990, private respondent Laur got involved in the
mauling of one, Jake Bondoc, along with two policemen, Corporal
Ferrer and Patrolman Berdon. Private respondent’s account of the
incident is to the effect that, while private respondent and his
companions were manning their posts at the hospital’s Administration
Building, a group of twelve (12) young boys engaged another group of
four male youngsters (4) in a stone-throwing encounter. This resulted
in damage to the windows of the nearby Holy Rosary College. The
caretaker of the college, Agustin Chan, while assessing the damage
caused, was chased by the smaller group and threw stones at him.
Agustin Chan ran and took refuge at the administration building where
private respondent and the two policemen were on guard duty. It was
at this point that one of the policemen hit one of the stone throwers
with a night stick. 2
A complaint filed by a certain Jake Bondoc, one of the young boys,
against private respondent and his companions provoked an
investigation conducted on July 27, 1990, during which complainant
Bondoc pointed to private respondent as the party responsible for his
injuries even as Patrolman Berdon admitted to having hit Bondoc.
On August 21, 1990, private respondent was dismissed by the Chief
of Hospital, Dr. Cesar J. Viardo per Office Order No. 101, s-90, on the
basis of the Public Assistance Complaints Unit’s
_______________
1 Petition, p. 6; Rollo, p. 6.
2 Comment, p. 4; Rollo, p. 76.
704
704 SUPREME COURT REPORTS ANNOTATED
Department of Health vs. National Labor Relations Commission
(PACU) report/investigation finding private respondent and his
companions to have indeed mauled Jake Bondoc. The two policemen
were merely suspended.
Consequently, on September 26, 1990, private respondent filed with
the National Labor Relations Commission a complaint for illegal
dismissal with additional claims for payment of wage differentials,
holiday pay, overtime pay and 13th month pay, as well as payment of
moral and exemplary damages, attorney’s fees and expenses of
litigation and with prayer for reinstatement without loss of seniority
rights against Dr. Jose N. Rodriguez Memorial Hospital (DJRMH) and
Dr. Cesar J. Viardo. This was docketed as “NLRC NCR Case No. 00-09-
05194-90” and subsequently assigned to Labor Arbiter Cornelio
Linsangan.
On January 2, 1993, Labor Arbiter Cornelio Linsangan rendered his
Decision in private respondent’s favor, the dispositive portion of which
reads:
“WHEREFORE, judgment is hereby rendered ordering the respondent
hospital to:
1. 1.reinstate complainant to his former position or if not possible, pay
him separation pay equivalent to one month salary for every year
of service;
2. 2.pay complainant the amount of P198,000.00 representing
underpaid wages, unpaid overtime, holiday pay and 13th month
pay;
3. 3.pay the complainant full backwages which as of this date
amounts to P49,088.00;
4. 4.pay the complainant the amount of P20,000.00 as moral and
exemplary damages; and
5. 5.pay the complainant attorney’s fees equivalent to 10% of the total
award.” 3
Respondent Labor Arbiter Linsangan so ruled because first, he has
determined that, contrary to the petitioners’ position that private
respondent’s employment was part of his medication and rehabilitative
therapy, private respondent was in truth an em-
_______________
3 Decision, pp. 12-13; Rollo, pp. 41-42.
705
VOL. 251, DECEMBER 29, 1995 705
Department of Health vs. National Labor Relations Commission
ployee in contemplation of the Labor Code, the existence of an
employer-employee relationship between petitioner hospital and
private respondent being evident from the fact that private
respondent’s work is necessary and desirable for the operation of the
hospital. Private respondent was allegedly performing such functions
as were inherent to and undertaken by the members of the regular
police force. This, the respondent Labor Arbiter believes to be an
indication that what private respondent was assigned to do was
definitely beyond his rehabilitative therapy. Second, private
respondent’s dismissal was illegal because it was not for a just cause.
The mauling incident was not sufficiently established, and, even if so
established, the same would not justify his dismissal. Such dismissal
was wanting in due process in view of the non-observance of the
procedure prescribed for a valid exercise of the power to dismiss under
Sections 2, 5 and 6 of Rule XIV of the Rules Implementing B.P. Blg.
130. 4
The aforesaid decision was appealed to the NLRC. In its Resolution,
dated September 27, 1993, the NLRC dismissed the appeal, the
dispositive portion of which reads:
“WHEREFORE, respondents appeal is hereby dismissed for its failure to
perfect the same on time.” 5
The petitioners, thus, instituted this petition for certiorari.
The principal issue presented in this case is whether or not
respondents NLRC and Labor Arbiter Cornelio L. Linsangan
committed serious error in their decisions and acted without
jurisdiction when they took cognizance of the complaint filed by private
respondent Ceferino R. Laur before the NLRC instead of the Civil
Service Commission.
The petitioners mainly contend that since the DJRMH is a
government hospital, its employees are covered by Civil Service rules
and regulations and not by the Labor Code. Therefore, any controversy
concerning the relationship between the employees
_______________
4 Decision, pp. 3-6; Rollo, pp. 32-35.
5 Rollo, pp. 25-27.
706
706 SUPREME COURT REPORTS ANNOTATED
Department of Health vs. National Labor Relations Commission
on the one hand and the hospital’s administration on the other, as is
the case of private respondent, comes under the jurisdiction of the Merit
Systems Board and the Civil Service Commission.
We find the petition to be impressed with merit.
The petitioner-hospital, the DJRMH, originally known as the Tala
Leprosarium, was one of three leper colonies established under
Commonwealth Act No. 161. Maintained to this day as a public medical
center and health facility attached to the Department of Health, the
DJRMH exercises strictly governmental functions relating to the
management and control of the dreaded communicable Hansen’s
disease, commonly known as leprosy. As it is clearly an agency of the
Government, the DJRMH falls well within the scope and/or coverage of
the Civil Service Law in accordance with paragraph 1, Section 2, Article
IX B, 1987 Constitution and the provisions of Executive Order No. 292,
otherwise known as the Administrative Code of 1987 and Presidential
Decree No. 807, otherwise known as the Civil Service Decree of the
Philippines.
As the central personnel agency of the Government, the Civil
Service Commission administers the Civil Service Law. It is, therefore,
the single arbiter of all contests relating to the civil service. The
discharge of this particular function was formerly lodged in one of its
offices, the Merit Systems Protection Board (MSPB) which was vested
with the power, among others, “to hear and decide on appeal
administrative cases involving officials and employees of the civil
service and its decision shall be final except those involving dismissal
or separation from the service which may be appealed to the
Commission.” However, with the issuance of Civil Service Commission
7
Resolution No. 93-2387 on June 29, 1993, such appeals shall now be
filed directly with the Civil Service Commission. Pertinent portion of
said resolution reads:
_______________
6Lopez, Jr. v. Civil Service Commission, 195 SCRA 777, 780; Dario v. Mison,176 SCRA
84, 112.
7 Sec. 16[2][a], Chapter 3, Book V, Executive Order No. 292.
707
VOL. 251, DECEMBER 29, 1995 707 Department of Health vs. National Labor Relations Commission
Department of Health vs. National Labor Relations Commission diction by virtue of their participation in all the stages of the
xxx xxx xxx
“NOW, THEREFORE, pursuant to the provisions of Section 17 of Book
V of the Administrative Code of 1987 which authorizes the Commission, as
an independent constitutional body, to effect changes in its organization as
the need arises, the Commission Resolves as it is hereby Resolved to effect
the following changes:
1. Decisions in administrative cases involving officials and employees of the civil service
appealable to the Commission pursuant to Section 47 of Book V of the Code including
personnel actions such as contested appointments shall now be appealed directly to the
Commission and not the MSPB”;
8
xxx xxx xxx
Worthy to note in this connection is the fact that the Labor Code itself
provides that “the terms and conditions of employment of government
employees shall be governed by the Civil Service Law, rules and
regulations.” Conformably to the foregoing, it is, indeed, the Civil
9
Service Commission which has jurisdiction over the present
controversy. Its decisions are subject to review by the Supreme Court. 10
Jurisdiction is conferred by law. Where there is none, no agreement
of the parties can provide one. Consequently, it was incorrect for the
11
respondent labor arbiter to have proceeded to hear the case, simply
6
because private respondent Ceferino Laur happened to lodge his
complaint before his office, or to hold that petitioners are estoppped
12
from assailing the respondent labor authorities’ jurisdiction over the
present case simply because the petitioners have earlier submitted
themselves to the said juris-
_______________
8 See Ruble Rubenecia v. Civil Service Commission, G.R. No. 115942, May 31, 1995.
Article 276, Presidential Decree No. 442, as amended.
9
10Now by the Court of Appeals pursuant to Revised Circular No. 1-91, as amended by
Revised Administrative Circular No. 1-95 which took effect on June 1, 1995.
Southeast Asian Fisheries Development Center-Aquaculture Department v. NLRC, 206
11
SCRA 283, 288.
12 Decision, p. 8; Rollo, p. 37.
708
708 SUPREME COURT REPORTS ANNOTATED
proceedings in the office of respondent Labor Arbiter Linsangan and in
the NLRC, and that they failed to raise the issue of jurisdiction in the
said proceedings. 13
Considering that the decision of a tribunal not vested with
appropriate jurisdiction is null and void, the respondent labor arbiter’s
14
finding of an employer-employee relationship between the petitioner
government agency and the private respondent should serve no purpose
whatsoever. Respondent labor arbiter’s order of payment of private
respondent’s monetary claims is likewise null and should not be given
effect.
WHEREFORE, finding the Dr. Jose N. Rodriguez Memorial
Hospital to be within the scope of the Civil Service Law and not of the
Labor Code, the questioned decision of the respondent labor arbiter
dated January 2, 1992 and the resolution of the NLRC, dated
September 7, 1993, are hereby REVERSED and SET ASIDE for having
been rendered without jurisdiction. The Temporary Restraining Order
issued on February 28, 1994 is hereby made permanent.
SO ORDERED.
Padilla (Chairman), Davide, Jr., Bellosillo and Kapunan,JJ.,
concur.
Decision and resolution reversed and set aside. TRO made
permanent.
Note.—A law limiting the right to appeal to the Civil Service
Commission in an administrative case is a rule of procedure, not of
substantive law, and failure to invoke timely a rule of procedure in
favor of a party constitutes waiver thereof. (Mendoza vs. Civil Service
Commission, 233 SCRA 657 [1994])
——o0o——
_______________
13 Comment, pp. 12-13; Rollo, pp. 84-85.
14 Javier v. Court of Appeals, 214 SCRA 572, 577.
709

© Copyright 2016 Central Book Supply, Inc. All rights reserved.

130 SUPREME COURT REPORTS ANNOTATED VOL. 190, SEPTEMBER 28, 1990 131
International Catholic Migration Commission vs. Calleja International Catholic Migration Commission vs. Calleja
G.R. No. 85750. September 28, 1990. * workings.—The grant of immunity from local jurisdiction to ICMC
INTERNATIONAL CATHOLIC MIGRATION COMMISSION,
petitioner, vs. HON. PURA CALLEJA IN HER CAPACITY AS
DIRECTOR OF THE BUREAU OF LABOR RELATIONS AND TRADE
UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS)
WFTU, respondents.
G.R. NO. 89331. September 28, 1990. * pressure or control by the host country to the prejudice of member States
KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED
LABOR ASSOCIATION IN LINE INDUSTRIES AND
AGRICULTURE, petitioner, vs. SECRETARY OF LABOR AND
EMPLOYMENT AND INTERNATIONAL RICE RESEARCH
INSTITUTE, INC., respondents.
Political Law; Public International Law; Nature of Specialized
Agencies; Specialized agencies are international organizations.—
"Specialized agencies" are international organizations having functions in
particular fields. The term appears in Articles 57 and 63 of the Charter of
the United Nations: "The Charter, while it invests the United Nations with
the general task of promoting progress and international cooperation in
economic, social, health, cultural, educational and related matters,
contemplates that these tasks will be mainly fulfilled not by organs of the
United Nations itself but by autonomous international organizations
established by inter-governmental agreements outside the United Nations.
There are now many such international agencies having functions in many
different fields, e.g. in posts, telecommunications, railways, canals, rivers,
sea transport, civil aviation, meteorology, atomic energy, finance, trade,
education and culture, health and refugees. Some are virtually world-wide
in their membership, some are regional or otherwise limited in their
membership. The Charter provides that those agencies which have 'wide
international responsibilities' are to be brought into relationship with the
United Nations by agreements entered into between them and the
Economic and Social Council, are then to be known as 'specialized
agencies.'"
Same; Same; Grant of lmmunity. Immunity to ICMC and IRRI is
granted to avoid interference by the host country in their internal
________________
* SECOND DIVISION.
131
and IRRI is clearly necessitated by their international character and
respective purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The exercise of
jurisdiction by the Department of Labor in these instances would defeat
the very purpose of immunity, which is to shield the affairs of international
organizations, in accordance with international practice, from political
of the organization, and to ensure the unhampered performance of their
functions.
Same; Same; Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations. ICMC employees are not
without recourse whenever there are disputes to be settled.—Section 31 of
the Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations provides that "each specialized agency shall
make provision for appropriate modes of settlement of: (a) disputes arising
out of contracts or other disputes of private character to which the
specialized agency is a party." Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC and the Philippine
Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities accorded.
Thus: "Article IV. Cooperation with Government Authorities.—1. The
Commission shall cooperate at all times with the appropriate authorities
of the Government to ensure the observance of Philippine laws, rules and
regulations, facilitate the proper administration of justice and prevent the
occurrences of any abuse of the privileges and immunities granted its
officials and alien employees in Article III of this Agreement to the
Commission. "2. In the event that the Government determines that there
has been an abuse of the privileges and immunities granted under this
Agreement, consultations shall be held between the Government and the
Commission to determine whether any such abuse has occurred and, if so,
the Government shall withdraw the privileges and immunities granted the
Commission and its officials."
Same; Same; IRRI employees have recourse to the Council of lRRI
Employees and Management (CIEM) in cases affecting employer-employee
relations.—Neither are the employees of IRRI without remedy in case of
dispute with management as, in fact, there had been organized a forum for
better management-employee relationship as evidenced by the formation
of the Council of IRRI Employees and Management (CIEM) wherein "both
management and employees were and still are represented for purposes of
maintaining mutual and
132
132 SUPREME COURT REPORTS ANNOTATED 133
International Catholic Migration Commission vs. Calleja VOL. 190, SEPTEMBER 28, 1990 133
beneficial cooperation between IRRI and its employees." The
existence of this Union factually and tellingly belies the argument that
Pres. Decree No. 1620, which grants to IRRI the status, privileges and
immunities of an international organization, deprives its employees of the
right to self-organization.
PETITIONS to review the decisions of the Bureau of Labor Relations
and the Secretary of Labor and Employment.
The facts are stated in the opinion of the Court.
Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in
85750.
Dominguez, Armamento, Cabana & Associates for petitioner in
G.R. No. 89331.
Jimenez & Associates for IRRI.
Alfredo L. Bentulan for private respondent in 85750.
MELENCIO-HERRERA, J.:
Consolidated on 11 December 1989, these two cases involve the validity
of the claim of immunity by the International Catholic Migration
Commission (ICMC) and the International Rice Research Institute, Inc.
(IRRI) from the application of Philippine labor laws.
I immediate conduct of a certification election. At that time, ICMC's
Facts and Issues
A. G.R. No. 85750—the International Catholic Migration Commission
(ICMC) Case.
As an aftermath of the Vietnam War, the plight of Vietnamese
refugees fleeing from South Vietnam's communist rule confronted the
international community.
In response to this crisis, on 23 February 1981, an Agreement was
forged between the Philippine Government and the United Nations
High Commissioner for Refugees whereby an operating center for
processing Indo-Chinese refugees for eventual resettlement to other
countries was to be established in Bataan (Annex "A," Rollo, pp. 22-32).
ICMC was one of those accredited by the Philippine Govern-
International Catholic Migration Commission vs. Calleja
ment to operate the refugee processing center in Morong, Bataan. It
was incorporated in New York, USA, at the request of the Holy See, as
a non-profit agency involved in international humanitarian and
voluntary work. It is duly registered with the United Nations Economic
and Social Council (ECOSOC) and enjoys Consultative Status,
Category II. As an international organization rendering voluntary and
humanitarian services in the Philippines, its activities are parallel to
those of the International Committee for Migration (ICM) and the
International Committee of the Red Cross (ICRC) [DOLE Records of
BLR Case No. A-2-62-87, ICMC v. Calleja, Vol. I]. On 14 July 1986,
Trade Unions of the Philippines and Allied Services (TUPAS) filed with
the then Ministry of Labor and Employment a Petition for Certification
Election among the rank and file members employed by ICMC. The
latter opposed the petition on the ground that it is an international
organization registered with the United Nations and, hence, enjoys
diplomatic immunity.
On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained
ICMC and dismissed the petition for lack of jurisdiction.
On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor
Relations (BLR), reversed the Med-Arbiter's Decision and ordered the
request for recognition as a specialized agency was still pending with
the Department of Foreign Affairs (DEFORAF).
Subsequently, however, on 15 July 1988, the Philippine
Government, through the DEFORAF, granted ICMC the status of a
specialized agency with corresponding diplomatic privileges and
immunities, as evidenced by a Memorandum of Agreement between the
Government and ICMC (Annex "E", Petition, Rollo, pp. 41-43),infra.
ICMC then sought the immediate dismissal of the TUPAS Petition
for Certification Election invoking the immunity expressly granted but
the same was denied by respondent BLR Director who, again, ordered
the immediate conduct of a preelection conference. ICMC's two Motions
for Reconsideration were denied despite an opinion rendered by
DEFORAF on 17 October 1988 that said BLR Order violated ICMC's
diplomatic immunity.
134
134 SUPREME COURT REPORTS ANNOTATED
International Catholic Migration Commission vs. Calleja
Thus, on 24 November 1988, ICMC filed the present Petition for
Certiorari with Preliminary Injunction assailing the BLR Order.
On 28 November 1988, the Court issued a Temporary Restraining
Order enjoining the holding of the certification election.
On 10 January 1989, the DEFORAF, through its Legal Adviser,
retired Justice Jorge C. Coquia of the Court of Appeals, filed a Motion
for Intervention alleging that, as the highest executive department
with the competence and authority to act on matters involving
diplomatic immunity and privileges, and tasked with the conduct of
Philippine diplomatic and consular relations with foreign governments
and UN organizations, it has a legal interest in the outcome of this case.
Over the opposition of the Solicitor General, the Court allowed
DEFORAF intervention.
On 12 July 1989, the Second Division gave due course to the ICMC
Petition and required the submittal of memoranda by the parties,
which has been complied with.
As initially stated, the issue is whether or not the grant of
diplomatic privileges and immunites to ICMC extends to immunity
from the application of Philippine labor laws.
ICMC sustains the affirmative of the proposition citing (1) its
Memorandum of Agreement with the Philippine Government giving it
the status of a specialized agency, (infra); (2) the Convention on the
Privileges and Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by the
Philippine Senate through Resolution No. 91 on 17 May 1949 (the
Philippine Instrument of Ratification was signed by the President on
30 August 1949 and deposited with the UN on 20 March
1950) infra; and (3) Article II, Section 2 of the 1987 Constitution, which
declares that the Philippines adopts the generally accepted principles
of international law as part of the law of the land.
Intervenor DEFORAF upholds ICMC's claim of diplomatic
immunity and seeks an affirmance of the DEFORAF determination
that the BLR Order for a certification election among the ICMC
employees is violative of the diplomatic immunity of said organization.
Respondent BLR Director, on the other hand, with whom the
135
VOL. 190, SEPTEMBER 28, 1990 135
International Catholic Migration Commission vs. Calleja
Solicitor General agrees, cites State policy and Philippine labor laws to
justify its assailed Order, particularly, Article II, Section 18 and Article
III, Section 8 of the 1987 Constitution, infra; and Articles 243 and 246
of the Labor Code, as amended, ibid. In addition, she contends that a
certification election is not a litigation but a mere investigation of a
non-adversary, factfinding character. It is not a suit against ICMC, its
property, funds or assets, but is the sole concern of the workers
themselves.
B. G.R. No. 89331—(The International Rice Research Institute
[IRRI] Case).
Before a Decision could be rendered in the ICMC Case, the Third
Division, on 11 December 1989, resolved to consolidate G.R. No. 89331
pending before it with G.R. No. 85750, the lower-numbered case
pending with the Second Division, upon manifestation by the Solicitor
General that both cases involve similar issues.
The facts disclose that on 9 December 1959, the Philippine
Government and the Ford and Rockefeller Foundations signed a
Memorandum of Understanding establishing the International Rice
Research Institute (IRRI) at Los Baños, Laguna. It was intended to be
an autonomous, philanthropic, tax-free, non-profit, non-stock
organization designed to carry out the principal objective of conducting
"basic research on the rice plant, on all phases of rice production,
management, distribution and utilization with a view to attaining
nutritive and economic advantage or benefit for the people of Asia and
other major rice-growing areas through improvement in quality and
quantity of rice."
Initially, IRRI was organized and registered with the Securities and
Exchange Commission as a private corporation subject to all laws and
regulations. However, by virtue of Pres. Decree No. 1620, promulgated
on 19 April 1979, IRRI was granted the status, prerogatives, privileges
and immunities of an international organization.
The Organized Labor Association in Line Industries and Agriculture
(OLALIA), is a legitimate labor organization with an existing local
union, the Kapisanan ng Manggagawa at TAC sa
136
136 SUPREME COURT REPORTS ANNOTATED VOL. 190, SEPTEMBER 28, 1990 137
International Catholic Migration Commission vs. Calleja International Catholic Migration Commission vs. Calleja
IRRI (Kapisanan, for short) in respondent IRRI.
On 20 April 1987, the Kapisanan filed a Petition for Direct
Certification Election with Region IV, Regional Office of the
Department of Labor and Employment (DOLE).
IRRI opposed the petition invoking Pres. Decree No. 1620 conferring
upon it the status of an international organization and granting it
immunity from all civil, criminal and administrative proceedings under
Philippine laws.
On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the
opposition on the basis of Pres. Decree No. 1620 and dismissed the
Petition for Direct Certification.
On appeal, the BLR Director, who is the public respondent in the
ICMC Case, set aside the Med-Arbiter's Order and authorized the
calling of a certification election among the rank-andfile employees of
IRRI. Said Director relied on Article 243 of the Labor Code, as
amended, infra, and Article XIII, Section 3 of the 1987
Constitution, and held that "the immunities and privileges granted to
1
IRRI do not include exemption from coverage of our Labor Laws."
Reconsideration sought by IRRI was denied.
On appeal, the Secretary of Labor, in a Resolution of 5 July 1989,
set aside the BLR Director's Order, dismissed the Petition for
Certification Election, and held that the grant of specialized agency
status by the Philippine Government to the IRRI bars DOLE from
assuming and exercising jurisdiction over IRRI. Said Resolution reads
in part as follows:
"Presidential Decree No. 1620 which grants to the IRRI the status,
prerogatives, privileges and immunities of an international organization is
clear and explicit. It provides in categorical terms that:
_______________
1Article XIII, Section 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment opportunities for all. It shall
guarantee the rights of all workers to self-organization, collective bargaining and negotiations
and peaceful concerted activities including the right to strike in accordance with law. They
shall be entitled to security of tenure, humane conditions of work and a living wage. They
shall also participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
137
"Art. 3—The Institute shall enjoy immunity from any penal, civil and
administrative proceedings, except insofar as immunity has been expressly
waived by the Director-General of the Institution or his authorized
representative.
"Verily, unless and until the Institute expressly waives its immunity,
no summons, subpoena, orders, decisions or proceedings ordered by any
court or administrative or quasi-judicial agency are enforceable as against
the Institute. In the case at bar there was no such waiver made by the
Director-General of the Institute. Indeed, the Institute, at the very first
opportunity already vehemently questioned the jurisdiction of this
Department by filing an ex-parte motion to dismiss the case."
Hence, the present Petition for Certiorari filed by Kapisanan alleging
grave abuse of discretion by respondent Secretary of Labor in upholding
IRRI's diplomatic immunity.
The Third Division, to which the case was originally assigned,
required the respondents to comment on the petition. In a
Manifestation filed on 4 August 1990, the Secretary of Labor declared
that it was "not adopting as his own" the decision of the BLR Director
in the ICMC Case as well as the Comment of the Solicitor General
sustaining said Director. The last pleading was filed by IRRI on 14
August 1990.
Instead of a Comment, the Solicitor General filed a Manifestation
and Motion praying that he be excused from filing a comment "it
appearing that in the earlier case of lnternational Catholic Migration
Commission v. Hon. Pura Calleja, G.R. No. 85750, the Office of the
Solicitor General had sustained the stand of Director Calleja on the
very same issue now before it, which position has been superseded by
respondent Secretary of Labor in G.R. No. 89331," the present case. The
Court acceded to the Solicitor General's prayer.
 The Court is now asked to rule upon whether or not the Secretary
of Labor committed grave abuse of discretion in dismissing the Petition
for Certification Election filed by Kapisanan.
Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting
IRRI the status, privileges, prerogatives and immunities of an
international organization, invoked by the Secretary of Labor, is
unconstitutional in so far as it deprives the Filipino workers of their
fundamental and constitutional right to form trade unions for the
purpose of collective bargaining as en-
138
138 SUPREME COURT REPORTS ANNOTATED Article II of the Memorandum of Agreement between the Philippine
International Catholic Migration Commission vs. Calleja "similar to that of a specialized agency." Article III, Sections 4 and 5 of
shrined in the 1987 Constitution.
A procedural issue is also raised. Kapisanan faults respondent
Secretary of Labor for entertaining IRRI's appeal from the Order of the
Director of the Bureau of Labor Relations directing the holding of a
certification election. Kapisanan contends that pursuant to Sections 7,
8, 9 and 10 of Rule V of the Omnibus Rules Implementing the Labor
2
Code, the Order of the BLR Director had become final and unappeable
and that, therefore, the Secretary of Labor had no more jurisdiction
over the said appeal.
On the other hand, in entertaining the appeal, the Secretary of
Labor relied on Section 25 of Rep. Act. No. 6715, which took effect on
21 March 1989, providing for the direct filing of appeal from the Med-
Arbiter to the Office of the Secretary of Labor and Employment instead
of to the Director of the Bureau of Labor Relations in cases involving
certification election orders.
III
Findings in Both Cases.
There can be no question that diplomatic immunity has, in fact, been
granted ICMC and IRRI.
________________
RULE V. Section 7. Appeal—Any aggrieved party may appeal the order of the Med-
2
Arbiter to the Bureau only on the following grounds: a) grave abuse of discretion and b) gross
incompetence. The appeal shall specifically state the grounds relied upon by the appellant
with supporting memorandum.
Section 8. Where to file appeal—The appellant shall file his appeal which shall be under
oath, in the Regional Office where the case originated, copy furnished the appellee.
Section 9. Period to Appeal.—The appeal shall be filed within ten (10) working days from
receipt of the Order by the appellant. Likewise, the appellee shall file his answer thereto
within ten (10) working days from receipt of the appeal. The Regional Director shall immedi-
ately forward the entire records of the case to the Bureau.
Section 10. Decision of the Bureau is final and unappealable.—The Bureau shall have
twenty (20) working days within which to decide the appeal from receipt of the records of the
case. The decision of the Bureau in all cases shall be final and unappealable.
139
VOL. 190, SEPTEMBER 28, 1990 139
International Catholic Migration Commission vs. Calleja
Government and ICMC provides that ICMC shall have a status
the Convention on the Privileges and Immunities of Specialized
Agencies, adopted by the UN General Assembly on 21 November 1947
and concurred in by the Philippine Senate through Resolution No. 19
on 17 May 1949, explicitly provides:
"Article III, Section 4. The specialized agencies, their property and assets,
wherever located and by whomsoever held, shall enjoy immunity from every
form of legal process except insofar as in any particular case they have
expressly waived their immunity. It is, however, understood that no waiver
of immunity shall extend to any measure of execution."
Sec. 5.—The premises of the specialized agencies shall be inviolable.
The property and assets of the specialized agencies, wherever located and
by whomsoever held shall be immune from search, requisition,
confiscation, expropriation and any other form of interference, whether by
executive, administrative, judicial or legislative action." (Emphasis ours).
IRRI is similarly situated. Pres. Decree No. 1620, Article 3, is explicit
in its grant of immunity, thus:
"Article 3. Immunity from Legal Process.—The Institute shall enjoy
immunity from any penal, civil and administrative proceedings, except
insofar as that immunity has been expressly waived by the Director-
General of the Institute or his authorized representatives.'"
Thus it is that the DEFORAF, through its Legal' Adviser, sustained
ICMC's invocation of immunity when in a Memorandum, dated 17
October 1988, it expressed the view that "the Order of the Director of
the Bureau of Labor Relations dated 21 September 1988 for the conduct
of Certification Election within ICMC violates the diplomatic immunity
of the organization." Similarly, in respect of IRRI, the DEFORAF
speaking through The Acting Secretary of Foreign Affairs, Jose D.
Ingles, in a letter, dated 17 June 1987, to the Secretary of Labor,
maintained that "IRRI enjoys immunity from the jurisdiction of DOLE
in this particular instance."
140
140 SUPREME COURT REPORTS ANNOTATED VOL. 190, SEPTEMBER 28, 1990 141
International Catholic Migration Commission vs. Calleja International Catholic Migration Commission vs. Calleja
The foregoing opinions constitute a categorical recognition by the
Executive Branch of the Government that ICMC and IRRI enjoy
immunities accorded to international organizations, which
determination has been held to be a political question conclusive upon
the Courts in order not to embarrass a political department of
Government.
"It is a recognized principle of international law and under our system of
separation of powers that diplomatic immunity is essentially a political
question and courts should refuse to look beyond a determination by the
executive branch of the government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law
officer of the government. . . or other officer acting under his direction.
Hence, in adherence to the settled principle that courts may not so exercise
their jurisdiction . . . as to embarrass the executive arm of the government
in conducting foreign relations, it is accepted doctrine that in such cases
the judicial department of (this) government follows the action of the
political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction." 3
A brief look into the nature of international organizations and
specialized agencies is in order. The term "international organization"
is generally used to describe an organization set up by agreement
between two or more states. Under contemporary international law,
4
such organizations are endowed with some degree of international legal
personality such that they are capable of exercising specific rights,
5
duties and powers. They6
_______________
World Health Organization and Dr. Leonce Verstuyft v. Hon. Benjamin Aquino, et al., L-
3
35131, 29 November 1972, 48 SCRA 242.
4MICHAEL AKEHURST, A MODERN INTRODUCTION TO INTERNATIONAL LAW
(1984) at 69.
5The leading judicial authority on the personality of international organizations is the
advisory opinion given by the ICJ in the Reparation for Injuries Suffered in the Service of the
United Nations Case ([1949] I.C.J. Rep 174) where the Court recognized the UN's
international personality.
6 M. AKEHURST, supra, at 70.
141
are organized mainly as a means for conducting general international
business in which the member states have an interest. The United 7
Nations, for instance, is an international organization dedicated to the
propagation of world peace. "Specialized agencies" are international
organizations having functions in particular fields. The term appears
in Articles 57 and 63 of the Charter of the United Nations: .
8 9
'The Charter, while it invests the United Nations with the general task of
promoting progress and international cooperation in economic, social,
health, cultural, educational and related matters, contemplates that these
tasks will be mainly fulfilled not by organs of the United Nations itself but
by autonomous international organizations established by inter-
governmental agreements outside the United Nations. There are now
many such international agencies having functions in many different
fields, e.g. in posts, telecommunications, railways, canals, rivers, sea
transport, civil aviation, meteorology, atomic energy, finance, trade,
education and culture, health and refugees. Some are virtually world-wide
in their membership, some are regional or otherwise limited in their
membership. The Charter provides that those agencies which have 'wide
international responsibilities' are to be brought into relationship with the
United Nations by agreements entered into between them and the
Economic and Social
______________
7 J.L. BRIERLY, THE LAW OF NATIONS (1963) at 95.
8 Article 57.—1. The various specialized-agencies, established by intergovernmental agreement
and having wide international responsibilities, as defined in their basic instruments, in economic,
social, cultural, educational, health, and related fields, shall be brought into relationship with the
United Nations in accordance with the provisions of Article 63.
2. Such agencies thus brought into relationship with the United Nations are hereinafter
referred to as specialized agencies.
9 Article 63.—1. The Economic and Social Council may enter into agreements with any of the
agencies referred to in Article 57, defining the terms on which the agency concerned shall be brought
into relationship with the United Nations. Such agreements shall be subject to approval by the
General Assembly.
 2. It may co-ordinate the activities of the specialized agencies through consultation with and
recommendations to such agencies and through recommendations to the General Assembly and to
the Members of the United Nations.
142
142 SUPREME COURT REPORTS ANNOTATED
International Catholic Migration Commission vs. Calleja
Council, are then to be known as 'specialized agencies.' "
The rapid growth of international organizations under contemporary
international law has paved the way for the development of the concept
of international immunities.
"It is now usual for the constitutions of international organizations to
contain provisions conferring certain immunities on the organizations
themselves, representatives of their member states and persons acting on
behalf of the organizations. A series of conventions, agreements and
protocols defining the immunities of various international organizations in
relation to their members generally are now widely in force; x x x"
There are basically three propositions underlying the grant of
international immunities to international organizations. These
principles, contained in the ILO Memorandum are stated thus: 1)
international institutions should have a status which protects them
against control or interference by any one government in the
performance of functions for the effective discharge of which they are
responsible to democratically constituted international bodies in which
all the nations concerned are represented; 2) no country should derive
any national financial advantage by levying fiscal charges on common
international funds; and 3) the international organization should, as a
collectivity of States members, be accorded the facilities for the conduct
of its official business customarily extended to each other by its
individual member States. The theory behind all three propositions is
12
said to be essentially institutional in character. "It is not concerned
with the status, dignity or privileges of individuals, but with the
elements of functional independence necessary to free international
institutions from national control and to enable them to discharge their
responsibilities impartially on behalf of all their members." The raison
d'etre
_______________
10 BRIERLY, supra, at 121-122.
11 C. WILFRED JENKS, INTERNATIONAL IMMUNITIES (1961) at 2-3.
12 lbid at 17.
.,
13 Ibid.
143
VOL. 190, SEPTEMBER 28, 1990 143
International Catholic Migration Commission vs. Calleja
for these immunities is the assurance of unimpeded performance of
10
their functions by the agencies concerned.
The grant of immunity from local jurisdiction to ICMC and IRRI is
clearly necessitated by their international character and respective
purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The
exercise of jurisdiction by the Department of Labor in these instances
would defeat the very purpose of immunity, which is to shield the
affairs of international organizations, in accordance with international
practice, from political pressure or control by the host country to the
prejudice of member States of the organization, and to ensure the
11
unhampered performance of their functions.
ICMC's and IRRI's immunity from local jurisdiction by no means
deprives labor of its basic rights, which are guaranteed by Article II,
Section 18, Article III, Section 8, and Article XIII, Section 3 (supra),
14 15
of the 1987 Constitution; and implemented by Articles 243 and 246 of
the Labor Code, relied on by
16
________________
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
14
protect the rights of workers and promote their welfare.
15Article III, Section 8. The right of the people, including those employed in the public and
private sectors, to form unions, associations, or societies for purposes not contrary to law shall
not be abridged.
16 Article 243. Coverage and Employees' Right to Self-Organization.—All persons
employed in commercial, industrial and agricultural enterprises and in religious, charitable,
medical or educational institutions whether operating for profit or not, shall have the right to
self-organization and to form, join or assist labor organizations of their own choosing for
purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employees may form labor
organizations for their mutual aid and protection.
13
Article Article 246. Non-abridgement of Right to Self-organization.—It shall be unlawful
for any person to restrain, coerce, discriminate against or unduly interfere with employees
and workers in their exercise of the right to self-organization. Such right shall include the
right to form, join, or assist labor organizations for the purpose of collective bargaining
through representatives of their own choosing
144
144 SUPREME COURT REPORTS ANNOTATED VOL. 190, SEPTEMBER 28, 1990 145
International Catholic Migration Commission vs. Calleja International Catholic Migration Commission vs. Calleja
the BLR Director and by Kapisanan.
For, ICMC employees are not without recourse whenever there are
disputes to be settled. Section 31 of the Convention on the Privileges
and Immunities of the Specialized Agencies of the United
Nations provides that "each specialized agency shall make provision
17
for appropriate modes of settlement of: (a) disputes arising out of
contracts or other disputes of private character to which the specialized
agency is a party." Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC and the Philippine
Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities
accorded. Thus:
"Article IV. Cooperation with Government Authorities.—1. The
Commission shall cooperate at all times with the appropriate authorities
of the Government to ensure the observance of Philippine laws, rules and
regulations, facilitate the proper administration of justice and prevent the
occurrences of any abuse of the privileges and immunities granted its
officials and alien employees in Article III of this Agreement to the
Commission.
"2. In the event that the Government determines that there has been
an abuse of the privileges and immunities granted under this Agreement,
consultations shall be held between the Government and the Commission
to determine whether any such abuse has occurred and, if so, the
Government shall withdraw the privileges and immunities granted the
Commission and its officials."
Neither are the employees of IRRI without remedy in case of dispute
with management as, in fact, there had been organized a forum for
better management-employee relationship as evidenced by the
formation of the Council of IRRI Employees and
________________
and to engage in lawful concerted activities for the same purpose or for their mutual aid
and protection, subject to the provisions of Article 264 of this Code.
This Convention, adopted by the U.N. General Assembly on November 21, 1947, was
17
concurred in by the Philippine Senate under Senate Resolution No. 21, dated 17 May 1949.
The Philippine Instrument of Ratification was signed by the Philippine President on 21
February 1959. (Vol. 1, Phil. Treaty Series, p. 621).
145
Management (CIEM) wherein "both management and employees were
and still are represented for purposes of maintaining mutual and
beneficial cooperation between IRRI and its employees." The existence
of this Union factually and tellingly belies the argument that Pres.
Decree No. 1620, which grants to IRRI the status, privileges and
immunities of an international organization, deprives its employees of
the right to self-organization.
The immunity granted being "from every form of legal process
except in so far as in any particular case they have expressly waived
their immunity," it is inaccurate to state that a certification election is
beyond the scope of that immunity for the reason that it is not a suit
against ICMC. A certification election cannot be viewed as an
independent or isolated process. It could trigger off a series of events in
the collective bargaining process together with related incidents and/or
concerted activities, which could inevitably involve ICMC in the "legal
process," which includes "any penal, civil and administrative
proceedings." The eventuality of Court litigation is neither remote and
from which international organizations are precisely shielded to
safeguard them from the disruption of their functions. Clauses on
jurisdictional immunity are said to be standard provisions in the
constitutions of international organizations. "The immunity covers the
organization concerned, its property and its assets. It is equally
applicable to proceedings in personam and proceedings in rem." 18
We take note of a Manifestation, dated 28 September 1989, in the
ICMC Case (p. 161, Rollo), wherein TUPAS calls attention to the case
entitled "International Catholic Migration Commission v. NLRC, et
als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims
that, having taken cognizance of that dispute (on the issue of payment
of salary for the unexpired portion of a six-month probationary
employment), the Court is now estopped from passing upon the
question of DOLE jurisdiction over ICMC.
We find no merit to said submission. Not only did the facts of said
controversy occur between 1983-1985, or before the grant
_____________
18 JENKS, supra at 38.
146
 147
146 SUPREME COURT REPORTS ANNOTATED
VOL. 190, SEPTEMBER 28, 1990 147
International Catholic Migration Commission vs. Calleja
Anscor Transport & Terminals, Inc. vs. NLRC
to ICMC on 15 July 1988 of the status of a specialized agency with
corresponding immunities, but also because ICMC in that case did not SO ORDERED.
invoke its immunity and, therefore, may be deemed to have waived it,
Padilla, Sarmiento and Regalado, JJ., concur.
assuming that during that period (1983-1985) it was tacitly recognized
as enjoying such immunity. Paras, J., On leave.
Anent the procedural issue raised in the IRRI Case, suffice it to state In G.R. No. 85750, petition granted; petition in G.R. No. 89331,
that the Decision of the BLR Director, dated 15 February 1989; had not dismissed.
become final because of a Motion for Reconsideration filed by IRRI. Said Note.—The doctrine of state immunity is applicable not only to our
Motion was acted upon only on 30 March 1989 when Rep. Act No. 6715, government but also to foreign states sought to be subjected to the
which provides for direct appeals from the Orders of the Med-Arbiter jurisdiction of our courts. (Sanders vs. Veridiano II, 162 SCRA 88.)
to the Secretary of Labor in certification election cases either from the
order or the results of the election itself, was already in effect, ——o0o——
specifically since 21 March 1989. Hence, no grave abuse of discretion © Copyright 2016 Central Book Supply, Inc. All rights reserved.
may be imputed to respondent Secretary of Labor in his assumption of

appellate jurisdiction, contrary to Kapisanan's allegations. The
pertinent portion of that law provides:
"Article 259.—Any party to an election may appeal the order or results of
the election as determined by the Med-Arbiter directly to the Secretary of
Labor and Employment on the ground that the rules and regulations or
parts thereof established by the Secretary of Labor and Employment for
the conduct of the election have been violated. Such appeal shall be decided
within 15 calendar days" (Emphasis ours).
En passant, the Court is gratified to note that the heretofore
antagonistic positions assumed by two departments of the executive
branch of government have been rectified and the resultant
embarrassment to the Philippine Government in the eyes of the
international community now, hopefully, effaced.
WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is
GRANTED, the Order of the Bureau of Labor Relations for certification
election is SET ASIDE, and the Temporary Restraining Order earlier
issued is made PERMANENT.
In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no
grave abuse of discretion having been committed by the Secretary of
Labor and Employment in dismissing the Petition for Certification
Election.
No pronouncement as to costs.
268 SUPREME COURT REPOBTS ANNOTATED VOL. 145, OCTOBER 28, 1986 269
Callanta vs. Carnation Philippines, Inc. Callanta vs. Carnation Philippines, Inc.
No. L-70615. October 28, 1986. * ment are reinstatement to his former position without loss of seniority
VIRGILIO CALLANTA, petitioner, vs. CARNATION PHILIPPINES,
INC., and NATIONAL LABOR RELATIONS COMMISSION [NLRC],
respondents.
Labor Law; Ilegal Dismissal; Dismissal with out just cause of an
employee from his employment, a violation of the Labor Code, but which
does not amount to an offense under said Code; “Offense,” concept of.—
Verily, the dismissal without just cause of an employee from his
employment constitutes a violation of the Labor Code and its implementing
rules and regulations. Such violation, however, does Hot amount to an
“offense” as understood under Article 291 of the Labor Coda In its broad
sense, an offense is an illegal act which does not amount to a crime as
defined in the penal law, but which by statute carries with it a penalty
similar to those imposed by law for the punishment of a crime. It is in this
sense that a general penalty clause is provided under Article 289 of the
Labor Code which provides that “x x x any violation of the provisions of this
Code declared to be unlawful or penal in nature shall be punished with
a fine of not iess than One Thousand Pesos [1,000.00] nor more than Ten
Thousand Pesos [10,000.00], or imprisonment of not less than three [3]
months nor more than three [3] years, or both such fine and imprisonment
at the discretion of the court.”
Same; Same; Same; Termination of an employment with out just
cause, not an unlawful practice; Reason.—The confusion arises over the use
of the term “illegal dismissal” which creates the impression that
termination of an employment without just cause constitutes an offense. It
must be noted, however that unlike in cases of commission of any of the
prohibited activities during strikes or lockouts under Article 265, unfair
labor practices under Articles 248, 249 and 250 and illegal recruitment
activities under Article 38, among others, which the Code itself deelares to
be unlawfai, termination of an employment without just or valid cause is
not categorized as an unlawful practice.
Same; Same; Same; Reliefs principally sought by an employee illegally
dismissed from employment—Besides, the reliefs principally sought by an
employee who was illegally dismissed from his employ-
_______________
* SECOND DIVISION.
269
rights and privileges, if any, backwages and damages, in case there is bad
faith in his dismissal. As an affirmative relief, reinstatement may be
ordered, with or without backwages.
Same; Same; Same; Same; Reinstatement and backwages; Award of
one, not a condition precedent to an award of the other; Backwages may be
ordered without ordering reinstatement—While ordinarily, reinstatement
is a concomitant of backwages, the two are not necessarily complements,
nor is the award of one a condition precedent to an award of the other. And,
in proper cases, backwages may be awarded without ordering
reinstatement. In either case, no penalty of fine nor imprisonment is
imposed on the employer upon a finding of illegality in the dismissal.
Same; Same; Same; Same; Backwages, not the principal cause of
action in an illegal dismissal case, but the unlawful deprivation of one’s
employment committed by the empfoyer; Award of backwages, nature and
concept of.—It is true that the “backwages” sought by an illegally dismissed
employee may be considered, by reason of its practical effect, as a “money
claim.” However, it is not the principal cause of action in an illegal
dismissal case but the unlawful deprivation of one’s employment
committed by the employer in violation of the right of an employee.
Backwages is merely one of the reliefs which an iiiegaiiy dismissed
employee prays the labor arbiter and the NLRC to render in his favor as a
consequence of the unlawful act committed by the employer. The award
thereof is not private compensation or damages but is in furtherance and
effectuation of the public objectives of the Labor Code. Even though the
practical effect is the enrichment of the individual, the award of backwages
is not in redress of a private right, but, rather, is in the nature of a
command upon the employer to make public reparation for his violation of
the Labor Code.
Same; Same; Prescription: Action for illegal dismissal prescribes in 4
years under the Civil Code; Action for damages due to separation from
employment for alleged unjustifiable causes is one for injury to plaintiffand
must be brought within 4 years.—The case of Valencia vs. Cebu Portland
Cement, et al, 106 PhiL 732, a 1959 case cited by petitioner, is applicable
in the instant case insofar as it concerns the issue of prescription of actions.
In said case, this Court had occasion to hold that an action for damages
involving a plaintiff separated from his employment for alleged
unjustifiable causes is one for “in-
270
 270 SUPREME COURT REPORTS ANNOTATED VOL. 145, OCTOBER 28, 1986 271
Callanta vs. Carnation Philippines, Inc. Callanta vs. Carnation Philippines, Inc.
jury to the rights of the plaintiff, and must be brought within four [4]
years.” In Santos vs. Court of Appeals, 96 SCRA 448 [1980], this Court,
thru then Chief Justice Enrique M. Fernando, sustained the stand of the
Soiicitor General that the period of prescription mentioned under Article
281, now Article 292, of the Labor Code, refers to and “is limited to money
claims, all other cases of injury to rights of a workingman being governed
by the Civil Code.” Accordingly, this Court ruled that petitioner Marciana
Santos, who sought reinstatement, had four [4] years within which to file
her complaint for the injury to her rights as provided under Article 1146 of
the Civil Code.
Same; Same; Same; Four-year prescriptive period under Art. 1146 of
the Civil Code applies by way of supplement to the Labor Code—Indeed
there is, merit in the contention of petitioner that the four [4]-year
prescriptive period under Article 1146 of the New Civil Code, applies by
way of supplement, in the instant case.
Same; Same; Same; Constitutional Law; Due Process; Property
Right;One’s employment, profession, trade or calling, a property
right; Right considered to be property within the constitutionat pro~ tection
of due process of law.—It is a principle in American jurisprudence which,
undoubtedly, is well-recognized in this jurisdiction that one’s employment,
profession, trade or calling is a “property right,” and the wrongful
interferenee therewith is an actionable wrong. The right is considered to
be property within the protection of a constitutional guaranty of due
process of law.
Same; Same; Same; Same; Action to contest legality ofone’s arbitrary
dismissal constitutes an action predicated upon an injury to the rights of
plaintiff under Art. 1146 of the Civil Code—Clearly then, when one is
arbitrarily and unjustly deprived of his job or means of iivelihood, the
action instituted to contest the legality of one’s dismissal frorn employment
constitutes, in essence, an action predicated “upon an injury to the rights
of the plaintiff,” as eontemplated under Art. 1146 of the New Civil Code,
which must be brought within four [4] years.
Same; Same; Same; Same; Strict application of Arts. 291 and292 of
the Labor Code providing for a 3-year prescriptive period does not destroy
enforcement of fundamental rights ofemployees; Articles 291 and 292 go to
matters of remedy, not destruction of the fundamental right; Statute of
limitations extinguish the remedy only.—Even on
271
the assumption that an action for illegal dismissal falls under the
category of “offenses” or “money claims” under Articles 291 and 292, Labor
Code, which provide for a three-year prescriptive period, still, a strict
application of said provisions will not destroy the enforcement of
fundamental rights of the employees. As a statutory provision on
limitations of actions, Articles 291 and 292 go to matters of remedy and not
to the destruction of fundamental rights. As a general rule, a statute of
limitation extinguishes the remedy only. Although the remedy to enforce a
right may be barred, that right may be enf orced by some other available
remedy which is not barred.
Same; Same; Same; Same; Delay of complainant in filing case for
illegal dismissal, with justifiable cause.—More so, in the instant case,
where the delay in filing the case was with justifiable cause. The threat to
petitioner that he would be charged with estafa if he filed a complaint for
illegal dismissal, which private respondent did after all on June 22, 1981,
justifies, the delayed filing of the action for illegal dismissal with the
Regional office No. X, MOLE on July 5,1982.
Same; Same; Alleged shortage of accountabilities of complainant
should have been impartially investigated with due regard for due
process;Outright dismissal too severe a penalty, for first offense.—Public
respondent dismissed the action for illegal dismissal on the sole issue of
prescription of actions. It did not resolve the case of illegal dismissal on the
merits. Nonetheless, to resolve once and for all the issue of the legality of
the dismissal, We find that petitioner, who has continuously served
respondent Carnation for five [5] years was, under the attendant
circumstances, arbitrarily dismissed from his employment. The alleged
shortage in his accountabilities should have been impartially investigated
with all due regard for due process in view of the admitted enmity between
petitioner and E.L. Corsino, respondent’s auditor. Absent such an
impartial investigation, the alleged shortage should not have been
attended with such a drastic consequence as termination of the
employment relationship. Outright ciisriiissal was too severe a penaity for
a first offense, considering that the alleged shortage was explained to
respondent’s Auditor, E.L. Corsino, in accordance with respondent’s
accounting and auditing policies.
Same; Same; Dismissal based on loss of trust and confidence arising
from alleged misconduct of employee, not to be used as a shield to dismiss
an employee arbitrarily; Reason.—Admittedly, loss of trust and confidence
arising from the same alleged misconduct is
 272
272 SUPREME COURT REPORTS ANNOTATED
Callanta vs. Carnation Philippines, Inc. “Art. 292. Money Claims.—AJl money claims arising from employer-
sufficient ground for dismissing an employee from his employment
despite the dismissal of the crime case. However, it must not be
indiscriminately used as a shield to dismiss an employee arbitrarily. For,
who can stop the employer frorn filing all the charges in the books for the
simple exercise of it, and then hide behind the pretext of loss of confidence
which can be proved by mere preponderance of evidence.
Same; Same; Reinstatement of employee cannot be enforced due to
supervening event; No law requiring a purchasing corporation to absorb the
employees of the selling corporation; Award of backwages to 3 years.—We
grant the petition and the decision of the NLRC is hereby reversed and set
aside. Although We are strongly inclined to affirm that part of the decision
of the Labor Arbiter ordering the reinstatement of petitioner to his former
position without loss of seniority rights and privileges, a supervening
event, which petitioner mentioned in his motion for early decision dated
January 6,1986 that is, FILIPRO, Inc.,'s taking over the business of
Carnation, has legally rendered the order of reinstatement difficult to
enforce, unless there is an express agreement on assumption of iiabilities
by the purchasing corporation, FILIPRO, Inc. Besides, there is no law
requiring that the purchasing corporation shouid absorb the empioyees of
the seiling corporation. In any case, the very concept of social justice
dictates that petitioner shall be entitled to backwages of three [3] years.
PETITION for certiorari to review the decision of the National Labor
Relations Commission.
The facts are stated in the opinion of the Court.
Danilo L. Pilapil for petitioner.
FERNAN, J.;
The issue raised in this petition for certiorari is whether or not an
action for illegal dismissal prescribes in three [3] years pursuant to
Articles 291 and 292 of the Labor Code which provide:
“Art. 291. Offenses.—Offenses penaiized under thisCodeand the rules and
regulations issued pursuant thereto shall prescribe in three [3] years.
273
VOL. 145, OCTOBER 28, 1986 273 274
Callanta vs. Carnation Philippines. Inc.
xxx xxx xxx
employee relations accruing during the effectivity of this Code shall be filed
within three [3] years from the time the cause of action accrued; otherwise,
they shall be forever barred.
xxx xxx xxx.”
Petitioner Virgilio Callanta was employed by private respondent
Carnation Philippines, Inc. [Carnation, for brevity] in January 1974 as
a salesman in the Agusan del Sur area. Five [5] years later or on June
1, 1979, respondent Carnation filed with the Regional Office No. X of
the Ministry of Labor and Employment [MOLE], an application for
clearance to terminate the employment of Virgilio Callanta on the
alleged grounds of serious misconduct and misappropriation of
company funds amounting to Pl2,000.00, more or less.
Upon approval on June 26, 1979 by MOLE Regional Director
Felizardo G. Baterbonia, of said clearance application, petitioner
Virgilio Callanta’s employment with Carnation was terminated
effective June 1,1979.
On July 5, 1982, Virgilio Callanta filed with the MOLE, Regional
Office No. X, a complaint for illegal disinissal with claims for
reinstatement, backwages, and damages against respondent
Carnation.
In its position paper dated October 5,1982, respondent Carnation
put in issue the timeliness of petitioner’s complaint alleging that the
same is barred by prescription for having been filed more than three [3]
years after the date of Callanta’s dismissal.
On March 24,1983, Labor Arbiter Pedro C. Ramos rendered a
decision finding the termination of Callanta’s employment to be
without valid cause. Respondent Carnation was therefore ordered to
reinstate Virgilio Callanta to his former position with backwages of one
[1] year without qualification including all fringe benefits provided for
by law and company policy, within ten [10] days from receipt of the
decisibn. It was likewise provided that failure on the part of respondent
to comply with the decision shall entitle complainant to full backwages
and all fringe benefits without loss of seniority rights.

274 SUPREME COURT REPORTS ANNOTATED
Callanta vs. Carnation Philippines, Inc.
On April 18,1983, respondent Carnation appealed to respondent
National Labor Relations Commission [NLRC] which in a decision
dated February 25,1985, set aside the decision of the Labor Arbiter. It
1
declared the complaint for iilegal dismissal filed by Virgilio Callanta to
have already prescribed. Thus:
“Records show that Virgilio Callanta was dismissed from his employment
with respondent company effective June 1, 1979; and that on 5 July 1982,
he filed the instant complaint against respondent for: Unlawful Dismissal
with Backwages, etc.
“The provisions of the Labor Code applicable are:
“Art. 291. Offenses.—Offenses penalized under this Code and the rules
and regulations issued pursuant thereto shali prescribe in three [3] years.
“Art, 292. Money claims.—All money claiins arising from employer-
employee relations accruing during the effectivity of this Code shall be filed
within three [3] years from the time the cause of action accrued; otherwise,
they shali be forever barred.
“Obviously, therefore, the causes of action, i.e., ‘Unlawful Disjnissal’
and ‘Backwages, etc/ have already prescribed, the complaint therefore
having been fiied beyond the three-year period from accrual date.
“With this finding, there is no need to discuss the other issues raised in
the appeal.
“WHEREFORE, in view of the foregoing, the Decision appealed from is
hereby SET ASIDE and another one entered, dismissing the complaint.
“SO ORDERED."
Hence, this petition, which We gave due course in the resolution dated
Septernber 18,1985. 2 terminating the employment.
Petitioner contends that since the Labor Code is silent as to the
prescriptive period of an action for illegal dismissal with claims for
reinstatement, backwages and dainages, the applicabie iaw, by way of
suppiement, is Articie 1146 of the New
_______________
1 PP. 13–14, Rollo.
2Private respondent Carnation Phils. Inc. failed to file its comment on the petition. In the
same resolution of September 18, 1985, said comment was dispensed with by the court, p. 32,
Rollo.
275
VOL. 145, OCTOBER 28, 1986 275
Callanta us. Carnation Philippines, Inc.
Civil Code which provides a four [4]-year prescriptive period for an
action predicated upon “an injury to the rights of the plaintiff’
considering that an action for illegal dismissal is neither a “penal
offense” nor a mere “money claim,” as contemplated under Articles 291
and 292, respectively, of the Labor Code. Petitioner further claims that
an action for illegal dismissal is a more serious violation of the rights
of an employee as it deprives him of his means of livelihood; thus, it
should correspondingly have a prescriptive period longer than the three
[3] years provided for in “money claims.”
Public respondent, on the other hand, counters with the arguments
that a case for illegal dismissal falls under the general category of
“offenses penalized under this Code and the rules and regulations
pursuant thereto” provided under Article 291 or a money claim under
Article 292, so that petitioner’s complaint for illegal dismissal filed on
July 5,1982, or three [3] years, one [i] month and five [5] days after his
alleged dismissal on June 1, 1979, was filed beyond the three-year
prescriptive period as provided under Articles 291 and 292 of the Labor
Code, hence, barred by prescription; that while it is admittedly a more
serious offense as it involves an employee’s means of livelihood, there
is no logic in assuming that it has a longer prescriptive period, as
naturally, one who is truly aggrieved would immediately seek the
redress of his grievance; that assuming arguendo that the law does not
provide for a prescriptive period for the enforcement of petitioner’s
right, it is nevertheless beyond dispute that the said right has already
lapsed into a stale demand; and that considering the seriousness of the
act committed by petitioner, private respondent was justified in
We find for petitioner.
Verily, the dismissal without just cause of an employee from bis
employment constitutes a violation of the Labor Code and its
implementing rules and regulations. Such violation, however, does not
amount to an “offense” as understood under Article 291 of the Labor
Code. In its broad sense, an offense is an illegal act which does not
amount to a crime as defined in the penal law, but which by statute
carries with it a penalty
276
276 SUPREME COURT REPORTS ANNOTATED VOL. 145, OCTOBER 28, 1986 277
Callanta vs. Carnation Philippines, Inc. Callanta vs. Carnation Philippines, Inc.
similar to those imposed by law for the punishment of a crime. It is in 3 legal dismissal cannot be generally categorized as an “offense” as used
this sense that a general penalty clause is provided under Article 289
of the Labor Code which provides that “x x x any violation of the
provisions of this code declared to be unlawful orpenal in natureshall
be punished with a fine of not less than One Thousand Pesos [Pl,000.00]
nor more than Ten Thousand Pesos [10,000.00], orimprisonment of not
less than three [3] months nor more than three [3] years, or both such
fine and imprisonment at the discretion of the court.” [Italics supplied.]
The confusion arises over the use of the term “illegal dismissal”
which creates the impression that termination of an employment
without just cause constitutes an offense. It must be noted, however
that unlike in cases of commission of any of the prohibited activities
during strikes or lockouts under Article 265, unfair labor practices
under Articles 248, 249 and 250 and illegal recruitment activities under
Article 38, among others, which the Code itself declares to be unlawful,
termination of an employment without just or valid cause is not
categorized as an uniawfui practice.
Besides, the reliefs principally sought by an employee who was
illegally dismissed from his einployinent are reinstate= ment to his
former position without loss of seniority rights and privileges, if any,
backwages and damages, in case there is bad faith in his dismissal As
an affirmative relief, reinstatement may be ordered, with or without
backwages, While ordinarily, reinstatement is a concomitant of
backwages, the two are not necessarily complements, nor is the award
of one a condition precedent to an award of the other. And, in proper 4
cases, baekwages may be awarded without ordering reinstatement. In
either case, no penalty of fine nor imprisonment is imposed on the
employer upon a finding of illegality in the dismissal By the very nature
of the reliefs sought, therefore, an action for il-
_______________
3Wickham vs. Pafumi, 256 N.Y.S. 2d 868, 871, 45 Misc 2d 344; People ex rel Schildhaus
on Behalf of Weinstein vs. Warden of the City Prison, Borough of Manhattan, Bellevue
Hospital, 235 N.Y.S. 2d 531, 537, 37 Misc 2d 660; Application of Waldau, Sup., 125 N.Y.S. 2d
793, 796.
4 Rothenberg, On Labor Relations, p. 577,
277
under Article 291 of the Labor Code, which according to public
respondent, must be brought within the period of three [3] years from
the time the cause of action accrued, other*wise, the same is f orever
barred.
It is true that the “backwages” sought by an illegally dismissed
employee may be considered, by reason of its practical effect, as a
“money claim.” However, it is not the principal cause of action in an
illegal dismissal case but the unlawful deprivation of one’s employment
committed by the employer in violation of the right of an employee.
Backwages is merely one of the reliefs which an illegally dismissed
employee prays the labor arbiter and the NLRC to render in his favor
as a consequence of the unlawful act committed by the employer. The
award thereof is not private compensation or damages but is in 5
furtherance and effectuation of the public objectives of the Labor
Code. Even though the practical effect is the enrichment of the
6
individual, the award of backwages is not in redress of a private right,
but, rather, is in the nature of a comrnand upon the employer to make
public reparation for his violation of the Labor Code. 7
The case of Valencia vs. Cebu Portland Cement, et. al, 106 Phil. 732,
a 1959 case cited by petitioner, is applicable in the instant case insofar
as it concerns the issue of prescription of actions. In said case, this
Court had occasion to hold that an action for damages involving a
plaintiff separated from his employment for alleged unjustifiable
causes is one for “injury to the rights of the plaintiff, and must be
brought within four [4]years." 8
In Santos vs. Court of Appeals, 96 SCRA 448 [1980], this Court, thru
then Chief Justice Enrique M. Fernando, sustained the stand of the
Solicitor General that the period of prescrip-
_______________
5 Manseau vs. U.S. 52 F Supp. 395; NLRB vs. Newark Morning Ledger, 120 F[2nd] 262.
6 NLRB vs. West Kentucky Coal Co., 116 F [2nd] 816.
7 NLRB vs. Agwilines, Inc. 87 F [2nd] 146.
8 Paras, Civil Code of the Philippines, Annotated, 10th Ed., Vol IX, p. 42.
278
278 SUPREME COURT REPORTS ANNOTATED Callanta vs. Carnation Philippines, Inc.
Callanta vs. Carnation Philippines, Inc, tection of a constitutional guaranty of due process of law, Clearly then, 12
tion mentioned under Article 281, now Article 292, of the Labor Code,
refers to and “is limited to money claims, all other cases of injury to
rights of a workingman being governed by the Civil Code.” Accordingly,
this Court ruled that petitioner Marciana Santos, who sought
reinstatement, had four [4] years within which to file her complaint for
the injury to her rights as provided under Article 1146 of the Civil Code.
Indeed there is, merit in the contention of petitioner that the four
[4]-year prescriptive period under Article 1146 of the New Civil Code,
applies by way of supplement, in the instant case, to wit:
“Art. 1146. The foilowing actions must be instituted within four years.
[1] Upon an injury to the rights of the plaintiff.
xxx xxx xxx.’ [Italics supplied]
As this Court stated in Bondoc vs. People’s Bank and Trust Co., when a
person has no property, his job may possibly be his only possession or
means of livelihood, hence, he should be protected against any arbitrary
and unjust deprivation of his job. Unemployment, said the Court
in Almira vs. B.F. Goodrich Philippines, brings “untold hardships and
10
sorrows on those dependent on the wage earners. The misery and pain
attendant on the loss of jobs thus could be avoided if there be acceptance
of the view that under all the circumstances of this case, petitioners
should not be deprived of their means of livelihood.”
It is a principle in American jurisprudence which, undoubtedly, is
well-recognized in this jurisdiction that one’s employrnent, profession,
trade or caiiing is a “property right,” and the wrongful interference
therewith is an actionable wrong. The right is considered to be
11
property within the pro-
_______________
9 103 SCRA 599 [1981].
10 58 SCRA 120,131 [1974].
11Carter vs. Knapp Motor Co., 11 So. 2d 383, 384, 243 Ala. 600, 144 A.L.R. 1177; Alabama
State Federation of Labor vs. McAdory,
279
VOL. 145, OCTOBER 28, 1986 279
when one is arbitrarily and unjustly deprived of his job or means of
livelihood, the action instituted to contest the legality of one’s dismissal
from employment constitutes, in essence, an action predicated “upon an
injury to the rights of the plaintiff,” as contemplated under Art. 1146 of
the New Civil Code, which mast be brought within four [4] years.
In the instant case, the action for illegal dismissal was filed by
petitioners on July 5,1982, or three [3] years, one [1] month and five [5]
days after the alleged effectivity date of his dismissal on June 1,1979
which is well within the four [4]-year prescriptive period under Article
1146 of the New Civil Code.
Even on the assumption that an action for illegal dismissal falls
under the category of “offenses” or “money claims” under Articles 291
and 292, Labor Code, which provide for a three-year prescriptive
period, still, a strict application of said provisions will not destroy the
9
enforcement of fundamental rights of the employees. As a statutory
provision on limitations of actions, Articles 291 and 292 go to matters
of remedy and not to the destruction of fundamental rights. As a 13
general rule, a statute of limitation extinguishes the remedy only.
Although the remedy to enforce a right may be barred, that right may
be enforced by some other available remedy which is not barred. 14
More so, in the instant case, where the delay in filing the case was
with justifiable cause. The threat to petitioner that he would be charged
with estafa if he filed a complaint for illegal dismissal, which private
respondent did after all on June 22, 1981, justifies, the delayed filing of
the action for illegal dismissal with the Regional Office No. X, MOLE
on July 5,1982. Laches will not in that sense strengthen the cause of
public respondent. Besides, it is deemed waived as it was never al-
_______________
18 So. 2d 810, 828, 246 Ala. 1; Lash vs. State, 14 So. 2d 229, 232, 244 Ala. 48.
12 Fernando, Constitution of the Philippines, Second Edition [1977] pp. 512–513
13 Chase Secur. Corp. vs. Donaldson, 325 US 304, 89 LED 1628.
14 51 Am Jr 2d p. 607.
280
280 SUPREME COURT REPORTS ANNOTATED
Callanta vs. Carnation Philippines, Inc.
leged before the Labor Arbiter nor the NLRC.
Public respondent dismissed the action for illegal dismissal on the
sole issue of prescription of actions. It did not resolve the case of illegal
dismissal on the merits. Nonetheless, to resolve once and for all the
issue of the legality of the dismissal, We find that petitioner, who has
continuously served respondent Carnation for five [5] years was, under
the attendant circumstances, arbitrarily dismissed from his
employment. The alleged shortage in his accountabilities should have
been impartially investigated with all due regard for due process in
view of the admitted enmity between petitioner and E.L. Corsino,
respondent’s auditor. Absent such an impartial investigation, the
15
alleged shortage should not have been attended with such a drastic
consequence as termination of the employment relationship. Outright
dismissal was too severe a penalty for a first offense, considering that
the alleged shortage was explained to respondent’s Auditor, E.L.
Corsino, in accordance with respondent’s accounting and auditing
policies.
The indecent haste of his dismissal from employment was, in fact,
aggravated by the filing of the estafa charge against petitioner with the
City Fiscai of Butuan City on June 22, 1981, or two [2] years after his
questioned dismissal. After the case had remained pending for five [5]
years, the Regional Trial Court of Agusan del Norte and Butuan City,
Branch V finally dismissed the same provisionally in an order dated
February 21,1986 for failure of the prosecution’s principal witness to
appear in court. Admittedly, loss of trust and confidence arising from
the same alleged misconduct is sufficient ground for dismissing an
employee from his employment despite the dismissal of the criminal
case. However, it must not be indiscriminately used as a shield to
16
dismiss an employee arbitrarily. For, who can stop the employer from
17
filing all the charges in the books for the simple exercise of it, and then
hide
_______________
15 p. 4, Petitioner’s Manifestation & Memorandum, p. 36, Rollo.
16 Sea-Land Service, Inc. vs. NLRC, 136 SCRA 544 [1985] Philippine Long Distance
Telephone Co. vs. NLRC, 129 SCRA 163 [1984]; San MiguelCorp. vs, NLRC, 128 SCRA
180 [1984].
17 Central Textile Mills, Inc. vs. NLRC, 95 SCRA 9 [1979].
281
VOL. 145, OCTOBER 28, 1986 281
Callanta vs. Carnation Philippines, Inc.
behind the pretext ot loss of confidence which can be proved by mere
preponderance of evidence.
We grant the petition and the decision of the NLRC is hereby
reversed and set aside. Although We are strongly inclined to affirm that
part of the decision of the Labor Arbiter ordering the reinstatement of
petitioner to his former position without loss of seniority rights and
privileges, a supervening event, which petitioner mentioned in his
motion for early decision dated January 6, 1986 that is, FILIPRO, Inc/s
18
taking over the business of Carnation, has legally rendered the order of
reinstatement difficult to enforce, unless there is an express agreement
on assumption of liabilities by the purchasing corporation, FILIPRO,
19
Inc. Besides, there is no law requiring that the purchasing corporation
should absorb the employees of the selling corporation. In any case, the
20
very concept of social justice dictates that petitioner shall be entitled to
backwages of three [3] years. 21
WHEREFORE, respondent Carnation Philippines, Inc. is hereby
ordered to pay petitioner Virgilio Callanta backwages for three [3]
years without qualification and deduction. This decision is immediately
executory. No costs.
SO ORDERED.
Feria (Chairman), Alampay, Gutierrez, Jr., andParas, JJ.,
concur.
Decision immediately executory.
Notes.—Illegality of dismissal is more apparent in the light
_______________
18 p. 49, Rollo.
19 Central Azucarera del Danao vs. Court of Appeals, 137 SCRA 294 [1985].
20MDDII Supervisors and Confidential Employees Association [FFW] vs. Presidential
Assistant on Legal Affairs, 79 SCRA 40 [1977].
21Lepanto Consolidated Mining Co. vs. Encarnacion, 136 SCRA 258 [1985];Medical
Doctors, Inc. vs. NLRC, 136 SCRA 1 [1985]; Insular Life Assurance Co. Ltd. vs. NLRC, 135
SCRA 697 [1985].
282
282 SUPREME COURT REPORTS ANNOTATED
Subayno vs. Ponce Enrile

VOL. 415, NOVEMBER 11, 2003 573
Mariveles Shipyard Corp. vs. Court of Appeals
G.R. No. 144134. November 11, 2003. *
MARIVELES SHIPYARD CORP., petitioner, vs. HON. COURT OF
APPEALS, LUIS REGONDOLA, MANUELIT GATALAN, ORESCA
**
AGAPITO, NOEL ALBADBAD, ROGELIO PINTUAN, DANILO**
CRISOSTOMO, ROMULO MACALINAO, NESTOR FERER, RICKY
CUESTA, ROLLY ANDRADA, LARRY ROGOLA, FRANCISCO **
LENOGON, AUGUSTO QUINTO, ARFE BERAMO, BONIFACIO **
TRINIDAD, ALFREDO ASCARRAGA, ERNESTO MAGNO, **
HONORARIO HORTECIO, NELBERT PINEDA, GLEN ESTIPULAR,
**
FRANCISCO COMPUESTO, ISABELITO CORTEZ, MATURAN
ROSAURO, SAMSON CANAS, FEBIEN ISIP, JESUS RIPARIP,
ALFREDO SIENES, ADOLAR ALBERT, HONESTO CABANILLAS,
AMPING CASTILLO and ELWIN REVILLA, respondents.
Actions; Pleadings and Practice; Certification of Non-Forum
Shopping; Attorneys; Corporation Law; It is settled that the requirement
that the certification of non-forum shopping should be executed and signed
by the plaintiff or the principal means that counsel cannot sign said
certification unless clothed with special authority to do so; In the case of
corporations, the physical act of signing may be performed, on behalf of the
corporate entity, only by specifically authorized individuals for the simple
reason that corporations, as artificial persons, cannot personally do the task
themselves.—It is settled that the requirement in the Rules that the
certification of non-forum shopping should be executed and signed by the
plaintiff or the principal means that counsel cannot sign said certification
unless clothed with special authority to do so. The reason for this is that
the plaintiff or principal knows better than anyone else whether a petition
has previously been filed involving the same case or substantially the same
issues. Hence, a certification signed by counsel alone is defective and
constitutes a valid cause for dismissal of the petition. In the case of natural
persons, the Rule requires the parties themselves to sign the certificate of
non-forum shopping. However, in the case of the corporations, the physical
act of signing may be performed, on behalf of the corporate entity, only by
specifically authorized individuals for the simple reason that corporations,
as artificial persons, cannot personally do the task themselves.
_______________
* SECOND DIVISION.
**Some of the respondents’ names were designated differently in some parts of the records.
The variance is as follows: Luis Regondula, Manolito Catalan, Noel Alibadbad, Nestor Ferrer, Ricky
Andrada, Augosto Quinto, Alfredo Azcarraga, Honario Hortecio and Isabelito Cortes.
574
574 SUPREME COURT REPORTS ANNOTATED
Mariveles Shipyard Corp. vs. Court of Appeals
In this case, not only was the originally appended certification signed
**
by counsel, but in its motion for reconsideration, still petitioner utterly
failed to show that Ms. Rosanna Ignacio, its Personnel Manager who
signed the verification and certification of non-forum shopping attached
**
thereto, was duly authorized for this purpose. It cannot be gainsaid that
obedience to the requirements of procedural rule is needed if we are to
expect fair results therefrom. Utter disregard of the rules cannot justly be
rationalized by harking on the policy of liberal construction.
**
Labor Law; Position Papers; Due Process; The essence of due process
is simply an opportunity to be heard, or, as applied to administrative
proceedings, an opportunity to explain one’s side or an opportunity to seek
a reconsideration of the action or ruling complained of; The requirement of
due process in labor cases before a Labor Arbiter is satisfied when the
parties are given the opportunity to submit their position papers to which
they are supposed to attach all the supporting documents or documentary
evidence that would prove their respective claims, in the event the Labor
Arbiter determines that no formal hearing would be conducted or that such
hearing was not necessary.—Petitioner’s contention, in our view, lacks
sufficient basis. Well settled is the rule that the essence of due process is
simply an opportunity to be heard, or, as applied to administrative
proceedings, an opportunity to explain one’s side or an opportunity to seek
a reconsideration of the action or ruling complained of. Not all cases require
a trial-type hearing. The requirement of due process in labor cases before
a Labor Arbiter is satisfied when the parties are given the opportunity to
submit their position papers to which they are supposed to attach all the
supporting documents or documentary evidence that would prove their
respective claims, in the event the Labor Arbiter determines that no formal
hearing would be conducted or that such hearing was not necessary. In any
event, as found by the NLRC, petitioner was given ample opportunity to
present its side in several hearings conducted before the Labor Arbiter and
in the position papers and other supporting documents that it had
submitted. We find that such opportunity more than satisfies the
requirement of due process in labor cases.
Same; Indirect Employers; Security Guards; Joint and Several
Obligations; When the security agency fails to pay its guards, the
corporation serviced, as principal, becomes jointly and severally liable for
the guards’ wages.—In this case, when petitioner contracted for security
services with Longest Force as the security agency that hired private
respondents to work as guards for the shipyard corporation, petitioner
became an indirect employer of private respondents pursuant to Article
107 abovecited. Following Article 106, when the agency as contractor failed
to pay the guards, the corporation as principal becomes jointly and
severally liable for the guards’ wages. This is mandated by the Labor Code
to ensure compliance
575
VOL. 415, NOVEMBER 11, 2003 575 that in an appeal via certiorari, only questions of law may be reviewed.—
Mariveles Shipyard Corp. vs. Court of Appeals
with its provisions, including payment of statutory minimum wage.
The security agency is held liable by virtue of its status as direct employer,
while the corporation is deemed the indirect employer of the guards for the
purpose of paying their wages in the event of failure of the agency to pay
them. This statutory scheme gives the workers the ample protection
consonant with labor and social justice provisions of the 1987 Constitution.
Same; Same; Same; Same; Labor standards are enacted by the
legislature to alleviate the plight of workers whose wages barely meet the
spiraling costs of their basic needs; Labor laws are considered written in
every contract, and stipulations in violation thereof are considered null.—
Petitioner cannot evade its liability by claiming that it had religiously paid
the compensation of guards as stipulated under the contract with the
security agency. Labor standards are enacted by the legislature to alleviate
the plight of workers whose wages barely meet the spiraling costs of their
basic needs. Labor laws are considered written in every contract.
Stipulations in violation thereof are considered null. Similarly, legislated
wage increases are deemed amendments to the contract. Thus, employers
cannot hide behind their contracts in order to evade their (or their
contractors’ or subcontractors’) liability for noncompliance with the
statutory minimum wage.
Same; Same; Same; Same; The solidary liability of a corporation with
that of the security agency does not preclude the application of the Civil
Code provision on the right of reimbursement from his co-debtor by the one
who paid; As an employer, the security agency is charged with knowledge of
labor laws, and the adequacy of the compensation it demands for
contractual services is its principal concern and not any other’s.—However,
we must emphasize that the solidary liability of petitioner with that of
Longest Force does not preclude the application of the Civil Code provision
on the right of reimbursement from his co-debtor by the one who paid. As
held in Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, the joint
and several liability imposed on petitioner is without prejudice to a claim
for reimbursement by petitioner against the security agency for such
amounts as petitioner may have to pay to complainants, the private
respondents herein. The security agency may not seek exculpation by
claiming that the principal’s payments to it were inadequate for the guards’
lawful compensation. As an employer, the security agency is charged with
knowledge of labor laws; and the adequacy of the compensation that it
demands for contractual services is its principal concern and not any
other’s.
Actions; Appeals; Pleadings and Practice; Well established is the rule
On the issue of the propriety of the award of overtime pay despite the al-
576
576 SUPREME COURT REPORTS ANNOTATED
Mariveles Shipyard Corp. vs. Court of Appeals
leged lack of proof thereof, suffice it to state that such involves a
determination and evaluation of facts which cannot be done in a petition
for review. Well established is the rule that in an appeal via certiorari, only
questions of law may be reviewed.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
King, Capuchino, Tan and Associates for petitioner.
C.S. Cruz & Associates for respondents.
QUISUMBING, J.:
For review on certiorari is the Resolution, dated December 29, 1999, of
1
the Court of Appeals in CA-G.R. SP No. 55416, which dismissed
outright the petition for certiorari of Mariveles Shipyard Corp., due to
a defective certificate of non-forum shopping and non-submission of the
required documents to accompany said petition. Mariveles Shipyard
Corp., had filed a special civil action for certiorari with the Court of
Appeals to nullify the resolution of the National Labor Relations
2
Commission (NLRC), dated April 22, 1999, in NLRC NCR Case No. 00-
09-005440-96-A, which affirmed the Labor Arbiter’s decision, dated 3
May 22, 1998, holding petitioner jointly and severally liable with
Longest Force Investigation and Security Agency, Inc., for the
underpayment of wages and overtime pay due to the private
respondents. Likewise challenged in the instant petition is the
resolution of the Court of Appeals, dated July 12, 2000, denying
4 for the said period. It likewise admitted its liability as to the non-
petitioner’s motion for reconsideration.
The facts, as culled from records, are as follows:
Sometime on October 1993, petitioner Mariveles Shipyard
Corporation engaged the services of Longest Force Investigation and
Security Agency, Inc. (hereinafter, “Longest Force”) to render security
services at its premises. Pursuant to their agreement, Longest
_______________
1Rollo, pp. 12-13. Penned by Associate Justice Ruben T. Reyes with Associate Justices
Teodoro P. Regino and Edgardo P. Cruz, concurring.
Id., at pp. 69-80.
2
payment of the alleged wage differential in the total amount of
P2,618,025 but passed on the liability to petitioner alleging that the
service fee paid by the latter to it was way below the PNPSOSIA and
PADPAO rate, thus, “contrary to the mandatory and prohibitive laws
because the right to proper compensation and benefits provided under
the existing labor laws cannot be waived nor compromised.”
The petitioner denied any liability on account of the alleged illegal
dismissal, stressing that no employer-employee relationship existed
between it and the security guards. It further pointed out that it would
be the height of injustice to make it liable again for monetary claims
which it had already paid. Anent the cross-claim filed by Longest Force

3 Id., at pp. 54-67. against it, petitioner prayed that it be dismissed for lack of merit.
4 Id., at pp. 8-9. Petitioner averred that Longest Force had
577 _______________
5 CA Rollo, p. 68, Position Paper of Longest Force but indicated as 1994 in Petitioner’s
VOL. 415, NOVEMBER 11, 2003 577 Position Paper, see CA Rollo, p. 25.
6 Rollo, pp. 102-104.
Mariveles Shipyard Corp. vs. Court of Appeals
578

Force deployed its security guards, the private respondents herein, at

578 SUPREME COURT REPORTS ANNOTATED
the petitioner’s shipyard in Mariveles, Bataan.
According to petitioner, it religiously complied with the terms of the Mariveles Shipyard Corp. vs. Court of Appeals
security contract with Longest Force, promptly paying its bills and the
contract rates of the latter. However, it found the services being benefited from the contract, it was now estopped from questioning said
rendered by the assigned guards unsatisfactory and inadequate, agreement on the ground that it had made a bad deal.
causing it to terminate its contract with Longest Force on April On May 22, 1998, the Labor Arbiter decided NLRC NCR Case No.
1995. Longest Force, in turn, terminated the employment of the
5
00-09-005440-96-A, to wit:
security guards it had deployed at petitioner’s shipyard.
“WHEREFORE, conformably with the foregoing, judgment is hereby
On September 2, 1996, private respondents filed a case for illegal rendered ordering the respondents as follows:
dismissal, underpayment of wages pursuant to the PNPSOSIA-
1. DECLARING respondents Longest Force Investigation & Security
PADPAO rates, non-payment of overtime pay, premium pay for holiday
Agency, Inc. and Mariveles Shipyard Corporation jointly and severally
and rest day, service incentive leave pay, 13th month pay and
liable to pay the money claims of complainants representing
attorney’s fees, against both Longest Force and petitioner, before the
underpayment of wages and overtime pay in the total amount of
Labor Arbiter. Docketed as NLRC NCR Case No. 00-09-005440-96-A, P2,700,623.40 based on the PADPAO rates of pay covering the period from
the case sought the guards’ reinstatement with full backwages and October 16, 1993 up to April 29, 1995 broken down as follows:
without loss of seniority rights.
UNDERPAYMENT OF WAGES:
For its part, Longest Force filed a cross-claim against the petitioner.
6

Longest Force admitted that it employed private respondents and

assigned them as security guards at the premises of petitioner from
October 16, 1993 to April 30, 1995, rendering a 12 hours duty per shift
 PERIOD MONTHLY ACTUAL UNDER- WAGE 4. Noel Alibadbad (the same) 87,116.90
COVERED PADPAO SALARY PAYMENT DIFFERENTIALS
RATES (8 hrs. RECEIVED FOR THE 5. Rogelio Pintuan (the same) 87,116.90
duty) PERIOD
6. Danilo Crisostomo (the same) 87,116.90
Oct. 16-Dec. P5,485.00 P5,000 P 485.00 P 970.00
7. Romulo Macalinao (the same) 87,116.90
15/93 (2
mos.) 8. Nestor Ferrer (the same) 87,116.90
Dec. 16/93- 6,630.00 5,000 1,630.00 5,705.00 9. Ricky Cuesta (the same) 87,116.90
Mar. 31/94
(3.5 mos.) 10. Andrada Ricky (the same) 87,116.90

Apr. 1-Dec. 7,090.00 5,810 1,280.00 11,520.00 11. Larry Rogola (the same) 87,116.90
31/94 (9
mos.) 12. Francisco Lenogon (the same) 87,116.90

Jan. 1-Apr. 7,220.00 5,810 1,410.00 5,597.70 13. Augosto Quinto (the same) 87,116.90
29/95 (3.97
14. Arfe Beramo (the same) 87,116.90
mos.)
15. Bonifacio Trinidad (the same) 87,116.90
TOTAL UNDERPAYMENTS --------- P23,792.70
16. Alfredo Azcarraga (the same) 87,116.90
OVERTIME:
17. Ernesto Magno (the same) 87,116.90

579 18. Honario Hortecio (the same) 87,116.90

VOL. 415, NOVEMBER 11, 2003 579 19. Nelbert Pineda (the same) 87,116.90

Mariveles Shipyard Corp. vs. Court of Appeals 20. Glen Estipular (the same) 87,116.90

21. Francisco Compuesto (the same) 87,116.90

22. Isabelito Cortes (the same) 87,116.90

Sub-Total of Underpayments and Overtime ................................
P87,116.90 23. Maturan Rosauro (the same) 87,116.90
1. Luis Regondula (the same) P 87,116.90 24. Samson Canas (the same) 87,116.90
2. Manolito Catalan (the same) 87,116.90 25. Febien Isip (the same) 87,116.90
3. Oresca Agapito (the same) 87,116.90 26. Jesus Riparip (the same) 87,116.90
27. Alfredo Sienes (the same) 87,116.90 1. Luis Regondula (same) P 126,684.40
8

28. Adolar Albert (the same) 87,116.90 2. Manolito Catalan (same) 126,684.40

29. Cabanillas Honesto (the same) 87,116.90 3. Oresca Agapito (same) 126,684.40

30. Castillo Amping (the same) 87,116.90 4. Noel Alibadbad (same) 126,684.40

31. Revilla Elwin (the same) 87,116.90 5. Rogelio Pintuan (same) 126,684.40

GRAND TOTAL P2,700,623.90 6. Danilo Crisostomo (same) 126,684.40

2. DECLARING both respondents liable to pay complainants at- 7. Romulo Macalinao (same) 126,684.40
torney’s fees equivalent to ten (10%) percent of the total award recovered
or the sum of P270,062.34. 8. Nestor Ferrer (same) 126,684.40
580
9. Ricky Cuesta (same) 126,684.40
580 SUPREME COURT REPORTS ANNOTATED
10. Andrada Rolly (same) 126,684.40
Mariveles Shipyard Corp. vs. Court of Appeals
11. Larry Rogola (same) 126,684.40
3. ORDERING respondent Longest Force Investigation & Security
Agency, Inc. to reinstate all the herein complainants to their former or 12. Francisco Lenogon (same) 126,684.40
equivalent positions without loss of seniority rights and privileges with full
backwages which as computed as of the date of this decision are as follows: 13. Augosto Quinto (same) 126,684.40
Backwages: 14. Arfe Beramo (same) 126,684.40
10/16 - 12/15/93 = 2 mos. 15. Bonifacio Trinidad (same) 126,684.40
P 5,485.00 x 2 mos. = P 10,970.00 16. Alfredo Azcarraga (same) 126,684.40
12/16/93 - 3/31/94 = 3.5 mos. 17. Ernesto Magno (same) 126,684.40
P 6,630.00 x 3.5 mos. = 23,205.00 18. Honario Hortecio (same) 126,684.40
4/1 - 12/31/94 = 9 mos. 19. Nelbert Pineda (same) 126,684.40
P 7,090.00 x 9 mos. = 63,810.00 20. Glen Estipular (same) 126,684.40
1/1 - 4/29/95 = 3.97 mos. 21. Francisco Compuesto (same) 126,684.40
P 7,220.00 x 3.97 mos. = 28,663.40 22. Isabelito Cortes (same) 126,684.40
TOTAL P126,684.40
7
23. Maturan Rosauro (same) 126,684.40
 1. The verification and certification on non-forum shopping is signed not
24. Samson Canas (same) 126,684.40
by duly authorized officer of petitioner corporation, but by counsel (Section
_______________ 1, Rule 65, 1997 Rules of Civil Procedure).
7 Erroneous Sum. Should be P126,648.40. 2. The petition is unaccompanied by copies of relevant and pertinent
8 Ibid. documents, particularly the motion for reconsideration filed before the
581 NLRC (Section 1, Rule 65, 1997 Rules of Civil Procedure). 12

The petitioner then moved for reconsideration of the order of dismissal.

VOL. 415, NOVEMBER 11, 2003 581 The appellate court denied the motion, pointing out that under
prevailing case law subsequent compliance with formal requirements
Mariveles Shipyard Corp. vs. Court of Appeals
for filing a petition as prescribed by the Rules, does
25. Febien Isip (same) 126,684.40 _______________
9 Erroneous Sum. Should be P3,926,100.40.
26. Jesus Riparip (same) 126,684.40 10 Erroneous Product. Should be P392,610.04.
11 Rollo, pp. 63-67.
27. Alfredo Sienes (same) 126,684.40
12 Id., at p. 13.
28. Adolar Albert (same) 126,684.40 582

29. Cabanillas Honesto (same) 126,684.40 582 SUPREME COURT REPORTS ANNOTATED

30. Castillo Amping (same) 126,684.40 Mariveles Shipyard Corp. vs. Court of Appeals

31. Revilla Elwin (same) 126,684.40 not ipso facto warrant a reconsideration. In any event, it found no grave
abuse of discretion on the part of the NLRC to grant the writ of
GRAND TOTAL P3,927,216.40 9
certiorari.

4. ORDERING said Longest Force Investigation & Security Agency,
Inc. to pay attorney’s fees equivalent to ten (10%) percent of the total award
recovered representing backwages in the amount of P392,721.64. 10
5. DISMISSING all other claims for lack of legal basis.
SO ORDERED.”
11
Hence, this present petition before us. Petitioner submits that THE
COURT OF APPEALS GRAVELY ERRED:
1. 1.. . . . IN DISMISSING THE PETITION AND DENYING THE
MOTION FOR RECONSIDERATION DESPITE THE FACT
THAT PETITIONER SUBSTANTIALLY COMPLIED WITH
THE REQUIREMENTS OF SECTION 1, RULE 65, 1997

Petitioner appealed the foregoing to the NLRC in NLRC NCR Case No. RULES OF CIVIL PROCEDURE.
00-09-005440-96-A. The labor tribunal, however, affirmed in toto the
2. 2.. . . . IN RULING THAT PETITIONER WAS NOT DENIED
decision of the Labor Arbiter. Petitioner moved for reconsideration, but
DUE PROCESS OF LAW.
this was denied by the NLRC.
3. 3.. . . . IN AFFIRMING THE DECISION OF THE NATIONAL
The petitioner then filed a special civil action for certiorari assailing
LABOR RELATIONS COMMISSION THAT “LONGEST
the NLRC judgment for having been rendered with grave abuse of
FORCE” AND PETITIONER ARE JOINTLY AND
discretion with the Court of Appeals, docketed as CA-G.R. SP No.
SEVERALLY LIABLE FOR PAYMENT OF WAGES AND
55416. The Court of Appeals, however, denied due course to the petition
OVERTIME PAY DESPITE THE CLEAR SHOWING THAT
and dismissed it outright for the following reasons:
PETITIONER HAVE ALREADY PAID THE SECURITY
 SERVICES THAT WAS RENDERED BY PRIVATE
RESPONDENTS.
4. 4.. . . . WHEN IT FAILED TO RULE THAT ONLY “LONGEST
FORCE” SHOULD BE SOLELY AND ULTIMATELY LIABLE
IN THE INSTANT CASE. 13
We find the issues for our resolution to be: (1) Was it error for the Court
of Appeals to sustain its order of dismissal of petitioner’s special civil
action for certiorari, notwithstanding subsequent compliance with the
requirements under the Rules of Court by the petitioner? (2) Did the
appellate court err in not holding that petitioner was denied due
process of law by the NLRC? and (3) Did the appellate court grievously
err in finding petitioner jointly and severally liable with Longest Force
for the payment of wage differentials and overtime pay owing to the
private respondents?
On the first issue, the Court of Appeals in dismissing CA-G.R. SP
No. 55416 observed that: (1) the verification and certification of non-
forum shopping was not signed by any duly authorized officer of
petitioner but merely by petitioner’s counsel; and (2) the petition was
not accompanied by a copy of motion for reconsideration filed before the
NLRC, thus violating Section 1, Rule 65 of the Rules of
14
_______________
13 Id., at pp. 26-27.
14 SEC. 1. Petition for certiorari.—x x x
583
VOL. 415, NOVEMBER 11, 2003 583 Mariveles Shipyard Corp. vs. Court of Appeals
Mariveles Shipyard Corp. vs. Court of Appeals plaintiff or the principal means that counsel cannot sign said
Court. Hence, a dismissal was proper under Section 3, Rule 46 of the 15
Rules.
In assailing the appellate court’s ruling, the petitioner appeals to
our sense of compassion and kind consideration. It submits that the
certification signed by its counsel and attached to its petition filed with
the Court of Appeals is substantial compliance with the requirement.
Moreover, petitioner calls our attention to the fact that when it filed its
motion for reconsideration before the Court of Appeals, a joint
verification and certification of non-forum shopping duly signed by its
Personnel Manager and a copy of the Motion for Reconsideration filed
16 17
before the NLRC were attached therein. Thus, petitioner prays that we
take a liberal stance to promote the ends of justice.
Petitioner’s plea for liberality, however, cannot be granted by the
Court for reasons herein elucidated.
It is settled that the requirement in the Rules that the certification
of non-forum shopping should be executed and signed by the
_______________
The petition shall be accompanied by a certified true copy of the judgment, order or resolution
subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46.
15 SEC. 3. Contents and filing of petition; effect of non-compliance with requirements.—x x
x
The petitioner shall also submit together with the petition a sworn certification that he has not
theretofore commenced any other action involving the same issues in the Supreme Court, the Court
of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action
or proceeding, he must state the status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals,
or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the
aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.
xxx
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient
ground for the dismissal of the petition.
16 CA Rollo, p. 122.
17 Id., at pp. 114-121.
584
584 SUPREME COURT REPORTS ANNOTATED
certification unless clothed with special authority to do so.18 The reason
for this is that the plaintiff or principal knows better than anyone else
whether a petition has previously been filed involving the same case or
substantially the same issues. Hence, a certification signed by counsel
alone is defective and constitutes a valid cause for dismissal of the
petition.19 In the case of natural persons, the Rule requires the parties
themselves to sign the certificate of nonforum shopping. However, in
the case of the corporations, the physical act of signing may be
performed, on behalf of the corporate entity, only by specifically
authorized individuals for the simple reason that corporations, as
artificial persons, cannot personally do the task themselves.20 In this
case, not only was the originally appended certification signed by
counsel, but in its motion for reconsideration, still petitioner utterly
failed to show that Ms. Rosanna Ignacio, its Personnel Manager who
signed the verification and certification of non-forum shopping attached
thereto, was duly authorized for this purpose. It cannot be gainsaid that
obedience to the requirements of procedural rule is needed if we are to
expect fair results therefrom. Utter disregard of the rules cannot justly
be rationalized by harking on the policy of liberal construction.21
Thus, on this point, no error could be validly attributed to
respondent Court of Appeals. It did not err in dismissing the petition
for non-compliance with the requirements governing the certification of
non-forum shopping.
Anent the second issue, petitioner avers that there was denial of due
process of law when the Labor Arbiter failed to have the case tried on
the merits. Petitioner adds that the Arbiter did not observe the
mandatory language of the then Sec. 5(b) Rule V (now Section 11, per
amendment in Resolution No. 01-02, Series of 2002) of the NLRC New
Rules of Procedure which provided that:
_______________
18Condo Suite Club Travel, Inc. v. National Labor Relations Commission, G.R. No.
125671, 28 January 2000, 323 SCRA 679, 687.
19 Eslaban, Jr. v. Vda. de Onorio, G.R. No. 146062, 28 June 2001, 360 SCRA 230, 236.
20 See BA Savings Bank v. Sia, G.R. No. 131214, 27 July 2000, 336 SCRA 484, 489.
21 Ortiz v. Court of Appeals, G.R. No. 127393, 4 December 1998, 299 SCRA 708, 712.
585
VOL. 415, NOVEMBER 11, 2003 585
Mariveles Shipyard Corp. vs. Court of Appeals
If the Labor Arbiter finds no necessity of further hearing after the parties
have submitted their position papers and supporting documents, he shall
issue an Order to that effect and shall inform the parties, stating the
reasons therefor . . . . 22
Petitioner’s contention, in our view, lacks sufficient basis. Well settled
is the rule that the essence of due process is simply an opportunity to
be heard, or, as applied to administrative proceedings, an opportunity
to explain one’s side or an opportunity to seek a reconsideration of the
action or ruling complained of. Not all cases require a trial-type
23
hearing. The requirement of due process in labor cases before a Labor
Arbiter is satisfied when the parties are given the opportunity to
submit their position papers to which they are supposed to attach all
the supporting documents or documentary evidence that would prove
their respective claims, in the event the Labor Arbiter determines that
no formal hearing would be conducted or that such hearing was not
necessary. In any event, as found by the NLRC, petitioner was given
24
ample opportunity to present its side in several hearings conducted
before the Labor Arbiter and in the position papers and other
supporting documents that it had submitted. We find that such
opportunity more than satisfies the requirement of due process in labor
cases.
On the third issue, petitioner argues that it should not be held
jointly and severally liable with Longest Force for underpayment of
wages and overtime pay because it had been religiously and promptly
paying the bills for the security services sent by Longest Force and that
these are in accordance with the statutory minimum wage. Also,
petitioner contends that it should not be held liable for overtime pay as
private respondents failed to present proof that overtime work was
actually performed. Lastly, peti-
_______________
22 As amended, this should now read as follows:
SECTION 11. ISSUANCE OF AN ORDER SUBMITTING THE CASE FOR DECISION.—After the
parties have submitted their position papers and supporting documents, AND UPON
EVALUATION OF THE CASE the Labor Arbiter finds no necessity of further hearing, he shall
issue an order expressly declaring the submission of the case for DECISION.
Sunset View Condominium Corporation v. National Labor Relations Commission, G.R.
23
No. 87799, 15 December 1993, 228 SCRA 466, 472.
24Columbus Philippines Bus Corporation v. National Labor Relations Commission, G.R.
Nos. 114858-59, 7 September 2001, 364 SCRA 606, 621.
586
586 SUPREME COURT REPORTS ANNOTATED
Mariveles Shipyard Corp. vs. Court of Appeals
tioner claims that the Court of Appeals failed to render a decision that
finally disposed of the case because it did not specifically rule on the
immediate recourse of private respondents, that is, the matter of
reimbursement between petitioner and Longest Force in accordance
with Eagle Security Agency, Inc. v. NLRC, andPhilippine Fisheries
25
Development Authority v. NLRC. 26
Petitioner’s liability is joint and several with that of Longest Force,
pursuant to Articles 106, 107 and 109 of the Labor Code which provide
as follows:
ART. 106. CONTRACTOR OR SUBCONTRACTOR—Whenever an
employer enters into a contract with another person for the performance of
the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
xxx
ART. 107. INDIRECT EMPLOYER.—The provisions of the
immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work,
task, job or project.
ART. 109. SOLIDARY LIABILITY.—The provisions of existing laws to
the contrary notwithstanding, every employer or indirect employer shall
be held responsible with his contractor or subcontractor for any violation
of any provision of this Code. For purposes of determining the extent of
their civil liability under this Chapter, they shall be considered as direct
employers.
In this case, when petitioner contracted for security services with
Longest Force as the security agency that hired private respondents to
work as guards for the shipyard corporation, petitioner became an
indirect employer of private respondents pursu-
_______________
25 G.R. Nos. 81314 & 81447, 18 May 1989, 173 SCRA 479.
26 G.R. No. 94825, 4 September 1992, 213 SCRA 621.
587
VOL. 415, NOVEMBER 11, 2003 587
Mariveles Shipyard Corp. vs. Court of Appeals
ant to Article 107 abovecited. Following Article 106, when the agency
as contractor failed to pay the guards, the corporation as principal
becomes jointly and severally liable for the guards’ wages. This is
mandated by the Labor Code to ensure compliance with its provisions,
including payment of statutory minimum wage. The security agency is
held liable by virtue of its status as direct employer, while the
corporation is deemed the indirect employer of the guards for the
purpose of paying their wages in the event of failure of the agency to
pay them. This statutory scheme gives the workers the ample
protection consonant with labor and social justice provisions of the 1987
Constitution. 27
Petitioner cannot evade its liability by claiming that it had
religiously paid the compensation of guards as stipulated under the
contract with the security agency. Labor standards are enacted by the
legislature to alleviate the plight of workers whose wages barely meet
the spiraling costs of their basic needs. Labor laws are considered
written in every contract. Stipulations in violation thereof are
considered null. Similarly, legislated wage increases are deemed
amendments to the contract. Thus, employers cannot hide behind their
contracts in order to evade their (or their contractors’ or
subcontractors’) liability for noncompliance with the statutory
minimum wage. 28
However, we must emphasize that the solidary liability of petitioner
with that of Longest Force does not preclude the application of the Civil
Code provision on the right of reimbursement from his co-debtor by the
one who paid. As held inDel Rosario & Sons
29
_______________
Alpha Investigation and Security Agency, Inc. v. National Labor Relations
27
Commission, G.R. No. 111722, 27 May 1997, 272 SCRA 653, 658.
Rosewood Processing, Inc. v. National Labor Relations Commission, G.R. Nos. 116476-
28
84, 21 May 1998, 290 SCRA 408, 425.
29 See Eagle Security Agency, Inc. v. National Labor Relations Commission, supra, at p.
486.
Civil Code. ART. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If
two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who
made the payment may claim from his co-debtors only the share which corresponds to each, with
the interest for the payment already made. If the payment is made before the debt is due, no interest
for the intervening period may be demanded.
588
588 SUPREME COURT REPORTS ANNOTATED
Mariveles Shipyard Corp. vs. Court of Appeals
Logging Enterprises, Inc. v. NLRC, the joint and several liability
30
imposed on petitioner is without prejudice to a claim for reimbursement
by petitioner against the security agency for such amounts as petitioner
may have to pay to complainants, the private respondents herein. The
security agency may not seek exculpation by claiming that the
principal’s payments to it were inadequate for the guards’ lawful respondents, by way of total backwages and attorney’s fees are hereby
compensation. As an employer, the security agency is charged with set at P3,926,100.40 and P392,610.04, respectively. Costs against
knowledge of labor laws; and the adequacy of the compensation that it petitioner.
demands for contractual services is its principal concern and not any SO ORDERED.
other’s. 31

Bellosillo (Chairman), Austria-Martinez, Callejo, Sr. andTinga,

On the issue of the propriety of the award of overtime pay despite JJ., concur.
the alleged lack of proof thereof, suffice it to state that such involves a
determination and evaluation of facts which cannot be done in a Judgment affirmed with modification.
petition for review. Well established is the rule that in an appeal via Notes.—In legitimate job-contracting, the principal employer is
certiorari, only questions of law may be reviewed. 32
considered only an indirect employer while in labor-only contracting,
One final point. Upon review of the award of backwages and the principal employer is considered the direct employer of the
attorney’s fees, we discovered certain errors that happened in the employees. (PCI Automation Center, Inc. vs. National Labor Relations
addition of the amount of individual backwages that resulted in the Commission, 252 SCRA 493 [1996])
erroneous total amount of backwages and attorney’s fees. These errors The client of a service contractor is not liable for separation pay and
ought to be properly rectified now. Thus, the correct sum of individual back wages of latter’s employees but is jointly and severally liable with
backwages should be P126,648.40 instead of P126,684.40, while the the contractor for the employee’s service incentive leave pay. (Sentinel
correct sum of total backwages awarded and attorney’s fees should Security Agency, Inc. vs. National Labor Relations Commission, 295
be P3,926,100.40 and P392,610.04, instead of P3,927,216.40 and SCRA 123 [1998])
P392,721.64, respectively.
——o0o——
WHEREFORE, the Resolution of the Court of Appeals in CA-G.R. 590
SP No. 55416 is AFFIRMED with MODIFICATION. Petitioner and
Longest Force are held liable jointly and severally for underpayment of © Copyright 2016 Central Book Supply, Inc. All rights reserved.
wages and overtime pay of the security guards, without prejudice to
petitioner’s right of reimbursement from Longest Force Investigation
and Security Agency, Inc. The amounts payable to complaining security
guards, herein private
_______________
When one of the solidary debtors cannot, because of his insolvency, reimburse his share
to the debtor paying the obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.
30 G.R. No. L-64204, 31 May 1985, 136 SCRA 669, 673.
31 Ibid.
Milestone Realty and Co., Inc. v. Court of Appeals, G.R. No. 135999, April 19, 2002, 381
32

SCRA 406, 417.

589

VOL. 415, NOVEMBER 11, 2003 589

Mariveles Shipyard Corp. vs. Court of Appeals

 SO ORDERED.
Corona (C.J., Chairperson), Leonardo-De Castro, Del
Castilloand Perez, JJ., concur.
Appeal denied, judgment affirmed in toto.
Note.—It is settled that denials which are unsubstantiated by clear
and convincing evidence are negative and self-serving evidence. (People
vs. Sison, 555 SCRA 156 [2008])
——o0o——
G.R. No. 188949. July 26, 2010.*
CENTRAL AZUCARERA DE TARLAC, petitioner, vs. CENTRAL
AZUCARERA DE TARLAC LABOR UNION-NLU, respondent.
Labor Law; Benefits; 13th Month Pay; All rank-and-file employees,
regardless of their designation or employment status and irrespective of the
method by which their wages are paid, are entitled to this benefit, provided
that they have worked for at least one month during the calendar year.—
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851
represents an additional income based on wage but not part of the wage. It
is equivalent to one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year. All rank-and-file employees, regardless
of their designation or employment status and irrespective of the method
by which their wages are paid, are entitled to this benefit, provided that
they have worked for at least one month during the calendar year. If the
employee worked for only a portion of the year, the 13th-month pay is
computed pro rata.
_______________
* SECOND DIVISION.
624
624 SUPREME COURT REPORTS ANNOTATED 624
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor 624 SUPREME COURT REPORTS ANNOTATED
Union-NLU
Same; Same; Same; The Supplementary Rules and Regulations
Implementing Presidential Decree (P.D.) No. 851 clarifies that overtime
pay, earnings, and other remuneration that are not part of the basic salary
shall not be included in the computation of the 13th-month pay.—On
January 16, 1976, the Supplementary Rules and Regulations
Implementing P.D. No. 851 was issued. The Supplementary Rules clarifies
that overtime pay, earnings, and other remuneration that are not part of
the basic salary shall not be included in the computation of the 13th-month
pay.
Same; Same; Same; The minimum 13th-month pay required by the
law shall not be less than one-twelfth (1/12) of the total basic salary earned
by an employee within a calendar year.—On November 16, 1987, the
Revised Guidelines on the Implementation of the 13th-Month Pay Law was
issued. Significantly, under this Revised Guidelines, it was specifically
stated that the minimum 13th-month pay required by law shall not be less
than one-twelfth (1/12) of the total basic salary earned by an employee
within a calendar year.
Same; Same; Same; Basic salary of an employee for the purpose of
computing the 13th-month pay was interpreted to include all remuneration
or earnings paid by the employer for services rendered, but does not include
allowances and monetary benefits which are not integrated as part of the
regular or basic salary.—The term “basic salary” of an employee for the
purpose of computing the 13th-month pay was interpreted to include all
remuneration or earnings paid by the employer for services rendered, but
does not include allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits, overtime, premium,
night differential and holiday pay, and cost-of-living allowances. However,
these salary-related benefits should be included as part of the basic salary
in the computation of the 13th-month pay if, by individual or collective
agreement, company practice or policy, the same are treated as part of the
basic salary of the employees.
Same; Same; Same; Benefits given to employees cannot be taken back
or reduced unilaterally by the employer because the benefit has become a
part of the employment contract, written or unwritten.—Article 100 of the
Labor Code, otherwise known as the Non-Diminution Rule, mandates that
benefits given to employees cannot be taken back or reduced unilaterally
by the employer because the
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor
Union-NLU
benefit has become part of the employment contract, written or
unwritten. The rule against diminution of benefits applies if it is shown
that the grant of the benefit is based on an express policy or has ripened
into a practice over a long period of time and that the practice is consistent
and deliberate. Nevertheless, the rule will not apply if the practice is due
to error in the construction or application of a doubtful or difficult question
of law. But even in cases of error, it should be shown that the correction is
done soon after discovery of the error.
Same; Same; Same; Distressed employees shall qualify for exemption
from the requirement of the Decree only upon prior authorization by the
Secretary of Labor.—Petitioner cannot use the argument that it is suffering
from financial losses to claim exemption from the coverage of the law on
13th-month pay, or to spare it from its erroneous unilateral computation
of the 13th-month pay of its employees. Under Section 7 of the Rules and
Regulations Implementing P.D. No. 851, distressed employers shall qualify
for exemption from the requirement of the Decree only upon prior
authorization by the Secretary of Labor. In this case, no such prior
authorization has been obtained by petitioner; thus, it is not entitled to
claim such exemption.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Jose T. De Leon for petitioner.
Arnel Z. Dolendo and Leonardo R. Subiela for respondent.
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court, assailing the Decision1 dated
_______________
1 Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices
Arcangelita M. Romilla-Lontok and Romeo F. Barza, concurring; Rollo, pp. 32-42.
625
VOL. 625, JULY 26, 2010 625
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-
NLU
May 28, 2009, and the Resolution2 dated July 28, 2009 of the Court of
Appeals (CA) in CA-G.R. SP No. 106657.
The factual antecedents of the case are as follows:
Petitioner is a domestic corporation engaged in the business of sugar
manufacturing, while respondent is a legitimate labor organization
which serves as the exclusive bargaining representative of petitioner’s
rank-and-file employees. The controversy stems from the
interpretation of the term “basic pay,” essential in the computation of
the 13th-month pay.
The facts of this case are not in dispute. In compliance with
Presidential Decree (P.D.) No. 851, petitioner granted its employees the
mandatory thirteenth (13th)-month pay since 1975. The formula used
by petitioner in computing the 13th-month pay was: Total Basic Annual
Salary divided by twelve (12). Included in petitioner’s computation of
the Total Basic Annual Salary were the following: basic monthly salary;
first eight (8) hours overtime pay on Sunday and legal/special holiday;
night premium pay; and vacation and sick leaves for each year.
Throughout the years, petitioner used this computation until 2006.3
On November 6, 2004, respondent staged a strike. During the
pendency of the strike, petitioner declared a temporary cessation of
operations. In December 2005, all the striking union members were
allowed to return to work. Subsequently, petitioner declared another
temporary cessation of operations for the months of April and May
2006. The suspension of operation was lifted on June 2006, but the
rank-and-file employees were allowed to report for work on a fifteen
(15) day-per-month rotation basis that lasted until September 2006. In
December 2006, petitioner gave the employees their 13th-month pay
based on the employee’s total earnings during the year divided by 12.4
_______________
2 Id., at pp. 44-47.
3 Id., at p. 33.
4 Id., at p. 34.
626
626 SUPREME COURT REPORTS ANNOTATED
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-
NLU
Respondent objected to this computation. It averred that petitioner
did not adhere to the usual computation of the 13th-month pay. It
claimed that the divisor should have been eight (8) instead of 12,
because the employees worked for only 8 months in 2006. It likewise
asserted that petitioner did not observe the company practice of giving
its employees the guaranteed amount equivalent to their one month
pay, in instances where the computed 13th-month pay was less than
their basic monthly pay.5
 Petitioner and respondent tried to thresh out their differences in
accordance with the grievance procedure as provided in their collective
bargaining agreement. During the grievance meeting, the
representative of petitioner explained that the change in the
computation of the 13th-month pay was intended to rectify an error in
the computation, particularly the concept of basic pay which should
have included only the basic monthly pay of the employees.6
For failure of the parties to arrive at a settlement, respondent
applied for preventive mediation before the National Conciliation and
Mediation Board. However, despite four (4) conciliatory meetings, the
parties still failed to settle the dispute. On March 29, 2007, respondent
filed a complaint against petitioner for money claims based on the
alleged diminution of benefits/erroneous computation of 13th-month
pay before the Regional Arbitration Branch of the National Labor
Relations Commission (NLRC).7
On October 31, 2007, the Labor Arbiter rendered a
Decision8dismissing the complaint and declaring that the petitioner
had the right to rectify the error in the computation of
_______________
5 Id., at pp. 34; 74.
6 Id., at p. 34.
7 Id., at pp. 34-35.
8 Penned by Labor Arbiter Mariano L. Bactin; id., at pp. 51-64.
627
VOL. 625, JULY 26, 2010 627
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-
NLU “WHEREFORE, the foregoing considered, the petition is hereby
the 13th-month pay of its employees. The fallo of the Decision reads:
9
“WHEREFORE, premises considered, the complaint filed by the
complainants against the respondents should be DISMISSED with
prejudice for utter lack of merit.
SO ORDERED.” 10
Respondents filed an appeal. On August 14, 2008, the NLRC
rendered a Decision11 reversing the Labor Arbiter. The dispositive
portion of the Decision reads:
“WHEREFORE, the decision appealed is reversed and set aside and
respondent-appellee Central Azucarera de Tarlac is hereby ordered to
adhere to its established practice of granting 13th[-] month pay on the basis
of gross annual basic which includes basic pay, premium pay for work in
rest days and special holidays, night shift differential and paid vacation
and sick leaves for each year.
Additionally, respondent-appellee is ordered to observe the guaranteed
one[-]month pay by way of 13th month pay.
SO ORDERED.” 12
Petitioner filed a motion for reconsideration. However, the same was
denied in a Resolution dated November 27, 2008. Petitioner then filed
a petition for certiorari under Rule 65 of the Rules of Court before the
CA.13
On May 28, 2009, the CA rendered a Decision14 dismissing the
petition, and affirming the decision and resolution of the NLRC, viz.:
_______________
9 Id., at p. 35.
10 Id., at p. 64.
11 Penned by Commissioner Isabel G. Panganiban-Ortiguerra, with Presiding
Commissioner Benedicto R. Palacol and Nieves Vivar-de Castro, concurring; id., at pp. 72-87.
12 Id., at pp. 86-87.
13 Id., at pp. 35-36.
14 Supra note 1.
628
628 SUPREME COURT REPORTS ANNOTATED
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-
NLU
DISMISSED and the assailed August 14, 2008 Decision and November 27,
2008 Resolution of the NLRC, are hereby AFFIRMED. No costs.
SO ORDERED.” 15
Aggrieved, petitioner filed the instant petition, alleging that the CA
committed a reversible error in affirming the Decision of the NLRC,
and praying that the Decision of the Labor Arbiter be reinstated.
The petition is denied for lack of merit.
The 13th-month pay mandated by Presidential Decree (P.D.) No.
851 represents an additional income based on wage but not part of the
wage. It is equivalent to one-twelfth (1/12) of the total basic salary
earned by an employee within a calendar year. All rank-and-file
employees, regardless of their designation or employment status and
irrespective of the method by which their wages are paid, are entitled
to this benefit, provided that they have worked for at least one month
during the calendar year. If the employee worked for only a portion of
the year, the 13th-month pay is computed pro rata.16
Petitioner argues that there was an error in the computation of the
13th-month pay of its employees as a result of its mistake in
implementing P.D. No. 851, an error that was discovered by the
management only when respondent raised a question concerning the
computation of the employees’ 13th-month pay for 2006. Admittedly, it
was an error that was repeatedly committed for almost thirty (30)
years. Petitioner insists that the length of time during which an
employer has performed a certain act beneficial to the employees, does
not prove that such an act was not done in error. It maintains that for
the claim of mistake to be negated, there must be a
_______________
15 Rollo, p. 42.
16 Azucena, Jr., Cesario Alvero, Everyone’s Labor Code, 2001 edition, p. 79.
629
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Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-
NLU
clear showing that the employer had freely, voluntarily, and
continuously performed the act, knowing that he is under no obligation
to do so. Petitioner asserts that such voluntariness was absent in this
case.17
The Rules and Regulations Implementing P.D. No. 851,
promulgated on December 22, 1975, defines 13th-month pay and basic
salary as follows:
“Sec. 2. Definition of certain terms.—As used in this issuance:
(a) “Thirteenth-month pay” shall mean one twelfth (1/12) of the basic
salary of an employee within a calendar year;
(b) “Basic salary” shall include all remunerations or earnings paid by
an employer to an employee for services rendered but may not include cost-
of-living allowances granted pursuant to Presidential Decree No. 525 or
Letter of Instructions No. 174, profit-sharing payments, and all allowances
and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the promulgation
of the Decree on December 16, 1975.”
On January 16, 1976, the Supplementary Rules and Regulations
Implementing P.D. No. 851 was issued. The Supplementary Rules
clarifies that overtime pay, earnings, and other remuneration that are
not part of the basic salary shall not be included in the computation of
the 13th-month pay.
On November 16, 1987, the Revised Guidelines on the
Implementation of the 13th-Month Pay Law was issued. Significantly,
under this Revised Guidelines, it was specifically stated that the
minimum 13th-month pay required by law shall not be less than one-
twelfth (1/12) of the total basic salary earned by an employee within a
calendar year.
Furthermore, the term “basic salary” of an employee for the purpose
of computing the 13th-month pay was interpreted to include all
remuneration or earnings paid by the employer for
_______________
17 Rollo, pp. 22-24.
630
630 SUPREME COURT REPORTS ANNOTATED
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-
NLU
services rendered, but does not include allowances and monetary
benefits which are not integrated as part of the regular or basic salary,
such as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and cost-of-
living allowances. However, these salary-related benefits should be
included as part of the basic salary in the computation of the 13th-
month pay if, by individual or collective agreement, company practice
or policy, the same are treated as part of the basic salary of the
employees.
Based on the foregoing, it is clear that there could have no erroneous
interpretation or application of what is included in the term “basic
salary” for purposes of computing the 13th-month pay of employees.
From the inception of P.D. No. 851 on December 16, 1975, clear-cut
administrative guidelines have been issued to insure uniformity in the
interpretation, application, and enforcement of the provisions of P.D.
No. 851 and its implementing regulations.
As correctly ruled by the CA, the practice of petitioner in giving
13th-month pay based on the employees’ gross annual earnings which
included the basic monthly salary, premium pay for work on rest days
and special holidays, night shift differential pay and holiday pay
continued for almost thirty (30) years and has ripened into a company
policy or practice which cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-
Diminution Rule, mandates that benefits given to employees cannot be
taken back or reduced unilaterally by the employer because the benefit
has become part of the employment contract, written or
unwritten.18 The rule against diminution of benefits applies if it is
shown that the grant of the benefit is based on an express policy or has
ripened into a practice over a long period of time and that the practice
is consistent and
Furthermore, petitioner cannot use the argument that it is suffering
from financial losses to claim exemption from the coverage of the law
on 13th-month pay, or to spare it from its erroneous unilateral
computation of the 13th-month pay of its employees. Under Section 7
of the Rules and Regulations Implementing P.D. No. 851, distressed
employers shall qualify for exemption from the requirement of the
Decree only upon prior authorization by the Secretary of Labor.20 In this
case, no such prior authorization has been obtained by petitioner; thus,
it is not entitled to claim such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the Resolution
dated July 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106657
are hereby AFFIRMED. Costs against petitioner.
_______________
19 Supra note 16, at p. 78.
20 See Dentech Manufacturing Corporation v. National Labor Relations Commission, 254
Phil. 603; 172 SCRA 588 (1989).

_______________ © Copyright 2016 Central Book Supply, Inc. All rights reserved.
18 Philippine Airlines, Inc. v. National Labor Relations Commission, 328 Phil. 826; 259
SCRA 459 (1996).
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NLU

deliberate. Nevertheless, the rule will not apply if the practice is due to
error in the construction or application of a doubtful or difficult
question of law. But even in cases of error, it should be shown that the
correction is done soon after discovery of the error.19
The argument of petitioner that the grant of the benefit was not
voluntary and was due to error in the interpretation of what is included
in the basic salary deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The guidelines set by the law
are not difficult to decipher. The voluntariness of the grant of the
benefit was manifested by the number of years the employer had paid
the benefit to its employees. Petitioner only changed the formula in the
computation of the 13th-month pay after almost 30 years and only after
the dispute between the management and employees erupted. This act
of petitioner in changing the formula at this time cannot be sanctioned,
as it indicates a badge of bad faith.
 G.R. No. 152928. June 18, 2009.*
METROPOLITAN BANK and TRUST COMPANY,
petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION,
FELIPE A. PATAG and BIENVENIDO C. FLORA, respondents.
Labor Law; Wages and Benefits; Retirement; To be considered a
company practice, the giving of the benefits should have been done over a
long period of time, and must be shown to have been consistent and
deliberate.—To be considered a company practice, the giving of the benefits
should have been done over a long period of time, and must be shown to
have been consistent and deliberate. The test or rationale of this rule on
long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.
Same; Same; Metrobank has consistently, deliberately and voluntarily
granted improved benefits to its officers, after the signing of each CBA with
its rank and file employees, retroactive to January 1st of the same year as
the grant of improved benefits and without the condition that the officers
should remain employees as of a certain date.—For over a decade,
Metrobank has consistently, delibe-rately and voluntarily granted
improved benefits to its officers, after the signing of each CBA with its rank
and file employees, retroactive to January 1st of the same year as the grant
of improved benefits and without the condition that the officers should
remain employees as of a certain date. This undeniably indicates a
unilateral and voluntary act on Metrobank’s part, to give said benefits to
its officers, knowing that such act was not required by law or the company
retirement plan.
Same; Same; This Court held that the grant of these benefits has
ripened into company practice or policy which cannot be peremptorily
withdrawn.—With regard to the length of time the company practice
should have been exercised to constitute voluntary employer practice
which cannot be unilaterally withdrawn by the employer,
_______________
* FIRST DIVISION.
377
VOL. 589, JUNE 18, 2009 377
Metropolitan Bank and Trust Company vs. National Labor Relations
Commission
jurisprudence has not laid down any hard and fast rule. In the case
of Davao Fruits Corporation v. Associated Labor Unions, 225 SCRA 562
(1993), the company practice of including in the computation of the 13th-
month pay the maternity leave pay and cash equivalent of unused vacation
and sick leave lasted for six (6) years. In another case, Tiangco v. Leogardo,
Jr., 122 SCRA 267 (1983), the employer carried on the practice of giving a
fixed monthly emergency allowance from November 1976 to February
1980, or three (3) years and four (4) months. While in Sevilla Trading v.
Semana, 428 SCRA 239 (2004) the employer kept the practice of including
non-basic benefits such as paid leaves for unused sick leave and vacation
leave in the computation of their 13th-month pay for at least two (2) years.
In all these cases, this Court held that the grant of these benefits has
ripened into company practice or policy which cannot be peremptorily
withdrawn. The common denominator in these cases appears to be the
regularity and deliberateness of the grant of benefits over a significant
period of time.
Same; Same; It is a jurisprudential rule that where there is an
established employer practice of regularly, knowingly and voluntarily
granting benefits to employees over a significant period of time, despite the
lack of a legal or contractual obligation on the part of the employer to do so,
the grant of such benefits ripens into a vested right of the employees and can
no longer be unilaterally reduced or withdrawn by the employer.—Anent
petitioner’s line of reasoning that it had no obligation under Article 287 of
the Labor Code or the express terms of the retirement plan to grant
improved benefits to employees who are no longer in the service at the time
of the grant, it appears to us that petitioner is deliberately missing the
point. Ordinarily, an employee would have no right to demand benefits that
the employer was not obligated by law or contract to give. However, it is
the jurisprudential rule that where there is an established employer
practice of regularly, knowingly and voluntarily granting benefits to
employees over a significant period of time, despite the lack of a legal or
contractual obligation on the part of the employer to do so, the grant of
such benefits ripens into a vested right of the employees and can no longer
be unilaterally reduced or withdrawn by the employer.
Same; The right to file a labor complaint or assert a cause of action
against an employer is a personal right of each employee.—Petitioner
contends that the CA’s ruling would result in unfair dis-
378
378 SUPREME COURT REPORTS ANNOTATED
Metropolitan Bank and Trust Company vs. National Labor Relations
Commission
 crimination since there were at least twelve (12) other retirees in 1998
similarly situated as respondents whose retirement benefits were
computed at the old rate but who did not file cases against Metrobank.
Petitioner posits the view that the CA ruling would unlawfully grant
greater benefits to respondents vis a vis the other retirees who did not
demand the improved benefits. This argument similarly deserves no credit.
The right to file a labor complaint or assert a cause of action against an
employer is a personal right of each employee. It is most certainly not
dependent on whether or not other employees similarly situated would also
file a case against the employer. If there are other employees in the same
boat as respondents who decided, for whatever reason, not to demand
payment of the improved benefits, that would be their prerogative and
their own look out. It should not prejudice respondents or ban them from
asserting their rights and pursuing their legal remedies against petitioner.
Same; It is a time-honored rule 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.—It is a time-honored rule 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. The policy is to extend the applicability to a greater number
of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and
protection to labor. This principle gives us even greater reason to affirm
the findings of the CA.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
De La Rosa and Nograles for petitioner.
Sanidad, Abaya, Te, Viterbo, Enriquez and Tan Law Firm for
private respondent.
379
VOL. 589, JUNE 18, 2009 379
Metropolitan Bank and Trust Company vs. National Labor Relations Commission
Commission
LEONARDO-DE CASTRO, J.:
In this petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, petitioner seeks to set aside and annul the
Decision1 dated December 13, 2001 and the Resolution2 dated April 9,
2002 rendered by the Court of Appeals (CA) in CA-G.R. No. 63144.
The CA decision affirmed an earlier resolution3 of the National
Labor Relations Commission (NLRC) dated March 31, 2000 which
ruled in favor of herein respondents.
The factual antecedents are as follows:
Respondents Felipe Patag (Patag) and Bienvenido Flora (Flora)
were former employees of petitioner Metropolitan Bank and Trust
Company (Metrobank). Both respondents availed of the bank’s
compulsory retirement plan in accordance with the 1995 Officers’
Benefits Memorandum. At the time of his retirement on February 1,
1998, Patag was an Assistant Manager with a monthly salary of
P32,100.00. Flora was a Senior Manager with a monthly salary of
P48,500.00 when he retired on April 1, 1998. Both of them received
their respective retirement benefits computed at 185% of their gross
monthly salary for every year of service as provided under the said 1995
Memorandum. In all, Patag was fully paid the total amount of
P1,957,782.71 while Flora was paid the total amount of P3,042,934.29
in retirement benefits.
Early in 1998, Collective Bargaining Agreement (CBA) negotiations
were on-going between Metrobank and its rank and file employees for
the period 1998-2000. Patag wrote a letter dated February 2, 19984 to
the bank requesting that his re-
_______________
1 Penned by Associate Justice Delilah Vidallon-Magtolis (ret.), with Associate Justices
Candido V. Rivero (ret.) and Juan Q. Enriquez, Jr. concurring; Rollo, pp. 60-66.
2 Id., at p. 68.
3 Id., at pp. 160-169.
4 Id., at p. 244.
380
380 SUPREME COURT REPORTS ANNOTATED
Metropolitan Bank and Trust Company vs. National Labor Relations
tirement benefits be computed at the new rate should there be an
increase thereof in anticipation of possible changes in officers’ benefits
after the signing of the new CBA with the rank and file. Flora likewise
wrote Metrobank in March 25, 1998,5 requesting the bank to use as
basis in the computation of their retirement benefits the increased rate
of 200% as embodied in the just concluded CBA between the bank and
its rank and file employees. Metrobank did not reply to their requests.
The records show that since the 1986-1988 CBA, and continuing
with each CBA concluded thereafter with its rank and file employees,
Metrobank would issue a Memorandum granting similar or better
benefits to its managerial employees or officers, retroactive to January
1st of the first year of effectivity of the CBA. When the 1998-2000 CBA
was approved, Metrobank, in line with its past practice, issued on June
10, 1998, a Memorandum on Officers’ Benefits, which provided for
improved benefits to its officers (the 1998 Officers’ Benefits
Memorandum). This Memorandum was signed by then Metrobank
President Antonio S. Abacan, Jr. Pertinently, the compulsory
retirement benefit for officers was increased from 185% to 200%
effective January 1, 1998, but with the condition that the benefits shall
only be extended to those who remain in service as of June 15, 1998.6
On June 29, 1998, Flora again wrote a letter,7 asking Metrobank for
a reconsideration of its condition that the new officers’ benefits shall
apply only to those officers still employed as of June 15, 1998.
Metrobank denied this request on July 17, 1998.8
Consequently on August 31, 1998, Patag and Flora, through their
counsel, wrote a letter to Metrobank demanding
_______________
5 Id., at p. 246.
6 Id., at pp. 250-253.
7 Id., at p. 255.
8 Id., at p. 254.
381
VOL. 589, JUNE 18, 2009 381
Metropolitan Bank and Trust Company vs. National Labor Relations
Commission Metropolitan Bank and Trust Company vs. National Labor Relations
the payment of their unpaid retirement benefits amounting to
P284,150.00 and P448,050.00, respectively, representing the increased
benefits they should have received under the 1998 Officers’ Benefits
Memorandum.9
In its letter-reply dated September 17, 1998, Metrobank’s First
Vice-President Paul Lim, Jr. informed Patag and Flora of their
ineligibility to the improved officers’ benefits as they had already
ceased their employment and were no longer officers of the bank as of
June 15, 1998.10
On September 25, 1998, Patag and Flora filed with the Labor
Arbiter their consolidated complaint against Metrobank for
underpayment of retirement benefits and damages, asserting that
pursuant to the 1998 Officers’ Benefits Memorandum, they were
entitled to additional retirement benefits. Patag, for his part, also
claimed he was entitled to payment of his 1997 profit share and 1998
structural adjustment.
On June 8, 1999, Labor Arbiter Geobel A. Bartolabac rendered a
decision,11 dismissing the complaint of Patag and Flora. As expected,
Patag and Flora filed an appeal with the NLRC. In a resolution12 dated
March 31, 2000, the Third Division of the NLRC partially granted the
appeal and directed Metrobank to pay Patag and Flora their unpaid
beneficial improvements under the 1998 Officers’ Benefits
Memorandum.
Aggrieved with the ruling of the NLRC, Metrobank elevated the
matter to the CA by way of a petition for certiorari, docketed as CA-
G.R. No. 63144.
On December 13, 2001, the CA promulgated its assailed decision
dismissing Metrobank’s petition and affirming the resolution of the
NLRC. In so ruling, the CA declared:
_______________
9 Id., at p. 149.
10 Id., at p. 150.
11 Id., at pp. 151-158.
12 Id., at pp. 160-169.
382
382 SUPREME COURT REPORTS ANNOTATED
Commission
“Upon the other hand, the private respondents’ (Patag and Flora)
evidence reveals that from 1986 to 1995, it has been the practice of the
petitioner (Metrobank) that whenever it enters and signs a new CBA with
its rank and file employees, it likewise issues a memorandum extending
benefits to its officers which are higher or at least the same as those
provided in the said CBA for the rank and file employees effective every
1st of January of the year, without any condition that the officers-
beneficiaries should remain employees of the petitioner as of a certain date
of a given year. xxx. Under the circumstances, the same may be deemed to
have ripened into company practice or policy which cannot be peremptorily
withdrawn.” 13
Petitioner’s subsequent motion for reconsideration was denied by
the CA in its Resolution dated April 9, 2002.
Hence, the instant petition where Metrobank raised the following
arguments:
I. THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR IN AFFIRMING THE NLRC’S DECISION AND
RESOLUTION BY RULING THAT THE PRIVATE
RESPONDENTS ARE ENTITLED TO THEIR BELATED CLAIM
FOR ADDITIONAL (RETIREMENT) BENEFITS EVEN AFTER
THEY EFFECTIVELY CEASED THEIR EMPLOYMENT WITH
PETITIONER AND DESPITE THEIR UNQUALIFIED
ACKNOWLEDGMENT AND RECEIPT OF THE PAYMENT IN
FULL OF THEIR RETIREMENT BENEFITS, CONTRARY TO
LAW AS WELL AS OTHER LAWFUL ORDERS AND SETTLED
JURISPRUDENCE ON THE MATTER.14
II. THE HONORABLE COURT OF APPEALS’ FAVORABLE
APPLICATION OF THE 1998 IMPROVED OFFICERS’
(RETIREMENT) BENEFITS TO THE RESPONDENTS DESPITE
THEIR NON-COMPLIANCE WITH THE REQUIREMENTS OF
ELIGIBILITY THERETO,
_______________
13 Id., at p. 65.
14 Id., at p. 27.
383
VOL. 589, JUNE 18, 2009 383
Metropolitan Bank and Trust Company vs. National Labor Relations Commission
Commission
IS PATENTLY CONTRARY TO LAW AND THE WELL-SETTLED
JURISPRUDENCE ON THE MATTER.15
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN NOT FINDING THAT RESPONDENTS ARE BARRED BY
ESTOPPEL FROM INSTITUTING THE ACTION AFTER HAVING
UNQUALIFIEDLY ACKNOWLEDGED AND RECEIVED THE
FULL PAYMENT OF THEIR RETIREMENT BENEFITS.16
Petitioner contends that respondents Patag and Flora, having
qualified for compulsory retirement under the 1995 Officers’ Benefits
Memorandum, cannot now claim to be eligible to higher retirement
benefits under the 1998 Improved Benefits Memorandum. In fact,
according to petitioner, Patag and Flora had unqualifiedly received the
full payment of their retirement benefits. Also, the 1998 Improved
Benefits Memorandum was issued after Patag and Flora compulsorily
retired on February 1, 1998 and April 1, 1998, respectively, and there
was an express condition in the 1998 Officers’ Benefits Memorandum
that the improved benefits shall apply only to officers who remain in
service as of June 15, 1998.
From the facts, it is clear that the core issue hinges on whether
respondents can still recover higher benefits under the 1998 Officers’
Benefits Memorandum despite the fact that they have compulsorily
retired prior to the issuance of said memorandum and did not meet the
condition therein requiring them to be employed as of June 15, 1998.
The main issue in this case involves a question of fact. As a rule, the
Supreme Court is not a trier of facts and this applies with greater force
in labor cases. Hence, factual findings of quasi-judicial bodies like the
NLRC, particularly when they coincide with those of the Labor Arbiter
and if supported by substantial evidence, are accorded respect and even
finality by this Court. However, where the findings of the NLRC and
_______________
15 Id., at p. 40.
16 Id., at pp. 48-49.
384
384 SUPREME COURT REPORTS ANNOTATED
Metropolitan Bank and Trust Company vs. National Labor Relations
the Labor Arbiter are contradictory, as in this case, the reviewing court
may delve into the records and examine for itself the questioned
findings.17
It is Metrobank’s position that the CA and the NLRC erred when
they recognized that there was an established company practice or
policy of granting improved benefits to its officers effective January 1
of the year and without any condition that the officers should remain
employees of Metrobank as of a certain date. Metrobank claims that
although its officers were extended the same as or higher benefits than
those contained in its CBA with its rank and file employees from 1986
to 1997, the same cannot be concluded to have ripened into a company
practice since the provisions of the retirement plan itself and the law
on retirement should be controlling.
We do not agree.
To be considered a company practice, the giving of the benefits
should have been done over a long period of time, and must be shown
to have been consistent and deliberate. The test or rationale of this rule
on long practice requires an indubitable showing that the employer
agreed to continue giving the benefits knowing fully well that said
employees are not covered by the law requiring payment thereof.18
It was the NLRC’s finding, as affirmed by the CA, that there is a
company practice of paying improved benefits to petitioner bank’s
officers effective every January 1 of the same year the improved
benefits are granted to rank and file employees in a CBA. We find that
the NLRC’s and CA’s factual conclusions were fully supported by
substantial evidence on record. Respondents were able to prove that for
the period 1986-1997, Metrobank issued at least four (4) separate
memo-
_______________
17 Tres Reyes v. Maxim’s Tea House, G.R. No. 140853, February 27, 2003, 398 SCRA 288,
298.
18 National Sugar Refineries Corporation v. National Labor Relations Commission, G.R.
No. 101761, March 24, 1993, 220 SCRA 453, 463.
385
VOL. 589, JUNE 18, 2009 385 Metropolitan Bank and Trust Company vs. National Labor Relations
Metropolitan Bank and Trust Company vs. National Labor Relations
Commission ployer, jurisprudence has not laid down any hard and fast rule. In the
randa, coinciding with the approval of four (4) different CBAs with the
rank and file, wherein bank officers were granted benefits, including
retirement benefits, that were commensurate or superior to those
provided for in Metrobank’s CBA with its rank and file employees.
Respondents attached to their position paper filed with the Labor
Arbiter copies of the CBAs that petitioner entered into with its rank
and file employees for the period 1986-1997 and also the various
officers’ benefits memoranda issued by the bank after each CBA
signing. Respondents had no hand in the preparation of these officers’
benefits memoranda for they appeared to be issuances of the bank
alone, signed by its President or other proper officer. Thus, petitioner
cannot credibly argue that respondents’ claim of a company practice
was baseless or self-serving.
The record further reveals that these improved officers’ benefits
were always made to retroact effective every January 1 of the year of
issuance of said memoranda and without any condition regarding the
term or date of employment. The condition that the managerial
employee or bank officer must still be employed by petitioner as of a
certain date was imposed for the first time in the 1998 Officers’
Benefits Memorandum.
In other words, for over a decade, Metrobank has consistently,
deliberately and voluntarily granted improved benefits to its
officers, after the signing of each CBA with its rank and file employees,
retroactive to January 1st of the same year as the grant of improved
benefits and without the condition that the officers should remain
employees as of a certain date. This undeniably indicates a unilateral
and voluntary act on Metrobank’s part, to give said benefits to its
officers, knowing that such act was not required by law or the company
retirement plan.
With regard to the length of time the company practice should have
been exercised to constitute voluntary employer practice which cannot
be unilaterally withdrawn by the em-
386
386 SUPREME COURT REPORTS ANNOTATED
Commission
case of Davao Fruits Corporation v. Associated Labor Unions,19 the
company practice of including in the computation of the 13th-month
pay the maternity leave pay and cash equivalent of unused vacation
and sick leave lasted for six (6) years. In another case, Tiangco v.
Leogardo, Jr.,20 the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980,
or three (3) years and four (4) months. While inSevilla Trading v.
Semana,21 the employer kept the practice of including non-basic
benefits such as paid leaves for unused sick leave and vacation leave in
the computation of their 13th-month pay for at least two (2) years. In
all these cases, this Court held that the grant of these benefits has
ripened into company practice or policy which cannot be peremptorily
withdrawn. The common denominator in these cases appears to be the
regularity and deliberateness of the grant of benefits over a significant
period of time.
In the case at bar, petitioner Metrobank favorably adjusted its
officers’ benefits, including retirement benefits, after the approval of
each CBA with the rank and file employees, to be effective every
January 1st of the same year as the CBA’s approval, and without any
condition regarding the date of employment of the officer, from 1986 to
1997 or for about eleven (11) years. This constitutes voluntary employer
practice which cannot be unilaterally withdrawn or diminished by the
employer without violating the spirit and intent of Art. 100 of the Labor
Code, to wit:
“Art. 100. Prohibition against elimination or diminution of
benefits.—Nothing in this Book shall be construed to eliminate or in any
way diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code.
_______________
19 G.R. No. 85073, August 24, 1993, 225 SCRA 562.
20 No. L-57636, May 16, 1983, 122 SCRA 267.
21 G.R. No. 152456, April 28, 2004, 428 SCRA 239.
387
VOL. 589, JUNE 18, 2009 387 Metropolitan Bank and Trust Company vs. National Labor Relations
Metropolitan Bank and Trust Company vs. National Labor Relations
Commission obligation on the part of the employer to do so, the grant of such benefits
The condition that an officer must still be in the service of petitioner
bank as of June 15, 1998 effectively reduced benefits of employees who
retired prior to the issuance of the 1998 Officers’ Benefits
Memorandum despite the fact in the past no such condition was
imposed by the bank and previous retirees presumably enjoyed the
higher benefits regardless of their date of retirement as long as they
were still employees of petitioner as of the January 1st effectivity date.
If it were true that notwithstanding the existence of the previous
officers’ benefits memoranda (which all did not contain the same
condition as the 1998 memorandum) there was no company practice of
granting the improved benefits to officers who retired from the bank
prior to the issuance of the officers’ benefits memorandum, it would
have been simple enough for the bank to prove this. A company as large
and prestigious as petitioner would certainly have a comprehensive and
efficient system of keeping employee records. All it had to do was show
some examples of past retirees over the period 1986 to 1997 who retired
prior to the issuance of the relevant officers’ benefits memorandum but
after the usual January 1st memorandum effectivity date and whose
retirement benefits were computed at the old rate and not at the
improved rate. Unfathomably, Metrobank presented no such evidence.
Contrary to petitioner’s insistent view, the CA committed no error
when it ruled that petitioner failed to present convincing evidence to
substantiate its claims.
Anent petitioner’s line of reasoning that it had no obligation under
Article 287 of the Labor Code or the express terms of the retirement
plan to grant improved benefits to employees who are no longer in the
service at the time of the grant, it appears to us that petitioner is
deliberately missing the point. Ordinarily, an employee would have no
right to demand benefits that the employer was not obligated by law or
contract to give. However, it is the jurisprudential rule that where there
is an established employer practice of regularly, knowingly and
voluntarily granting benefits to employees over a significant period of
time, despite the lack of a legal or contractual
388
388 SUPREME COURT REPORTS ANNOTATED
Commission
ripens into a vested right of the employees and can no longer be
unilaterally reduced or withdrawn by the employer.22
With respect to petitioner’s argument that respondents should be
deemed “estopped” from claiming additional benefits in view of their
“unqualified receipt” of their retirement benefits and other benefits, we
find the same lacking in merit. There was nothing in the
receipts/vouchers signed by respondents to indicate that they
acknowledged full receipt of all amounts due them or that they are
waiving their right to claim any deficiency in their benefits. Indeed, in
this jurisdiction, even written, express quitclaims, releases and waivers
in labor cases may be invalidated under certain circumstances. As a
rule, quitclaims, waivers or releases are looked upon with disfavor and
are commonly frowned upon as contrary to public policy and ineffective
to bar claims for the measure of a worker’s legal rights.23 In this case,
respondents’ consistent acts of demanding the improved benefits before
and after their actual receipt of their partial benefits belie any intention
to waive their legal right to demand the deficiency in their benefits.
Thus, we cannot accept petitioner’s view that there is estoppel or even
implied waiver on the part of respondents.
Finally, petitioner contends that the CA’s ruling would result in
unfair discrimination since there were at least twelve (12) other
retirees in 1998 similarly situated as respondents
_______________
22 See, for example, Oceanic Pharmacal Employees Union v. Inciong, No. L-50568,
November 7, 1979, 94 SCRA 270, 274; Davao Integrated Port Services, Inc. v. Abarquez, G.R.
No. 102132, March 19, 1993, 220 SCRA 197, 207; Republic Planters Bank v. National Labor
Relations Commission, G.R. No. 117460, January 6, 1997, 266 SCRA 142, 148 and Manila
Electric Company v. Quisumbing, G.R. No. 127598, January 27, 1999, 302 SCRA 173, 200.
23 Phil. Employ Services and Resources, Inc. v. Paramio, G.R. No. 144786, April 15, 2004,
427 SCRA 732, 755.
389
VOL. 589, JUNE 18, 2009 389 390 SUPREME COURT REPORTS ANNOTATED
Metropolitan Bank and Trust Company vs. National Labor Relations Metropolitan Bank and Trust Company vs. National Labor Relations
Commission Commission
whose retirement benefits were computed at the old rate but who did
not file cases against Metrobank. Petitioner posits the view that the CA
ruling would unlawfully grant greater benefits to respondentsvis-à-
vis the other retirees who did not demand the improved benefits. This
argument similarly deserves no credit. The right to file a labor
complaint or assert a cause of action against an employer is a personal
right of each employee. It is most certainly not dependent on whether
or not other employees similarly situated would also file a case against
the employer. If there are other employees in the same boat as
respondents who decided, for whatever reason, not to demand payment
of the improved benefits, that would be their prerogative and their own
look out. It should not prejudice respondents or ban them from
asserting their rights and pursuing their legal remedies against
petitioner.
It is worth reiterating that the condition requiring bank officers to
be still employed as of June 15, 1998 to be eligible to the adjusted
benefits, was included by Metrobank for the first time in the 1998
Officers’ Benefits Memorandum dated June 10, 1998.24Significantly,
petitioner took such action only after Patag and Flora wrote letters
dated February 2, 199825 and March 25, 1998,26respectively, requesting
the bank to use as basis in the computation of their retirement benefits
the increased rate that might be granted with the signing of the 1998-
2000 CBA between the bank and its rank and file employees. Thus,
when Metrobank opted to impose a new condition in its Officers’
Benefits Memorandum dated June 10, 1998, it already had knowledge
of respondents’ requests. Indeed, the imposition of the said condition
shortly after respondents made their requests is suspicious, to say the
least. Such conduct on the part of Metrobank deserves no sympathy
from this Court.
_______________
24 Rollo, pp. 250-253.
25 Supra note 4.
26 Supra note 5.
390
It is a time-honored rule 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. The policy is to extend the applicability to a greater
number of employees who can avail of the benefits under the law, which
is in consonance with the avowed policy of the State to give maximum
aid and protection to labor.27 This principle gives us even greater reason
to affirm the findings of the CA.
WHEREFORE, the petition for review is hereby DENIED. The
assailed decision and resolution of the CA in CA-G.R. No. 63144 are
hereby AFFIRMED.
SO ORDERED.
Puno (C.J., Chairperson), Carpio, Corona and Bersamin, JJ.,
concur.
 G.R. No. 166647. March 31, 2006. * habit, or pattern of evidence must be numerous enough to base on inference
PAG-ASA STEEL WORKS, INC., petitioner, vs. COURT OF APPEALS,
FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS
UNION (PSWU), respondent.
Labor Law; Civil Procedure; Appeals; Well-settled is the rule, also
applicable in labor cases, that issues not raised below cannot be raised for
the first time on appeal.—On the procedural issue, well-settled is the rule,
also applicable in labor cases, that issues not raised below cannot be raised
for the first time on appeal. Points of law, theories, issues and arguments
not brought to the attention of the lower court need not be, and ordinarily
will not be, considered by the reviewing court, as they cannot be raised for
the first time at that late stage. Basic considerations of due process impel
this rule.
Same; Wages; Wage Order No. NCR-08 clearly states that only those
employees receiving salaries below the prescribed minimum wage are
entitled to the wage increase provided therein, and not all employees across-
the-board.—Wage Order No. NCR-08 clearly states that only those
employees receiving salaries below the prescribed minimum wage are
entitled to the wage increase provided therein, and not all employees
across-the-board as respondent Union would want petitioner to do.
Considering therefore that none of the members of respondent Union are
receiving salaries below the P250.00 minimum wage, petitioner is not
obliged to grant the wage increase to them.
_______________
* FIRST DIVISION.
476
476 SUPREME COURT REPORTS ANNOTATED CALLEJO, SR., J.:
Pag-Asa Steel Works, Inc. vs. Court of Appeals of Appeals (CA) in CA-G.R. SP No. 65171 ordering Pag-Asa Steel
Evidence; Customs; Like any other fact, habits, customs, usage or
patterns of conduct must be proved.—However, just like any other fact,
habits, customs, usage or patterns of conduct must be proved. Thus was
the ruling of the Court in Boston Bank of the Philippines v. Manalo, et al.,
482 SCRA 108 (2006): Habit, custom, usage or pattern of conduct must be
proved like any other facts. Courts must contend with the caveat that,
before they admit evidence of usage, of habit or pattern of conduct, the
offering party must establish the degree of specificity and frequency of
uniform response that ensures more than a mere tendency to act in a given
manner but rather, conduct that is semi-automatic in nature. The offering
party must allege and prove specific, repetitive conduct that might
constitute evidence of habit. The examples offered in evidence to prove
of systematic conduct. Mere similarity of contracts does not present the
kind of sufficiently similar circumstances to outweigh the danger of
prejudice and confusion.
Labor Law; Benefits; To ripen into a company practice that is
demandable as a matter of right, the giving of the increase should not be by
reason of a strict legal or contractual obligation, but by reason of an act of
liberality on the part of the employer.—To ripen into a company practice
that is demandable as a matter of right, the giving of the increase should
not be by reason of a strict legal or contractual obligation, but by reason of
an act of liberality on the part of the employer. Hence, even if the company
continuously grants a wage increase as mandated by a wage order or
pursuant to a CBA, the same would not automatically ripen into a company
practice. In this case, petitioner granted the increase under Wage Order
No. NCR-07 on its belief that it was obliged to do so under the CBA.
PETITION for review on certiorari of the decision and resolution of
the Court of Appeals.
The facts are stated in the opinion of the Court.
Rodolfo P. Ortico for petitioner.
Florante M. Yambot for respondent.
477
VOL. 486, MARCH 31, 2006 477
Pag-Asa Steel Works, Inc. vs. Court of Appeals
This is a Petition for Review on Certiorari of the Decision of the Court
1
Works, Inc. to pay the members of Pag-Asa Steel Workers Union
(Union) the wage increase prescribed under Wage Order No. NCR-08.
Also assailed in this petition is the CA Resolution denying the
corporation’s motion for reconsideration.
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized
and existing under Philippine laws and is engaged in the manufacture
of steel bars and wire rods. Pag-Asa Steel Workers Union is the duly
authorized bargaining agent of the rank-and-file employees of
petitioner.
On January 8, 1998, the Regional Tripartite Wages and
Productivity Board (Wage Board) of the National Capital Region (NCR)
issued Wage Order No. NCR-06. It provided for an increase of P13.00
2

10. TABAOG ALBERT 04.10.97 221.00 11.00 232.00

per day in the salaries of employees receiving the minimum wage, and
a consequent increase in the minimum wage rate to P198.00 per day. 11. SALEN EDILBERTO 02.10.97 221.00 11.00 232.00
Petitioner and the Union negotiated on how to go about the wage
adjustments. Petitioner forwarded a letter dated March 10, 1998 to the
3
13. PAEZ REYNALDO 02.27.97 235.00 11.00 246.00
Union with the list of the salary adjustments of the rank-and-file
employees after the implementation of Wage Order No. NCR-06, and 14. HERNANDEZ ALFREDO 03.23.96 246.00 10.00 256.00
the notation that said “adjustments [were] in accordance with the
formula [they] have discussed and [were] designed so as no distortion 15. BANIA LUIS JR. 12.08.95 246.00 10.00 256.00
shall result from the implementation of Wage Order No. NCR-06.”
16. MAGBOO VICTOR 05.25.96 246.00 10.00 256.00
_______________
Penned by Associate Justice Hakim S. Abdulwahid, with Associate Justices Delilah
1
17. NINORA BONIFACIO 03.22.96 246.00 10.00 256.00
Vidallon-Magtolis (retired) and Jose L. Sabio, Jr., concurring; Rollo, pp. 282-290.
2 Rollo, pp. 388-390. 18. ALANCADO RODERICK 11.10.95 246.00 10.00 256.00
3 Id., at p. 124.
478
19. PUTONG PASCUAL 06.23.96 246.00 10.00 256.00

478 SUPREME COURT REPORTS ANNOTATED 20. PAR EULOGIO JR. 08.16.95 246.00 10.00 256.00

Pag-Asa Steel Works, Inc. vs. Court of Appeals 21. SALON FONDADOR 11.16.95 246.00 10.00 256.00

DATE PRESENT ADJUST NEW 22. RODA GEORGE 10.11.95 246.00 10.00 256.00

NAME REGULAR RATE EFF 2/6/98 RATE 23. RIOJA JOSEPH 12.28.95 246.00 10.00 256.00

1. PEPINO EMMANUEL 08.01.97 191.00 13.00 204.00 24. RAYMUNDO ANTONIO 06.05.96 246.00 10.00 256.00

2. SEVANDRA RODOLFO 01.17.98 192.00 13.00 205.00 25. BUGTAI ROBERTO 04.10.96 246.00 10.00 256.00

3. BERNABE ALFREDO 10.24.97 200.00 13.00 213.00 26. RELATO RAMON 07.07.96 265.00 10.00 275.00

4. UMBAL ADOLFO 08.18.97 215.00 12.00 227.00 27. REGACHUELO DENNIS 11.30.95 265.00 10.00 275.00

5. AQUINO JONAS 08.25.97 215.00 12.00 227.00 28. ORNOPIA REYNALDO 08.09.94 268.00 10.00 278.00

6. AGCAOILI JAIME 01.08.98 220.00 11.00 231.00 29. PULPULAAN JAIME 01.18.96 275.00 10.00 285.00

7. BERMEJO JIMMY JR. 04.01.97 221.00 11.00 232.00 30. PANLAAN FERDINAND 01.18.96 275.00 10.00 285.00

8. EDRADAN ELDEMAR P. 04.17.97 221.00 11.00 232.00 31. BAGASBAS EULOGIO, JR. 01.18.96 275.00 10.00 285.00

9. REBOTON RONILO 05.14.97 221.00 11.00 232.00 32. ALEJANDRO OLIVER 12.03.95 275.00 10.00 285.00

33. PRIELA DANILO 11.30.95 280.00 10.00 290.00

34. NOBELJAS EDGAR 07.10.95 283.00 10.00 293.00 53. CHUA MARLONITO 10.20.93 288.00 10.00 298.00

35. SAJOT RONNIE 10.02.93 288.00 10.00 298.00 54. CATACUTAN JUNE 03.02.94 288.00 10.00 298.00

36. WHITING JOEL 09.30.93 288.00 10.00 298.00 55. DE LOS SANTOS REYNALDO 12.23.93 288.00 10.00 298.00

37. SURINGA FRANKLIN 12.19.93 288.00 10.00 298.00 56. REYES EFREN 10.23.93 288.00 10.00 298.00

38. SIBOL MICHAEL 12.11.93 288.00 10.00 298.00 57. CAGOMOC DANILO 01.13.94 288.00 10.00 298.00

39. SOLO JOSE 02.20.94 288.00 10.00 298.00 58. DOROL ERWIN 09.16.93 288.00 10.00 298.00

40. TIZON JOEL 12.23.93 288.00 10.00 298.00 59. CURAMBAO TIRSO 09.23.93 288.00 10.00 298.00

60. VENTURA FERDINAND 09.20.94 292.00 10.00 302.00

479 61. ALBANO JESUS 01.06.94 297.00 10.00 307.00
VOL. 486, MARCH 31, 2006 479 62. CALLEJA JOSEPH 05.10.93 303.00 10.00 313.00
Pag-Asa Steel Works, Inc. vs. Court of Appeals 63. PEREZ DANILO 03.01.93 303.00 10.00 313.00
41. SABATIN GILBERT 04.19.94 288.00 10.00 298.00 64. BATOY ERNIE 06.15.93 305.00 10.00 315.00
42. REYES RONALDO 04.14.94 288.00 10.00 298.00 65. SAMPAGA EDGARDO 06.07.93 307.00 10.00 317.00
43. AMANIA WILFREDO 01.06.94 288.00 10.00 298.00 66. SOLON ROBINSON 05.10.94 315.00 10.00 325.00
44. QUIDATO ARISTON 12.12.93 288.00 10.00 298.00 67. ELEDA FULGENIO 06.07.93 322.00 10.00 332.00
45. LAROGA CLAUDIO JR. 10.13.93 288.00 10.00 298.00 68. CASCARA RODRIGO 06.07.93 322.00 10.00 332.00
46. MORALES LUIS 09.30.93 288.00 10.00 298.00 69. ROMANOS ARNULFO 06.07.93 322.00 10.00 332.00
47. ANTOLO DANILO 12.26.93 288.00 10.00 298.00 70. LUMANSOC MARIANO 06.07.93 322.00 10.00 332.00
48. EXMUNDO HERCULES 05.13.94 288.00 10.00 298.00 71. RAMOS GRACIANO 06.07.93 322.00 10.00 332.00
49. AMPER VALENTINO 08.02.93 288.00 10.00 298.00 72. MAZON NESTOR 07.24.90 330.00 10.00 340.00
50. BAYO-ANG ALDEN JR. 07.14.93 288.00 10.00 298.00 73. BRIN LUCENIO 07.26.90 330.00 10.00 340.00
51. BASCONES NELSON 02.26.94 288.00 10.00 298.00 74. SE FREDIE 03.25.90 340.00 10.00 350.00
52. DECENA LAURO 09.18.93 288.00 10.00 298.00 75. RONCALES DIOSDADO 04.30.90 340.00 10.00 350.00
76. DISCAYA EDILBERTO 09.06.89 340.00 10.00 350.00 95. FULGUERAS DOMINGO 01.25.87 362.00 10.00 372.00

77. SUAREZ LUISTO 06.10.92 347.00 10.00 357.00 96. ZIPAGAN NELSON 02.07.84 370.00 10.00 380.00

78. CASTRO PEDRO 10.30.92 348.00 10.00 358.00 97. LAURIO JESUS 06.01.82 371.00 10.00 381.00

79. CLAVECILLA AMBROSIO 09.09.88 351.00 10.00 361.00 98. ACASIO PEDRO 11.21.79 372.00 10.00 382.00

80. YSON ROMEO 09.11.88 351.00 10.00 361.00 99. MACALISANG EPIFANIO 02.01.88 372.00 10.00 382.00

81. JUMAWAN URBANO JR. 12.20.87 354.00 10.00 364.00 100. OFILAN ANTONIO 03.12.79 374.50 10.00 384.50
480 101. SEVANDRA ALFREDO 05.02.69 374.50 10.00 384.50
480 SUPREME COURT REPORTS 102. VILLAMER JOEY 11.04.81 374.50 10.00 384.50
ANNOTATED
103. GRIPON GIL 01.17.76 374.75 10.00 384.75
Pag-Asa Steel Works, Inc. vs. Court of Appeals
104. CARLON HERMINIGILDO, 04.17.87 375.00 10.00 385.00
82. MARASIGAN GRACIANO 05.20.88 354.00 10.00 364.00 JR.
83. MAGLENTE ROLANDO 09.03.87 354.00 10.00 364.00 105. MANLABAO HEROHITO 04.14.81 375.00 10.00 385.00
84. NEBRIA CALIX 02.25.88 354.00 10.00 364.00 106. VILLANUEVA DOMINGO 12.01.77 375.50 10.00 385.50
85. BARBIN DANIEL 09.03.87 354.00 10.00 364.00 107. APITAN NAZARIO 09.04.79 376.00 10.00 386.00
86. CAMAING CARLITO 12.22.87 354.00 10.00 364.00 108. SALAMEDA EDUARDO 02.13.79 377.00 10.00 387.00
87. BUBAN JONATHAN 10.22.87 354.00 10.00 364.00 109. ARNALDO LOPE 05.02.69 378.50 10.00 388.50
88. GUEVARRA ARNOLD 10.04.87 354.00 10.00 364.00 110. SURIGAO HERNANDO 12.29.79 379.00 10.00 389.00
89. MALAPO MARCOS JR. 08.04.87 354.00 10.00 364.00 111. DE LA CRUZ CHARLIE 07.14.76 379.00 10.00 389.00
90. ZUNIEGA CARLOS 02.19.88 354.00 10.00 364.00 112. ROSAURO JUAN 07.15.76 379.50 10.00 389.50
91. SABORNIDO JULITO 12.20.87 354.00 10.00 364.00 113. HILOTIN ARLEN 10.10.77 383.00 10.00 393.00
4

92. DALUYO LOTERIO 04.02.88 354.00 10.00 364.00 On September 23, 1999, petitioner and the Union entered into a
Collective Bargaining Agreement (CBA), effective July 1, 1999 until
93. AGUILLON GRACIANO 05.27.87 359.00 10.00 369.00 July 1, 2004. Section 1, Article VI (Salaries and Wage) of said CBA
provides:
94. CRISTY EMETERIO 04.06.87 359.50 10.00 369.50
_______________
 4 Id., at pp. 125-127.
NAME WAGE NAME WAGE
481

5. Welfredo Amania 343.00 57. Edgar Noblejas 338.00

VOL. 486, MARCH 31, 2006 481
6. Valentino Amper 343.00 58. Antonio Ofilan 429.50
Pag-Asa Steel Works, Inc. vs. Court of Appeals
7. Danilo Antolo 343.00 59. Reynaldo Ornopia 323.00
Section 1. WAGE ADJUSTMENT—The COMPANY agrees to grant all
the workers, who are already regular and covered by _______________
this AGREEMENT at the effectivity of this AGREEMENT, a general 5 Id., at p. 103.
wage increase as follows:
482
July 1, 1999 . . . . . . . . . . . P15.00 per day per employee
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee 482 SUPREME COURT REPORTS ANNOTATED

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee Pag-Asa Steel Works, Inc. vs. Court of Appeals
The aforesaid wage increase shall be implemented across the board.
Any Wage Order to be implemented by the Regional Tripartite Wage and 8. Nazario Apitan 431.00 60. Reynaldo Paez 291.00
Productivity Board shall be in addition to the wage increase adverted to
above. However, if no wage increase is given by the Wage Board within six 9. Jonas Aquino 272.00 61. Ferdinand Panlaan 330.00
(6) months from the signing of this AGREEMENT, the Management is
willing to give the following increases, to wit: 10. Eulogio Bagasbas, Jr. 330.00 62. Eulogio Par Jr. 301.00
July 1, 1999 . . . . . . . . . . . P20.00 per day per employee 11. Luis Bania, Jr. 301.00 63. Marvin Peco 223.00
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee
12. Daniel Barbin 409.00 64. Emmanuel Pepino 249.00
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee
The difference of the first year adjustment to retroact to July 1, 1999. 13. Nelson Bascones 343.00 65. Danilo Perez 358.00
The across-the-board wage increase for the 4th and 5th year of this
14. Alden Bayo-ang, Jr. 343.00 66. Jaime Pulpulaan 330.00
AGREEMENT shall be subject for a re-opening or renegotiation as
provided for by Republic Act No. 6715. 5

15. Jimmy Bermejo 277.00 67. Ariston Quidato 343.00

For the first year of the CBA’s effectivity, the salaries of Union
members were increased as follows: 16. Alfredo Bernabe 258.00 68. Graciano Ramos Jr. 377.00

NAME WAGE NAME WAGE 17. Lucenio Brin 385.00 69. Antonio Raymundo 301.00

1. Pedro Acasio P427.00 53. Nestor Mazon P385.00 18. Jonathan Buban 409.00 70. Ronilo Reboton 277.00

2. Roderick Alancado 301.00 54. Luis Morales 343.00 19. Roberto Bugtai 301.00 71. Ramon Relato 320.00

3. Jesus Albano 352.00 55. Calix Nebria 409.00 20. Danilo Cagomoc 343.00 72. Efren Reyes 343.00

4. Oliver Alejandro 330.00 56. Bonifacio Ninora Jr. 301.00 21. Joseph Calleja 358.00 73. Ronaldo Reyes 343.00
22. Carlito Camaing 409.00 74. Joseph Rioja 301.00 Pag-Asa Steel Works, Inc. vs. Court of Appeals

23. Hermenigildo Carlon, Jr. 430.00 75. George Roda 301.00 43. Urbano Jumawan, Jr. 409.00 95. Ferdinand Ventura 347.00

24. June Catacutan 343.00 76. Diosdado Roncales 395.00 44. Ronilo Lacandoze 265.00 96. Joey Villamer 429.50

25. Marlonito Chua 343.00 77. Gilbert Sabatin 343.00 45. Claudio Laroga, Jr. 343.00 97. Domingo Villanueva 430.50

26. Ambrocio Clavecilla 406.00 78. Julito Sabornido 409.00 46. Jesus Laurio 426.00 98. Joel Whiting 343.00

27. Emeterio Cristy 414.50 79. Ronnie Sajot 343.00 47. Mariano Lumansoc 377.00 99. Romeo Yson 406.00

28. Tirso Curambao 343.00 80. Eduardo Salameda 432.00 48. Victor Magboo 301.00 100. Carlos Zuniega 409.00

29. Loterio Daluyo 409.00 81. Edilberto Salen 277.00 49. Rolando Maglente 409.00 101. Nelson Zipagan 425.00

30. Lauro Decena 343.00 82. Fundador Salon 301.00 50. Marcos Malapo Jr. 409.00 102. Michael Sibol 343.00

31. Charlie dela Cruz 434.00 83. Edgar Sampaga 362.00 51. Herohito Manlabao 430.00 103. Renante Tangian 223.00

32. Raynaldo delos Santos 343.00 84. Fredie Se 395.00 52. Graciano Marasigan 409.00 104. Rodrigo Cascara 377.00
6

33. Edilberto Discaya 395.00 85. Rodolfo Sevandra 250.00 On October 14, 1999, Wage Order No. NCR-07 was issued, and on7

October 26, 1999, its Implementing Rules and Regulations. It provided

34. Erwin Dorol 343.00 86. Jose Solo 343.00 for a P25.50 per day increase in the salary of employees receiving the
minimum wage and increased the minimum wage to P223.50 per day.
35. Eldemar Edradan 277.00 87. Robinson Solon 370.00 Petitioner paid the P25.50 per day increase to all of its rank-and-file
employees.
36. Fulgencio Eleda 377.00 88. Luisito Suarez 402.00
On July 1, 2000, the rank-and-file employees were granted the
37. Hercules Exmundo 343.00 89. Jeriel Suico 223.00 second year increase provided in the CBA in the amount of P25.00 per
day. 8

38. Domingo Fulgueras 417.00 90. Hernando Surigao 434.00

On November 1, 2000, Wage Order No. NCR-08 took effect. Section
9

39. Federico Garcia 277.00 91. Franklin Suringa 343.00 1 thereof provides:
Section 1. Upon the effectivity of this Wage Order, private sector workers
40. Gil Gripon 429.75 92. Albert Tabaog 277.00 and employees in the National Capital Region receiving the prescribed
daily minimum wage rate of P223.50 shall receive an increase of TWENTY
41. Arnold Guevarra 409.00 93. Joel Tizon 343.00 SIX PESOS and FIFTY CENTAVOS (P26.50) per day, thereby setting
the new minimum wage rate in the National Capital Region at TWO
42. Arlen Hilotin 438.00 94. Alfredo Umbal 272.00 HUNDRED FIFTY PESOS (P250.00) per day.” 10

483 _______________
6 Id., at p. 161.
VOL. 486, MARCH 31, 2006 483 7 Id., at pp. 347-351.
 8 Id., at pp. 164-166.
9 Id., at pp. 368-372.
10 Id., at p. 368.
484
484 SUPREME COURT REPORTS ANNOTATED diminution of benefits.
Pag-Asa Steel Works, Inc. vs. Court of Appeals For its part, petitioner alleged that there is no such company
Then Union president Lucenio Brin requested petitioner to implement
the increase under Wage Order No. NCR-08 in favor of the company’s
rank-and-file employees. Petitioner rejected the request, claiming that
since none of the employees were receiving a daily salary rate lower
than P250.00 and there was no wage distortion, it was not obliged to
grant the wage increase.
The Union elevated the matter to the National Conciliation and
Mediation Board. When the parties failed to settle, they agreed to refer
the case to voluntary arbitration. In the Submission Agreement, the
parties agreed that the sole issue is “[w]hether or not the management
is obliged to grant wage increase under Wage Order No. NCR #8 as a
matter of practice,” and that the award of the Voluntary Arbitrator
11
(VA) shall be final and binding. 12
In its Position Paper, the Union alleged that it has been the
company’s practice to grant a wage increase under a government-issued
wage order, aside from the yearly wage increases in the CBA. It averred
that petitioner paid the salary increases provided under the previous
wage orders in full (aside from the yearly CBA increases), regardless of
whether there was a resulting wage distortion, or whether Union
members’ salaries were above the minimum wage rate. Wage Order No.
NCR-06, where rank-and-file employees were given different wage
increases ranging from P10.00 to P13.00, was an exception since the
adjustments were the result of the formula agreed upon by the Union
and the employer after negotiations. The Union averred that all of their
CBAs with petitioner had a “collateral agreement” where petitioner
was mandated to pay the equivalent of the wage orders across-the-
board, or at least to negotiate how much will be paid. It pointed out that
an established practice cannot be discontin-
_______________
11 Id., at p. 339.
Id.
12
485
VOL. 486, MARCH 31, 2006 485
Pag-Asa Steel Works, Inc. vs. Court of Appeals
ued without running afoul of Article 100 of the Labor Code on non-
13
practice and that it complied with the previous wage orders (Wage
Order Nos. NCR-01-05) because some of its employees were receiving
wages below the minimum prescribed under said orders. As for Wage
Order No. NCR-07, petitioner alleged that its compliance was in
accordance with its verbal commitment to the Union during the CBA
negotiations that it would implement any wage order issued in 1999.
Petitioner further averred that it applied the wage distortion formula
prescribed under Wage Order Nos. NCR-06 and NCR-07 because an
actual distortion occurred as a result of their implementation. It
asserted that at present, all its employees enjoy regular status and that
none receives a daily wage lower than the P250.00 minimum wage rate
prescribed under Wage Order No. NCR-08. 14
In reply to the Union’s position paper, petitioner contended that the
full implementation of the previous wage orders did not give rise to a
company practice as it was not given to the workers within the
bargaining unit on a silver platter, but only per request of the Union
and after a series of negotiations. In fact, during CBA negotiations, it
steadfastly rejected the following proposal of the Union’s counsel, Atty.
Florente Yambot, to include an across-the-board implementation of the
wage orders: 15
“x x x To supplement the above wage increases, the parties agree that
additional wage increases equal to the wage orders shall be paid across-
the-board whenever the Regional Tripartite Wage and Productivity Board
issues wage orders. It is understood that these additional wage increases
will be paid not as wage orders but as agreed additional salary increases
using the wage orders merely as a device
_______________
13 CA Rollo, pp. 41-45.
14 Rollo, p. 130.
15 Id., at p. 192.
486
486 SUPREME COURT REPORTS ANNOTATED

Pag-Asa Steel Works, Inc. vs. Court of Appeals
to fix or determine how much the additional wage increases shall be paid.”
The Union, however, insisted that there was such a company practice.
It pointed out that despite the fact that all the employees were already
receiving salaries above the minimum wage, the CBA still provided for
the payment of a wage increase using wage orders as the yardstick. It
claimed that the parties intended that petitioner-employer would pay
the additional increases apart from those in the CBA. The Union 17
further asserted that the CBA did not include all the agreements of the
parties; hence, to determine the true intention of the parties, parol
evidence should be resorted to. Thus, Atty. Yambot’s version of the
wage adjustment provision should be considered. 18
On June 6, 2001, the VA rendered judgment in favor of the company
and ordered the case dismissed. It held that there was no company
19
practice of granting a wage order increase to employees across-the-
board, and that there is no provision in the CBA that would oblige
petitioner to grant the wage increase under Wage Order No. NCR-08
across-the-board. 20
The Union filed a petition for review with the CA under Rule 43 of
the Rules of Court. It defined the issue for resolution as follows:
“The principal issue in the present petition is whether or not the wage
increase of P26.50 under Wage Order No. NCR-08 must be paid to the
union members as a matter of practice and whether or not parol evidence
can be resorted to in proving or explaining or elucidating the existence of a
collateral agreement/company practice for the payment of the wage
increase under the wage order despite that the employees were already
receiving wages way above the
_______________
16 Id., at p. 196.
17 Id., at pp. 186-188.
18 Id., at pp. 200-202.
19 Id., at pp. 78-87.
20 Id., at pp. 84-87.
487
VOL. 486, MARCH 31, 2006 487
Pag-Asa Steel Works, Inc. vs. Court of Appeals COMMITTED A GRAVE REVERSIBLE ERROR IN NOT
minimum wage of P250.00/day as prescribed by Wage Order No. NCR-08
and irrespective of whether wage distortion exists.” 21
16
On September 23, 2004, the CA rendered judgment in favor of the
Union and reversed that of the VA. The fallo of the decision reads:
“WHEREFORE, the assailed Decision dated June 6, 2001 of public
respondent Voluntary Arbitrator is REVERSED and SET ASIDE. Private
respondent Pag-Asa Steel Works, Inc. is ordered to pay the members of the
petitioner union the P26.50 daily wage by applying the wage increase
prescribed under Wage Order No. NCR-08. Costs against private
respondent.
SO ORDERED.” 22
The CA stressed that the CBA constitutes the law between the
employer and the Union. It held that the CBA is plain and clear, and
leaves no doubt as to the intention of the parties, that is, to grant a
wage increase that may be ordered by the Wage Board in addition to
the CBA-mandated salary increases regardless of whether the
employees are already receiving wages way above the minimum wage.
The appellate court further held that the employer has no valid reason
not to implement the wage increase mandated by Wage Order No.
NCR-08 because prior thereto, it had been paying the wage increase
provided for in the CBA even though the employees concerned were
already receiving wages way above the applicable minimum
wage. Petitioner filed a motion for reconsideration which the CA
23
denied for lack of merit on January 11, 2005. 24
Petitioner then filed the instant petition in which it raises the
following issues:
_______________
21 CA Rollo, p. 14.
22 Rollo, p. 289.
23 Id., at pp. 287-288.
24 Id., at p. 53.
488
488 SUPREME COURT REPORTS ANNOTATED
Pag-Asa Steel Works, Inc. vs. Court of Appeals
1. I.WHETHER THE HONORABLE COURT OF APPEALS
FINDING THAT THE INCREASES PROVIDED FOR
 UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED AS
A MATTER OF RIGHT BY THE RESPONDENT UNDER
THE 1999 CBA, in that:
1. a)Issue not averred in the complaint nor raised during the trial
cannot be raised for the first time on appeal; and
2. b)The Rules of Statutory Construction, in relation to Articles
1370 and 1374 of the New Civil Code, as well as Section 11 of
the Rules of Court, requires that contract must be read in its
entirety and the various stipulations in a contract must be
read together to give effect to all.
1. II.WHETHER THE HONORABLE COURT OF APPEALS
COMMITTED A GRAVE REVERSIBLE ERROR IN NOT
FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED BY
THE RESPONDENT UNION AS A MATTER
OF PRACTICE.” 25
Petitioner points out that the only issue agreed upon during the
voluntary arbitration proceedings was whether or not the company was
obliged to grant the wage increase under Wage Order No. NCR-08 as a
matter of practice. It posits that the respondent did not anchor its claim
for such wage increase on the CBA but on an alleged company practice
of granting the increase pursuant to a wage order. According to
petitioner, respondent Union changed its theory on appeal when it
claimed before the CA that the CBA is ambiguous. Petitioner contends
26
that respondent Union was precluded from raising this issue as it was
not raised during the voluntary arbitration. It insists that an issue
cannot be raised for the first time on appeal. 27
Petitioner further argues that there is no ambiguity in the CBA. It
avers that Section 1, Article VI of the CBA should be
_______________
25 Id., at p. 23.
26 Id., at pp. 25-27.
27 Id., at pp. 39-40.
489
VOL. 486, MARCH 31, 2006 489
Pag-Asa Steel Works, Inc. vs. Court of Appeals
read in its entirety. From the said provision, it is clear that the CBA
28
contemplated only the implementation of a wage order issued within
six months from the execution of the CBA, and not every wage order
issued during its effectivity. Hence, petitioner complied with Wage
Order No. NCR-07 which was issued 28 days from the execution of the
CBA. Petitioner emphasizes that this was implemented not because it
was a matter of practice but because it was agreed upon in the CBA. It 29
alleges that respondent Union in fact realized that it could not invoke
the provisions of the CBA to enforce Wage Order No. NCR-08, which is
why it agreed to limit the issue for voluntary arbitration to whether
respondent Union is entitled to the wage increase as a matter of
practice. The fact that the “Yambot proposals” were left out in the final
document simply means that the parties never agreed to them. 30
In any case, petitioner avers that respondent Union is not entitled
to the wage increase provided under Wage Order No. NCR-08 as a
matter of practice. There is no company practice of granting a wage-
order-mandated increase in addition to the CBA-mandated wage
increase. It points out that, as admitted by respondent Union, the
previous wage orders were not automatically implemented and were
made applicable only after negotiations. Petitioner argues that the
previous wage orders were implemented because at that time, some
employees were receiving salaries below the minimum wage and the
resulting wage distortion had to be remedied. 31
For its part, respondent Union avers that the provision “[a]ny Wage
Order to be implemented by the Regional Tripartite Wage and
Productivity Board shall be in addition to the wage increase adverted
to above” referred to a company practice of paying a wage increase
whenever the government is-
_______________
28 Id., at p. 27.
29 Id., at pp. 32-33.
30 Id., at pp. 36-37.
31 Id., at pp. 41-45.
490
490 SUPREME COURT REPORTS ANNOTATED
Pag-Asa Steel Works, Inc. vs. Court of Appeals
sues a wage order even if the employees’ salaries were above the
minimum wage and there is no resulting wage distortion. According to
respondent, the CBA contemplated all the salary increases that may be
mandated by wage orders to be issued in the future. Since the wage
order was only a device to determine exactly how much and when the
increase would be given, these increases are, in effect, CBA-mandated
and not wage order increases. Respondent further avers that the
32
ambiguity in the wage adjustment provision of the CBA can be clarified
by resorting to parol evidence, that is, Atty. Yambot’s version of said
provision. 33
The petition is meritorious. We rule that petitioner is not obliged to
grant the wage increase under Wage Order No. NCR-08 either by virtue
of the CBA, or as a matter of company practice.
On the procedural issue, well-settled is the rule, also applicable in
labor cases, that issues not raised below cannot be raised for the first
time on appeal. Points of law, theories, issues and arguments not
34
brought to the attention of the lower court need not be, and ordinarily
will not be, considered by the reviewing court, as they cannot be raised
for the first time at that late stage. Basic considerations of due process
impel this rule. 35
We agree with petitioner’s contention that the issue on the
ambiguity of the CBA and its failure to express the true intention of the
parties has not been expressly raised before the voluntary arbitration
proceedings. The parties specifically confined the issue for resolution
by the VA to whether or not the petitioner is obliged to grant an
increase to its employees as a matter of practice. Respondent did not
anchor its claim
_______________
32 Id., at p. 437.
33 Id., at p. 440.
34Labor Congress of the Philippines v. National Labor Relations Commission,354 Phil.
481, 490; 292 SCRA 469, 477 (1998).
35 Del Rosario v. Bonga, G.R. No. 136308, January 23, 2001, 350 SCRA 101, 108.
491
VOL. 486, MARCH 31, 2006 491
Pag-Asa Steel Works, Inc. vs. Court of Appeals Section 1. WAGE ADJUSTMENT—The COMPANY agrees to grant to all
for an across-the-board wage increase under Wage Order No. NCR-08
on the CBA. However, we note that it raised before the CA two issues,
namely:
“x x x whether or not the wage increase of P26.50 under Wage Order No.
NCR-08 must be paid to the union members as a matter of practice and
whether or not parol evidence can be resorted to in proving or explaining
or elucidating the existence of a collateral agreement/company practice for
the payment of the wage increase under the wage order despite that the
employees were already receiving wages way above the minimum wage of
P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of
whether wage distortion exists.” 36
Petitioner, in its Comment on the petition, delved into these issues and
elaborated on its contentions. By so doing, it thereby agreed for the CA
to take cognizance of such issues as defined by respondent (petitioner
therein). Moreover, a perusal of the records shows that the issue of
whether or not the CBA is ambiguous and does not reflect the true
agreement of the parties was, in fact, raised before the voluntary
arbitration proceedings. Despite the submission agreement confining
the issue to whether petitioner was obliged to grant an increase
pursuant to Wage Order No. NCR-08 as a matter of practice,
respondent Union nevertheless raised the same issues in its pleadings.
In its Position Paper, it asserted that the CBA consistently contained a
collateral agreement to pay the equivalent of the wage orders across-
the-board; in its Reply, it claimed that such provision clearly provided
that petitioner would pay the additional increases apart from the CBA
and that the wage order serves only as a measure of said increase.
These assertions indicate that respondent Union also relied on the CBA
to support its claim for the wage increase.
Central to the substantial issue is Article VI, Section I, of the CBA
of the parties, dated September 23, 1999, viz.:
_______________
36 CA Rollo, p. 14.
492
492 SUPREME COURT REPORTS ANNOTATED
Pag-Asa Steel Works, Inc. vs. Court of Appeals
SALARIES AND WAGE
workers who are already regular and covered by this AGREEMENT at the
effectivity of this AGREEMENT a general wage increase as follows:
July 1, 1999 ……. P15.00 per day per employee
July 1, 2000 ……. P25.00 per day per employee
 July 1, 2001 ……. P 30.00 per day per employee
The aforesaid wage increase shall be implemented across the board.
Any Wage Order to be implemented by the Regional Tripartite Wage and
Productivity Board shall be in addition to the wage increase adverted to
above. However, if no wage increase is given by the Wage Board within six
(6) months from the signing of this AGREEMENT, the Management is
willing to give the following increases, to wit:
July 1, 1999 ……. P 20.00 per day per employee
July 1, 2000 ……. P 25.00 per day per employee
July 1, 2001 …… P 30.00 per day per employee
The difference of the first year adjustment to retroact to July 1, 1999.
The across-the-board wage increase for the 4th and 5th year of this
AGREEMENT shall be subject for a reopening or renegotiation as provided
for by Republic Act No. 6715.” 37
On the other hand, Wage Order No. NCR-08 specifically provides that
only those in the private sector in the NCR receiving the prescribed
daily minimum wage rate of P223.00 per day would receive an increase
of P26.50 a day, thereby setting the new minimum wage rate in said
region to P250.00 per day. There is no dispute that, when the order was
issued, the lowest paid employee of petitioner was receiving a wage
higher than P250.00 a day. As such, its employees had no right to
demand for an increase under said order. As correctly ruled by the VA:
_______________
37 Id., at p. 93.
493
VOL. 486, MARCH 31, 2006 493 Pag-Asa Steel Works, Inc. vs. Court of Appeals
Pag-Asa Steel Works, Inc. vs. Court of Appeals with the increase of P30.00 under the CBA which is due on July 31, 2001
“We now come to the core of this case. Is [petitioner] under an obligation to
grant wage increase to its workers under W.O. No. NCR-08 as a matter of
practice? It is submitted that employers (unless exempt) in Metro Manila
(including the [petitioner]) are mandated to implement the said wage order
but limited to those entitled thereto. There is no legal basis to implement
the same across-the-board. A perusal of the record shows that the lowest
paid employee before the implementation of Wage Order #8 is P250.00/day
and none was receiving below P223.50 minimum. This could only mean
that the union can no longer demand for any wage distortion adjustment.
Neither could they insist for an adjustment of P26.50 increase under Wage
Order #8. The provision of wage order #8 and its implementing rules are
very clear as to who are entitled to the P26.50/day increase, i.e., “private
sector workers and employees in the National Capital Region receiving the
prescribed daily minimum wage rate of P223.50 shall receive an increase of
Twenty-Six Pesos and Fifty Centavos (P26.50) per day,” and since the
lowest paid is P250.00/day the company is not obliged to adjust the wages
of the workers.
With the above narration of facts and with the union not having
effectively controverted the same, we find no merit to the complainant’s
assertion of such a company practice in the grant of wage order increase
applied across-the-board. The fact that it was shown the increases granted
under the Wage Orders were obtained thru request and negotiations
because of the existence of wage distortion and not as company practice as
what the union would want.
Neither do we find merit in the argument that under the CBA, such
increase should be implemented across-the-board. The provision in the
CBA that “Any Wage Order to be implemented by the Regional Tripartite
Wage and Productivity Board shall be in addition to the wage increase
adverted above” cannot be interpreted in support of an across-the-board
increase. If such were the intentions of this provision, then the company
could have simply accepted the original demand of the union for such
across-the-board implementation, as set forth in their original proposal
(Annex “2” union[’]s counsel proposal). The fact that the company rejected
this proposal can only mean that it was never its intention to agree, to such
across-the-board implementation. Thus, the union will have to be
contented
494
494 SUPREME COURT REPORTS ANNOTATED
barely a month from now.” 38
The error of the CA lies in its considering only the CBA in interpreting
the wage adjustment provision, without taking into account Wage
Order No. NCR-08, and the fact that the members of respondent Union
were already receiving salaries higher than P250.00 a day when it was
issued. The CBA cannot be considered independently of the wage order
which respondent Union relied on for its claim.
Wage Order No. NCR-08 clearly states that only those employees
receiving salaries below the prescribed minimum wage are entitled to
the wage increase provided therein, and not all employees across-the-
board as respondent Union would want petitioner to do. Considering
therefore that none of the members of respondent Union are receiving
salaries below the P250.00 minimum wage, petitioner is not obliged to
grant the wage increase to them.
The ruling of the Court in Capitol Wireless, Inc. v. Bate is
instructive on how to construe a CBA vis-à-vis a wage order. In that
case, the company and the Union signed a CBA with a similar
provision: “[s]hould there be any government mandated wage increases
and/or allowances, the same shall be over and above the benefits herein
granted.” Thereafter, the Wage Board of the NCR issued several wage
40
orders providing for an across-the-board increase in the minimum wage
of all employees in the private sector. The company implemented the
wage increases only to those employees covered by the wage orders—
those receiving not more than the minimum wage. The Union
protested, contending that, pursuant to said provision, any and all
government-mandated increases in salaries and allowance should be
granted to all employees across-the-board. The Court held as follows:
_______________
38 Rollo, pp. 83-84.
39 316 Phil. 355; 246 SCRA 289 (1995).
40 Emphasis added.
495
VOL. 486, MARCH 31, 2006 495 CBA, we find it to have more than amply covered all aspects of the
Pag-Asa Steel Works, Inc. vs. Court of Appeals agreements would be violative of the CBA provision afore-quoted.”
“x x x The wage orders did not grant across-the-board increases to all
employees in the National Capital Region but limited such increases only
to those already receiving wage rates not more than P125.00 per day under
Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day under Wage
Order No. NCR-02. Since the wage orders specified who among the
employees are entitled to the statutory wage increases, then the increases
applied only to those mentioned therein. The provisions of the CBA should
be read in harmony with the wage orders, whose benefits should be given
only to those employees covered thereby.” (Emphasis added) 41
In this case, as gleaned from the pleadings of the parties, respondent
Union relied on a collateral agreement between it and petitioner, an
agreement extrinsic of the CBA based on an alleged established
practice of the latter as employer. The VA rejected this claim:
Complainant Pag-Asa Steel Workers Union additionally advances the
arguments that “there exist a collateral agreement to pay the equivalent
of wage orders across the board or at least to negotiate how much will be
paid” and that “parol evidence is now applicable to show or explain what
the unclean provisions of the CBA means regarding wage adjustment.” The
39
respondent cites Article XXVII of the CBA in effect, as follows:
“The parties acknowledged that during the negotiation which resulted in this AGREEMENT,
each had the unlimited right & opportunity to make demands, claims and proposals of every
kind and nature with respect to any subject or matter not removed by law from the Collective
Bargaining and the understanding and agreements arrived at by the parties after the exercise
of that right & opportunity are set forth in this AGREEMENT. Therefore, the COMPANY
and the UNION, for the life of this AGREEMENT, agrees that neither party shall not be
obligated to bargain collectively with respect to any subject matter not specifically referred to
or covered in this AGREEMENT, and furthermore, that each party voluntarily &
unqualifiedly waives such right even though such subject may not have been within the
knowledge or contemplation of either
_______________
Capitol Wireless, Inc. v. Bate, supra, at p. 359; p. 293.
41
496
496 SUPREME COURT REPORTS ANNOTATED
Pag-Asa Steel Works, Inc. vs. Court of Appeals
or both of the parties at the time they signed this AGREEMENT.”
From the said CBA provision and upon an appreciation of the entire
collective bargaining. To allow alleged collateral agreements or parol/oral
42
We agree with petitioner’s contention that the rule excluding parol
evidence to vary or contradict a written agreement, does not extend so
far as to preclude the admission of extrinsic evidence, to show prior or
contemporaneous collateral parol agreements between the parties.
Such evidence may be received regardless of whether or not the written
agreement contains reference to such collateral agreement. As the 43
Court ruled in United Kimberly-Clark Employees Union, et al. v.
Kimberly-Clark Philippines, Inc.: 44
“A CBA is more than a contract; it is a generalized code to govern a myriad
of cases which the draftsmen cannot wholly anticipate. It covers the whole
employment relationship and prescribes the rights and duties of the
parties. It is a system of industrial self-government with the grievance
machinery at the very heart of the system. The parties solve their problems
by molding a system of private law for all the problems which may arise
and to provide for their solution in a way which will generally accord with
the variant needs and desires of the parties.
If the terms of a CBA are clear and have no doubt upon the intention of
the contracting parties, the literal meaning of its stipulation shall prevail.
However, if, in a CBA, the parties stipulate that the hirees must be
presumed of employment qualification standards but fail to state such
qualification standards in said CBA, the VA may resort to evidence
extrinsic of the CBA to determine the full
_______________
42 Rollo, pp. 84-85.
43Land Settlement and Development Corporation v. Garcia Plantation Co., Inc., 117 Phil. 761,
765; April 24, 1963, 7 SCRA 750 (1963).
44 G.R. No. 162957, March 6, 2006, 484 SCRA 187.
497
VOL. 486, MARCH 31, 2006 497 498 SUPREME COURT REPORTS ANNOTATED
Pag-Asa Steel Works, Inc. vs. Court of Appeals Pag-Asa Steel Works, Inc. vs. Court of Appeals
agreement intended by the parties. When a CBA may be expected to speak
on a matter, but does not, its sentence imports ambiguity on that subject.
The VA is not merely to rely on the cold and cryptic words on the face of
the CBA but is mandated to discover the intention of the parties.
Recognizing the inability of the parties to anticipate or address all future
problems, gaps may be left to be filled in by reference to the practices of the
industry, and the step which is equally a part of the CBA although not
expressed in it. In order to ascertain the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally
considered. The VA may also consider and rely upon negotiating and
contractual history of the parties, evidence of past practices interpreting
ambiguous provisions. The VA has to examine such practices to determine
the scope of their agreement, as where the provision of the CBA has been
loosely formulated. Moreover, the CBA must be construed liberally rather
than narrowly and technically and the Court must place a practical and
realistic construction upon it.” 45
However, just like any other fact, habits, customs, usage or patterns of
conduct must be proved. Thus was the ruling of the Court inBoston
Bank of the Philippines v. Manalo, et al.: 46
“Habit, custom, usage or pattern of conduct must be proved like any other
facts. Courts must contend with the caveat that, before they admit
evidence of usage, of habit or pattern of conduct, the offering party must
establish the degree of specificity and frequency of uniform response that
ensures more than a mere tendency to act in a given manner but rather,
conduct that is semi-automatic in nature. The offering party must allege
and prove specific, repetitive conduct that might constitute evidence of
habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic
conduct. Mere similarity of contracts does not present the kind of
sufficiently similar circumstances to outweigh the danger of prejudice and
confusion.
In determining whether the examples are numerous enough, and
sufficiently regular, the key criteria are adequacy of sampling and
uniformity of response. After all, habit means a course of behav-
_______________
45 Id.
46 G.R. No. 158149, February 9, 2006, 482 SCRA 108.
498
ior of a person regularly represented in like circumstances. It is only when
examples offered to establish pattern of conduct or habit are numerous
enough to lose an inference of systematic conduct that examples are
admissible. The key criteria are adequacy of sampling and uniformity of
response or ratio of reaction to situations.”
We have reviewed the records meticulously and find no evidence to
prove that the grant of a wage-order-mandated increase to all the
employees regardless of their salary rates on an agreement collateral
to the CBA had ripened into company practice before the effectivity of
Wage Order No. NCR-08. Respondent Union failed to adduce proof on
the salaries of the employees prior to the issuance of each wage order
to establish its allegation that, even if the employees were receiving
salaries above the minimum wage and there was no wage distortion,
they were still granted salary increase. Only the following lists of
salaries of respondent Union’s members were presented in evidence: (1)
before Wage Order No. NCR-06 was issued; (2) after Wage Order No.
NCR-06 was implemented; (3) after the grant of the first year increase
under the CBA; (4) after Wage Order No. NCR-07 was implemented;
and (5) after the second year increase in the CBA was implemented.
The list of the employees’ salaries before Wage Order No. NCR-06
was implemented belie respondent Union’s claim that the wage-order-
mandated increases were given to employees despite the fact that they
were receiving salaries above the minimum wage. This list proves that
some employees were in fact receiving salaries below the P198.00 Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-
minimum wage rate prescribed by the wage order—two rank-and-file Martinez and Chico-Nazario, JJ., concur.
employees in particular. As petitioner explains, a wage distortion Petition granted, judgment and resolution reversed and set aside.
occurred as a result of granting the increase to those employees who
500
were receiving salaries below the prescribed minimum wage. The wage
distortion necessitated the upward adjustment of the salaries of the 500 SUPREME COURT REPORTS ANNOTATED
other employees and not because it was a matter of company practice
or usage. The situation of the employees before Wage Order No. NCR- Report on the Alleged Spurious Bailbonds and Release Orders Issued by
08, the RTC, Br. 27, Sta. Cruz, Laguna
499
Notes.—The salesmen’s commissions, comprising a predetermined
VOL. 486, MARCH 31, 2006 499 percent of the selling price of the goods sold by each salesman, were
properly included in the term “basic salary” for purposes of computing
Pag-Asa Steel Works, Inc. vs. Court of Appeals their 13th month pay. (Philippine Duplicators, Inc. vs. National Labor
Relations Commission, 241 SCRA 380 [1995])
however, was different. Not one of the members of respondent Union
was then receiving less than P250.00 per day, the minimum wage Factual findings of quasi-judicial agencies like the National Labor
requirement in said wage order. Relations Commission are generally accorded not only respect but at
times finality if such are supported by substantial evidence. (Molave
The only instance when petitioner admittedly implemented a wage
Tours Corporation vs. National Labor Relations Commission, 250
order despite the fact that the employees were not receiving salaries
SCRA 325 [1995])
below the minimum wage was under Wage Order No. NCR-07.
Petitioner, however, explains that it did so because it was agreed upon ——o0o——
in the CBA that should a wage increase be ordered within six months © Copyright 2016 Central Book Supply, Inc. All rights reserved.
from its signing, petitioner would give the increase to the employees in
addition to the CBA-mandated increases. Respondent’s isolated act
could hardly be classified as a “company practice” or company usage
that may be considered an enforceable obligation.
Moreover, to ripen into a company practice that is demandable as a
matter of right, the giving of the increase should not be by reason of a
strict legal or contractual obligation, but by reason of an act of liberality
on the part of the employer. Hence, even if the company continuously
grants a wage increase as mandated by a wage order or pursuant to a
CBA, the same would not automatically ripen into a company practice.
In this case, petitioner granted the increase under Wage Order No.
NCR-07 on its belief that it was obliged to do so under the CBA.
WHEREFORE, premises considered, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. SP No. 65171 and
Resolution dated January 11, 2005 are REVERSED and SET ASIDE.
The Decision of the Voluntary Arbitrator is REINSTATED. No costs.
SO ORDERED.
 G.R. No. 185665. February 8, 2012.*
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC.,
petitioner, vs. EASTERN TELECOMS EMPLOYEES UNION,
respondent.
Remedial Law; Civil Procedure; Appeals; Petition for Review on
Certiorari; As a general rule, in petitions for review under Rule 45, the
Court, not being a trier of facts, does not normally embark on a re-
examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the CA are
conclusive and binding on the Court; Exceptions.—As a general rule, in
petitions for review under Rule 45, the Court, not being a trier of facts, does
not normally embark on a re-examination of the evidence presented by the
contending parties during the trial of the case considering that the findings
of facts of the CA are conclusive and binding on the Court. The rule,
however, admits of several exceptions, one of which is when the findings of
the appellate court are contrary to those of the trial court or the lower
administrative body, as the case may be. Considering the incongruent
factual conclusions of the CA and the NLRC, this Court finds itself obliged
to resolve it.
Labor Law; Bonus; From a legal point of view, a bonus is a gratuity or
act of liberality of the giver which the recipient has no right to demand as a
matter of right; A bonus, however, becomes a demandable or enforceable
obligation when it is made part of the wage or salary or compensation of the
employee.—From a legal point of view, a bonus is a gratuity or act of
liberality of the giver which the recipient has no right to demand as a
matter of right. The grant of a bonus is basically a management
prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits
aside from the employee’s basic salaries or wages. A bonus, however,
becomes a demandable or enforceable obligation when it is made part of
the wage or salary or compensation of the employee. Particularly
instructive is the ruling of the Court in Metro Transit Organization, Inc. v.
National Labor Relations Commission, 245 SCRA 767 (1995), where it was
written: Whether or not a bonus forms part of wages depends upon the cir-
_______________
* THIRD DIVISION.
517
VOL. 665, FEBRUARY 8, 2012 517
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union
cumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if
profits are realized or if a certain level of productivity is achieved, it cannot
be considered part of the wage. Where it is not payable to all but only to
some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefore, not a
part of the wage.
Same; Same; A bonus may be granted on equitable consideration when
the giving of such bonus has been the company’s long and regular
practice.—Granting arguendo that the CBA Side Agreement does not
contractually bind petitioner ETPI to give the subject bonuses,
nevertheless, the Court finds that its act of granting the same has become
an established company practice such that it has virtually become part of
the employees’ salary or wage. A bonus may be granted on equitable
consideration when the giving of such bonus has been the company’s long
and regular practice. InPhilippine Appliance Corporation v. Court of
Appeals, 430 SCRA 525 (2004), it was pronounced: To be considered a
“regular practice,” however, the giving of the bonus should have been done
over a long period of time, and must be shown to have been consistent and
deliberate. The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue giving the
benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.
Same; Same; Supplements; The rule is settled that any benefit and
supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-
diminution of benefits is founded on the constitutional mandate to protect
the rights of workers and to promote their welfare and to afford labor full
protection.—The giving of the subject bonuses cannot be peremptorily
withdrawn by ETPI without violating Article 100 of the Labor Code: Art.
100. Prohibition against elimination or diminution of benefits.—Nothing in
this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code. The rule is settled that any benefit and
supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or elimi-
518
518 SUPREME COURT REPORTS ANNOTATED

Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union following of 147 regular members. It has an existing collecti[ve] bargaining
nated by the employer. The principle of non-diminution of benefits is
founded on the constitutional mandate to protect the rights of workers and
to promote their welfare and to afford labor full protection.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Liam S. Pagdanganan and Rodolfo Ma. A. Ponferrada for
petitioner.
Domingo T. Anonuevo for respondent.
MENDOZA, J.:
Before the Court is a petition for review on certiorari seeking
modification of the June 25, 2008 Decision1 of the Court of
Appeals(CA) and its December 12, 2008 Resolution,2 in CA-G.R. SP No.
91974, annulling the April 28, 2005 Resolution3 of the National Labor
Relations Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled
“In the Matter of the Labor Dispute in Eastern Telecommunications,
Philippines, Inc.”
The Facts
As synthesized by the NLRC, the facts of the case are as follows,viz.:
“Eastern Telecommunications Phils., Inc. (ETPI) is a corporation
engaged in the business of providing telecommunications facilities,
particularly leasing international date lines or circuits, regular landlines,
internet and data services, employing approximately 400 employees.
_______________
1 Rollo, pp. 59-71. Penned by Associate Justice Edgardo P. Cruz with Associate Justices
Fernanda Lampas Peralta and Ricardo R. Rosario, concurring.
2 Id., at pp. 73-74.
3 Id., at pp. 75-91.
519
VOL. 665, FEBRUARY 8, 2012 519 resolved in a compulsory arbitra-
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union 520 SUPREME COURT REPORTS ANNOTATED
Eastern Telecoms Employees Union (ETEU) is the certified exclusive
bargaining agent of the company’s rank and file employees with a strong
agreement with the company to expire in the year 2004 with a Side
Agreement signed on September 3, 2001.
In essence, the labor dispute was a spin-off of the company’s plan to
defer payment of the 2003 14th, 15th and 16th month bonuses sometime
in April 2004. The company’s main ground in postponing the payment of
bonuses is due to allege continuing deterioration of company’s financial
position which started in the year 2000. However, ETPI while postponing
payment of bonuses sometime in April 2004, such payment would also be
subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining
Agreement for the period 2001-2004 between ETPI and ETEU which
stated as follows:
“4. Employment Related Bonuses. The Company confirms that
the 14th, 15th and 16th month bonuses (other than 13th month pay)
are granted.”
The union strongly opposed the deferment in payment of the bonuses
by filing a preventive mediation complaint with the NCMB on July 3, 2003,
the purpose of which complaint is to determine the date when the bonus
should be paid.
In the conference held at the NCMB, ETPI reiterated its stand that
payment of the bonuses would only be made in April 2004 to which date of
payment, the union agreed. Thus, considering the agreement forged
between the parties, the said agreement was reduced to a Memorandum of
Agreement. The union requested that the President of the company should
be made a signatory to the agreement, however, the latter refused to sign.
In addition to such a refusal, the company made a sudden turnaround in
its position by declaring that they will no longer pay the bonuses until the
issue is resolved through compulsory arbitration.
The company’s change in position was contained in a letter dated April
14, 2004 written to the union by Mr. Sonny Javier, Vice-President for
Human Resources and Administration, stating that “the deferred release
of bonuses had been superseded and voided due to the union’s filing of the
issue to the NCMB on July 18, 2003.” He declared that “until the matter is
520
 Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union Employees Union
tion, the company cannot and will not pay any ‘bonuses’ to any and all
union members.”
Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of
unfair labor practice for failure of ETPI to pay the bonuses in gross
violation of the economic provision of the existing CBA.
On May 19, 2004, the Secretary of Labor and Employment, finding that
the company is engaged in an industry considered vital to the economy and
any work disruption thereat will adversely affect not only its operation but
also that of the other business relying on its services, certified the labor
dispute for compulsory arbitration pursuant to Article 263 (q) of the Labor
Code as amended.
Acting on the certified labor dispute, a hearing was called on July 16,
2004 wherein the parties have submitted that the issues for resolution are
(1) unfair labor practice and (2) the grant of 14th, 15th and 16th month
bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were
directed to submit their respective position papers and evidence in support
thereof after which submission, they agreed to have the case considered
submitted for decision.” 4
In its position paper,5 the Eastern Telecoms Employees
Union(ETEU) claimed that Eastern Telecommunications Philippines,
Inc.(ETPI) had consistently and voluntarily been giving out 14th month
bonus during the month of April, and 15th and 16th month bonuses
every December of each year (subject bonuses) to its employees from
1975 to 2002, even when it did not realize any net profits. ETEU posited
that by reason of its long and regular concession, the payment of these
monetary benefits had ripened into a company practice which could no
longer be unilaterally withdrawn by ETPI. ETEU added that this long-
standing company practice had been expressly confirmed in the Side
Agreements of the 1998-2001 and 2001-2004 Collective Bargaining
Agreements (CBA) which provided for the continuous grant of these
bonuses in no uncertain terms. ETEU theorized that the grant of the
_______________
4 Id., at pp. 76-78.
5 Id., at pp. 494-514.
521
VOL. 665, FEBRUARY 8, 2012 521
subject bonuses is not only a company practice but also a contractual
obligation of ETPI to the union members.
ETEU contended that the unjustified and malicious refusal of the
company to pay the subject bonuses was a clear violation of the
economic provision of the CBA and constitutes unfair labor
practice(ULP). According to ETEU, such refusal was nothing but a ploy
to spite the union for bringing the matter of delay in the payment of the
subject bonuses to the National Conciliation and Mediation
Board(NCMB). It prayed for the award of moral and exemplary
damages as well as attorney’s fees for the unfair labor practice allegedly
committed by the company.
On the other hand, ETPI in its position paper,6 questioned the
authority of the NLRC to take cognizance of the case contending that it
had no jurisdiction over the issue which merely involved the
interpretation of the economic provision of the 2001-2004 CBA Side
Agreement. Nonetheless, it maintained that the complaint for
nonpayment of 14th, 15th and 16th month bonuses for 2003 and 14th
month bonus for 2004 was bereft of any legal and factual basis. It
averred that the subject bonuses were not part of the legally
demandable wage and the grant thereof to its employees was an act of
pure gratuity and generosity on its part, involving the exercise of
management prerogative and always dependent on the financial
performance and realization of profits. It posited that it resorted to the
discontinuance of payment of the bonuses due to the unabated huge
losses that the company had continuously experienced. It claimed that
it had been suffering serious business losses since 2000 and to require
the company to pay the subject bonuses during its dire financial straits
would in effect penalize it for its past generosity. It alleged that the
non-payment of the subject bonuses was neither flagrant nor malicious
and, hence, would not amount to unfair labor practice.
_______________
6 Id., at pp. 118-143.
522
522 SUPREME COURT REPORTS ANNOTATED
 Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms Aggrieved, ETEU filed a petition for certiorari8 before the CA
Employees Union
Further, ETPI argued that the bonus provision in the 2001-2004
CBA Side Agreement was a mere affirmation that the distribution of
bonuses was discretionary to the company, premised and conditioned
on the success of the business and availability of cash. It submitted that
said bonus provision partook of the nature of a “one-time” grant which
the employees may demand only during the year when the Side
Agreement was executed and was never intended to cover the entire
term of the CBA. Finally, ETPI emphasized that even if it had an
unconditional obligation to grant bonuses to its employees, the drastic
decline in its financial condition had already legally released it
therefrom pursuant to Article 1267 of the Civil Code.
On April 28, 2005, the NLRC issued its Resolution dismissing
ETEU’s complaint and held that ETPI could not be forced to pay the
union members the 14th, 15th and 16th month bonuses for the year
2003 and the 14th month bonus for the year 2004 inasmuch as the
payment of these additional benefits was basically a management
prerogative, being an act of generosity and munificence on the part of
the company and contingent upon the realization of profits. The NLRC
pronounced that ETPI may not be obliged to pay these extra
compensations in view of the substantial decline in its financial
condition. Likewise, the NLRC found that ETPI was not guilty of the
ULP charge elaborating that no sufficient and substantial evidence was
adduced to attribute malice to the company for its refusal to pay the
subject bonuses. The dispositive portion of the resolution reads:
“WHEREFORE, premises considered, the instant complaint is hereby
DISMISSED for lack of merit.
SO ORDERED.” 7
_______________
7 Id., at p. 90.
523
VOL. 665, FEBRUARY 8, 2012 523 SO ORDERED.”
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union
Respondent ETEU moved for reconsideration but the motion was
denied by the NLRC in its Resolution dated August 31, 2005.
ascribing grave abuse of discretion on the NLRC for disregarding its
evidence which allegedly would prove that the subject bonuses were
part of the union members’ wages, salaries or compensations. In
addition, ETEU asserted that the NLRC committed grave abuse of
discretion when it ruled that ETPI is not contractually bound to give
said bonuses to the union members.
In its assailed June 25, 2008 Decision, the CA declared that the Side
Agreements of the 1998 and 2001 CBA created a contractual obligation
on ETPI to confer the subject bonuses to its employees without
qualification or condition. It also found that the grant of said bonuses
has already ripened into a company practice and their denial would
amount to diminution of the employees’ benefits. It held that ETPI
could not seek refuge under Article 1267 of the Civil Code because this
provision would apply only when the difficulty in fulfilling the
contractual obligation was manifestly beyond the contemplation of the
parties, which was not the case therein. The CA, however, sustained
the NLRC finding that the allegation of ULP was devoid of merit. The
dispositive portion of the questioned decision reads:
“WHEREFORE, premises considered, the instant petition is
GRANTED and the resolution of the National Labor Relations Commission
dated April 28, 2005 is hereby ANNULLED and SET ASIDE. Respondent
Eastern Telecommunications Philippines, Inc. is ordered to pay the
members of petitioner their 14th, 15th and 16th month bonuses for the
year 2003 and 14th month for the year 2004. The complaint for unfair labor
practice against said respondent is DISMISSED.
_______________
8 Id., at pp. 450-480.
524
524 SUPREME COURT REPORTS ANNOTATED
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union
9
Issues
Dissatisfied, ETPI now comes to this Court via Rule 45, raising the
following errors allegedly committed by the CA, to wit:
I.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW
WHEN IT ANNULLED AND SET ASIDE THE RESOLUTIONS OF
THE NLRC DISREGARDING THE WELL SETTLED RULE THAT A
WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION.
II.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW
WHEN IT DISREGARDED THE RULE THAT FINDINGS OF FACTS
OF QUASI-JUDICIAL BODIES ARE ACCORDED FINALITY IF
THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE
CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE
BASED ON SUBSTANTIAL AND OVERWHELMING EVIDENCE
AND UNDISPUTED FACTS.
III.
IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS
TO CONSIDER THAT THE BONUS GIVEN BY EASTERN
COMMUNICATIONS TO ITS EMPLOYEES IS NOT DEPENDENT
ON THE REALIZATION OF PROFITS.
IV.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF
LAW WHEN IT DISREGARDED THE UNDISPUTED FACT THAT
EASTERN COMMUNICATIONS IS SUFFERING FROM
TREMENDOUS FINANCIAL LOSSES, AND ORDERED
_______________
9 Id., at pp. 70-71.
525
VOL. 665, FEBRUARY 8, 2012 525
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms Employees Union
Employees Union
EASTERN COMMUNICATIONS TO GRANT THE BONUSES
REGARDLESS OF THE FINANCIAL DISTRESS OF EASTERN
COMMUNICATIONS.
V.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF
LAW WHEN IT ARRIVED AT THE CONCLUSION THAT THE
GRANT OF BONUS GIVEN BY EASTERN COMMUNICATIONS TO
ITS EMPLOYEES HAS RIPENED INTO A COMPANY PRACTICE. 10
A careful perusal of the voluminous pleadings filed by the parties
leads the Court to conclude that this case revolves around the following
core issues:
1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th
month bonuses for the year 2003 and 14th month bonus for the year 2004
to the members of respondent union; and
2. Whether or not the CA erred in not dismissing outright ETEU’s
petition for certiorari.
ETPI insists that it is under no legal compulsion to pay 14th, 15th
and 16th month bonuses for the year 2003 and 14th month bonus for
the year 2004 contending that they are not part of the demandable
wage or salary and that their grant is conditional based on successful
business performance and the availability of company profits from
which to source the same. To thwart ETEU’s monetary claims, it insists
that the distribution of the subject bonuses falls well within the
company’s prerogative, being an act of pure gratuity and generosity on
its part. Thus, it can withhold the grant thereof especially since it is
currently plagued with economic difficulties and financial losses. It
alleges that the company’s fiscal situation greatly declined due to
tremendous and extraordinary losses it sustained beginning the year
2000. It claims that it cannot be compelled to act liberally and confer
upon its employees
_______________
10 Id., at p. 34.
526
526 SUPREME COURT REPORTS ANNOTATED
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
additional benefits over and above those mandated by law when it
cannot afford to do so. It posits that so long as the giving of bonuses will
result in the financial ruin of an already distressed company, the
employer cannot be forced to grant the same.
ETPI further avers that the act of giving the subject bonuses did not
ripen into a company practice arguing that it has always been a
contingent one dependent on the realization of profits and, hence, the
workers are not entitled to bonuses if the company does not make
profits for a given year. It asseverates that the 1998 and 2001 CBA Side
Agreements did not contractually afford ETEU a vested property right
to a perennial payment of the bonuses. It opines that the bonus
provision in the Side Agreement allows the giving of benefits only at
the time of its execution. For this reason, it cannot be said that the
grant has ripened into a company practice. In addition, it argues that
even if such traditional company practice exists, the CA should have
applied Article 1267 of the Civil Code which releases the obligor from
the performance of an obligation when it has become so difficult to
fulfill the same.
It is the petitioner’s stance that the CA should have dismissed
outright the respondent union’s petition for certiorari alleging that no
question of jurisdiction whatsoever was raised therein but, instead,
what was being sought was a judicial re-evaluation of the adequacy or
inadequacy of the evidence on record. It claims that the CA erred in
disregarding the findings of the NLRC which were based on substantial
and overwhelming evidence as well as on undisputed facts. ETPI added
that the CA court should have refrained from tackling issues of fact
and, instead, limited itself on issues of jurisdiction and grave abuse of
jurisdiction amounting to lack or excess of it.527
VOL. 665, FEBRUARY 8, 2012 527
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union Court in Metro Transit Organization, Inc. v. National Labor Relations
The Court’s Ruling
As a general rule, in petitions for review under Rule 45, the Court,
not being a trier of facts, does not normally embark on a re-examination
of the evidence presented by the contending parties during the trial of
the case considering that the findings of facts of the CA are conclusive
and binding on the Court. The rule, however, admits of several
exceptions, one of which is when the findings of the appellate court are
contrary to those of the trial court or the lower administrative body, as
the case may be.11 Considering the incongruent factual conclusions of
the CA and the NLRC, this Court finds Itself obliged to resolve it.
The pivotal question determinative of this controversy is whether
the members of ETEU are entitled to the payment of 14th, 15th and
16th month bonuses for the year 2003 and 14th month bonus for year
2004.
After an assiduous assessment of the record, the Court finds no
merit in the petition.
From a legal point of view, a bonus is a gratuity or act of liberality
of the giver which the recipient has no right to demand as a matter of
right.12 The grant of a bonus is basically a management prerogative
which cannot be forced upon the employer who may not be obliged to
assume the onerous burden of granting bonuses or other benefits aside
from the employee’s basic salaries or wages.13
A bonus, however, becomes a demandable or enforceable obligation
when it is made part of the wage or salary or com-
_______________
11 New City Builders, Inc. v. National Labor Relations Commission, 499 Phil. 207, 212-
213; 460 SCRA 220, 227 (2005).
12 Philippine National Construction Corp. v. National Labor Relations Commission, 345
Phil. 324, 331; 280 SCRA 109, 114 (1997).
13 Trader’s Royal Bank v. National Labor Relations Commission, G.R. No. 88168, August
30, 1990, 189 SCRA 274, 277.
528
528 SUPREME COURT REPORTS ANNOTATED
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union
pensation of the employee.14 Particularly instructive is the ruling of the
Commission,15 where it was written:
“Whether or not a bonus forms part of wages depends upon the
circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if
profits are realized or if a certain level of productivity is achieved, it cannot
be considered part of the wage. Where it is not payable to all but only to
some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefore, not a
part of the wage.”
The consequential question that needs to be settled, therefore, is
whether the subject bonuses are demandable or not. Stated differently,
can these bonuses be considered part of the wage, salary or
compensation making them enforceable obligations?
 The Court believes so.
In the case at bench, it is indubitable that ETPI and ETEU agreed
on the inclusion of a provision for the grant of 14th, 15th and 16th
month bonuses in the 1998-2001 CBA Side Agreement,16 as well as in
the 2001-2004 CBA Side Agreement,17 which was signed on September
3, 2001. The provision, which was similarly worded, states:
_______________
14 Philippine National Construction Corp. v. National Labor Relations Commission, 366
Phil. 678; 307 SCRA 218, 228 (1999); Philippine Duplicators, Inc. v. National Labor Relations
Commission, 311 Phil. 407, 419; 241 SCRA 380, 388 (1995).
15 315 Phil. 860, 871; 245 SCRA 767, 774-775 (1995).
16 Rollo, pp. 560-564.
17 Id., at pp. 240-245.
529
VOL. 665, FEBRUARY 8, 2012 529
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union From the foregoing, ETPI cannot insist on business losses as a basis
Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month bonuses
(other than the 13th month pay) are granted.
A reading of the above provision reveals that the same provides for
the giving of 14th, 15th and 16th month bonuses without qualification.
The wording of the provision does not allow any other interpretation.
There were no conditions specified in the CBA Side Agreements for the
grant of the benefits contrary to the claim of ETPI that the same is
justified only when there are profits earned by the company. Terse and
clear, the said provision does not state that the subject bonuses shall
be made to depend on the ETPI’s financial standing or that their
payment was contingent upon the realization of profits. Neither does it
state that if the company derives no profits, no bonuses are to be given
to the employees. In fine, the payment of these bonuses was not related
to the profitability of business operations.
The records are also bereft of any showing that the ETPI made it
clear before or during the execution of the Side Agreements that the
bonuses shall be subject to any condition. Indeed, if ETPI and ETEU
intended that the subject bonuses would be dependent on the company
earnings, such intention should have been expressly declared in the
Side Agreements or the bonus provision should have been deleted
altogether. In the absence of any proof that ETPI’s consent was vitiated
by fraud, mistake or duress, it is presumed that it entered into the Side
Agreements voluntarily, that it had full knowledge of the contents
thereof and that it was aware of its commitment under the contract.
Verily, by virtue of its incorporation in the CBA Side Agreements, the
grant of 14th, 15th and 16th month bonuses has become more than just
an act of generosity on the part of ETPI but a contractual obligation it
has undertaken. Moreover, the continuous conferment of bonuses by
ETPI to the union members from 1998 to 2002 by virtue of the Side
Agreements evidently negates its argument
530
530 SUPREME COURT REPORTS ANNOTATED
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union
that the giving of the subject bonuses is a management prerogative.
for disregarding its undertaking. It is manifestly clear that although it
incurred business losses of P149,068,063.00 in the year 2000, it
continued to distribute 14th, 15th and 16th month bonuses for said
year. Notwithstanding such huge losses, ETPI entered into the 2001-
2004 CBA Side Agreement on September 3, 2001 whereby it contracted
to grant the subject bonuses to ETEU in no uncertain terms. ETPI
continued to sustain losses for the succeeding years of 2001 and 2002
in the amounts of P348,783,013.00 and P315,474,444.00, respectively.
Still and all, this did not deter it from honoring the bonus provision in
the Side Agreement as it continued to give the subject bonuses to each
of the union members in 2001 and 2002 despite its alleged precarious
financial condition. Parenthetically, it must be emphasized that ETPI
even agreed to the payment of the 14th, 15th and 16th month bonuses
for 2003 although it opted to defer the actual grant in April 2004. All
given, business losses could not be cited as grounds for ETPI to
repudiate its obligation under the 2001-2004 CBA Side Agreement.
The Court finds no merit in ETPI’s contention that the bonus
provision confirms the grant of the subject bonuses only on a single
instance because if this is so, the parties should have included such
limitation in the agreement. Nowhere in the Side Agreement does it
say that the subject bonuses shall be conferred once during the year the
Side Agreement was signed. The Court quotes with approval the
observation of the CA in this regard:
 “ETPI argues that assuming the bonus provision in the Side Agreement
of the 2001-2004 CBA entitles the union members to the subject bonuses,
it is merely in the nature of a “one-time” grant and not intended to cover
the entire term of the CBA. The contention is untenable. The bonus
provision in question is exactly the same as that contained in the Side
Agreement of the 1998-2001 CBA and
531
VOL. 665, FEBRUARY 8, 2012 531 Employees Union
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms Appeals,20 mere pecuniary inability to fulfill an engagement does not
Employees Union discharge a contractual obligation. Contracts, once perfected, are
there is no denying that from 1998 to 2001, ETPI granted the subject
bonuses for each of those years. Thus, ETPI may not now claim that the
bonus provision in the Side Agreement of the 2001-2004 CBA is only a “one-
time” grant.” 18
ETPI then argues that even if it is contractually bound to distribute
the subject bonuses to ETEU members under the Side Agreements, its
current financial difficulties should have released it from the obligatory
force of said contract invoking Article 1267 of the Civil Code. Said
provision declares:
“Article 1267. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may also
be released therefrom, in whole or in part.”
The Court is not persuaded.
The parties to the contract must be presumed to have assumed the
risks of unfavorable developments. It is, therefore, only in absolutely
exceptional changes of circumstances that equity demands assistance
for the debtor.19 In the case at bench, the Court determines that ETPI’s
claimed depressed financial state will not release it from the binding
effect of the 2001-2004 CBA Side Agreement.
ETPI appears to be well aware of its deteriorating financial
condition when it entered into the 2001-2004 CBA Side Agreement with
ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses
from 2000 to 2002, its business losses in the year 2003 were not exactly
unforeseen or unexpected. Consequently, it cannot be said that the
difficulty in complying with its obligation under the Side Agreement
was “manifestly beyond the contemplation of the parties.” Besides, as
held in Central Bank of the Philippines v. Court of
_______________
18 Id., at p. 18.
19 So v. Food Fest Land, Inc., G.R. No. 183628, April 7, 2010, 617 SCRA 541, 550.
532
532 SUPREME COURT REPORTS ANNOTATED
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
binding between the contracting parties. Obligations arising therefrom
have the force of law and should be complied with in good faith. ETPI
cannot renege from the obligation it has freely assumed when it signed
the 2001-2004 CBA Side Agreement.
Granting arguendo that the CBA Side Agreement does not
contractually bind petitioner ETPI to give the subject bonuses,
nevertheless, the Court finds that its act of granting the same has
become an established company practice such that it has virtually
become part of the employees’ salary or wage. A bonus may be granted
on equitable consideration when the giving of such bonus has been the
company’s long and regular practice. In Philippine Appliance
Corporation v. Court of Appeals,21 it was pronounced:
“To be considered a “regular practice,” however, the giving of the bonus
should have been done over a long period of time, and must be shown to
have been consistent and deliberate. The test or rationale of this rule on
long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.”
The records show that ETPI, aside from complying with the regular
13th month bonus, has been further giving its employees 14th month
bonus every April as well as 15th and 16th month bonuses every
December of the year, without fail, from 1975 to 2002 or for 27 years
whether it earned profits or not. The considerable length of time ETPI
has been giving the special grants to its employees indicates a
unilateral and voluntary act on its part to continue giving said benefits
knowing that such act was not required by law. Accordingly, a company
practice in favor of the employees has been estab-
_______________
20 223 Phil. 266, 274; 139 SCRA 46, 53 (1985).
 21 G.R. No. 149434, June 3, 2004, 430 SCRA 525, 532.
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
533
Employees Union
VOL. 665, FEBRUARY 8, 2012 533
SO ORDERED.
Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms Velasco, Jr. (Chairperson), Bersamin,** Abad and Perlas-Bernabe,
Employees Union JJ., concur.
Petition denied, judgment and resolution affirmed.
lished and the payments made by ETPI pursuant thereto ripened into
benefits enjoyed by the employees. Notes.—Bonus is a gratuity or act of liberality of the giver; It is
granted and paid to an employee for his industry and loyalty which
The giving of the subject bonuses cannot be peremptorily withdrawn
contributed to the success of the employer’s business and made possible
by ETPI without violating Article 100 of the Labor Code:
the realization of profits. Lepanto Ceramics, Inc. vs. Lepanto Ceramics
“Art. 100. Prohibition against elimination or diminution of Employees Association, 614 SCRA 63 [2010].
benefits.—Nothing in this Book shall be construed to eliminate or in any
way diminish supplements, or other employee benefits being enjoyed at the Distinction between “facilities” and “supplements.” (SLL
time of promulgation of this Code.” International Cables Specialist vs. National Labor Relations
Commission, 644 SCRA 411 [2011])
The rule is settled that any benefit and supplement being enjoyed
by the employees cannot be reduced, diminished, discontinued or ——o0o——
eliminated by the employer. The principle of non-diminution of benefits © Copyright 2016 Central Book Supply, Inc. All rights reserved.
is founded on the constitutional mandate to protect the rights of

workers and to promote their welfare and to afford labor full
protection.22
Interestingly, ETPI never presented countervailing evidence to
refute ETEU’s claim that the company has been continuously paying
bonuses since 1975 up to 2002 regardless of its financial state. Its
failure to controvert the allegation, when it had the opportunity and
resources to do so, works in favor of ETEU. Time and again, it has been
held that should doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor
of the latter.23
WHEREFORE, the petition is DENIED. The June 25, 2008 Decision
of the Court of Appeals and its December 12, 2008 Resolution are
AFFIRMED.
_______________
22 Arco Metal Products Co., Inc. v. Samahan Ng Mga Manggagawa Sa Arco Metal-
NAFLU, G.R. No. 170734, May 14, 2008, 554 SCRA 110, 118.
23 Gu-miro v. Adorable, G.R. No. 160952, 480 Phil. 597, 605; 437 SCRA 162, 168 (2004).
534

534 SUPREME COURT REPORTS ANNOTATED

 G.R. No. 177705. September 18, 2009.*
KIMBERLY-CLARK PHILIPPINES, INC. petitioner, vs. NORA
DIMAYUGA, ROSEMARIE C. GLORIA, and MARICAR C. DE GUIA,
respondents.
Labor Law; Retirement; It is settled that entitlement of employees to
retirement benefits must specifically be granted under existing laws, a
collective bargaining agreement or employment contract, or an established
employer policy.—It is settled that entitlement of employees to retirement
benefits must specifically be granted under existing laws, a collective
bargaining agreement or employment contract, or an established employer
policy. No law or collective bargaining agreement or other applicable
contract, or an established company policy was existing during
respondents’ employment entitling them to the P200,000 lump-sum
retirement pay. Petitioner was not thus obliged to grant them such pay.
Same; It is settled doctrine that the grant of a bonus is a prerogative,
not an obligation of the employer.—Petitioner’s decision to extend the
benefit to some former employees who had already resigned before the offer
of the lump sum pay incentive was thus an act of generosity which it is not
obliged to extend to respondents. Apropos is this Court’s ruling
inBusinessday: With regard to the private respondents’ claim for the mid-
year bonus, it is settled doctrine that the grant of a bonus is a prerogative,
not an obligation, of the employer. The matter of giving a bonus over and
above the worker’s lawful salaries and allowances is entirely dependent on
the financial capability of the employer to give it. The fact that the
company’s business was no longer profitable (it was in fact moribund) plus
the fact that the private respondents did not work up to the middle of the
year (they were discharged in May 1998) were valid reasons for not
granting them a mid-year bonus. Requiring the company to pay a mid-year
bonus to them also would in effect penalize the company for its
generosity to those workers who remained with the company “till the end”
of its days.
Same; Quitclaims; While quitclaims executed by employees are
commonly frowned upon as being contrary to public policy and are
_______________
* SECOND DIVISION.
649
VOL. 600, SEPTEMBER 18, 2009 649
Kimberly-Clark Philippines, Inc. vs. Dimayuga
ineffective to bar claims for the full measure of their legal rights, where
the person making the waiver has done so voluntarily, with a full
understanding thereof, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as being a valid and
binding undertaking.—While quitclaims executed by employees are
commonly frowned upon as being contrary to public policy and are
ineffective to bar claims for the full measure of their legal rights, where the
person making the waiver has done so voluntarily, with a full
understanding thereof, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as being a valid and
binding undertaking. In the case at bar, Nora and Rosemarie are
Accounting graduates. They have not alleged having been compelled to
sign the quitclaims, nor that the considerations thereof (P1,024,113.73 for
Nora and P682,721.24 for Rosemarie) are unconscionable.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Laguesma, Magsalin, Consulta & Gastardo for petitioner.
Luciano R. Caraang for respondents.
CARPIO-MORALES, J.:
Respondents were employees of Kimberly-Clark Philippines, Inc.
(petitioner). Nora Dimayuga (Nora) was Cost Accounting Supervisor,
Rosemarie Gloria (Rosemarie) was Business Analyst, and Maricar de
Guia (Maricar) was General Accounting Manager.
On September 19, 2002, Nora tendered her resignation effective
October 21, 2002.1
On October 7, 2002, Rosemarie tendered her resignation, also
effective October 21, 2002.2
_______________
1 NLRC Records, p. 46.
2 Id., at p. 48.
650
650 SUPREME COURT REPORTS ANNOTATED
Kimberly-Clark Philippines, Inc. vs. Dimayuga
As petitioner had been experiencing a downward trend in its sales,
it created a tax-free early retirement package for its employees as a cost-
cutting and streamlining measure. Twenty-four of its employees
availed of the offer that was made available from November 10-30,
2002.3
Despite their resignation before the early retirement package was
offered, Nora and Rosemarie pleaded with petitioner that they be
retroactively extended the benefits thereunder, to which petitioner
acceded.4 Hence, Nora received a total of P1,025,113.73 while
Rosemarie received a total of P1,006,493.94, in consideration of which
they executed release and quitclaim deeds dated January 17, 20035 and
January 16, 2003,6 respectively.
On November 4, 2002, Maricar tendered her resignation effective
December 1, 2002,7 citing career advancement as the reason therefor.
As at the time of her resignation the early retirement package was still
effective, she received a total of P523,540.13 for which she signed a
release and quitclaim.8
On November 28, 2002, petitioner announced that in lieu of the
merit increase which it did not give that year, it would provideeconomic
assistance, to be released the following day, to all monthly-paid
employees on regular status as of November 16, 2002.
Still later or on January 16, 2003, petitioner announced that it
would the grant a lump sum retirement pay in the amount of P200,000,
in addition to the early retirement package benefit, to those who signed
up for early retirement and who would sign up until January 22, 2003.9
_______________
3 Id., at p. 34.
4 Id., at pp. 35, 61.
5 Id., at p. 127.
6 Id., at p. 128.
7 Id., at p. 55.
8 Id., at p. 128.
9 Id., at p. 23.
651
VOL. 600, SEPTEMBER 18, 2009 651 Services, Inc. v. NLRC (Businessday),14 the NLRC ratiocinated that
Kimberly-Clark Philippines, Inc. vs. Dimayuga retirement pay was an act of discrimination, more so because a certain
On May 23, 2003, respondents filed a Complaint,10 docketed as
NLRC Case No. RAB-IV 5-17522-03-L, before the National Labor
Relations Commission (NLRC) Regional Arbitration Branch No. IV
against petitioner and its Finance Manager Fernando B. Gomez
(Gomez) whom respondents alleged to be “responsible for the
withholding of [their] additional retirement benefits,”11 claiming
entitlement to the P200,000 lump sum retirement pay. Respondents
Nora and Rosemarie additionally claimed entitlement to the economic
assistance.
By Decision of August 31, 2004, Labor Arbiter Generoso V. Santos
dismissed the claims of Nora and Rosemarie, holding that they were
not entitled to the P200,000 lump sum retirement pay, they having
ceased to be employees of petitioner at the time it was offered or made
effective on January 16, 2003. He, however, granted Maricar’s claim for
the same pay, holding that she was entitled to it because at the time
she resigned from the company effective December 1, 2002, such pay
was already offered. Besides, the Labor Arbiter ruled, Maricar had a
vested right to it as she was given a formal notice of her entitlement to
it by petitioner, through its Human Resources Director.
On appeal by both parties,12 the NLRC, by Decision13 of November
22, 2005, modified the Labor Arbiters Decision by ordering petitioner
to pay Nora P200,000 additional bonus and P2,880 economic
assistance, and to pay Rosemarie P200,000 additional bonus and
P2,656 economic assistance. It affirmed Maricar’s entitlement to the
lump sum retirement pay.
_______________
10 Id., at pp. 1-2.
11 Id., at p. 15.
12 Id., at pp. 95-170.
13 Id., at pp. 175-176. Penned by Commissioner Angelita A. Gacutan and concurred in by
Presiding Commissioner Raul T. Aquino and Commissioner Victoriano R. Calaycay.
652
652 SUPREME COURT REPORTS ANNOTATED
Kimberly-Clark Philippines, Inc. vs. Dimayuga
Applying the ruling in Businessday Information Systems and
petitioner’s refusal to give Nora and Rosemarie the lump sum
Oscar Diokno, another employee who presumably resigned also prior to
January 16, 2003, was given said benefit.
As to the award of economic assistance, the NLRC held that Nora
and Rosemarie were also entitled to it as the same was given in lieu of
the annual performance-based salary increase that was not given in
2002 and, therefore, already earned by them when they resigned.
Petitioner’s Motion for Reconsideration15 having been denied,16 it filed a
Petition for Certiorari17 before the Court of Appeals.
By Decision18 of January 19, 2007, the appellate court affirmed the
NLRC Decision. It held that, contrary to petitioner’s assertion that the
early retirement package was extended to respondents out of
generosity, the offer/grant thereof, as well as their inclusion in the
termination report submitted to the Department of Labor and
Employment, made them “full retirees,” hence, they must be given the
other benefits extended to petitioner’s other employees, following the
ruling in Businessday.
The appellate court added that since respondents resigned from
their respective positions barely a month before the effectivity of the
early retirement package, the general principles of fair play and justice
dictate that petitioner extend to them the same benefits in
consideration of their long years of service.
_______________
14 G.R. No. 103575, April 5, 1993, 221 SCRA 9.
15 NLRC Records, pp. 190-199.
16 Id., at pp. 210-211.
17 CA Rollo, pp. 2-32.
18 Id., at pp. 240-251. Penned by Court of Appeals Associate Justice Renato C. Dacudao,
with the concurrence of Associate Justices Hakim S. Abdulwahid and Arturo G. Tayag.
653
VOL. 600, SEPTEMBER 18, 2009 653
Kimberly-Clark Philippines, Inc. vs. Dimayuga employees. It may not, in the guise of exercising management prerogatives,
The appellant court, noting that Nora and Rosemarie received
commendable ratings, upheld their entitlement to the economic
assistance as their resignation before the grant of such benefit took
effect did not detract from the fact that it was in substitution of the
traditional merit increase extended by petitioner to its employees with
commendable or outstanding ratings which it failed to give in 2002.
Petitioner’s Motion for Reconsideration19 having been denied,20it
filed the present petition, insisting that Nora and Rosemarie are no
longer entitled to the economic assistance and lump sum pay
considering that they were already retired and have in fact executed
quitclaims and waivers.
And petitioner questions the application to the present case by the
appellate court of the doctrine laid down in Businessday.
The petition is impressed with merit.
It is settled that entitlement of employees to retirement benefits
must specifically be granted under existing laws, a collective
bargaining agreement or employment contract, or an established
employer policy.21 No law or collective bargaining agreement or other
applicable contract, or an established company policy wasexisting
during respondents’ employment entitling them to the P200,000 lump-
sum retirement pay. Petitioner was not thus obliged to grant them such
pay.
Respondents nevertheless argue that since other employees who
resigned before the announcement of the grant of the lump sum
retirement pay received the same, they (respondents) should also
receive it,22 citing the pronouncement in Businessday that:
_______________
19 Id., at pp. 270-288.
20 Id., at p. 298.
21 Vide Article 287, Labor Code; GVM Security and Protective Agency v. National Labor
Relations Commission, G.R. No. 102157, July 23, 1993, 224 SCRA 734, 736.
22 Vide NLRC Records, p. 18
654
654 SUPREME COURT REPORTS ANNOTATED
Kimberly-Clark Philippines, Inc. vs. Dimayuga
“x x x The law requires an employer to extend equal treatment to its
grant greater benefits to some and less to others. Management
prerogatives are not absolute prerogatives but are subject to legal limits,
collective bargaining agreements, or general principles of fair play and
justice.” (Underscoring supplied)
23
Respondents’ reliance on Businessday is misplaced. The factual
milieu in Businessday is markedly different from that of the present
case. That case involved the retrenched employees’ separation payto
which they are entitled under Article 283 of the Labor Code. In the
present case, Nora and Rosemarie resigned prior to petitioner’s offer of
the lump sum retirement pay as an incentive to those employees who
would voluntarily avail of its early retirement scheme as a cost-cutting
and streamlining measure. That respondents resigned, and not
retrenched, is clear from their respective letters to petitioner. And
nowhere in the letters is there any allegation that they resigned in view
of the company’s downward trend in sales which necessitated
downsizing or streamlining.
The appellate court’s finding that petitioner’s inclusion of Nora and
Rosemarie in the termination report submitted to the DOLE and its
grant to them of the early retirement benefits made them “full retirees”
to thus entitle them to the same benefits offered to those who would
voluntarily resign after November 16, 2003 does not lie.
Petitioner’s claim that it allowed Nora and Rosemarie to avail of the
early retirement package despite their previous separation from the
company out of pure generosity is well-taken in light of Nora’s letter of
September 15, 2002 asking if she could avail of the early retirement
package as “it would certainly be of great assistance to us financially.”
It is thus absurd to fault petitioner for acceding to such a request out
of compassion by directing it to pay additional benefits to resigned
employees who are not entitled thereto.
_______________
23 Businessday Information Systems and Services v. National Labor Relations
Commission, supra note 14 at 13.
655
VOL. 600, SEPTEMBER 18, 2009 655
Kimberly-Clark Philippines, Inc. vs. Dimayuga Moreover, petitioner’s decision to give economic assistance was
Petitioner’s decision to extend the benefit to some former employees
who had already resigned before the offer of the lump sum pay incentive
was thus an act of generosity which it is not obliged to extend to
respondents. Apropos is this Court’s ruling inBusinessday:
“With regard to the private respondents’ claim for the mid-year bonus,
it is settled doctrine that the grant of a bonus is a prerogative, not an
obligation, of the employer. The matter of giving a bonus over and above
the worker’s lawful salaries and allowances is entirely dependent on the
financial capability of the employer to give it. The fact that the company’s
business was no longer profitable (it was in fact moribund) plus the fact
that the private respondents did not work up to the middle of the year (they
were discharged in May 1998) were valid reasons for not granting them a
mid-year bonus. Requiring the company to pay a mid-year bonus to them
also would in effect penalize the company for its generosity to those
workers who remained with the company “till the end” of its
days.” (Citations omitted) (Emphasis and underscoring supplied)
24
Neither are Nora and Rosemarie entitled to the economic assistance
which petitioner awarded to “all monthly employees who are under
regular status as of November 16, 2002,” they having resigned earlier
or on October 21, 2002.
Again, contrary to the appellate court’s ruling that Nora and
Rosemarie already earned the economic assistance, the same having
been given in lieu of the performance-based annual salary increase, the
Court finds that the economic assistance was a bonus over and above
the employees’ salaries and allowances. A perusal of the memorandum
regarding the grant of economic assistance shows that it was granted
in lieu of salary increase (the grant of which depends on petitioner’s
financial capability) and that it was not intended to be a counterpart of
the Collective Bargaining Agreement grant to members of the K-CPI
union. The grant of economic assistance to all monthly employees under
regular status as
_______________
24 Id., at pp. 13-14.
656
656 SUPREME COURT REPORTS ANNOTATED
Kimberly-Clark Philippines, Inc. vs. Dimayuga
of November 16, 2002 was thus well within petitioner’s prerogatives.
arrived at more than a month after respondents’ resignation and,
therefore, it was a benefit not yet existing at the time of their
separation.
In any event, assuming that Nora and Rosemarie are entitled to the
economic assistance, they had signed release and quitclaim deeds upon
their resignation25 in which they waived
“x x x any or manner of action or actions, course or courses of action,
suits, debts, dues, sums of money, accounts, reckonings, promises,
damages (whether actual, moral, nominal, temperate, liquidated or
exemplary), claims and liabilities whatsoever, in law or equity, arising out
or and in connection with, but not limited to claims for salary, termination
pay, vacation leave, overtime, night work, compensation for injuries or
illness directly caused by my employment or either aggravated by or the
results of the nature of my employment and claims for which I may or shall
make, or may have for or by any reason of any matter, cause or thing
whatsoever, including but not limited to my employment and to matters
arising from my employment by KIMBERLY-CLARK PHILIPPINES, INC. Note.—While the law looks with disfavor upon quitclaims and
over any period or periods in the past.” 26
releases by the employees who are inveigled or pressured into signing
While quitclaims executed by employees are commonly frowned them by unscrupulous employees seeking to evade their legal
upon as being contrary to public policy and are ineffective to bar claims responsibilities. But quitclaims and releases are not per seinvalid.
for the full measure of their legal rights, where the person making the (Espina vs. Court of Appeals, 519 SCRA 327 [2007])
waiver has done so voluntarily, with a full understanding thereof, and ——o0o——
the consideration for the quitclaim is credible and reasonable, the _______________
transaction must be recognized as being a valid and binding
** Additional member per Special Order No. 691 dated September 4, 2009.
undertaking.27 In the case at bar, Nora and Rosemarie are Accounting
graduates. They have not alleged having been compelled to sign the © Copyright 2016 Central Book Supply, Inc. All rights reserved.
_______________
25 NLRC Records, p. 127.
26 Id., at pp. 127-128.
27 Vide Magsalin v. National Organization of Working Men,G.R. No. 148492, May 9,
2003, 403 SCRA 199, 207.
657

VOL. 600, SEPTEMBER 18, 2009 657

Kimberly-Clark Philippines, Inc. vs. Dimayuga

quitclaims, nor that the considerations thereof (P1,024,113.73 for Nora

and P682,721.24 for Rosemarie) are unconscionable.
As for Maricar’s claim to the lump sum retirement pay, the Court
finds that, like Nora and Rosemarie, she is not entitled to it. Although
the incentive was offered when she was still connected with petitioner,
she resigned from employment, citing career advancement as the
reason therefor. Indubitably, the incentive was addressed to those
employees who, without prior plans of resigning, opted to terminate
their employment in light of the downsizing being undertaken by
petitioner. In other words, Maricar resigned from petitioner in order to
find gainful employment elsewhere—a reason which has no bearing on
the financial viability of petitioner.
WHEREFORE, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals dated January 19, 2007 and April
30, 2007, respectively, are REVERSED and SET ASIDE. NLRC Case
No. RAB-IV-17522-03-L is DISMISSED.
SO ORDERED.
Ynares-Santiago,** Brion, Del Castillo and Abad, JJ., concur.
Petition granted, judgment and resolution reversed and set aside.

VOL. 440, OCTOBER 19, 2004 621
China Banking Corporation vs. Borromeo
G.R. No. 156515. October 19, 2004. *
CHINA BANKING CORPORATION, petitioner, vs. MARIANO M.
BORROMEO, respondent.
Labor Law; National Labor Relations Commission
(NLRC);Technicalities; Relation; It is settled that administrative bodies like
the NLRC, including the Labor Arbiter, are not bound by the technical
niceties of the law and procedure and the rules obtaining in courts of law.—
It is settled that administrative bodies like the NLRC, including the Labor
Arbiter, are not bound by the technical niceties of the law and procedure
and the rules obtaining in courts of law. Rules of evidence are not strictly
observed in proceedings before administrative bodies like the NLRC, where
decisions may be reached on the basis of position papers.
Same; Same; Factual Findings; Appeals; Factual findings of the
NLRC affirming those of the Labor Arbiter, are accorded respect, if not
finality, and are considered binding on this Court.—Before delving on the
merits of the case, it is well to remember that factual findings of the NLRC
affirming those of the Labor Arbiter, both
_______________
* SECOND DIVISION.
622
622 SUPREME COURT REPORTS ANNOTATED China Banking Corporation vs. Borromeo
China Banking Corporation vs. Borromeo CA-G.R. SP No. 57365, remanding to the Labor Arbiter for further
bodies being deemed to have acquired expertise in matters within
their jurisdiction, when sufficiently supported by evidence on record, are
accorded respect, if not finality, and are considered binding on this Court.
Same; Employment; Management Prerogative; Company Policies and
Regulations; Validity; Company policies and regulations are, unless shown
to be grossly oppressive or contrary to law, generally binding and valid on
the parties.—It is well recognized that company policies and regulations
are, unless shown to be grossly oppressive or contrary to law, generally
binding and valid on the parties and must be complied with until finally
revised or amended unilaterally or preferably through negotiation or by
competent authority.
Same; Same; Same; Same; Management has the prerogative to
discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations.—Management has the
prerogative to discipline its employees and to impose appropriate penalties
on erring workers pursuant to company rules and regulations. With more
reason should these truisms apply to the respondent, who, by reason of his
position, was required to act judiciously and to exercise his authority in
harmony with company policies.
PETITION for review on certiorari of the decision and resolution of
the Court of Appals.
The facts are stated in the opinion of the Court.
Ma. Hildelita N. Pagkatipunan-Alano for petitioner.
Adonis B. Nicanor for respondent.
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by China
Banking Corporation seeking the reversal of the Decision dated July 19,1
2002 of the Court of Appeals in
_______________
Penned by Associate Justice Oswaldo D. Agcaoili, with Associate Justices Eriberto U.
1
Rosario, Jr. and Danilo B. Pine, concurring; Rollo, pp. 69-90.
623
VOL. 440, OCTOBER 19, 2004 623
hearings the complaint for payment of separation pay, mid-year bonus,
profit share and damages filed by respondent Mariano M. Borromeo
against the petitioner Bank. Likewise, sought to be reversed is the
appellate court’s Resolution dated January 6, 2003, denying the
petitioner Bank’s motion for reconsideration.
The factual antecedents of the case are as follows:
Respondent Mariano M. Borromeo joined the petitioner Bank on
June 1, 1989 as Manager assigned at the latter’s Regional Office in
Cebu City. He then had the rank of Manager Level I. Subsequently, the
respondent was laterally transferred to Cagayan de Oro City as Branch
Manager of the petitioner Bank’s branch thereat.
 For the years 1989 and 1990, the respondent received a “highly
satisfactory” performance rating and was given the corresponding
profit sharing/performance bonus. From 1991 up to 1995, he
consistently received a “very good” performance rating for each of the
said years and again received the corresponding profit
sharing/performance bonus. Moreover, in 1992, he was promoted from
Manager Level I to Manager Level II. In 1994, he was promoted to
Senior Manager Level I. Then again, in 1995, he was promoted to
Senior Manager Level II. Finally, in 1996, with a “highly satisfactory”
performance rating, the respondent was promoted to the position of
Assistant Vice-President, Branch Banking Group for the Mindanao
area effective October 16, 1996. Each promotion had the corresponding
increase in the respondent’s salary as well as in the benefits he received
from the petitioner Bank.
However, prior to his last promotion and then unknown to the
petitioner Bank, the respondent, without authority from the Executive
Committee or Board of Directors, approved several DAUD/BP
accommodations amounting to P2,441,375 in favor of Joel Maniwan,
with Edmundo Ramos as surety. DAUD/BP is the acronym for checks
“Drawn Against Uncollected Deposits/Bills Purchased.” Such checks,
which are not
624
624 SUPREME COURT REPORTS ANNOTATED
China Banking Corporation vs. Borromeo
sufficiently funded by cash, are generally not honored by banks.
Further, a DAUD/BP accommodation is a credit accommodation
granted to a few and select bank clients through the withdrawal of
uncollected or uncleared check deposits from their current account.
Under the petitioner Bank’s standard operating procedures, DAUD/BP
accommodations may be granted only by a bank officer upon express
authority from its Executive Committee or Board of Directors.
As a result of the DAUD/BP accommodations in favor of Maniwan,
a total of ten out-of-town checks (7 PCIB checks and 3 UCPB checks) of
various dates amounting to P2,441,375 were returned unpaid from
September 20, 1996 to October 17, 1996. Each of the returned checks
was stamped with the notation “Payment Stopped/Account Closed.”
On October 8, 1996, the respondent wrote a Memorandum to the
petitioner Bank’s senior management requesting for the grant of a P2.4
million loan to Maniwan. The memorandum stated that the loan was
“to regularize/liquidate subject’s (referring to Maniwan) DAUD
availments.” It was only then that the petitioner Bank came to know of
the DAUD/BP accommodations in favor of Maniwan. The petitioner
Bank further learned that these DAUD/BP accommodations exceeded
the limit granted to clients, were granted without proper prior approval
and already past due. Acting on this information, Samuel L. Chiong,
the petitioner Bank’s First Vice- President and Head-Visayas
Mindanao Division, in his Memorandum dated November 19, 1996 for
the respondent, sought clarification from the latter on the following
matters:
1. “1)When DAUD/BP accommodations were allowed, what
efforts, if any, were made to establish the identity and/or
legitimacy of the alleged broker or drawers of the checks
accommodated?
2. “2)Did the branch follow and comply with operating procedure
which require that all checks accommodated for DAUD/BP
should be previously verified with the drawee bank and history
if not outright balances determined if enough to cover the
checks?
625
VOL. 440, OCTOBER 19, 2004 625
China Banking Corporation vs. Borromeo
1. “3)How did the accommodations reach P2,441,375.00 when our
records indicate that the borrowers B/P-DAUD line is only for
P500,000.00? When did the accommodations start exceeding
the limit of P500,000.00 and under whose authority?
2. “4)When did the accommodated checks start bouncing?
3. “5)What is the status of these checks now and what has the
branch done so far to protect/ensure collectibility of the
returned checks?
4. “6)What about client Joel Maniwan and surety Edmund Ramos,
what steps have they done to pay the checks returned?” 2
In reply thereto, the respondent, in his Letter dated December 5, 1996,
answered the foregoing queries in seriatim and explained, thus:
1. “1.None
 2. “2.No
3. “3.The accommodations reach P2.4 million upon the request of
Mr. Edmund Ramos, surety, and this request was
subsequently approved by undersigned. The excess
accommodations started in July ’96 without higher
management approval.
4. “4.Checks started bouncing on September 20, 1996.
5. “5.Checks have remained unpaid. The branch sent demand
letters to Messrs. Maniwan and Ramos and referred the
matter to our Legal Dept. for filing of appropriate legal action.
6. “6.Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has
signified their intention to settle by Feb. 1997.
“Justification for lapses committed (Item nos. 1 to 3).
“The account was personally endorsed and referred to us by Mr.
Edmund Ramos, Branch Manager of Metrobank, Divisoria Br., Cagayan
de Oro City. In fact, the CASA account was opened jointly as &/or
(Maniwan &/or Ramos). Mr. Ramos gave us his full assurance that the
checks that we intend to purchase are the same drawee that Metrobank
has been purchasing for the past one (1) year already. He even disclosed
that these checks were verified by his own branch accountant and that Mr.
Maniwan’s loan account
_______________
2 Rollo, p. 200.
626
626 SUPREME COURT REPORTS ANNOTATED
China Banking Corporation vs. Borromeo
was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin of
CIFC. To show his sincerity, Mr. Ramos signed as surety for Mr. Maniwan
for P2.5MM. Corollary to this, Mr. Ramos applied for a loan with us
mortgaging his house, lot and duplex with an estimated market value of
P4.508MM. The branch, therefore, is not totally negligent as officer to
officer bank checking was done. In fact, it is also for the very same reason
that other banks granted DAUD to subject account and, likewise, the
checks returned unpaid, namely:
Solidbank P1.8 Million
Allied Bank .8
Far East Bank 2.0
MBTC 5.0
“The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for
itself. Further to this, undersigned conferred with the acting BOH VS Yap
if these checks are legitimate 3rd party checks.
“On the other hand, Atty. Musni continues to insist that Mr. Maniwan
was gypped by a broker in the total amount of P10.00 Million.
“Undersigned accepts full responsibility for committing an error in
judgment, lapses in control and abuse of discretion by relying solely on the
word, assurance, surety and REM of Mr. Edmund Ramos, a friend and a
co-bank officer. I am now ready to face the consequence of my action.”
3
In another Letter dated April 8, 1997, the respondent notified Chiong
of his intention to resign from the petitioner Bank and apologized “for
all the trouble I have caused because of the Maniwan case.” The 4
respondent, however, vehemently denied benefiting therefrom. In his
Letter dated April 30, 1997, the respondent formally tendered his
irrevocable resignation effective May 31, 1997. 5
In the Memorandum dated May 23, 1997 addressed to the
respondent, Nancy D. Yang, the petitioner Bank’s Senior
_______________
3 Id., at pp. 201-202.
4 Id., at p. 205.
5 Id., at p. 206.
627
VOL. 440, OCTOBER 19, 2004 627
China Banking Corporation vs. Borromeo
Vice-President and Head-Branch Banking Group, informed the former
that his approval of the DAUD/BP accommodations in favor of
Maniwan without authority and/or approval of higher management
violated the petitioner Bank’s Code of Ethics. As such, he was directed
to restitute the amount of P1,507,736.79 representing 90% of the total
loss of P1,675,263.10 incurred by the petitioner Bank. However, in view
of his resignation and considering the years of service in the petitioner
Bank, the management earmarked only P836,637.08 from the
respondent’s total separation benefits or pay. The memorandum
addressed to the respondent stated:
“After a careful review and evaluation of the facts surrounding the above
case, the following have been conclusively established:
 1. ‘1.The branch granted various BP/DAUD accommodations to
clients Joel Maniwan/Edmundo Ramos in excess of approved lines
through the following out-of-town checks which were returned for
the reason “Payment Stopped/Account Closed”:
1. 1.PCIB Cebu Check No. 86256 P251,816.00
2. 2.PCIB Cebu Check No. 86261 235,880.00
3. 3.PCIB Cebu Check No. 8215 241,443.00
4. 4.UCPB Tagbilaran Check No. 27 7,630.00
5. 5.PCIB Bogo, Cebu Check No. 6117 267,418.00
6. 6.UCPB Tagbilaran Check No. 216070 197,467.00
7. 7.UCPB Tagbilaran Check No. 216073 263,920.00
8. 8.PCIB Bogo, Cebu Check No. 6129 253,528.00
9. 9.PCIB Bogo, Cebu Check No. 6122 198,615.00
10. 10.PCIB Bogo, Cebu Check No. 6134 253,658.00
1. ‘2.The foregoing checks were accommodated through your approval
which was in excess of your authority.
2. ‘3.The branch failed to follow the fundamental and basic
procedures in handling BP/DAUD accommodations which made
the accommodations basically flawed.
628
628 SUPREME COURT REPORTS ANNOTATED In the Letter dated May 26, 1997 addressed to the respondent,
China Banking Corporation vs. Borromeo Resources Division, again informed him that the management would
1. ‘4.The accommodations were attended by lapses in control
consisting of failure to report the exception and failure to cover
the account of Joel Maniwan with the required Credit Line
Agreement.’
“Since the foregoing were established by your own admissions in your letter
explanation dated 5 December 1996, and the Audit Report and findings of
the Region Head, Management finds your actions in violation of the Bank’s
Code of Ethics:
‘Table 6.2., no. 1: Compliance with Standard Operating Procedures
—“Infraction of Bank procedures in handling any bank transactions or work assignment
which results in a loss or probable loss.”
‘Table 6.3., no. 6: Proper Conduct and Behavior -
“Willful misconduct in the performance of duty whether or not the bank suffers a loss,” and/or
‘Table 6.5., no. 1: Work Responsibilities—
“Dereliction of duty whether or not the Bank suffers a loss,” and/or
‘Table 6.6., no. 2: Authority and Subordination—
“Failure to carry out lawful orders or instructions of superiors.’
Your approval of the accommodations in excess of your authority
without prior authority and/or approval from higher management is a
violation of the above cited Rules.
“In view of these, you are directed to restitute the amount of
P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred
by the Bank as your proportionate share. However, in light of your
voluntary separation from the Bank effective May 31, 1997, in view of the
years of service you have given to the Bank, management shall earmark
and segregate only the amount of P836,637.08 from your total separation
benefits/pay. The Bank further directs you to fully assist in the effort to
collect from Joel Maniwan and Edmundo Ramos the sums due to the
Bank.”
6
_______________
Id., at pp. 209-210.
6
629
VOL. 440, OCTOBER 19, 2004 629
China Banking Corporation vs. Borromeo
Remedios Cruz, petitioner Bank’s Vice-President of the Human
withhold the sum of P836,637.08 from his separation pay, mid-year
bonus and profit sharing. The amount withheld represented his
proportionate share in the accountability vis-à-vis the DAUD/BP
accommodations in favor of Maniwan. The said amount would be
released upon recovery of the sums demanded from Maniwan in Civil
Case No. 97174 filed against him by the petitioner Bank with the
Regional Trial Court in Cagayan de Oro City.
Consequently, the respondent, through counsel, made a demand on
the petitioner Bank for the payment of his separation pay and other
benefits. The petitioner Bank maintained its position to withhold the
sum of P836,637.08. Thus, the respondent filed with the National Labor
Relations Commission (NLRC), Regional Arbitration Branch No. 10, in
Cagayan de Oro City, the complaint for payment of separation pay,
mid-year bonus, profit share and damages against the petitioner Bank.
 The parties submitted their respective position papers to the Labor
Arbiter. Thereafter, the respondent filed a motion to set case for trial
or hearing. Acting thereon, the Labor Arbiter, in the Order dated
January 29, 1999, denied the same stating that:
“. . . This Branch views that if complainant finds the necessity to controvert
the allegations in the respondent’s pleadings, then he may file a
supplemental position paper and adduce thereto evidence and additional
supporting documents, the soonest possible time. All the evidence will be
evaluated by the Branch to determine whether or not a clarificatory
hearing shall be conducted.” 7 proposed the withholding of his benefits in acknowledgment of the
On February 26, 1999, the Labor Arbiter issued another Order
submitting the case for resolution upon finding that he
_______________
7 CA Rollo, p. 145.
630
630 SUPREME COURT REPORTS ANNOTATED China Banking Corporation vs. Borromeo
China Banking Corporation vs. Borromeo committed against the bank. Further, the NLRC concurred with the
could judiciously pass on the merits without the necessity of further
hearing.
On even date, the Labor Arbiter promulgated the
Decision dismissing the respondent’s complaint. According to the Labor
8
Arbiter, the respondent, an officer of the petitioner Bank, had
committed a serious infraction when, in blatant violation of the bank’s
standard operating procedures and policies, he approved the DAUD/BP
accommodations in favor of Maniwan without authorization by senior
management. Even the respondent himself had admitted this breach in
the letters that he wrote to the senior officers of the petitioner Bank.
The Labor Arbiter, likewise, made the finding that the respondent
offered to assign or convey a property that he owned to the petitioner
Bank as well as proposed the withholding of the benefits due him to
answer for the losses that the petitioner Bank incurred on account of
unauthorized DAUD/BP accommodations. But even if the respondent
had not given his consent, the Labor Arbiter held that the petitioner
Bank’s act of withholding the benefits due the respondent was justified
under its Code of Ethics. The respondent, as an officer of the petitioner
Bank, was bound by the provisions of the said Code.
Aggrieved, the respondent appealed to the National Labor Relations
Commission. After the parties had filed their respective memoranda,
the NLRC, in the Decision dated October 20, 1999, dismissed the appeal
as it affirmed in toto the findings and conclusions of the Labor Arbiter.
The NLRC preliminarily ruled that the Labor Arbiter committed no
grave abuse of discretion when he decided the case on the basis of the
position papers submitted by the parties. On the merits, the NLRC, like
the Labor Arbiter, gave credence to the petitioner Bank’s allegation
that the respondent offered to pledge his property to the bank and
serious infraction he
_______________
8 Id., at pp. 148-152.
631
VOL. 440, OCTOBER 19, 2004 631
Labor Arbiter that the petitioner Bank was justified in withholding the
benefits due the respondent. Being a responsible bank officer, the
respondent ought to know that, based on the petitioner Bank’s Code of
Ethics, restitution may be imposed on erring employees apart from any
other penalty for acts resulting in loss or damage to the bank. The
decretal portion of the NLRC decision reads:
“WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal
is Dismissed for lack of merit.
SO ORDERED.” 9
The respondent moved for a reconsideration of the said decision but the
NLRC, in the Resolution of December 20, 1999, denied his motion.
The respondent then filed a petition for certiorari with the Court of
Appeals alleging that the NLRC committed grave abuse of discretion
when it affirmed the findings and conclusions of the Labor Arbiter. He
vehemently denied having offered to pledge his property to the bank or
proposed the withholding of his separation pay and other benefits.
Further, he argued that the petitioner Bank deprived him of his right
to due process because it unilaterally imposed the penalty of restitution
on him. The DAUD/BP accommodations in favor of Maniwan allegedly
could not be considered as a “loss” to the bank as the amounts may still
be recovered. The respondent, likewise, maintained that the Labor
Arbiter should not have decided the case on the basis of the parties’
position papers but should have conducted a full-blown hearing
thereon.
On July 19, 2002, the CA rendered the Decision now being assailed
10
by the petitioner Bank. The CA found merit in the respondent’s
contention that he was deprived of his right to due process by the
petitioner Bank as no administrative in-
_______________
9 Id., at p. 237.
10 Rollo, pp. 69-90.
632
632 SUPREME COURT REPORTS ANNOTATED China Banking Corporation vs. Borromeo
China Banking Corporation vs. Borromeo ground to warrant reconsideration. Hence, its recourse to this Court
vestigation was conducted by it prior to its act of withholding the
respondent’s separation pay and other benefits. The respondent was
not informed of any charge against him in connection with the
Maniwan DAUD/BP accommodations nor afforded the right to a
hearing or to defend himself before the penalty of restitution was
imposed on him. This, according to the appellate court, was contrary
not only to the fundamental principle of due process but to the
petitioner Bank’s Code of Ethics as well.
The CA further held that the Labor Arbiter, likewise, failed to afford
the respondent due process when it denied his motion to set case for
trial or hearing. While the authority of the Labor Arbiter to decide a
case based on the parties’ position papers and documents is
indubitable, the CA opined that factual issues attendant to the case,
including whether or not the respondent proposed the withholding of
his benefits or pledged the same to the petitioner Bank, necessitated
the conduct of a full-blown trial. The appellate court explained that:
“Procedural due process, as must be remembered, has two main concerns,
the prevention of unjustified or mistaken deprivation and the promotion of
participation and dialogue by affected individuals in the decision-making
process. Truly, the magnitude of the case and the withholding of
Borromeo’s property as well as the willingness of the parties to conciliate,
make a hearing imperative. As manifested by the bank, it did not contest
Borromeo’s motion for hearing or trial inasmuch as the bank itself wanted
to fully ventilate its side.”
11
Accordingly, the CA set aside the decision of the NLRC and ordered
that the records of the case be remanded to the Labor Arbiter for
further hearings on the factual issues involved.
The petitioner Bank filed a motion for reconsideration of the said
decision but the CA, in the assailed Resolution of January 6, 2003,
denied the same as it found no compelling
_______________
11 Id., at p. 89. (Citations omitted).
633
VOL. 440, OCTOBER 19, 2004 633
12
alleging that the assailed CA decision is contrary to law and
jurisprudence in that:
I.
THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED
BY THE NATIONAL LABOR RELATIONS COMMISSION ARE
SUPPORTED BY SUBSTANTIAL EVIDENCE AND SHOULD HAVE
BEEN ACCORDED RESPECT AND FINALITY BY THE COURT OF
APPEALS IN ACCORDANCE WITH GOVERNING JURISPRUDENCE.
II.
AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE
WITH THE REQUIREMENTS OF DUE PROCESS IN THE
PROCEEDINGS A QUO.
III.
THERE WAS NO VIOLATION BY PETITIONER BANK OF
RESPONDENT’S RIGHT TO DUE PROCESS AS NO ADMINISTRATIVE
INVESTIGATION WAS NEEDED TO BE CONDUCTED ON HIS
ADMITTED MISCONDUCT. 13
The petitioner Bank posits that the sole factual issue that remained in
dispute was whether the respondent pledged his benefits as guarantee
for the losses the bank incurred resulting from the unauthorized
DAUD/BP accommodations in favor of Maniwan. On this issue, both
the Labor Arbiter and the NLRC found that the respondent had indeed
pledged his benefits to the bank. According to the petitioner Bank, this
factual finding should have been accorded respect by the CA as the
same is supported by the evidence on record. By ordering the remand
of the case to the Labor Arbiter, the CA allegedly unjustifiably analyzed
and weighed all over again the evidence presented.
_______________
12 Id., at p. 92.
13 Id., at p. 45.
634
634 SUPREME COURT REPORTS ANNOTATED The respondent is of the view that restitution is not proper because the
China Banking Corporation vs. Borromeo
The petitioner Bank insists that the Labor Arbiter acted within his
authority when he denied the respondent’s motion to set case for
hearing or trial and instead decided the case on the basis of the position
papers and evidence submitted by the parties. Due process simply
demands an opportunity to be heard and the respondent was not denied
of this as he was even given the opportunity to file a supplemental
position paper and other supporting documents, but he did not do so.
The petitioner Bank takes exception to the findings of the appellate
court that the respondent was not afforded the right to a hearing or to
defend himself by the petitioner Bank as it did not conduct an
administrative investigation. The petitioner Bank points out that it
was poised to conduct one but was preempted by the respondent’s
resignation. In any case, respondent himself in his Letter dated
December 5, 1996, in reply to the clarificatory queries of Chiong,
admitted that the DAUD/BP accommodations were granted “without
higher management approval” and that he (the respondent) “accepts
full responsibility for committing an error of judgment, lapses in control
and abuse of discretion . . .” Given the respondent’s admission, the
holding of a formal investigation was no longer necessary.
For his part, the respondent, in his Comment, maintains that the
DAUD/BP accommodations in favor of Maniwan were approved, albeit
not expressly, by the senior management of the petitioner Bank. He
cites the regular reports he made to Chiong, his superior, regarding the
DAUD/BP transactions made by the branch, including that of
Maniwan, and Chiong never called his attention thereto nor stopped or
reprimanded him therefor. These reports further showed that he did
not conceal these transactions to the management.
The respondent vehemently denies having offered the withholding
of his benefits or pledged the same to the petitioner Bank. The findings
of the Labor Arbiter and the NLRC that what he did are allegedly not
supported by the evidence on record.
635
VOL. 440, OCTOBER 19, 2004 635
China Banking Corporation vs. Borromeo
petitioner Bank has not, as yet, incurred any actual loss as the amount
owed by Maniwan may still be recovered from him. In fact, the
petitioner Bank had already instituted a civil case against Maniwan for
the recovery of the sum and the RTC rendered judgment in the
petitioner Bank’s favor. The case is still pending appeal. In any case,
the respondent argues that the petitioner Bank could not properly
impose the accessory penalty of restitution on him without imposing
the principal penalty of “Written Reprimand/Suspension” as provided
under its Code of Ethics. He, likewise, vigorously avers that, in
contravention of its own Code of Ethics, he was denied due process by
the petitioner Bank as it did not conduct any administrative
investigation relative to the unauthorized DAUD/BP accommodations.
He was not informed in writing of any charge against him nor was he
given the opportunity to defend himself.
The petition is meritorious.
The Court shall first resolve the procedural issue raised in the
petition, i.e., whether the CA erred in remanding the case to the Labor
Arbiter. The Court rules in the affirmative. It is settled that
administrative bodies like the NLRC, including the Labor Arbiter, are
not bound by the technical niceties of the law and procedure and the
rules obtaining in courts of law. Rules of evidence are not strictly
14
observed in proceedings before administrative bodies like the NLRC,
where decisions may be reached on the basis of position papers. The 15
holding of a formal hearing or trial is discretionary with the Labor
Arbiter and is something that the parties cannot demand as a matter
of right. As a corollary, trial-type hearings
16
_______________
14 Bantolino v. Coca-Cola Bottlers Phils., Inc., 403 SCRA 699 (2003).
15 Rabago v. National Labor Relations Commission, 200 SCRA 158 (1991).
16 Columbus Philippines Bus Corp. v. National Labor Relations Commission, 364 SCRA
606 (2001).
636
636 SUPREME COURT REPORTS ANNOTATED dations in excess of the authority given to him and in violation of the
China Banking Corporation vs. Borromeo Ethics provides that restitution/forfeiture of benefits may be imposed
are not even required as the cases may be decided based on verified
position papers, with supporting documents and their affidavits.
Hence, the Labor Arbiter acted well within his authority when he
issued the Order dated February 26, 1999 submitting the case for
resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing. On the other hand, the
assailed CA decision’s directive requiring him to conduct further
hearings constitutes undue interference with the Labor Arbiter’s
discretion. Moreover, to require the conduct of hearings would be to
negate the rationale and purpose of the summary nature of the
proceedings mandated by the Rules and to make mandatory the
application of the technical rules of evidence. The appellate court,
18
therefore, committed reversible error in ordering the remand of the case
to the Labor Arbiter for further hearings.
Before delving on the merits of the case, it is well to remember that
factual findings of the NLRC affirming those of the Labor Arbiter, both
bodies being deemed to have acquired expertise in matters within their
jurisdiction, when sufficiently supported by evidence on record, are
accorded respect, if not finality, and are considered binding on this
Court. As long as their decisions are devoid of any arbitrariness in the
19
process of their deduction from the evidence proffered by the parties,
all that is left is for the Court to stamp its affirmation.
In this case, the factual findings of the Labor Arbiter and those of
the NLRC concur on the following material points: the respondent was
a responsible officer of the petitioner Bank; by his own admission, he
granted DAUD/BP accommo-
_______________
17 Bantolino v. Coca-Cola Bottlers Phils., Inc., supra.
18 Id., at p. 704.
19 Ignacio v. Coca-Cola Bottlers Phils., Inc., 365 SCRA 418 (2001).
20 Id., at p. 424.
637
VOL. 440, OCTOBER 19, 2004 637 China Banking Corporation vs. Borromeo
China Banking Corporation vs. Borromeo
bank’s standard operating procedures; the petitioner Bank’s Code of
on the employees for, inter alia, infraction of the bank’s standard
operating procedures; and, the respondent resigned from the petitioner
17
Bank on May 31, 1998. These factual findings are amply supported by
the evidence on record.
Indeed, it had been indubitably shown that the respondent admitted
that he violated the petitioner Bank’s standard operating procedures in
granting the DAUD/BP accommodations in favor of Maniwan without
higher management approval. The respondent’s replies to the
clarificatory questions propounded to him by way of the Memorandum
dated No-vember 19, 1996 were particularly significant. When the
respondent was asked whether efforts were made to establish the
identity and/or legitimacy of the drawers of the checks before the
DAUD/BP accommodations were allowed, he replied in the 21
negative. To the query “did the branch follow and comply with
22
operating procedure which require that all checks accommodated for
DAUD/BP should be previously verified with the drawee bank and
history, if not outright balances, determined if enough to cover the
checks?” again, the respondent answered “no.” When asked under
23 24
whose authority the excess DAUD/BP accommodations were
granted, the respondent expressly stated that they were “approved by
25
undersigned (referring to himself)” and that the excess accommodation
was granted “without higher management approval.” More telling, 26
however, is the respondent’s statement that he “accepts full
20
responsibility for committing
_______________
21 See Note 2.
22 See Note 3.
23 See Note 2.
24 See Note 3.
25 See Note 2.
26 See Note 3.
638
638 SUPREME COURT REPORTS ANNOTATED
an error in judgment, lapses in control and abuse of discretion by
relying solely on the word, assurance, surety and REM of Mr. Edmundo
Ramos.” The respondent added that he was “ready to face the
27
consequence of [his] action.” 28
The foregoing sufficiently establish that the respondent, by his own
admissions, had violated the petitioner Bank’s standard operating
procedures. Among others, the petitioner Bank’s Code of Ethics
provides:
“Forfeiture of benefits/privileges may also be effected in cases where
infractions or violations were incurred in connection with or arising from
the application/availment thereof.”
It is well recognized that company policies and regulations are, unless
shown to be grossly oppressive or contrary to law, generally binding
and valid on the parties and must be complied with until finally revised
or amended unilaterally or preferably through negotiation or by
competent authority. Moreover, management has the prerogative to
29

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES

discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations. With more reason30

VIOLATIONS PENALTIES should these truisms apply to the respondent, who, by reason of his
position, was required to act judiciously and to exercise his authority in
1ST 2ND 3RD harmony
4TH with company policies. 31

Contrary to the respondent’s contention that the petitioner Bank

1. Infraction of Bank Written Suspension/Dismissal* Dismissal*
could not properly impose the accessory penalty of restitution on him
procedures in Reprimand/Suspension* without imposing the principal penalty of “Written
handling any Bank Reprimand/Suspension,” the latter’s Code of Ethics expressly sanctions
transaction or work the imposition of restitution/forfeiture of benefits apart from or
assignment which independent of the other penalties. Obviously, in view of his voluntary
results in a loss or separation from the petitioner Bank, the imposition of the penalty of
probable loss reprimand or suspension would be futile. The petitioner Bank was left
with no other recourse but to impose the ancillary penalty of
* With restitution, if warranted. restitution. It was certainly within the petitioner Bank’s prerogative to
impose on the respondent what it considered the appropriate penalty
Further, the said Code states that: under the circumstances pursuant to its company rules and
“7.2.5. Restitution/Forfeiture of Benefits regulations.
Restitution may be imposed independently or together with any other _______________
penalty in case of loss or damage to the property of the Bank, its employees, 29 Alcantara, Jr. v. Court of Appeals, 386 SCRA 370 (2002).
clients or other parties doing business with the Bank. The Bank may Philippine Airlines, Inc. v. National Labor Relations Commission (4th Division),337
30

recover the amount involved by means of salary deduction or whatever SCRA 286 (2000).
legal means that will prompt offenders to pay the amount involved. But 31Philippine Long Distance Telephone Company v. National Labor Relations
restitution shall in no way mitigate the penalties attached to the violation Commission, 303 SCRA 9 (1999).
or infraction. 640
_______________
27 Ibid. 640 SUPREME COURT REPORTS ANNOTATED
Id.
China Banking Corporation vs. Borromeo
28

639
Anent the issue that the respondent’s right to due process was violated
VOL. 440, OCTOBER 19, 2004 639 by the petitioner Bank since no administrative investigation was
conducted prior to the withholding of his separation benefits, the Court
China Banking Corporation vs. Borromeo
rules that, under the circumstances obtaining in this case, no formal
administrative investigation was necessary. Due process simply
demands an opportunity to be heard and this opportunity was not
denied the respondent. 32
Prior to the respondent’s resignation, he was furnished with the
Memorandum dated November 19, 1996 in which several clarificatory
33
questions were propounded to him regarding the DAUD/BP
accommodations in favor of Maniwan. Among others, the respondent
was asked whether the bank’s standard operating procedures were
complied with and under whose authority the accommodations were
granted. From the tenor thereof, it could be reasonably gleaned that the
said memorandum constituted notice of the charge against the
respondent.
Replying to the queries, the respondent, in his Letter dated 34
December 5, 1996, admitted, inter alia, that he approved the DAUD/BP
accommodations in favor of Maniwan and the amount in excess of the
credit limit of P500,000 was approved by him without higher
management approval. The respondent, likewise, admitted non-
compliance with the bank’s standard operating procedures, specifically,
that which required that all checks accommodated for DAUD/BP be
previously verified with the drawee bank and history, if not outright
balances determined if enough to cover the checks. In the same letter,
the respondent expressed that he “accepts full responsibility for
committing an error in judgment, lapses in control and abuse of
discretion” and that he is “ready to face the consequence of his action.”
_______________
32 Ginete v. Sunrise Manning Agency, 359 SCRA 404 (2001).
33 See Note 2.
34 See Note 3.
641
VOL. 440, OCTOBER 19, 2004 641 China Banking Corporation vs. Borromeo
China Banking Corporation vs. Borromeo Mindanao area of the petitioner Bank. His position carried authority
Contrary to his protestations, the respondent was given the
opportunity to be heard and considering his admissions, it became
unnecessary to hold any formal investigation. More particularly, it
35
became unnecessary for the petitioner Bank to conduct an investigation
on whether the respondent had committed an “[I]nfraction of Bank
procedures in handling any Bank transaction or work assignment
which results in a loss or probable loss” because the respondent already
admitted the same. All that was needed was to inform him of the
findings of the management and this was done by way of the
36
Memorandum dated May 23, 1997 addressed to the respondent. His
37
claim of denial of due process must perforce fail.
Significantly, the respondent is not wholly deprived of his
separation benefits. As the Labor Arbiter stressed in his decision, “the
separation benefits due the complainant (the respondent herein) were
merely withheld.” The NLRC made the same conclusion and was even
38
more explicit as it opined that the respondent “is entitled to the benefits
he claimed in pursuance to the Collective Bargaining Agreement but,
in the meantime, such benefits shall be deposited with the bank by way
of pledge.” Even the petitioner Bank itself gives “the assurance that as
39
soon as the Bank has satisfied a judgment in Civil Case No. 97174, the
earmarked portion of his benefits will be released without delay.” 40
It bears stressing that the respondent was not just a rank and file
employee. At the time of his resignation, he was the Assistant Vice-
President, Branch Banking Group for the
_______________
35Pampanga II Electric Cooperative, Inc. v. National Labor Relations Commission, 250
SCRA 31 (1995). See also Bernardo v. National Labor Relations Commission, 255 SCRA
108 (1996); and Magos v. National Labor Relations Commission, 300 SCRA 484 (1998).
36 Ibid.
37 See Note 6.
38 Rollo, p. 97.
39 Id., at 106.
40 Id., at 190.
642
642 SUPREME COURT REPORTS ANNOTATED
for the exercise of independent judgment and discretion, characteristic
of sensitive posts in corporate hierarchy. As such, he was, as earlier
41
intimated, required to act judiciously and to exercise his authority in
harmony with company policies. 42
On the other hand, the petitioner Bank’s business is essentially
imbued with public interest and owes great fidelity to the public it deals
with. It is expected to exercise the highest degree of diligence in the
43
selection and supervision of their employees. As a corollary, and like
44
all other business enterprises, its prerogative to discipline its
employees and to impose appropriate penalties on erring workers
pursuant to company rules and regulations must be respected. The 45

law, in protecting the rights of labor, authorized neither oppression nor

self-destruction of an employer company which itself is possessed of
rights that must be entitled to recognition and respect. 46

WHEREFORE, the petition is GRANTED. The Decision dated July

19, 2002 of the Court of Appeals and its Resolution dated January 6,
2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The
Resolution dated October 20, 1999 of the NLRC, affirming the Decision
dated February 26, 1999 of the Labor Arbiter, is REINSTATED.
SO ORDERED.
Puno (Chairman), Austria-Martinez and Tinga, JJ., concur.
_______________
41 Dayan v. Bank of the Philippine Islands, 369 SCRA 712 (2001).
42 See Note 31.
43 Dayan v. Bank of the Philippine Islands, supra.
44 Philippine Commercial International Bank v. Court of Appeals, 350 SCRA 446 (2001).
45 See Note 30.
46 Dayan v. Bank of the Philippine Islands, supra.
643

VOL. 440, OCTOBER 19, 2004 643

Home Development Mutual Fund vs. Commission on Audit

Chico-Nazario, J., On Leave.

Petition granted, judgment and resolution reversed and set aside.
Note.—Company policies and regulations are, unless shown to be
grossly oppressive or contrary to law, generally binding and valid on
the parties and must be complied with until finally revised or amended
unilaterally or preferably through negotiation or by competent
authority. (Alcantara, Jr. vs. Court of Appeals, 386 SCRA 370 [2002])
——o0o——
© Copyright 2016 Central Book Supply, Inc. All rights reserved.


452 SUPREME COURT REPORTS ANNOTATED
GTE Directories Corporation vs. Sanchez
G.R. No. 76219. May 27, 1991. *
GTE DIRECTORIES CORPORATION, petitioner, vs. HON.
AUGUSTO S. SANCHEZ and GTE DIRECTORIES CORPORATION
EMPLOYEES UNION, respondents.
Labor Law; Deliberate disregard or disobedience of rules, defiance o f
management authority by the employees cannot be countenanced, until and
unless the rules or orders imposed by the employers are declared to be illegal
or improper by competent authority, the employe e s ignore or disobey them
at their peril.—To sanction disregard or disobedience by employees of a rule
or order laid down by management, on the pleaded theory that the rule or
order is unreasonable, illegal, or otherwise irregular for one reason or
another, would be disastrous to the discipline and order that it is in the
interest of both the employer and his employees to preserve and maintain
in the working establishment and without which no meaningful operation
and progress is possible. Deliberate disregard or disobedience of rules,
defiance of
________________
* FIRST DIVISION.
453
VOL. 197, MAY 27, 1991 453 454
GTE Directories Corporation vs. Sanchez 454 SUPREME COURT REPORTS ANNOTATED
management authority cannot be countenanced. This is not to say
that the employees have no remedy against rules or orders they regard as
unjust or illegal. They may object thereto, ask to negotiate thereon, bring
proceedings for redress against the employer before the Ministry of Labor.
But until and unless the rules or orders are declared to be illegal or
improper by competent authority, the employees ignore or disobey them at
their peril. It is impermissible to reverse the process: suspend enforcement
of the orders or rules until their legality or propriety shall have been
subject of negotiation, conciliation, or arbitration.
Same; Same; Strikes; The filing of the strike notice, and the
commencement of conciliation activities by the Bureau of Labor Relations
did not operate to make GTE’s orders illegal and unenforceable so as to
excuse continued non-compliance therewith.—When the strike notice was
filed by the union, the chain of events which culminated in the termination
of the 14 salespersons’ employment was already taking place, the series of
defiant refusals by said sales representatives to comply with GTE’s
requirement to submit individual reports was already in progress. At that
time, no less than three (3) of the ultimate six (6) direct orders of the
employer for the submission of the reports had already been disobeyed. The
filing of the strike notice, and the commencement of conciliation activities
by the Bureau of Labor Relations did not operate to make GTE’s orders
illegal or unenforceable so as to excuse continued non-compliance
therewith. It does not follow that just because the employees or their union
are unable to realize or appreciate the desirability of their employers’
policies or rules, the latter were laid down to oppress the former and
subvert legitimate union activities. Indeed, the overt, direct, deliberate and
continued defiance and disregard by the employees of the authority of their
employer left the latter with no alternative except to impose sanctions. The
sanction of suspension having proved futile, termination of employment
was the only option left to the employer.
PETITION for certiorari to review the order of the Department of
Labor and Employment.
The facts are stated in the opinion of the Court.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Ignacio P. Lacsina for respondent Union.
NARVASA, J.:
GTE Directories Corporation (hereafter, simply GTE) i s a for-
GTE Directories Corporation vs. Sanchez
eign corporation engaged in the Philippines in the business of
publishing the PLDT (Philippine Long Distance Telephone Company)
telephone directories for Metro Manila and several provinces.
The record shows that initially, the practice was for its sales
representatives to be given work assignments within specific territories
by the so-called “draw method.” These sales territories were so plotted
or mapped out as to have “an equal number of advertisers as well as **
revenue **.” Within these territories, the sales representatives therein
assigned were given quotas; i.e., they had to “achieve a certain amount
of revenue or advertisements sold, decreased, increased or cancelled
within a given period of time.”
 A territory was not fully released to the salesperson for handling at
one time, but assigned in increments or partial releases of account.
Now, increments were given by the so-called “Grid System,” grids
(divisions or sections) within each territory usually numbering five (i.e.,
Grids I to V). Each grid was assigned a fixed closing dated. At such
closing date, a salesperson should have achieved a certain amount of
the revenue target designated for his grid; otherwise, he loses the
forthcoming grid or forfeits the remaining grids not yet received. The
Grid System was installed for the following reasons: (1) to give all
salespersons an opportunity to contact advertisers within a reasonable
period; (2) to assure GTE that it will get its share of adverstising budget
from clients as early as possible; and (3) to ensure an even flow of work
throughout the company.
This practice was observed from 1980 until sometime in June, 1984
when GTE realized that competition among media for a share of the
advertising revenue had become so keen as to require quick reaction.
GTE therefore launched an aggressive campaign to get what it
considered to be its rightful share of the advertising budget of its
clientele before it could be allocated to other media (newspaper,
television, radio, etc.) It adopted a new strategy by which:
1. (1)all its sales representatives were required, as in the past, to
achieve specified revenue targets (advertisements sold) within
pre-determined periods;
2. (2)in cases of cancelled revenue accounts or advertisements, it
required all its salespersons to re-establish contact and renew
455
VOL. 197, MAY 27, 1991 455 observed that most of them had omitted to submit reports
GTE Directories Corporation vs. Sanchez
1. the same within a fixed period;
2. (3)if the cancelled revenue accounts were not renewed within
the assigned period, said accounts were declared, for a set
period, OPEN TERRITORY to all sales representatives
including the one who reported the cancellation;
3. (4)if not renewed during said open territory period, said
cancelled accounts were deemed no longer “open territory,”
and the same could be referred for handling to contractual
salespersons and/or outside agencies.
A new “Sales Evaluation and Production Policy” was thereafter drawn
up. GTE informed all its sales representatives of the new policy in a
Memorandum dated October 12, 1984. The new policy was regarded as
an improvement over the previous Sales Production Policy, which solely
considered quota attainment and handling in the Sales Report for the
purpose of evaluating performance.
It appears that the new policy did not sit well with the union. It
demanded that it be given 15 days “to raise questions or objections to
or to seek reconsideration of the sales and administrative practices
issued by the Company on June 14, 1984.” This, GTE granted, and by
letter dated October 26, 1984, the union submitted its proposals for
“revisions, corrections and deletions of some policies incorporated in the
Sales Administrative Practices issued on June 14, 1984 including the
new policies recently promulgated by Management.”
GTE next formulated a new set of “Sales Administrative Practices,”
pursuant to which it issued on July 9, 1985, a memorandum requiring
all Premise Sales Representatives (PSRs) to submit individual reports
reflecting target revenues as of deadlines, set at August 2, 1985. This
was superseded by another memorandum dated July 16, 1985, revising
the previous schedules on the basis of “the consensus reached after
several discussions with your DSMs, as well as, most of you,” and
pointing out that “the amount required on the lst deadline (P30,000) **
has been reduced further (to P20,000) having taken into consideration
that most of your accounts you have already on hand are with your
respective ‘prep artists.’ ”
On August 5, 1985, GTE’s Sales Manager sent another
Memorandum to “all premise sales personnel.” That memorandum
456
456 SUPREME COURT REPORTS ANNOTATED
GTE Directories Corporation vs. Sanchez
regarding “the target of P20,000.00 revenue handled on ** (the) first
Grid deadline of August 2, 1985” notwithstanding that “several
consultations/discussions ** (had) been held with your DSMs, as well
as yourselves in different and separate occasions,” and “these
schedules/targets were drawn up by no less than you, collectively,” and
notwithstanding that “this has been a practice of several years.” It
closed with the expressed expectation that the sales reports would be
submitted “no later than 2:00 P.M. reflecting P20,000.00 revenue
handled, as per memo re: Grid Deadlines dated July 16, 1985.”
But as before, the sales representatives did not submit the reports.
Instead their union, GTE Directories Corporation Employees Union
(hereafter, simply the union), sent a letter to the Sales Manager dated
August 5, 1985. The letter stated that in fact “only one out of nineteen
1
sales representatives met the P20,000 revenue handled on our first grid
deadline of August 2;” that the schedule was not “drawn (up) as a result
of an agreement of all concerned” since GTE had failed to get
“affirmative responses” from “clustered groups of SRs;” that the union
could not “comprehend how cancelling non-cancelling accounts help
production;” and that its members would fail “expectations of cancelling
** non-cancelling accounts” since it “would result to further reduction
of our pay which (they) believe is the purpose of your discriminate and
whimsical memo.”
The following day, on August 6, 1985, the union filed in behalf of the
sales representatives, a notice of strike grounded on alleged unfair
labor practices of GTE consisting of the following:
1. “1.Refusal to bargain on unjust sales policies particularly on the
failure to meet the 75% of the average sales production for two
consecutive years;
2. 2.Open territory of accounts;
3. 3.Illegal suspension of Brian Pineda, a union officer; and
4. 4.Non-payment of eight days’ suspension pay increase.”
In due course, the Bureau of Labor Relations undertook to
_______________
The original was attached as Annex B of the Compliance dated Sept. 10, 1990 submitted
1
by GTE through counsel (rollo, pp. 270, 273).
457
VOL. 197, MAY 27, 1991 457 458
GTE Directories Corporation vs. Sanchez 458 SUPREME COURT REPORTS ANNOTATED
conciliate the dispute.
On the same day, August 6, 1985, GTE sent still another
memorandum to sixteen (16) of its premise sales representatives, this
time through its Director for Marketing & Sales, requiring submission
of “individual reports reflecting target revenues as of grid deadlines **
not later than 4:00 P.M. **.” No compliance was made. GTE thereupon
2
suspended its sales representatives “without pay effective August 12,
1985 for five (5) working days” and warned them that their failure to
submit the requisite reports by August 19, 1985 would merit “more
drastic disciplinary actions.” Still, no sales representative complied
with the requirement to submit the reports (“list of accounts to be
cancelled”). So, by memorandum of the Marketing Director dated
August 19, 1985, all the sales representatives concerned were
suspended anew “effective August 20, 1985 until you submit the **
(report).”
Finally, GTE gave its sales representatives an ultimatum. By
memorandum dated August 23, 1985, individually addressed to its
sales representatives, GTE required them, for the last time, to submit
the required reports (“list of accounts to be cancelled”) within twenty-
four (24) hours from receipt of the memorandum; otherwise, they would
be terminated “for cause.” Again not one sales representatives
submitted a report. Instead, on August 29, 1985, the Union President
sent an undated letter to GTE (addressed to its Director for Marketing
& Sales) acknowledging receipt of the notice of their suspension on
August 19, 1985 in view of their “ ‘continued refusal to submit the list
of accounts to be cancelled,’ ” professing surprise at being “served with
a contradictory notice, giving us this time 24 hours to submit the
required list, without the suspension letter, which we consider as still
in force, being first recalled or withdrawn,” asking that they be
informed which of the two directives should be followed, and reserving
their “right to take such action against you personally for your acts of
harassment and intimidation which are clearly designed to discourage
our legitimate union activities in protesting management’s continious
(sic)
_______________
2 Copies were attached as Annexes C, C-1 to C-15 of the Compliance dated Sept. 10,
1990, supra (rollo, pp. 276-291).
GTE Directories Corporation vs. Sanchez
unfair labor practices.”
Consequently, by separate letters dated August 29, 1985
individually received, GTE terminated the employment of the
recalcitrant sales representatives, numbering fourteen, with the
undertaking to give them “separation pay, upon proper clearance and
submission of company documents, material etc., in ** (their)
possession.” Among those dismissed were the union’s president and
third vice president, and several members of its board of directors. On
September 2, 1985, the union declared a strike in which about 60
employees participated. During all this time, conciliation efforts were
being exerted by the Bureau of Labor Relations, including attempts to
prevent the imposition of sanctions by GTE on its employees, and the
strike itself. When these proved futile, Acting Labor Minister Vicente
Leogardo, Jr. issued an Order dated December 6, 1985 assuming
jurisdiction over the dispute. The order made the following disposition,
to wit:
“WHEREFORE, this Office hereby assumes jurisdiction over the labor
dispute at G.T.E. Directories, pursuant to Article 264 (g) of the Labor Code
of the Philippines, as amended. Accordingly, all striking workers including
those who were dismissed during the conciliation proceedings, except those
who have already resigned, are hereby directed to return to work and the
management of G.T.E. Directories to accept all returning employees under
the same terms and conditions prevailing previous to the strike notice and
without prejudice to the determination of the obligation and rights of the
parties or to the final outcome of this dispute. The Bureau of Labor
Relations is hereby directed to hear the dispute and submit its
recommendations within 15 days upon submission of the case for
resolution. All concerned including the military and police authorities are
hereby requested to assist in the implementation of this Order.”
The Acting Secretary opined that the dispute “adversely affects the
national interest,” because:
1. 1)GTE, a “100% foreign owned” company, had, as publisher of
“PLDT’s Metro Manila and provincial directories * * * earned
a total of P127,038,463 contributing close to P10 million in
income tax alone to the Philippine government,” and that
“major contribution to the national economy ** (was) being
threatened because of the ** strike;” and
459
VOL. 197, MAY 27, 1991 459 by competent authorities;”
GTE Directories Corporation vs. Sanchez
1. 2)“top officers of the union were dismissed during the
conciliation process thereby compounding the dispute,”
Reconsideration of this Order was sought by GTE by motion
filed on December 16, 1985, on the ground that—
1. 1)“the basis for assumption of jurisdiction is belied by the facts
and records of the case and hence, unwarranted;”
2. 2)“national interest is not adversely affected to warrant
assumption of jurisdiction by (the) Office of the Minister of
Labor and Employment;” and
3. 3)“assumption of jurisdiction by the ** Minister ** without prior
consultation with the parties violates the company’s right to
due process of law.”
GTE however reiterated its previously declared “position that with or
without the order now being questioned, it will accept all striking
employees back to work except the fourteen (14) premise sales
representatives who were dismissed for cause prior to the strike.”
By Resolution of then Labor Minister Blas Ople dated January 20,
1986, GTE’s motion for reconsideration was denied. The order
noted inter alia that GTE had “accepted back to work all the returning
workers except fourteen (14) whom it previously dismissed insistng
that they were legally dismissed for violation of company rules and,
therefore, are not included and may not be reinstated on the basis of a
return-to-work order,” and that “they were dismissed for their alleged
failure to comply with the reportorial requirement under the Sales and
Administrative Practices in effect since 1981 but which for the present
is the subject of negotiations between the parties.” The Order then—
1. 1)adverted to the “general rule (that) promulgations of company
policies and regulations are basic management prerogatives
although the principle of collective bargaining encompasses
almost all relations between the employer and its employees
which are best threshed out through negotiations, ** (and
that) it is recognized that company policies and regulations
are, unless shown to be grossly oppressive or contrary to law,
generally binding and valid on the parties until finally revised
or amended unilaterally or preferably through negotiations or
460
460 SUPREME COURT REPORTS ANNOTATED
GTE Directories Corporation vs. Sanchez
 1. 2)affirmed the “recognized principle of law that company 461
policies and regulations are, unless shown to be grossly
VOL. 197, MAY 27, 1991 461
oppressive or contrary to law, generally binding (and) valid on
the parties and must be complied with until finally revised or
GTE Directories Corporation vs. Sanchez
amended unilaterally or preferably through negotiations or by
competent authorities;” and lows:
2. 3)closed by pointing out that “as a basic principle, the matter of 1. “1.The union and management of G.T.E. Directories
the acceptability of company policies and rules is a proper Corporation are directed to negotiate and effect a voluntary
subject of collective negotiations between the parties or settlement on the questioned Grid schedule, the Sales
arbitration if necessary.” Evaluation and Production Policy;
In a clarificatory Order dated January 21, 1986, Minister Ople 2. 2.Management is ordered to reinstate the fourteen (14)
reiterated the proposition that “promulgations of company policies and employees with full back wages from the time they were
regulations are basic management prerogatives,” and that “unless dismissed up to the time that they were on forced leave with
shown to be grossly oppressive or contrary to law,” they are “generally pay.”
binding and valid on the parties and must be complied with until finally
revised or amended unilaterally or preferably, through negotiations or Both the Union and GTE moved for reconsideration of the Order.
by competent authorities.” The Union contended that:
Adjudication of the dispute on the merits was made on March 31, 1. 1)GTE should have been adjudged guilty of unfair labor practice
1986 by Order of Minister Ople’s successor, Augusto Sanchez. The and other unlawful acts;
Order—
2. 2)its strike should have been declared lawful;
1. 1)pointed out “that the issue central to the labor dispute **
3. 3)GTE’s so-called “bottom-third” policy, as well as all sales and
revolves around compliance with existing company policies,
administrative practices related thereto, should have been
rules and regulations specifically the sales evaluation and
held illegal; and
production policy which was amended by the October 12, 1984
memorandum and the grid schedule;” 4. 4)GTE should have been commanded: (a) to pay all striking
employees their usual salaries, allowances, commission and
2. 2)declared that because fourteen (14) sales representatives—
other emoluments corresponding to the period of their strike;
who after reinstatement pursuant to the order of January 20,
(b) to release to its employees the 8-days pay increase
1986 had been placed “on forced leave with pay—“were
unlawfully withheld from them; (c) to lift the suspension
actually dismissed for failure to comply with the reporting
imposed on Brian Pineda and restore to him the pay withheld
requirements under the ‘Sales Administration Practices’
corresponding to the suspension period; (d) to pay the sales
which was (sic) then the subject of negotiations between the
representatives all their lost income corresponding to the
parties at the Bureau of Labor Relations,” it was only fair that
period of their suspensions, and dismissal, including
they “be reinstated ** with back wages since they were
commissions that they might have earned corresponding to
terminated from employment based on a policy ** still being
their one-week forced leave.
negotiated to avoid precisely a labor-management dispute
from arising” therefrom;” GTE, for its part, argued that the termination of the employment of its
fourteen (14) premise sales representatives prior to the strike should
3. 3)pronounced the union’s action relative to the allegedly illegal
have been upheld. It also filed an opposition to the union’s motion for
dismisal of one Brian Pineda to be “barred by extinctive
reconsideration.
prescription” in accordance with the CBA then in force; and
4. 4)on the foregoing premises adjudicated the dispute as fol-
 The motions were resolved in a “Decision” handed down by Minister
Sanchez on June 6, 1986. The Minister stated that he saw no need to
change his rulings as regards Pineda’s suspension, the question on
GTE’s sales and administrative policies, and the matter of back wages.
However, as regards “the other issues raised by the union,” the Minister
agreed “with the
462
462 SUPREME COURT REPORTS ANNOTATED
GTE Directories Corporation vs. Sanchez VOL. 197, MAY 27, 1991 463
company that these were not adequately threshed out in the earlier
proceedings ** (for) (w)hile it is true that the union had already
presented evidence to support its contention, the company should be
given the opportunity to present its own evidence.” Accordingly, he
directed the Bureau of Labor Relations to hear said “other issues raised
by the union and to submit its findings and recommendations thereon
within 20 days from submission of the case for decision.”
Again GTE moved for reconsideration; again it was rebuffed. The
Labor Minister denied its motion by Order dated October 1, 1986. In
that order, the Minister, among other things—
1. 1)invoked Section 6, Rule XIII of the Rules and Regulations
Implementing the Labor Code, pertinently reading as follows:
“During the proceedings, the parties shall not do any act which may disrupt
or impede the early settlement of the dispute. They are obliged, as part of
their duty to bargain collectively in good faith, to participate fully and
promptly in the conciliation proceedings called by the Bureau or the
Regional Office.”,
and pointed out that “in dismissing 14 salesmen ** for alleged
violations of the reportorial requirements of its sales policies which was
then the subject of conciliation proceedings between them, (GTE) acted
evidently in bad faith; hence the status quo prior to their dismissal
must be restored ** (and) their reinstatement with backwages is in
order up to the time they were on forced leave. **;”
1. 2)declared that because he had “ordered the parties to negotiate
and effect a voluntary settlement of the questioned Grid
Schedule, the Sales Evaluation and Productions Policy, it
would be unripe and premature for us to rule on the legality or
illegality on the company’s sales policies at this instance;”
2. 3)opted, however, to himself resolve “the so-called ‘other issues’
” which he had earlier directed the Bureau of Labor Relations
to first hear and resolve (in the Decision of June 6,
1986, supra), i.e., GTE’s liability for unfair labor practice, the
legality of the strike and the strikers’ right to be paid their
wages while on strike, his ruling thereon being as follows:
“While the company, in merely implementing its challenged sales policies
did not ipso facto commit an unfair labor practice, it did so
463
GTE Directories Corporation vs. Sanchez
when it in mala fide dismissed the fourteen salesmen, all union members,
while conciliation proceedings were being conducted on disputes on its very
same policies, especially at that time when a strike notice was filed on the
complaint of the union alleging that said sales policies are being used to
bust the union; thus precipitating a lawful strike on the part of the latter.
A strike is legal if it was provoked by the employer’s failure to abide by the
terms and conditions of its collective bargaining agreement with the union,
by the discrimination employed by it with regard to the hire and tenure of
employment, and the dismissal of employees due to union activities as well
as the company’s refusal to bargain collectively in good faith (Cromwell
Commercial Co., Inc. vs. Cromwell Employees and Laborers Union, 19
SCRA 398). The same rule applies if employer was guilty of bad faith delay
in reinstating them to their position (RCPI vs. Phil. Communications
Electronics & Electricity Workers Federation, 58 SCRA 762).
“While as a rule strikers are not entitled to backpay for the strike period
(J.P. Heilbronn Co. vs. NLU, 92 Phil. 575) strikers may be properly
awarded backwages where the strike was precipitated by union busting
activities of the employer (Davao Free Workers, Front, et al. vs. CIR, 60
SCRA 408), as in the case at bar. **.”
The Minister accordingly annulled and set aside his order for the
Bureau of Labor Relations to conduct hearings on said issues since he
had already resolved them, and affirmed his Order of March 31, 1986—
”directing Union and Management to negotiate a voluntary settlement
on the company sales policies and reinstating the fourteen employees
with full backwages from the time they were dismissed up to the time
they were on forced leave with pay”—”but with the modification that
management ** (was) directed to give the striking workers strike
duration pay for the whole period of the strike less earnings.”
 GTE thereupon instituted the special civil action of certiorari at bar
praying for invalidation, because rendered with grave abuse of
discretion, of the Labor Minister’s orders—
1. 1)commanding “reinstatement of the fourteen dismissed
employees, and
2. 2)“finding ** (it) guilty of unfair labor practice and directing **
(it) to pay strike duration pay to striking workers.”
It seems to the Court that upon the undisputed facts on record, GTE
had cause to dismiss the fourteen (14) premise sales representatives
who had repeatedly and deliberately, not
464
464 SUPREME COURT REPORTS ANNOTATED ** clearly designed to discourage our legitimate union
GTE Directories Corporation vs. Sanchez practices.” The basic question then is whether or not the
to say defiantly, refused to comply with its directive for submission of
individual reports on specified matters. The record shows that GTE
addressed no less than (six) written official communications to said
premise sales representatives embodying this requirement, to wit:
1. 1)Memorandum of July 9, 1985 pursuant to GTE’s “Sales
Administrative Practices”—superseded by a memorandum
dated July 16, 1985—requiring submission of individual
reports by August 2, 1985;
2. 2)Memorandum of August 5, 1985, requiring submission of the
reports by 2:00 P.M.;
3. 3)Memorandum of August 6, 1985, for submission of requisite
reports not later than 4:00 P.M. of that day, with a warning of
“appropriate disciplinary action;”
4. 4)Letter of August 9, 1985 imposing suspension without pay for
five (5) working days and extending the period for submission
of reports to August 19, 1985;
5. 5)Letter of August 19, 1985 suspending the sales
representatives until their submission of the required reports;
6. 6)Letter dated August 28, 1985 giving the sales representatives
“a last chance to comply with ** (the) directive within 24 hours
from receipt **;” with warning that failure to comply would
result in termination of employment.
The only response of the sales representatives to these formal directives
were:
1. 1)a letter by their Union to GTE’s Sales Manager dated August
5, 1985 in which the requirement was criticized as not being
the “result of an agreement of all concerned,” and as
incomprehensible, “discriminate and whimsical;”
2. 2)a strike notice filed with the Ministry of Labor on August 6,
1985; and
3. 3)an undated letter sent to GTE’s Director for Marketing &
Sales on August 29, 1985, drawing attention to what it deemed
contradictory directives, and reserving the right to take action
against the manager for “acts of harassment and intimidation
activities in protesting management’s continuous unfair labor
effectivity of an employer’s regulations and policies is
dependent upon the acceptance and consent of the employees
thereby sought to be
465
VOL. 197, MAY 27, 1991 465
GTE Directories Corporation vs. Sanchez
bound; or otherwise stated, whether or not the union’s objections to, or
request for reconsideration of those regulations orpolicies
automatically suspend enforcement thereof and excusethe employees’
refusal to comply with the same.
This Court has already had occasion to rule upon a similar issue. The
issue was raised in a 1989 case, G.R. No. 53515, San Miguel Brewery
Sales Force Union (PTGWO) v. Ople. In that case, the facts were briefly
3
as follows:
“In September 1979, the company introduced a marketing scheme known
as the ‘Complementary distribution system’ (CDS) whereby its beer
products were offered for sale directly to wholesalers through San Miguel’s
sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor
practice in the Ministry of Labor, with a notice of strike on the ground that
the CDS was contrary to the existing marketing scheme whereby the Route
Salesmen were assigned specific territories within which to sell their
stocks of beer, and wholesalers had to buy beer products from them, not
from the company. It was alleged that the new marketing scheme violates
** (a provision) of the collective bargaining agreement because the
introduction of the CDS would reduce the take-home pay of the salesmen
and their truck helpers for the company would be unfairly competing with
them.”
The Labor Minister found nothing to suggest that the employer’s
unilateral action of inaugurating a new sales scheme “was designed to
discourage union organization or diminish its influence;” that on the
contrary, it was “part of its overall plan to improve efficiency and
economy and at the same time gain profit to the highest;” that the
union’s “conjecture that the new plan will sow dissatisfaction from its
rank is already a prejudgment of the plan’s viability and effectiveness,
** like saying that the plan will not work out to the workers’ (benefit)
and therefore management must adopt a new system of marketing.”
The Minister accordingly dismissed the strike notice, although he
ordered a slight revision of the CDS, which the employer evidently
found acceptable.
This Court approved of the Minister’s findings, and declared correct
his holding that the CDS was “a valid exercise of man-
_______________
3 170 SCRA 25-28.
466
466 SUPREME COURT REPORTS ANNOTATED VOL. 197, MAY 27, 1991 467
GTE Directories Corporation vs. Sanchez GTE Directories Corporation vs. Sanchez
agement prerogatives,” viz.:4
“‘Except as limited by special laws, an employer is free to regulate, according
to his own discretion and judgment, all aspects of employment,including
hiring, work assignments, working methods, time, place and manner of
work, tools to be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of work. *** (NLU vs.
Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR, 21
SCRA 226, 235.)’ (Perfecto V. Hernandez, Labor Relations Law, 1985 ed.,
p. 44.) (Italics ours.)”
The Court then closed its decision with the following pronouncements:
“Every business enterprise endeavors to increase its profits. Inthe process,
it may adopt or devise means designed towards that goal.In Abbott
Laboratories vs. NLRC, 154 SCRA 713, We ruled:
‘* * * Even as the law is solicitous of the welfare of the employees, it
must also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied.’
So long as a company’s management prerogatives are exercised in good
faith for the advancement of the employer’s interest and not for the purpose
of defeating or circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold them (LVN Pictures
Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs.
Embroidery and Garments Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110). ***.”
In the case at bar, it must thus be conceded that its adoption of a new
“Sales Evaluation and Production Policy” was within its management
prerogative to regulate, according to its own discretion and judgment,
all aspects of employment, including the manner, procedure and
processes by which particular work activities should be done. There
were, to be sure, objections presented by the union, i.e, that the
schedule had not been
_______________
4 At pp. 27-28.
5 At p. 28.
467
“drawn (up) as a result of an agreement of all concerned,” that the new
policy was incomprehensible, discriminatory and whimsical, and
“would result to further reduction” of the sales representatives’
compensation. There was, too, the union’s accusation that GTE had
committed unfair labor practices, such as—
1. “1.Refusal to bargain on unjust sales policies particularly on the
failure to meet the 75% of the average sales production for two
consecutive years;
2. 2.Open territory of accounts;
5
3. 3.Illegal suspension of Brian Pineda, a union officer; and
4. 4.Non-payment of eight days’ suspension pay increase.”
This Court fails to see, however, how these objections and accusations
justify the deliberate and obdurate refusal of the sales representatives
to obey the management’s simple requirement for submission by all
Premise Sales Representatives (PSRs) of individual reports or
memoranda requiring reflecting target revenues—which is all that
GTE basically required—and which it addressed to the employees
concerned no less than six (6) times. The Court fails to see how the
existence of objections made by the union justify the studied disregard,
or wilful disobedience by the sales representatives of direct orders of
their superior officers to submit reports. Surely, compliance with their
superiors’ directives could not have foreclosed their demands for the
revocation or revision of the new sales policies or rules; there was
nothing to prevent them from submitting the requisite reports with the
reservation to seek such revocation or revision.
To sanction disregard or disobedience by employees of a rule or order
laid down by management, on the pleaded theory that the rule or order
is unreasonable, illegal, or otherwise irregular for one reason or
another, would be disastrous to the discipline and order that it is in the
interest of both the employer and his employees to preserve and
maintain in the working establishment and without which no
meaningful operation and progress is possible. Deliberate disregard or
disobedience of rules, defiance of management authority cannot be
countenanced. This is not to say that the employees have no remedy
against rules or orders they regard as unjust or illegal. They may object
thereto,
468
468 SUPREME COURT REPORTS ANNOTATED
GTE Directories Corporation vs. Sanchez
ask to negotiate thereon, bring proceedings for redress against the
employer before the Ministry of Labor. But until and unless the rules
or orders are declared to be illegal or improper by competent authority,
the employees ignore or disobey them at their peril. It is impermissible
to reverse the process: suspend enforcement of the orders or rules until
their legality or propriety shall have been subject of negotiation,
conciliation, or arbitration.
These propositions were in fact adverted to in relation to the dispute
in question by then Minister Blas Ople in his Order dated January 21,
1986, to the effect among others, that “promulgations of company
policies and regulations are basic management prerogatives” and that
it is a “recognized principle of law that company policies and
regulations are, unless shown to be grossly oppressive or contrary to
law, generally binding (and) valid on the parties and must be complied
with until finally revised or amended unilaterally or preferably through
negotiations or by competent authorities.”
Minister Sanchez however found GTE to have “acted evidently in
bad faith” in firing its 14 salespersons “for alleged violations of the
reportorial requirements of its sales policies which was then the subject
of conciliation proceedings between them;” and that “(w)hile the
6
company, in merely implementing its challenged sales policies did
not ipso facto commit an unfair labor practice, it did so when it in mala
fide dismissed the fourteen salesmen, all union members, while
conciliation proceedings were being conducted on disputes on its very
same policies, especially at that time when a strike notice was filed on
the complaint of the union alleging that said sales policies are being
used to bust the union; thus precipitating a lawful strike on the part of
the latter.” No other facts appear on record relevant to the issue of
GTE’s dismissal of the 14 sales representatives. There is no proof on
record to demonstrate any underhanded motive on the part of GTE in
formulating and imposing the sales policies in question, or requiring
the submission of reports in line therewith. What, in fine, appears to be
the Minister’s thesis is that an employer has the prerogative to lay
________________
6 SEE page 7, supra.
469
VOL. 197, MAY 27, 1991 469
GTE Directories Corporation vs. Sanchez
down basic policies and rules applicable to its employees, but may not
exact compliance therewith, much less impose sanctions on employees
shown to have violated them, the moment the propriety or feasibility of
those policies and rules, or their motivation, is challenged by the
employees and the latter file a strike notice with the Labor
Department—which is the situation in the case at bar.
When the strike notice was filed by the union, the chain of events
which culminated in the termination of the 14 sales persons’
employment was already taking place, the series of defiant refusals by
said sales representatives to comply with GTE’s requirement to submit
individual reports was already in progress. At that time, no less than
three (3) of the ultimate six (6) direct orders of the employer for the
submission of the reports had already been disobeyed. The filing of the
strike notice, and the commencement of conciliation activities by the
Bureau of Labor Relations did not operate to make GTE’s orders illegal
or unenforceable so as to excuse continued noncompliance therewith. It
does not follow that just because the employees or their union are
unable to realize or appreciate the desirability of their employers’
policies or rules, the latter were laid down to oppress the former and
subvert legitimate union activities. Indeed, the overt, direct, deliberate
and continued defiance and disregard by the employees of the authority
of their employer left the latter with no alternative except to impose
sanctions. The sanction of suspension having proved futile, termination
of employment was the only option left to the employer.
To repeat, it would be dangerous doctrine indeed to allow employees
to refuse to comply with rules and regulations, policies and procedures
laid down by their employer by the simple expedient of formally
challenging their reasonableness or the motives which inspired them,
or filing a strike notice with the Department of Labor and Employment,
or, what amounts to t h e same thing, to give the employees the power
to suspend compliance with company rules or policies by requesting
that they be first subject of collective bargaining. It would be well nigh
impossible under these circumstances for any employer to maintain
discipline in its establishment. This is, of course, intolerable. For
common sense teaches, as Mr. Justice Gregorio Perfecto once had
occasion to stress, that:
7 undertaken by “banks, hospitals, and export-oriented industries.” It
“Success of industries and public services is the foundation upon which just
wages may be paid. There cannot be success without efficiency. There
cannot be efficiency without discipline. Consequently, when employees and
laborers violate the rules of discipline they jeopardize not only the interest
of the employer but also their own. In violating the rules of discipline they
aim at killing the hen that lays the golden eggs. Laborers who trample
down the rules set for an efficient service are, in effect, parties to a
conspiracy, not only against capital but also against labor. The high
interest of society and of the individuals demand that we should require
everybody to do his duty. That demand is addressed not only to employer
but also to employees.”
Minister Sanchez decided the dispute in the exercise of the jurisdiction
assumed by his predecessor in accordance with Article 263 (g) of the
Labor Code, providing in part as follows:
8
“(g) When in his opinion there exists a labor dispute causing or likely to
cause strikes or lockouts adversely affecting the national interest, such as
may occur in but not limited to public utilities, companies engaged in the
generation or distribution of energy, banks, hospitals, and export-oriented
industries, including those within export processing zones, the Minister of
Labor and Employment shall assume jurisdiction over the dispute and
decide it or certify the same to the Commission for compulsory arbitration.
**.”
Even that assumption of jurisdiction is open to question.
The production and publication of telephone directories, which is the
principal activity of GTE, can scarcely be described as an industry
affecting the national interest. GTE is a publishing firm chiefly
dependent on the marketing and sale of advertising space for its not
inconsiderable revenues. Its services, while of value, cannot be deemed
to be in the same category of such
_______________
Batangas Transportation Co. v. Bagong Pagkakaisa of the Employees and Laborers of
7
the Batangas Trans. Co., 7 Phil. 108, 112 (1949).
8 Order dated Dec. 6, 1985 by Acting Labor Minister Vicente Leogardo, Jr.: SEE p.
4, supra.
VOL. 197, MAY 27, 1991 471
Torillo vs. Leogardo, Jr.
essential activities as “the generation or distribution of energy” or those
cannot be regarded as playing as vital a role in communication as other
mass media. The small number of employees involved in the dispute,
the employer’s payment of “P10 million in income tax alone to the
Philippine government,” and the fact that the “top officers of the union
were dismissed during the conciliation process,” obviously do not suffice
to make the dispute in the case at bar one “adversely affecting the
national interest.”
WHEREFORE, the petiton is GRANTED, and as prayed for, the
Order dated October 1, 1986 of the public respondent is NULLIFIED
and SET ASIDE.
SO ORDERED.
Gancayco, Griño-Aquino and Medialdea, JJ., concur.
Cruz, J., No part. Related to one of the counsel.
Petition granted. Order nullified and set aside.