THIRD DIVISION 22. Rosalie R.
Policios names as appearing in the attached Computation sheet consisting
G.R. No. 189851, June 22, 2016 23. Genelyn C. Muñez
INTEC CEBU INC., AKIHIKO KAMBAYASHI AND 24. Alome Migue,
WATARU SATO, Petitioners, v. HON. COURT OF APPEALS, 25. Elsie Alcos
ROWENA REYES, ROWENA ODIONG, HYDEE AYUDA, TERESITA 26. Lydialyn B. Godinez
BERIDO, CRISTINA LABAPIZ, GEMMA JUMAO-AS, SIGMARINGA 27. Myrna S. Logaos
BAROLO, LIGAYA B. ANADON, DONALINE DELA TORRE, JOY P. 28. Jenife Espinosa
LOMOD, JACQUELINE A. FLORES, SUSAN T. ALIÑO, ANALYN P.
29. Maria Fe Tomo
ABALLE, CAROLINE A. LABATOS, LENITH F. ROMANO, LEONILA
B. FLORES, CECILIA G. PAPELLERO, AGNES C. CASIO, VIOLETA 30. Jocelyn Casiban
O. MATCHETE, CANDIDA I. CRUJIDO, CLAUDIA B. CUTAMORA, 31. Ailyn Bagyao
ROSALIE R. POLICIOS, GENELYN C. MUÑEZ, ALOME MIGUE, 32. Josephine Casino
ELSIE ALCOS, LYDIALYN B. GODINEZ AND MYRNA S. 33. Pilar Batajoy
LOGAOS, Respondents. 34. Juliet Teofilo
DECISION 35. Cheryl Sugarol
PEREZ, J.: 36. Rechel Daitol
For our resolution is this Petition for Certiorari under Rule 65 of 37. Janette Quidong5
1
the Rules of Court assailing the Decision dated 22 April 2009 and Respondents alleged that in 2005, their working days were reduced
Resolution2 dated 31 July 2009 of the Court of Appeals in CA-G.R. from 6 to 2-4 days. Intec apparently explained that reduction in
SP No. 03471. The challenged decision reversed the judgment3 of working days was due to lack of job orders. However, respondents
the National Labor Relations Commission (NLRC) and discovered that Intec hired around 188 contractual employees
reinstatement of the Decision4 of the Labor Arbiter. The Labor tasked to perform tasks which respondents were regularly doing.
Arbiter ruled that respondent employees were constructively On 17 May 2006, private respondents claimed that they were
dismissed. effectively terminated from employment as shown in the
Establishment Termination Report6 submitted to the Department of
As culled from the records of the case, the following antecedent Labor and Employment (DOLE). Two (2) days later, respondents
facts appear: filed a complaint for illegal dismissal.
Petitioner Intec Cebu Inc. (Intec) is engaged in the manufacture Intec, for its part, claimed that the company was established to
and assembly of mechanical system and printed circuit board for supply the required materials of Kenwood Precision Corporation
cassette tape recorder, CD and CD ROM player while the (Kenwood). When Kenwood stopped its operations in the
following respondents were hired by Intec in 1997 and 1998, Philippines, Intec's business operations were severely affected,
respectively, as production workers: prompting Intec to set up a new product line exclusively for Pentax
Cebu Phils. Corporation (Pentax). In December 2005, Intec's job
1. Rowena Reyes orders from Pentax declined. On 4 January 2006, a memorandum
2. Rowena R. Odiong was issued informing the employees that the working days would
3. Hydee P. Ayuda be reduced to 3-4 days from the normal 6 day-work week. The
4. Teresita C. Berido reduced work week policy was extended from April to June 2006.
5. Cristina S. Labapiz A corresponding memorandum was issued and a copy thereof was
6. Gemma T. Jumao-as submitted to the DOLE.
7. Sigmaringa B. Barolo
8. Ligaya B. Anadon On 17 May 2007, Labor Arbiter Jermelina Pasignajen Ay-ad
9. Donaline dela Torre declared that respondents were illegally dismissed and adjudged
10. Joy P. Lomod Intec and its officials liable for payment of separation pay and
11. Jacqueline A. Flores backwages. Labor Arbiter Ay-ad found that Intec hired casual
12. Susan T. Alino employees to replace respondents. As regards the other monetary
13. Analyn P. Aballe claims of respondents, Labor Arbiter Ay-ad ruled that Intec was
14. Caroline A. Labatos able to prove, by presenting copies of the payroll, that private
15. Lenith F. Romano respondents were properly paid. The dispositive portion of the
16. Leonila B. Flores Labor Arbiter's Decision reads:
17. Cecilia G. Papellero WHEREFORE, judgment is hereby rendered declaring
18. Agnes C. Casio complainants to have been illegally (constructively) dismissed
19. Violeta O. Matchete from their employment. Consequently, the respondents INTEC
          CEBU, INC., WATARU SATO AND AKIHIRO
20. Candida I. Crujido KAMBAYASHI, are hereby directed to PAYjointly and severally
21. Claudia B. Cutamora the following complainants of the amounts indicated opposite their
of two (2) pages, in concept of separation pay and backwages in
the total amount of SIX MILLION NINE HUNDRED SIXTY-
SEVEN THOUSAND NINE HUNDRED TWENTY-FOUR
PESOS (P6,967,924.00), in cash or in check payable to NLRC-
RAB VII, Cebu City, through the Cashier of this Arbitration
Branch within ten (10) days from receipt of this Decision.
All other claims are DISMISSED for insufficiency of evidence
and for lack of jurisdiction. The claims and the case against
respondents Feliciana Tero and Cheryl Inso are DISMISSED for
lack of merit.7
On 14 December 2007, the NLRC set aside the Decision of the
Labor Arbiter and held that Intec suffered tremendous financial
losses which justified the reduction of working days. The
dispositive portion of the decision reads:
WHEREFORE, the assailed decision is SET ASIDE and a new
one entered declaring that complainants were not dismissed either
actually or constructively. Considering, however, all attendant
factors as discussed, respondent Intec Cebu, Inc. is hereby directed
to give all thirty-seven (37) complainants their respective
separation pay based on one-half month salary per year of service,
or the grand total amount of ONE MILLION ONE HUNDRED
TWENTY-FIVE THOUSAND SEVEN HUNDRED THIRTY-
FIVE PESOS (P1,125,735.00) as earlier computed per assailed
decision.
Complainants are NOT entitled to backwages. 8
Intec elevated the matter to the Court of Appeals. In a Decision
dated 22 April 2009, the Court of Appeals reversed the NLRC and
reinstated the Decision of the Labor Arbiter with respect to
respondents herein. As for Jenife Espinosa, Maria Fe Tomo,
Jocelyn Casiban, Ailyn Bagyao, Josephine Casino, Pilar Batajoy,
Juliet Teofilo, Cheryl Sugarol, Rechel Daitol and Janette Quidong,
the case was dismissed for their failure to sign the verification of
certification of non-forum shopping in their petition.
The instant petition is one for certiorari with Intec attributing
grave abuse of discretion on the part of the Court of Appeals for
the following acts:
FIRST: BY OVERTURNING ITS OWN RESOLUTION
DISMISSING OUTRIGHT THE PRIVATE RESPONDENTS'
PETITION FOR CERTIORARI, AND THEREBY GIVING DUE
COURSE TO THEIR MOTION FOR RECONSIDERATION,
WITH THE MANIFEST ADVANCE PRONOUNCEMENT
THAT THE SAID MOTION WOULD EVENTUALLY BE
GRANTED.
SECOND: BY DISREGARDING THE FACTUAL FINDINGS
OF THE HONORABLE NATIONAL LABOR RELATIONS
COMMISSION, 4th DIVISION, CEBU CITY, THAT THE
PRIVATE RESPONDENTS "WERE NOT DISMISSED EITHER
ACTUALLY OR CONSTRUCTIVELY."
THIRD: BY CAPRICIOUSLY ASSERTING THAT THE
FINANCIAL STATEMENTS OF THE PETITIONERS ARE
SELF-SERVING AND OF DOUBTFUL VERACITY AS THEY
WERE NOT PREPARED BY AN INDEPENDENT AUDITOR,
WHICH ASSERTION IS IN EFFECT AN ASSAULT UPON THE
INTEGRITY AND HONESTY OF THE AUDITOR.
FOURTH: BY CIRCUMVENTING THE DOCTRINE LAID
DOWN BY THIS HONORABLE COURT IN THE CASE OF
"JARDINE DAVIS, INC. vs. THE NLRC, ET AL.", G.R. 26272,
JULY 28, 1999, THAT RESORT TO JUDICIAL REVIEW OF
THE DECISION OF THE NLRC BY WAY OF SPECIAL CIVIL
ACTION FOR CERTIORARI UNDER RULE 65 OF THE
RULES OF COURT IS CONFINED ONLY TO ISSUES OF
WANT OF JURISDICTION AND GRAVE ABUSE OF
DISCRETION ON THE PART OF THE LABOR
TRIBUNAL, BARRING AN INQUIRY AS TO THE
CORRECTNESS OF THE EVALUATION OF EVIDENCE
WHICH HAS THE BASIS OF LABOR AGENCY IN
REACHING A CONCLUSION;
FIFTH: ASSUMING, WITHOUT HOWEVER ADMITTING,
THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO
SEPARATION PAY AND BACKWAGES, AS DETERMINED
BY THE LABOR ARBITER, THE COMPUTATION OF
BENEFITS RECEIVEABLE - WHICH CONTAINS GLARING
SERIOUS ERROR, IF REINSTATED, AS THE COURT OF
APPEALS, 18th DIVISION, WANTED IT TO BE.9
Intec claims that the reduction of the number of working days was
undertaken to forestall business losses as proven by the audited
financial statements of Intec for the years 2001-2006. Intec insists
that the workers they employed from TESDA and Sisters of Mary
were on-the-job trainees and they were already employed prior to
the implementation of the reduced working days policy of the
company. Moreover, Intec stresses that these workers were
retained to enable the company to comply with the urgent off-and-
on job orders of Pentax which could not be accomplished by the
regular employees.
Intec reiterates that respondents voluntarily resigned or abandoned
their work when they filed their application for leave following the
issuance of the second memorandum extending the implementation
of the reduced number of working days. According to Intec,
respondents had categorically declared that they would no longer
report for work.
Respondents urge this Court to affirm the findings of the Labor
Arbiter and the Court of Appeals that they were constructively
dismissed. Respondents refutes Intec's claim that it is suffering
from business reverses when it just hired additional workers from
TESDA and Sisters of Mary despite the fact that respondents were
under reduced work days.
The charge of constructive dismissal is predicated on the claim that
the implementation of the reduced work week is illegal.
The Court has held that management is free to regulate, according TOTAL 18,964,180.00 (24,878,385.00) (5,914,205.00)11
to its own discretion and judgment, all aspects of employment,
An examination of Intec's financial statements for 2005-2006
including hiring, work assignments, working methods, time, place,
shows that while Intec suffered a net loss of P9,240,929.00 in
and manner of work, processes to be followed, supervision of
2005, it earned a net income of P9,568,674.00 in 2006. The period
workers, working regulations, transfer of employees, work
covered in the financial statement of 2006 is from May 2005-April
supervision, lay-off of workers, and discipline, dismissal and recall
2006. It was only on the 9th month of operation did Intec decide to
of workers. The exercise of management prerogative, however, is
carry out the reduced work day scheme. Note that the reduced
not absolute as it must be exercised in good faith and with due
work day scheme was implemented only in January 2006. Unless
regard to the rights of labor.10
evidence is shown by the company that the income for 2006 was
earned only between the months of January to April, it is safe to
Thus, it was incumbent upon Intec to prove that that the
presume that at the time the reduced work day scheme was being
implementation of the reduced working days is valid and done in
implemented, the company was still benefiting from its gains as
good faith. Intec claims that it implemented a reduction of work
shown in the numbers for 2006.
days scheme to forestall its losses.
Furthermore, the loss incurred in 2005 may be attributed to the
Two memoranda were allegedly sent to the affected employees
acquisition of property and equipment amounting to
informing them of the reduction of work days. The first
P9,218,967.0012 in 2005. There is also no indication in the financial
memorandum was dated 4 January 2006 and submitted to the
statements, much less an observation made by the independent
DOLE only on 9 January 2006. In 2006, there was no specific rule
auditor, that a reduction in demand would necessitate a reduction
or guideline covering the reduction of workdays. It was only in
in the employees' work days.
January 2009 where the DOLE issued Department Advisory No. 2,
Series of 2009 which requires the employer to notify DOLE of the
We cannot give weight to the evidence presented by Intec to prove
reduction of work days prior to its implementation. If the
the slump in demand. First, the two-page delivery data are lacking
reportorial requirement in retrenchment under Article 283 is to be
in specifics. The report did not indicate when it was prepared.
followed, the DOLE should be notified at least one month prior to
Second, the report was prepared by Intec employees and approved
the intended date of retrenchment. Be that as it may, Intec
by their President. Third, the report appeared to be mere
submitted its report after the reduction of workdays was
projections because it was not supported by corresponding sales or
implemented. Moreover, there is nothing on the records which
delivery receipts. The actual sales may vary from the projected
show that a second notice was sent to the employees informing
demand, thus, the report cannot be made as basis of a slump in
them of the extension of the reduced work days to June 2006.
demand or a slow-down.
Intec presented its financial statements from the years 2001-2006
In addition, the hiring of 188 workers, whether they be trainees or
to prove that the company was suffering from financial losses
casual employees, necessarily incurred cost to the company. No
owing to the decline of its job orders. The summary of Intec's net
proof was submitted that these newly-hired employees were
income/loss for the years 2001-2006 is illustrated below:
performing work different from the regular workers.
SUMMARY OF INTEC'S NET INCOME (LOSS) 31 APRIL
2001-2006
In sum, there is no reason to implement a cost-cutting measure in
the form of reducing the employees' working days.
Net Income Net Loss Totals
April 30, Intec committed illegal reduction of work hours. Constructive
(9,708,820.00) (9,708,820.00)
2001 dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable or
April 30,
(5,928,636.00) (5,928,636.00) unlikely; when there is a demotion in rank or diminution in pay or
2002 both; or when a clear discrimination, insensibility, or disdain by an
April 30, employer becomes unbearable to the employee. 13
4,669,180.00 4,669,180.00
2003
Intec's unilateral and arbitrary reduction of the work day scheme
April 30,
4,726,326.00 4,726,326.00 had significantly greatly reduced respondents' salaries thereby
2004 rendering it liable for constructive dismissal.
April 30,
(9,240,929.00) (9,240,929.00) There is no merit to Intec's charge of abandonment against
2005
respondents. To constitute abandonment, there must be clear proof
April 30,
9,568,674.00 9,568,674.00 of deliberate and unjustified intent to sever the employer-employee
2006 relationship. Clearly, the operative act is still the employee's
ultimate act of putting an end to his employment. Furthermore, it is
a settled doctrine that the filing of a complaint for illegal dismissal This is a petition for review on certiorari1 under Rule 45 of the
is inconsistent with abandonment of employment. An employee Rules of Court assailing the Resolutions dated July 22, 20082 and
who takes steps to protest his dismissal cannot logically be said to February 24, 20093 of the Court of Appeals (CA) in CA-GR. SP
have abandoned his work. The filing of such complaint is proof No. 02373-MIN, which dismissed the petition filed by petitioner
enough of his desire to return to work, thus negating any Christine Joy Capin-Cadiz (Cadiz) on the following grounds: (1)
suggestion of abandonment.14 incomplete statement of material dates; (2) failure to attach registry
receipts; and (3) failure to indicate the place of issue of counsel's
We affirm the Court of Appeals' finding that there is no proof that Professional Tax Receipt (PTR) and Integrated Bar of the
respondents committed unauthorized absences or had otherwise Philippines (IBP) official receipts.
refused to work. The complaint for constructive dismissal is the Antecedent Facts
best evidence against abandonment because the filing of a Cadiz was the Human Resource Officer of respondent Brent
complaint for illegal dismissal is incompatible to abandonment. Hospital and Colleges, Inc. (Brent) at the time of her indefinite
suspension from employment in 2006. The cause of suspension
Lastly, we note that Intec availed of the wrong mode of appeal. was Cadiz's Unprofessionalism and Unethical Behavior Resulting
For certiorari to prosper, the following requisites must concur: (1) to Unwed Pregnancy. It appears that Cadiz became pregnant out of
the writ is directed against a tribunal, a board or any officer wedlock, and Brent imposed the suspension until such time that
exercising judicial or quasi-judicial functions; (2) such tribunal, she marries her boyfriend in accordance with law.
board or officer has acted without or in excess of jurisdiction, or Cadiz then filed with the Labor Arbiter (LA) a complaint for
with grave abuse of discretion amounting to lack or excess of Unfair Labor Practice, Constructive Dismissal, Non-Payment of
jurisdiction; and (3) there is no appeal or any plain, speedy and Wages and Damages with prayer for Reinstatement. 4
adequate remedy in the ordinary course of law. 15 Ruling of the Labor Tribunals
In its Decision5 dated April 12, 2007, the LA found that Cadiz's
Well-settled is the rule that a petition for certiorari against a court indefinite suspension amounted to a constructive dismissal;
which has jurisdiction over a case will prosper only if grave abuse nevertheless, the LA ruled that Cadiz was not illegally dismissed as
of discretion is manifested. The burden is on the part of the there was just cause for her dismissal, that is, she engaged in
petitioner to prove not merely reversible error, but grave abuse of premarital sexual relations with her boyfriend resulting in a
discretion amounting to lack or excess of jurisdiction on the part of pregnancy out of wedlock. 6 The LA further stated that her
the public respondent issuing the impugned order. Mere abuse of "immoral conduct x x x [was] magnified as serious misconduct not
discretion is not enough; it must be grave. The term grave abuse of only by her getting pregnant as a result thereof before and without
discretion is defined as a capricious and whimsical exercise of marriage, but more than that, also by the fact that Brent is an
judgment so patent and gross as to amount to an evasion of a institution of the Episcopal Church in the Philippines operating
positive duty or a virtual refusal to perform a duty enjoined by law, both a hospital and college where [Cadiz] was employed." 7 The LA
as where the power is exercised in an arbitrary and despotic also ruled that she was not entitled to reinstatement "at least until
manner because of passion or hostility.16 she marries her boyfriend," to backwages and vacation/sick leave
pay. Brent, however, manifested that it was willing to pay her 13th
A writ of certiorari will not issue where the remedy of appeal is month pay. The dispositive portion of the decision reads:
available to the aggrieved party.17 In this case, appeal under Rule
45 of the Rules of Court was clearly available to Intec. WHEREFORE, judgment is hereby rendered, ordering [Brent] to
pay [Cadiz] 13th month pay in the sum of Seven Thousand Nine
Finding no grave abuse of discretion in this case, Hundred Seventy & 11/100 Pesos (P7,970.11).
the certiorari petition should be dismissed. All other charges and claims are hereby dismissed for lack of
merit.
WHEREFORE, the instant petition is DISMISSED and the SO ORDERED.8
Decision dated 22 April 2009 and Resolution dated 31 July 2009 of Cadiz appealed to the National Labor Relations Commission
the Court of Appeals in CA-G.R. SP No. 03471 are AFFIRMED.
(NLRC), which affirmed the LA decision in its Resolution 9 dated
SO ORDERED. December 10, 2007. Her motion for reconsideration having been
THIRD DIVISION
denied by the NLRC in its Resolution10 dated February 29, 2008,
February 24, 2016 Cadiz elevated her case to the CA on petition for certiorari under
G.R. No. 187417
Rule 65.
CHRISTINE JOY CAPIN-CADIZ, Petitioner,  Ruling of the CA
vs.
The CA, however, dismissed her petition outright due to technical
BRENT HOSPITAL AND COLLEGES, INC., Respondent. defects in the petition: (1) incomplete statement of material dates;
DECISION
(2) failure to attach registry receipts; and (3) failure to indicate the
REYES, J.: place of issue of counsel's PTR and IBP official receipts. 11 Cadiz
sought reconsideration of the assailed CA Resolution dated July
22, 2008 but it was denied in the assailed Resolution dated
February 24, 2009. 12 The CA further ruled that "a perusal of the
petition will reveal that public respondent NLRC committed no
grave abuse of discretion amounting to lack or excess of
jurisdiction x x x holding [Cadiz's] dismissal from employment
valid." 13
Hence, the present petition.
Cadiz argues that -
I
THE HONORABLE [NLRC] GRAVELY ABUSED ITS
DISCRETION WHEN IT HELD THAT [CADIZ'S]
IMPREGNATION OUTSIDE OF WEDLOCK IS A GROUND
FOR THE TERMINATION OF [CADIZ'S] EMPLOYMENT14
II
THE [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION
WHEN IT UPHELD THE DISMISSAL OF [CADIZ] ON THE
GROUND THAT THE INDEFINITE SUSPENSION WAS
VALID AND REQUIRED [CADIZ] TO FIRST ENTER INTO
MARRIAGE BEFORE SHE CAN BE ADMITTED BACK TO
HER EMPLOYMENT15
III
RESPONDENT [NLRC] GRAVELY ABUSED ITS
DISCRETION WHEN IT DENIED [CADIZ'S] CLAIM FOR
BACKWAGES, ALLOWANCES, SICK LEAVE PAY,
MATERNITY PAY AND MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES 16
IV
THE [CA] MISPLACED APPLICATION OF THE MATERIAL
DATA RULE RESULTING TO GRAVE ABUSE OF
DISCRETION WHEN IT DISMISSED THE APPEAL17
Cadiz contends, among others, that getting pregnant outside of
wedlock is not grossly immoral, especially when both partners do
not have any legal impediment to marry. Cadiz surmises that the
reason for her suspension was not because of her relationship with
her then boyfriend but because of the resulting pregnancy. Cadiz
also lambasts Brent's condition for her reinstatement - that she gets
married to her boyfriend - saying that this violates the stipulation
against marriage under Article 136 of the Labor Code. Finally,
Cadiz contends that there was substantial compliance with the rules
of procedure, and the CA should not have dismissed the petition. 18
Brent, meanwhile, adopts and reiterates its position before the LA
and the NLRC that Cadiz's arguments are irrational and out of
context. Brent argues, among others, that for Cadiz to limit acts of
immorality only to extra-marital affairs is to "change the norms,
beliefs, teachings and practices of BRENT as a Church institution
of the x x x Episcopal Church in the Philippines." 19
Ruling of the Court
Ordinarily, the Court will simply gloss over the arguments raised
by Cadiz, given that the main matter dealt with by the CA were the
infirmities found in the petition and which caused the dismissal of
her case before it. In view, however, of the significance of the
issues involved in Cadiz's dismissal from employment, the Court
will resolve the petition including the substantial grounds raised
herein.
The issue to be resolved is whether the CA committed a reversible
error in ruling that: (1) Cadiz's petition is dismissible on ground of
technical deficiencies; and (2) the NLRC did not commit grave
abuse of discretion in upholding her dismissal from employment.
Rules of procedure are mere tools designed to facilitate the
attainment of justice
In dismissing outright Cadiz's petition, the CA found the following
defects: (1) incomplete statement of material dates; (2) failure to
attach registry receipts; and (3) failure to indicate the place of issue
of counsel's PTR and IBP official receipts.
Rule 46, Section 3 of the Rules of Court states the contents of a
petition filed with the CA under Rule 65, viz, "the petition shall x x
x indicate the material dates showing when notice of the judgment
or final order or resolution subject thereof was received, when a
motion for new trial or reconsideration, if any, was filed and when
notice of the denial thereof was received." The rationale for this is
to enable the CA to determine whether the petition was filed within
the period fixed in the rules. 20 Cadiz's failure to state the date of
receipt of the copy of the NLRC decision, however, is not fatal to
her case since the more important material date which must be duly
alleged in a petition is the date of receipt of the resolution of denial
of the motion for reconsideration,21 which she has duly complied
with. 22
The CA also dismissed the petition for failure to attach the registry
receipt in the affidavit of service.23 Cadiz points out, on the other
hand, that the registry receipt number was indicated in the petition
and this constitutes substantial compliance with the requirement.
What the rule requires, however, is that the registry receipt must be
appended to the paper being served.24 Clearly, mere indication of
the registry receipt numbers will not suffice. In fact, the absence of
the registry receipts amounts to lack of proof of
service.25 Nevertheless, despite this defect, the Court finds that the
ends of substantial justice would be better served by relaxing the
application of technical rules of procedure. 26With regard to
counsel's failure to indicate the place where the IBP and PTR
receipts were issued, there was substantial compliance with the
requirement since it was indicated in the verification and
certification of non-forum shopping, as correctly argued by Cadiz's
lawyer. 27
Time and again, the Court has emphasized that rules of procedure
are designed to secure substantial justice. These are mere tools to
expedite the decision or resolution of cases and if their strict and
rigid application would frustrate rather than promote substantial
justice, then it must be avoided.28
Immorality as a just cause for termination of employment
Both the LA and the NLRC upheld Cadiz's dismissal as one
attended with just cause. The LA, while ruling that Cadiz's
indefinite suspension was tantamount to a constructive dismissal,
nevertheless found that there was just cause for her dismissal.
According to the LA, "there was just cause therefor, consisting in
her engaging in premarital sexual relations with Carl Cadiz,
allegedly her boyfriend, resulting in her becoming pregnant out of
wedlock."29 The LA deemed said act to be immoral, which was
punishable by dismissal under Brent's rules and which likewise
constituted serious misconduct under Article 282(a) of the Labor
Code. The LA also opined that since Cadiz was Brent's Human
Resource Officer in charge of implementing its rules against
immoral conduct, she should have been the "epitome of proper
conduct."30 The LA ruled:
[Cadiz's] immoral conduct by having premarital sexual relations
with her alleged boy friend, a former Brent worker and her co-
employee, is magnified as serious misconduct not only by her
getting pregnant as a result thereof before and without marriage,
but more than that, also by the fact that Brent is an institution of
the Episcopal Church in the Philippines x x x committed to
"developing competent and dedicated professionals x x x and in
providing excellent medical and other health services to the
community for the Glory of God and Service to Humanity." x x x
As if these were not enough, [Cadiz] was Brent's Human Resource
Officer charged with, among others, implementing the rules of
Brent against immoral conduct, including premarital sexual
relations, or fornication x x x. She should have been the epitome of
proper conduct, but miserably failed. She herself engaged in
premarital sexual relations, which surely scandalized the Brent
community.xx x.31
The NLRC, for its part, sustained the LA's conclusion.
The Court, however, cannot subscribe to the labor tribunals'
conclusions.
Admittedly, one of the grounds for disciplinary action under
Brent's policies is immorality, which is punishable by dismissal at
first offense.32 Brent's Policy Manual provides:
CATEGORY IV
In accordance with Republic Act No. 1052,33 the following are just
cause for terminating an employment of an employee without a
definite period:
xxxx
2. Serious misconduct or willful disobedience by the employee of
the orders of his employer or representative in connection with his
work, such as, but not limited to the following:
xxxx
b. Commission of immoral conduct or indecency within the
company premises, such as an act of lasciviousness or any act
which is sinful and vulgar in nature.
c. Immora1ity, concubinage, bigamy. 34
Its Employee's Manual of Policies, meanwhile, enumerates "[a]cts
of immorality such as scandalous behaviour, acts of lasciviousness
against any person (patient, visitors, co-workers) within hospital
premises"35 as a ground for discipline and discharge. Brent also
relied on Section 94 of the Manual of Regulations for Private
Schools (MRPS), which lists "disgraceful or immoral conduct" as a
cause for terminating employment. 36
Thus, the question that must be resolved is whether Cadiz's
premarital relations with her boyfriend and the resulting pregnancy
out of wedlock constitute immorality. To resolve this, the Court
makes reference to the recently promulgated case of Cheryll
Santos Leus v. St. Scholastica’s College Westgrove and/or Sr.
Edna Quiambao, OSB.37
Leus involved the same personal circumstances as the case at
bench, albeit the employer was a Catholic and sectarian
educational institution and the petitioner, Cheryll Santos Leus
(Leus ), worked as an assistant to the school's Director of the Lay
Apostolate and Community Outreach Directorate. Leus was
dismissed from employment by the school for having borne a child
out of wedlock. The Court ruled in Leus that the determination of
whether a conduct is disgraceful or immoral involves a two-step
process: first, a consideration of the totality of the circumstances
surrounding the conduct; and second, an assessment of the said
circumstances vis-a-vis the prevailing norms of conduct, i.e., what
the society generally considers moral and respectable.
In this case, the surrounding facts leading to Cadiz's dismissal are
straightforward - she was employed as a human resources officer in
an educational and medical institution of the Episcopal Church of
the Philippines; she and her boyfriend at that time were both
single; they engaged in premarital sexual relations, which resulted
into pregnancy. The labor tribunals characterized these as
constituting disgraceful or immoral conduct. They also sweepingly
concluded that as Human Resource Officer, Cadiz should have
been the epitome of proper conduct and her indiscretion "surely
scandalized the Brent community."38
The foregoing circumstances, however, do not readily equate to
disgraceful and immoral conduct. Brent's Policy Manual and
Employee's Manual of Policies do not define what constitutes
immorality; it simply stated immorality as a ground for disciplinary
action. Instead, Brent erroneously relied on the standard dictionary
definition of fornication as a form of illicit relation and proceeded
to conclude that Cadiz's acts fell under such classification, thus
constituting immorality. 39
Jurisprudence has already set the standard of morality with which
an act should be gauged - it is public and secular, not
religious. 40 Whether a conduct is considered disgraceful or
immoral should be made in accordance with the prevailing norms
of conduct, which, as stated in Leus, refer to those conducts which
are proscribed because they are detrimental to conditions upon
which depend the existence and progress of human society. The
fact that a particular act does not conform to the traditional moral
views of a certain sectarian institution is not sufficient reason to
qualify such act as immoral unless it, likewise, does not conform to
public and secular standards. More importantly, there must
be substantial evidence to establish that premarital sexual
relations and pregnancy out of wedlock is considered disgraceful
or immoral.41
The totality of the circumstances of this case does not justify the
conclusion that Cadiz committed acts of immorality. Similar
to Leus, Cadiz and her boyfriend were both single and had no legal
impediment to marry at the time she committed the alleged
immoral conduct. In fact, they eventually married on April 15,
2008.42 Aside from these, the labor tribunals' respective conclusion
that Cadiz's "indiscretion" "scandalized the Brent community" is
speculative, at most, and there is no proof adduced by Brent to
support such sweeping conclusion. Even Brent admitted that it
came to know of Cadiz's "situation" only when her pregnancy
became manifest.43 Brent also conceded that "[a]t the time [Cadiz]
and Carl R. Cadiz were just carrying on their boyfriend-girlfriend
relationship, there was no knowledge or evidence by [Brent] that
they were engaged also in premarital sex."44 This only goes to
show that Cadiz did not flaunt her premarital relations with her
boyfriend and it was not carried on under scandalous or disgraceful
circumstances. As declared in Leus, "there is no law which
penalizes an unmarried mother by reason of her sexual conduct or
proscribes the consensual sexual activity between two unmarried
persons; that neither does such situation contravene[s] any
fundamental state policy enshrined in the Constitution. "45 The fact
that Brent is a sectarian institution does not automatically subject
Cadiz to its religious standard of morality absent an express
statement in its manual of personnel policy and regulations,
prescribing such religious standard as gauge as these regulations
create the obligation on both the employee and the employer to
abide by the same. 46
Brent, likewise, cannot resort to the MRPS because the Court
already stressed in Leus that "premarital sexual relations between
two consenting adults who have no impediment to marry each
other, and, consequently, conceiving a child out of wedlock,
gauged from a purely public and secular view of morality, does not
amount to a disgraceful or immoral conduct under Section 94(e) of
the 1992 MRPS."47
Marriage as a condition for reinstatement
The doctrine of management prerogative gives an employer the
right to "regulate, according to his own discretion and judgment, all
aspects of employment, including hiring, work assignments,
working methods, the time, place and manner of work, work
supervision, transfer of employees, lay-off of workers, and
discipline, dismissal, and recall of employees." 48 In this case, Brent
imposed on Cadiz the condition that she subsequently contract
marriage with her then boyfriend for her to be reinstated.
According to Brent, this is "in consonance with the policy against
encouraging illicit or common-law relations that would subvert the
sacrament of marriage."49
Statutory law is replete with legislation protecting labor and
promoting equal opportunity in employment. No less than the 1987
Constitution mandates that the "State shall afford full protection to
labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for
all."50 The Labor Code of the Philippines, meanwhile, provides:
Art. 136. Stipulation against marriage. It shall be unlawful for an
employer to require as a condition of employment or continuation
of employment that a woman employee shall not get married, or to
stipulate expressly or tacitly that upon getting married, a woman
employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.
With particular regard to women, Republic Act No. 9710 or
the Magna Carta of Women51 protects women against
discrimination in all matters relating to marriage and family
relations, including the right to choose freely a spouse and to
enter into marriage only with their free and full consent. 52
Weighed against these safeguards, it becomes apparent that Brent's
condition is coercive, oppressive and discriminatory. There is no
rhyme or reason for it.  It forces Cadiz to marry for economic
reasons and deprives her of the freedom to choose her status, which
is a privilege that inheres in her as an intangible and inalienable
right. 53While a marriage or no-marriage qualification may be
justified as a "bona fide occupational qualification," Brent must
prove two factors necessitating its imposition, viz: (1) that the
employment qualification is reasonably related to the essential
operation of the job involved; and (2) that there is a factual basis
for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the
job.54 Brent has not shown the presence of neither of these factors.
Perforce, the Court cannot uphold the validity of said condition.
Given the foregoing, Cadiz, therefore, is entitled to reinstatement
without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date
of actual reinstatement. Where reinstatement is no longer viable as
an option, separation pay should be awarded as an alternative and
as a form of financial assistance. 55 In the computation of
separation pay, the Court stresses that it should not go beyond
the date an employee was deemed to have been actually
separated from employment, or beyond the date when
reinstatement was rendered impossible.56 In this case, the
records do not show whether Cadiz already severed her
employment with Brent or whether she is gainfully employed
elsewhere; thus, the computation of separation pay shall be pegged
based on the findings that she was employed on August 16, 2002,
on her own admission in her complaint that she was dismissed on
November 17, 2006, and that she was earning a salary of P9,108.70
per month,57 which shall then be computed at a rate of one (1)
month salary for every year of service,58 as follows:
Monthly salary P9,108.70
multiplied by number of
x
years
in service (Aug 02 to Nov 06) 4
  P36,434.8
0
The Court also finds that Cadiz is only entitled to limited
backwages. Generally, the computation of backwages is reckoned
from the date of illegal dismissal until actual reinstatement. 59 In
case separation pay is ordered in lieu of reinstatement or
reinstatement is waived by the employee, backwages is computed
from the time of dismissal until the finality of the decision ordering
separation pay. 60 Jurisprudence further clarified that the period for
computing the backwages during the period of appeal should end
on the date that a higher court reversed the labor arbitration ruling
of illegal dismissal. 61 If applied in Cadiz's case, then the
computation of backwages should be from November 17, 2006,
which was the time of her illegal dismissal, until the date of
promulgation of this decision. Nevertheless, the Court has also
recognized that the constitutional policy of providing full
protection to labor is not intended to oppress or destroy
management. 62 The Court notes that at the time of Cadiz's
indefinite suspension from employment, Leus was yet to be
decided by the Court. Moreover, Brent was acting in good faith
and on its honest belief that Cadiz's pregnancy out of wedlock
constituted immorality. Thus, fairness and equity dictate that the
award of backwages shall only be equivalent to one (1) year or
P109,304.40, computed as follows:
Monthly salary P9,108.70
multiplied by one
x
year
or 12 months 12
 
P109,304.40
Finally, with regard to Cadiz's prayer for moral and exemplary
damages, the Court finds the same without merit. A finding of
illegal dismissal, by itself, does not establish bad faith to entitle an
employee to moral damages. 63 Absent clear and convincing
evidence showing that Cadiz's dismissal from Brent's employ had
been carried out in an arbitrary, capricious and malicious manner,
moral and exemplary damages cannot be awarded. The Court
nevertheless grants the award of attorney's fees in the amount of
ten percent (10%) of the total monetary award, Cadiz having been
forced to litigate in order to seek redress of her grievances. 64
WHEREFORE, the petition is GRANTED. The Resolutions
dated July 22, 2008 and February 24, 2009 of the Court of Appeals
in CA-G.R. SP No. 02373-MIN are REVERSED and SET
ASIDE, and a NEW ONE ENTERED finding petitioner Christine
Joy Capin-Cadiz to have been dismissed without just cause.
Respondent Brent Hospital and Colleges, Inc. is
hereby ORDERED TO PAY petitioner Christine Joy Capin-
Cadiz:
(1) One Hundred Nine Thousand Three Hundred Four Pesos and
40/100 (Pl 09,304.40) as backwages;
(2) Thirty-Six Thousand Four Hundred Thirty-Four Pesos and
80/100 (P36,434.80) as separation pay; and
(3) Attorney's fees equivalent to ten percent (10%) of the total
award.
The monetary awards granted shall earn legal interest at the rate of
six percent (6%) per annum from the date of the finality of this
Decision until fully paid.
SO ORDERED.
THIRD DIVISION
G.R. No. 187226, January 28, 2015
CHERYLL SANTOS LEUS, Petitioner, v. ST.
SCHOLASTICA’S COLLEGE WESTGROVE AND/OR SR.
EDNA QUIAMBAO, OSB, Respondents.
DECISION
REYES, J.:
Cheryll Santos Leus (petitioner) was hired by St. Scholastica’s
College Westgrove (SSCW), a Catholic educational institution, as
a non-teaching personnel, engaged in pre-marital sexual relations,
got pregnant out of wedlock, married the father of her child, and
was dismissed by SSCW, in that order. The question that has to be
resolved is whether the petitioner’s conduct constitutes a ground
for her dismissal.
Before this Court is a petition for review on certiorari under Rule
45 of the Rules of Court seeking to annul and set aside the
Decision1 dated September 24, 2008 and Resolution2 dated March
2, 2009 issued by the Court of Appeals (CA) in CA-G.R. SP No.
100188, which affirmed the Resolutions dated February 28,
20073 and May 21, 20074 of the National Labor Relations
Commission (NLRC) in NLRC CA No. 049222-06.
The Facts
SSCW is a catholic and sectarian educational institution in Silang,
Cavite. In May 2001, SSCW hired the petitioner as an Assistant to
SSCW’s Director of the Lay Apostolate and Community Outreach
Directorate.
Sometime in 2003, the petitioner and her boyfriend conceived a
child out of wedlock. When SSCW learned of the petitioner’s
pregnancy, Sr. Edna Quiambao (Sr. Quiambao), SSCW’s
Directress, advised her to file a resignation letter effective June 1,
2003. In response, the petitioner informed Sr. Quiambao that she
would not resign from her employment just because she got
pregnant without the benefit of marriage.5
On May 28, 2003, Sr. Quiambao formally directed the petitioner to
explain in writing why she should not be dismissed for engaging in
pre-marital sexual relations and getting pregnant as a result thereof,
which amounts to serious misconduct and conduct unbecoming of
an employee of a Catholic school.6
7
In a letter  dated May 31, 2003, the petitioner explained that her
pregnancy out of wedlock does not amount to serious misconduct
or conduct unbecoming of an employee. She averred that she is
unaware of any school policy stating that being pregnant out of
wedlock is considered as a serious misconduct and, thus, a ground
for dismissal. Further, the petitioner requested a copy of SSCW’s
policy and guidelines so that she may better respond to the charge
against her.
On June 2, 2003, Sr. Quiambao informed the petitioner that,
pending the promulgation of a “Support Staff Handbook,” SSCW
follows the 1992 Manual of Regulations for Private Schools (1992
MRPS) on the causes for termination of employments; that Section
94(e) of the 1992 MRPS cites “disgraceful or immoral conduct” as
a ground for dismissal in addition to the just causes for termination
of employment provided under Article 282 of the Labor Code. 8
On June 4, 2003, the petitioner, through counsel, sent Sr.
Quiambao a letter,9 which, in part, reads:
To us, pre-marital sex between two consenting adults without legal
impediment to marry each other who later on married each other
does not fall within the contemplation of “disgraceful or immoral
conduct” and “serious misconduct” of the Manual of Regulations
for Private Schools and the Labor Code of the Philippines.
Your argument that what happened to our client would set a bad
example to the students and other employees of your school is
speculative and is more imaginary than real. To dismiss her on that
sole ground constitutes grave abuse of management prerogatives.
Considering her untarnished service for two years, dismissing her
with her present condition would also mean depriving her to be
more secure in terms of financial capacity to sustain maternal
needs.10
In a letter11 dated June 6, 2003, SSCW, through counsel,
maintained that pre-marital sexual relations, even if between two
consenting adults without legal impediment to marry, is considered
a disgraceful and immoral conduct or a serious misconduct, which
are grounds for the termination of employment under the 1992
MRPS and the Labor Code. That SSCW, as a Catholic institution
of learning, has the right to uphold the teaching of the Catholic
Church and expect its employees to abide by the same. They
further asserted that the petitioner’s indiscretion is further
aggravated by the fact that she is the Assistant to the Director of
the Lay Apostolate and Community Outreach Directorate, a
position of responsibility that the students look up to as role model.
The petitioner was again directed to submit a written explanation
on why she should not be dismissed.
On June 9, 2003, the petitioner informed Sr. Quiambao that she
adopts her counsel’s letter dated June 4, 2003 as her written
explanation.12
Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao
informed the petitioner that her employment with SSCW is
terminated on the ground of serious misconduct. She stressed that
pre-marital sexual relations between two consenting adults with no
impediment to marry, even if they subsequently married, amounts
to immoral conduct. She further pointed out that SSCW finds
unacceptable the scandal brought about by the petitioner’s
pregnancy out of wedlock as it ran counter to the moral principles
that SSCW stands for and teaches its students.
Thereupon, the petitioner filed a complaint for illegal dismissal
with the Regional Arbitration Branch of the NLRC in Quezon City
against SSCW and Sr. Quiambao (respondents). In her position
paper,14 the petitioner claimed that SSCW gravely abused its
management prerogative as there was no just cause for her
dismissal. She maintained that her pregnancy out of wedlock
cannot be considered as serious misconduct since the same is a
purely private affair and not connected in any way with her duties
as an employee of SSCW. Further, the petitioner averred that she
and her boyfriend eventually got married even prior to her
dismissal.
For their part, SSCW claimed that there was just cause to terminate
the petitioner’s employment with SSCW and that the same is a
valid exercise of SSCW’s management prerogative. They
maintained that engaging in pre-marital sex, and getting pregnant
as a result thereof, amounts to a disgraceful or immoral conduct,
which is a ground for the dismissal of an employee under the 1992
MRPS.
They pointed out that SSCW is a Catholic educational institution,
which caters exclusively to young girls; that SSCW would lose its
credibility if it would maintain employees who do not live up to the
values and teachings it inculcates to its students. SSCW further
asserted that the petitioner, being an employee of a Catholic
educational institution, should have strived to maintain the honor,
dignity and reputation of SSCW as a Catholic school. 15
The Ruling of the Labor Arbiter
On February 28, 2006, the Labor Arbiter (LA) rendered a
Decision,16 in NLRC Case No. 6-17657-03-C which dismissed the
complaint filed by the petitioner. The LA found that there was a
valid ground for the petitioner’s dismissal; that her pregnancy out
of wedlock is considered as a “disgraceful and immoral conduct.”
The LA pointed out that, as an employee of a Catholic educational
institution, the petitioner is expected to live up to the Catholic
values taught by SSCW to its students. Likewise, the LA opined
that:
Further, a deep analysis of the facts would lead us to disagree with
the complainant that she was dismissed simply because she
violate[d] a Catholic [teaching]. It should not be taken in isolation
but rather it should be analyzed in the light of the surrounding
circumstances as a whole. We must also take into [consideration]
the nature of her work and the nature of her employer-school. For
us, it is not just an ordinary violation. It was committed by the
complainant in an environment where her strict adherence to the
same is called for and where the reputation of the school is at stake.
x x x.17
The LA further held that teachers and school employees, both in
their official and personal conduct, must display exemplary
behavior and act in a manner that is beyond reproach.
The petitioner appealed to the NLRC, insisting that there was no
valid ground for the termination of her employment. She
maintained that her pregnancy out of wedlock cannot be
considered as “serious misconduct” under Article 282 of the Labor
Code since the same was not of such a grave and aggravated
character. She asserted that SSCW did not present any evidence to
establish that her pregnancy out of wedlock indeed eroded the
moral principles that it teaches its students. 18
The Ruling of the NLRC
On February 28, 2007, the NLRC issued a Resolution,19 which
affirmed the LA Decision dated February 28, 2006. The NLRC
pointed out that the termination of the employment of the
personnel of private schools is governed by the 1992 MRPS; that
Section 94(e) thereof cites “disgraceful or immoral conduct” as a
just cause for dismissal, in addition to the grounds for termination
of employment provided for under Article 282 of the Labor Code.
The NLRC held that the petitioner’s pregnancy out of wedlock is a
“disgraceful or immoral conduct” within the contemplation of
Section 94(e) of the 1992 MRPS and, thus, SSCW had a valid
reason to terminate her employment.
The petitioner sought reconsideration20 of the Resolution dated
February 28, 2007 but it was denied by the NLRC in its
Resolution21 dated May 21, 2007.
Unperturbed, the petitioner filed a petition22 for certiorari with the
CA, alleging that the NLRC gravely abused its discretion in ruling
that there was a valid ground for her dismissal. She maintained that
pregnancy out of wedlock cannot be considered as a disgraceful or
immoral conduct; that SSCW failed to prove that its students were
indeed gravely scandalized by her pregnancy out of wedlock. She
likewise asserted that the NLRC erred in applying Section 94(e) of
the 1992 MRPS.
The Ruling of the CA
On September 24, 2008, the CA rendered the herein assailed
Decision,23 which denied the petition for certiorari filed by the
petitioner. The CA held that it is the provisions of the 1992 MRPS
and not the Labor Code which governs the termination of
employment of teaching and non-teaching personnel of private
schools, explaining that:
It is a principle of statutory construction that where there are two
statutes that apply to a particular case, that which was specially
intended for the said case must prevail. Petitioner was employed by
respondent private Catholic institution which undeniably follows
the precepts or norms of conduct set forth by the Catholic Church.
Accordingly, the Manual of Regulations for Private Schools
followed by it must prevail over the Labor Code, a general statute.
The Manual constitutes the private schools’ Implementing Rules
and Regulations of Batas Pambansa Blg. 232 or the Education Act
of 1982. x x x.24
The CA further held that the petitioner’s dismissal was a valid
exercise of SSCW’s management prerogative to discipline and
impose penalties on erring employees pursuant to its policies, rules
and regulations. The CA upheld the NLRC’s conclusion that the
petitioner’s pregnancy out of wedlock is considered as a
“disgraceful and immoral conduct” and, thus, a ground for
dismissal under Section 94(e) of the 1992 MRPS. The CA likewise
opined that the petitioner’s pregnancy out of wedlock is scandalous
per se given the work environment and social milieu that she was
in, viz:
Under Section 94 (e) of the [MRPS], and even under Article 282
(serious misconduct) of the Labor Code, “disgraceful and immoral
conduct” is a basis for termination of employment.x x x x
Petitioner contends that her pre-marital sexual relations with her
boyfriend and her pregnancy prior to marriage was not disgraceful
or immoral conduct sufficient for her dismissal because she was
not a member of the school’s faculty and there is no evidence that
her pregnancy scandalized the school community.
We are not persuaded. Petitioner’s pregnancy prior to marriage is
scandalous in itself given the work environment and social milieu
she was in. Respondent school for young ladies precisely seeks to
prevent its students from situations like this, inculcating in them
strict moral values and standards. Being part of the institution,
petitioner’s private and public life could not be separated. Her
admitted pre-marital sexual relations was a violation of private
respondent’s prescribed standards of conduct that views pre-
marital sex as immoral because sex between a man and a woman
must only take place within the bounds of marriage.
Finally, petitioner’s dismissal is a valid exercise of the employer-
school’s management prerogative to discipline and impose
penalties on erring employees pursuant to its policies, rules and
regulations. x x x.25 (Citations omitted)
The petitioner moved for reconsideration26 but it was denied by the
CA in its Resolution27 dated March 2, 2009.
Hence, the instant petition.
Issues
Essentially, the issues set forth by the petitioner for this Court’s
decision are the following: first, whether the CA committed
reversible error in ruling that it is the 1992 MRPS and not the
Labor Code that governs the termination of employment of
teaching and non-teaching personnel of private schools;
and second, whether the petitioner’s pregnancy out of wedlock
constitutes a valid ground to terminate her employment.
The Ruling of the Court
The Court grants the petition.
First Issue: Applicability of the 1992 MRPS
The petitioner contends that the CA, in ruling that there was a valid
ground to dismiss her, erred in applying Section 94 of the 1992
MRPS. Essentially, she claims that the 1992 MRPS was issued by
the Secretary of Education as the revised implementing rules and
regulations of Batas Pambansa Bilang 232 (BP 232) or the
“Education Act of 1982.” That there is no provision in BP 232,
which provides for the grounds for the termination of employment
of teaching and non-teaching personnel of private schools. Thus,
Section 94 of the 1992 MRPS, which provides for the causes of
terminating an employment, is invalid as it “widened the scope and
coverage” of BP 232.
The Court does not agree.
The Court notes that the argument against the validity of the 1992
MRPS, specifically Section 94 thereof, is raised by the petitioner
for the first time in the instant petition for review. Nowhere in the
proceedings before the LA, the NLRC or the CA did the petitioner
assail the validity of the provisions of the 1992 MRPS.
“It is well established that issues raised for the first time on appeal
and not raised in the proceedings in the lower court are barred by
estoppel. Points of law, theories, issues, and arguments not brought
to the attention of the trial court ought not to be considered by a
reviewing court, as these cannot be raised for the first time on
appeal. To consider the alleged facts and arguments belatedly
raised would amount to trampling on the basic principles of fair
play, justice, and due process.”28
In any case, even if the Court were to disregard the petitioner’s
belated claim of the invalidity of the 1992 MRPS, the Court still
finds the same untenable.
The 1992 MRPS, the regulation in force at the time of the instant
controversy, was issued by the Secretary of Education pursuant to
BP 232. Section 7029 of BP 232 vests the Secretary of Education
with the authority to issue rules and regulations to implement the
provisions of BP 232. Concomitantly, Section 5730 specifically
empowers the Department of Education to promulgate rules and
regulations necessary for the administration, supervision and
regulation of the educational system in accordance with the
declared policy of BP 232.
The qualifications of teaching and non-teaching personnel of
private schools, as well as the causes for the termination of their
employment, are an integral aspect of the educational system of
private schools. Indubitably, ensuring that the teaching and non-
teaching personnel of private schools are not only qualified, but
competent and efficient as well goes hand in hand with the
declared objective of BP 232 – establishing and maintaining
relevant quality education.31 It is thus within the authority of the
Secretary of Education to issue a rule, which provides for the
dismissal of teaching and non-teaching personnel of private
schools based on their incompetence, inefficiency, or some other
disqualification.
Moreover, Section 69 of BP 232 specifically authorizes the
Secretary of Education to “prescribe and impose such
administrative sanction as he may deem reasonable and appropriate
in the implementing rules and regulations” for the “[g]ross
inefficiency of the teaching or non-teaching personnel” of private
schools.32Accordingly, contrary to the petitioner’s claim, the Court
sees no reason to invalidate the provisions of the 1992 MRPS,
specifically Section 94 thereof.
Second Issue: Validity of the Petitioner’s Dismissal
The validity of the petitioner’s dismissal hinges on the
determination of whether pregnancy out of wedlock by an
employee of a catholic educational institution is a cause for the
termination of her employment.
In resolving the foregoing question, the Court will assess the
matter from a strictly neutral and secular point of view – the
relationship between SSCW as employer and the petitioner as an
employee, the causes provided for by law in the termination of
such relationship, and the evidence on record. The ground cited for
the petitioner’s dismissal, i.e., pre-marital sexual relations and,
consequently, pregnancy out of wedlock, will be assessed as to
whether the same constitutes a valid ground for dismissal pursuant
to Section 94(e) of the 1992 MRPS.
The standard of review in a Rule 45 petition from the CA
decision in labor cases.
In a petition for review under Rule 45 of the Rules of Court, such
as the instant petition, where the CA’s disposition in a labor case is
sought to be calibrated, the Court’s review is quite limited. In
ruling for legal correctness, the Court has to view the CA decision
in the same context that the petition for certiorari it ruled upon was
presented to it; the Court has to examine the CA decision from the
prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, not on
the basis of whether the NLRC decision on the merits of the case
was correct.33
The phrase “grave abuse of discretion” is well-defined in the
Court’s jurisprudence. It exists where an act of a court or tribunal
is performed with a capricious or whimsical exercise of judgment
equivalent to lack of jurisdiction.34 The determination of the
presence or absence of grave abuse of discretion does not include
an inquiry into the correctness of the evaluation of evidence, which
was the basis of the labor agency in reaching its conclusion. 35
Nevertheless, while a certiorari proceeding does not strictly
include an inquiry as to the correctness of the evaluation of
evidence (that was the basis of the labor tribunals in determining
their conclusion), the incorrectness of its evidentiary evaluation
should not result in negating the requirement of substantial
evidence. Indeed, when there is a showing that the findings or
conclusions, drawn from the same pieces of evidence, were
arrived at arbitrarily or in disregard of the evidence on record,
they may be reviewed by the courts. In particular, the CA can
grant the petition for certiorari if it finds that the NLRC, in its
assailed decision or resolution, made a factual finding not
supported by substantial evidence. A decision that is not supported
by substantial evidence is definitely a decision tainted with grave
abuse of discretion.36
The labor tribunals’ respective conclusions that the petitioner’s
pregnancy is a “disgraceful or immoral conduct”  were arrived
at arbitrarily.
The CA and the labor tribunals affirmed the validity of the
petitioner’s dismissal pursuant to Section 94(e) of the 1992 MRPS,
which provides that:
Sec. 94. Causes of Terminating Employment – In addition to the
just causes enumerated in the Labor Code, the employment of
school personnel, including faculty, may be terminated for any of
the following causes:
x x x x e. Disgraceful or immoral conduct; x x x x
The labor tribunals concluded that the petitioner’s pregnancy out of
wedlock, per se, is “disgraceful and immoral” considering that she
is employed in a Catholic educational institution. In arriving at
such conclusion, the labor tribunals merely assessed the fact of the
petitioner’s pregnancy vis-à-vis the totality of the circumstances
surrounding the same.
However, the Court finds no substantial evidence to support the
aforementioned conclusion arrived at by the labor tribunals. The
fact of the petitioner’s pregnancy out of wedlock, without more, is
not enough to characterize the petitioner’s conduct as disgraceful
or immoral. There must be substantial evidence to establish that
pre-marital sexual relations and, consequently, pregnancy out of
wedlock, are indeed considered disgraceful or immoral.
The totality of the circumstances surrounding the conduct
alleged to be disgraceful or immoral must be assessed against the
prevailing norms of conduct.
In Chua-Qua v. Clave,37 the Court stressed that to constitute
immorality, the circumstances of each particular case must be
holistically considered and evaluated in light of the prevailing
norms of conduct and applicable laws.38 Otherwise stated, it is not
the totality of the circumstances surrounding the conduct per
se that determines whether the same is disgraceful or immoral, but
the conduct that is generally accepted by society as respectable or
moral. If the conduct does not conform to what society generally
views as respectable or moral, then the conduct is considered as
disgraceful or immoral. Tersely put, substantial evidence must be
presented, which would establish that a particular conduct, viewed
in light of the prevailing norms of conduct, is considered
disgraceful or immoral.
Thus, the determination of whether a conduct is disgraceful or
immoral involves a two-step process: first,a consideration of the
totality of the circumstances surrounding the conduct;
and second, an assessment of the said circumstances vis-à-vis the
prevailing norms of conduct, i.e., what the society generally
considers moral and respectable.
That the petitioner was employed by a Catholic educational
institution per se does not absolutely determine whether her
pregnancy out of wedlock is disgraceful or immoral. There is still a
necessity to determine whether the petitioner’s pregnancy out of
wedlock is considered disgraceful or immoral in accordance with
the prevailing norms of conduct.
Public and secular morality should determine the prevailing
norms of conduct, not religious morality.  
However, determining what the prevailing norms of conduct are
considered disgraceful or immoral is not an easy task. An
individual’s perception of what is moral or respectable is a
confluence of a myriad of influences, such as religion, family,
social status, and a cacophony of others. In this regard, the Court’s
ratiocination in Estrada v. Escritor39 is instructive.
In Estrada, an administrative case against a court interpreter
charged with disgraceful and immoral conduct, the Court stressed
that in determining whether a particular conduct can be considered
as disgraceful and immoral, the distinction between public and
secular morality on the one hand, and religious morality, on the
other, should be kept in mind.40 That the distinction between public
and secular morality and religious morality is important because
the jurisdiction of the Court extends only to public and secular
morality.41 The Court further explained that:
The morality referred to in the law is public and necessarily
secular, not religious x x x. “Religious teachings as expressed in
public debate may influence the civil public order but public moral
disputes may be resolved only on grounds articulable in secular
terms.” Otherwise, if government relies upon religious beliefs in
formulating public policies and morals, the resulting policies
and morals would require conformity to what some might
regard as religious programs or agenda. The non-believers
would therefore be compelled to conform to a standard of conduct
buttressed by a religious belief, i.e., to a “compelled religion,”
anathema to religious freedom. Likewise, if government based its
actions upon religious beliefs, it would tacitly approve or endorse
that belief and thereby also tacitly disapprove contrary religious or
non-religious views that would not support the policy. As a result,
government will not provide full religious freedom for all its
citizens, or even make it appear that those whose beliefs are
disapproved are second-class citizens. Expansive religious freedom
therefore requires that government be neutral in matters of religion;
governmental reliance upon religious justification is inconsistent
with this policy of neutrality.
In other words, government action, including its proscription
of immorality as expressed in criminal law like concubinage,
must have a secular purpose. That is, the government
proscribes this conduct because it is “detrimental (or
dangerous) to those conditions upon which depend the
existence and progress of human society” and not because the
conduct is proscribed by the beliefs of one religion or the
other. Although admittedly, moral judgments based on religion
might have a compelling influence on those engaged in public
deliberations over what actions would be considered a moral
disapprobation punishable by law. After all, they might also be
adherents of a religion and thus have religious opinions and moral
codes with a compelling influence on them; the human mind
endeavors to regulate the temporal and spiritual institutions of
society in a uniform manner, harmonizing earth with
heaven. Succinctly put, a law could be religious or Kantian or
Aquinian or utilitarian in its deepest roots, but it must have an
articulable and discernible secular purpose and justification to
pass scrutiny of the religion clauses. x x x.42 (Citations omitted
and emphases ours)
Accordingly, when the law speaks of immoral or, necessarily,
disgraceful conduct, it pertains to public and secular morality; it
refers to those conducts which are proscribed because they
are detrimental to conditions upon which depend the existence
and progress of human society. Thus, in Anonymous v.
Radam,43 an administrative case involving a court utility worker
likewise charged with disgraceful and immoral conduct, applying
the doctrines laid down in Estrada, the Court held that:
For a particular conduct to constitute “disgraceful and
immoral” behavior under civil service laws, it must be
regulated on account of the concerns of public and secular
morality. It cannot be judged based on personal bias,
specifically those colored by particular mores. Nor should it be
grounded on “cultural” values not convincingly demonstrated
to have been recognized in the realm of public policy expressed
in the Constitution and the laws. At the same time, the
constitutionally guaranteed rights (such as the right to privacy)
should be observed to the extent that they protect behavior that
may be frowned upon by the majority.
Under these tests, two things may be concluded from the fact that
an unmarried woman gives birth out of wedlock:
(1) if the father of the child is himself unmarried, the woman is
not ordinarily administratively liable for disgraceful and
immoral conduct. It may be a not-so-ideal situation and may
cause complications for both mother and child but it does not
give cause for administrative sanction. There is no law which
penalizes an unmarried mother under those circumstances
by reason of her sexual conduct or proscribes the
consensual sexual activity between two unmarried persons.
Neither does the situation contravene any fundamental
state policy as expressed in the Constitution, a document
that accommodates various belief systems irrespective of
dogmatic origins.
(2) if the father of the child born out of wedlock is himself
married to a woman other than the mother, then there is a
cause for administrative sanction against either the father
or the mother. In such a case, the “disgraceful and
immoral conduct” consists of having extramarital relations
with a married person. The sanctity of marriage is
constitutionally recognized and likewise affirmed by our
statutes as a special contract of permanent union. Accordingly,
judicial employees have been sanctioned for their dalliances
with married persons or for their own betrayals of the marital
vow of fidelity.
In this case, it was not disputed that, like respondent, the father of
her child was unmarried. Therefore, respondent cannot be held
liable for disgraceful and immoral conduct simply because she
gave birth to the child Christian Jeon out of wedlock. 44 (Citations
omitted and emphases ours)
Both Estrada and Radam are administrative cases against
employees in the civil service. The Court, however, sees no reason
not to apply the doctrines enunciated in Estrada and Radam in the
instant case. Estrada and Radam also required the Court to
delineate what conducts are considered disgraceful and/or immoral
as would constitute a ground for dismissal. More importantly, as in
the said administrative cases, the instant case involves an
employee’s security of tenure; this case likewise concerns
employment, which is not merely a specie of property right, but
also the means by which the employee and those who depend on
him live.45
It bears stressing that the right of an employee to security of tenure
is protected by the Constitution. Perfunctorily, a regular employee
may not be dismissed unless for cause provided under the Labor
Code and other relevant laws, in this case, the 1992 MRPS. As
stated above, when the law refers to morality, it necessarily
pertains to public and secular morality and not religious morality.
Thus, the proscription against “disgraceful or immoral conduct”
under Section 94(e) of the 1992 MRPS, which is made as a cause
for dismissal, must necessarily refer to public and secular morality.
Accordingly, in order for a conduct to be considered as disgraceful
or immoral, it must be “‘detrimental (or dangerous) to those
conditions upon which depend the existence and progress of
human society’ and not because the conduct is proscribed by the
beliefs of one religion or the other.”
Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a
teacher who had an extra-marital affair with his co-teacher, who is
likewise married, on the ground of disgraceful and immoral
conduct under Section 94(e) of the 1992 MRPS. The Court pointed
out that extra-marital affair is considered as a disgraceful and
immoral conduct is an afront to the sanctity of marriage, which is a
basic institution of society, viz:
We cannot overemphasize that having an extra-marital affair is an
afront to the sanctity of marriage, which is a basic institution of
society. Even our Family Code provides that husband and wife
must live together, observe mutual love, respect and fidelity. This
is rooted in the fact that both our Constitution and our laws cherish
the validity of marriage and unity of the family. Our laws, in
implementing this constitutional edict on marriage and the family
underscore their permanence, inviolability and solidarity. 47
The petitioner’s pregnancy out of wedlock is not a disgraceful or
immoral conduct since she and the father of her child have no
impediment to marry each other.
In stark contrast to Santos, the Court does not find any
circumstance in this case which would lead the Court to conclude
that the petitioner committed a disgraceful or immoral conduct. It
bears stressing that the petitioner and her boyfriend, at the time
they conceived a child, had no legal impediment to marry. Indeed,
even prior to her dismissal, the petitioner married her boyfriend,
the father of her child. As the Court held in Radam, there is no law
which penalizes an unmarried mother by reason of her sexual
conduct or proscribes the consensual sexual activity between two
unmarried persons; that neither does such situation contravene any
fundamental state policy enshrined in the Constitution.
Admittedly, the petitioner is employed in an educational institution
where the teachings and doctrines of the Catholic Church,
including that on pre-marital sexual relations, is strictly upheld and
taught to the students. That her indiscretion, which resulted in her
pregnancy out of wedlock, is anathema to the doctrines of the
Catholic Church. However, viewed against the prevailing norms of
conduct, the petitioner’s conduct cannot be considered as
disgraceful or immoral; such conduct is not denounced by public
and secular morality. It may be an unusual arrangement, but it
certainly is not disgraceful or immoral within the contemplation of
the law.
To stress, pre-marital sexual relations between two consenting
adults who have no impediment to marry each other, and,
consequently, conceiving a child out of wedlock, gauged from a
purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of the 1992
MRPS.
Accordingly, the labor tribunals erred in upholding the validity of
the petitioner’s dismissal. The labor tribunals arbitrarily relied
solely on the circumstances surrounding the petitioner’s pregnancy
and its supposed effect on SSCW and its students without
evaluating whether the petitioner’s conduct is indeed considered
disgraceful or immoral in view of the prevailing norms of conduct.
In this regard, the labor tribunals’ respective haphazard evaluation
of the evidence amounts to grave abuse of discretion, which the
Court will rectify.
The labor tribunals’ finding that the petitioner’s pregnancy out of
wedlock despite the absence of substantial evidence is not only
arbitrary, but a grave abuse of discretion, which should have been
set right by the CA.
There is no substantial evidence to prove that the petitioner’s
pregnancy out of wedlock caused grave scandal to SSCW  and its
students.
SSCW claimed that the petitioner was primarily dismissed because
her pregnancy out of wedlock caused grave scandal to SSCW and
its students. That the scandal brought about by the petitioner’s
indiscretion prompted them to dismiss her. The LA upheld the
respondents’ claim, stating that:
In this particular case, an “objective” and “rational evaluation” of
the facts and circumstances obtaining in this case would lead us to
focus our attention x x x on the impact of the act committed by
the complainant. The act of the complainant x x x eroded the
moral principles being taught and project[ed] by the
respondent [C]atholic school to their young lady
students.48 (Emphasis in the original)
On the other hand, the NLRC opined that:
In the instant case, when the complainant-appellant was already
conceiving a child even before she got married, such is considered
a shameful and scandalous behavior, inimical to public welfare and
policy. It eroded the moral doctrines which the respondent
Catholic school, an exclusive school for girls, is teaching the
young girls. Thus, when the respondent-appellee school
terminated complainant-appellant’s services, it was a valid
exercise of its management prerogative. Whether or not she was
a teacher is of no moment. There is no separate set of rules for non-
teaching personnel. Respondents-appellees uphold the teachings of
the Catholic Church on pre-marital sex and that the complainant-
appellant as an employee of the school was expected to abide by
this basic principle and to live up with the standards of their purely
Catholic values. Her subsequent marriage did not take away the
fact that she had engaged in pre-marital sex which the respondent-
appellee school denounces as the same is opposed to the teachings
and doctrines it espouses.49 (Emphasis ours)
Contrary to the labor tribunals’ declarations, the Court finds that
SSCW failed to adduce substantial evidence to prove that the
petitioner’s indiscretion indeed caused grave scandal to SSCW and
its students. Other than the SSCW’s bare allegation, the records are
bereft of any evidence that would convincingly prove that the
petitioner’s conduct indeed adversely affected SSCW’s integrity in
teaching the moral doctrines, which it stands for. The petitioner is
only a non-teaching personnel; her interaction with SSCW’s
students is very limited. It is thus quite impossible that her
pregnancy out of wedlock caused such a grave scandal, as claimed
by SSCW, as to warrant her dismissal.
Settled is the rule that in termination cases, the burden of proving
that the dismissal of the employees was for a valid and authorized
cause rests on the employer. It is incumbent upon the employer to
show by substantial evidence that the termination of the
employment of the employees was validly made and failure to
discharge that duty would mean that the dismissal is not justified
and therefore illegal.50“Substantial evidence is more than a mere
scintilla of evidence. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion,
even if other minds equally reasonable might conceivably opine
otherwise.”51
Indubitably, bare allegations do not amount to substantial evidence.
Considering that the respondents failed to adduce substantial
evidence to prove their asserted cause for the petitioner’s dismissal,
the labor tribunals should not have upheld their allegations hook,
line and sinker. The labor tribunals’ respective findings, which
were arrived at sans any substantial evidence, amounts to a grave
abuse of discretion, which the CA should have rectified. “Security
of tenure is a right which may not be denied on mere speculation of
any unclear and nebulous basis.”52
The petitioner’s dismissal is not a valid exercise of SSCW’s
management prerogative.
The CA belabored the management prerogative of SSCW to
discipline its employees. The CA opined that the petitioner’s
dismissal is a valid exercise of management prerogative to impose
penalties on erring employees pursuant to its policies, rules and
regulations.
The Court does not agree.
The Court has held that “management is free to regulate, according
to its own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, time, place
and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall
of workers. The exercise of management prerogative, however, is
not absolute as it must be exercised in good faith and with due
regard to the rights of labor.” Management cannot exercise its
prerogative in a cruel, repressive, or despotic manner. 53
SSCW, as employer, undeniably has the right to discipline its
employees and, if need be, dismiss them if there is a valid cause to
do so. However, as already explained, there is no cause to dismiss
the petitioner. Her conduct is not considered by law as disgraceful
or immoral. Further, the respondents themselves have admitted that
SSCW, at the time of the controversy, does not have any policy or
rule against an employee who engages in pre-marital sexual
relations and conceives a child as a result thereof. There being no
valid basis in law or even in SSCW’s policy and rules, SSCW’s
dismissal of the petitioner is despotic and arbitrary and, thus, not a
valid exercise of management prerogative.
In sum, the Court finds that the petitioner was illegally dismissed
as there was no just cause for the termination of her employment.
SSCW failed to adduce substantial evidence to establish that the
petitioner’s conduct, i.e., engaging in pre-marital sexual relations
and conceiving a child out of wedlock, assessed in light of the
prevailing norms of conduct, is considered disgraceful or immoral.
The labor tribunals gravely abused their discretion in upholding the
validity of the petitioner’s dismissal as the charge against the
petitioner lay not on substantial evidence, but on the bare
allegations of SSCW. In turn, the CA committed reversible error in
upholding the validity of the petitioner’s dismissal, failing to
recognize that the labor tribunals gravely abused their discretion in
ruling for the respondents.
The petitioner is entitled to separation pay, in lieu of
actual reinstatement, full backwages and attorney’s fees, but not
to moral and exemplary damages.
Having established that the petitioner was illegally dismissed, the
Court now determines the reliefs that she is entitled to and their
extent. Under the law and prevailing jurisprudence, “an illegally
dismissed employee is entitled to reinstatement as a matter of
right.”54 Aside from the instances provided under Articles
28355 and 28456 of the Labor Code, separation pay is, however,
granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases
of illegal dismissal, the accepted doctrine is that separation pay is
available in lieu of reinstatement when the latter recourse is no
longer practical or in the best interest of the parties. 57
In Divine Word High School v. NLRC,58 the Court ordered the
employer Catholic school to pay the illegally dismissed high
school teacher separation pay in lieu of actual reinstatement since
her continued presence as a teacher in the school “may well be met
with antipathy and antagonism by some sectors in the school
community.”59
In view of the particular circumstances of this case, it would be
more prudent to direct SSCW to pay the petitioner separation pay
in lieu of actual reinstatement. The continued employment of the
petitioner with SSCW would only serve to intensify the
atmosphere of antipathy and antagonism between the parties.
Consequently, the Court awards separation pay to the petitioner
equivalent to one (1) month pay for every year of service, with a
fraction of at least six (6) months considered as one (1) whole year,
from the time of her illegal dismissal up to the finality of this
judgment, as an alternative to reinstatement.
Also, “employees who are illegally dismissed are entitled to full
backwages, inclusive of allowances and other benefits or their
monetary equivalent, computed from the time their actual
compensation was withheld from them up to the time of their
actual reinstatement but if reinstatement is no longer possible, the
backwages shall be computed from the time of their illegal
termination up to the finality of the decision.”60 Accordingly, the
petitioner is entitled to an award of full backwages from the time
she was illegally dismissed up to the finality of this decision.
Nevertheless, the petitioner is not entitled to moral and exemplary
damages. “A dismissed employee is entitled to moral damages
when the dismissal is attended by bad faith or fraud or constitutes
an act oppressive to labor, or is done in a manner contrary to good
morals, good customs or public policy. Exemplary damages may
be awarded if the dismissal is effected in a wanton, oppressive or
malevolent manner.”61
“Bad faith, under the law, does not simply connote bad judgment
or negligence. It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong, or a breach of a known
duty through some motive or interest or ill will that partakes of the
nature of fraud.”62
“It must be noted that the burden of proving bad faith rests on the
one alleging it”63 since basic is the principle that good faith is
presumed and he who alleges bad faith has the duty to prove the
same.64“Allegations of bad faith and fraud must be proved by clear
and convincing evidence.”65
The records of this case are bereft of any clear and convincing
evidence showing that the respondents acted in bad faith or in a
wanton or fraudulent manner in dismissing the petitioner. That the
petitioner was illegally dismissed is insufficient to prove bad faith.
A dismissal may be contrary to law but by itself alone, it does not
establish bad faith to entitle the dismissed employee to moral
damages. The award of moral and exemplary damages cannot be
justified solely upon the premise that the employer dismissed his
employee without cause.66
However, the petitioner is entitled to attorney’s fees in the amount
of 10% of the total monetary award pursuant to Article 11167 of the
Labor Code. “It is settled that where an employee was forced to
litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney’s fees is legally and morally justifiable.” 68
Finally, legal interest shall be imposed on the monetary awards
herein granted at the rate of six percent (6%) per annum from the
finality of this judgment until fully paid.69
WHEREFORE, in consideration of the foregoing disquisitions,
the petition is GRANTED. The Decision dated September 24,
2008 and Resolution dated March 2, 2009 of the Court of Appeals
in CA-G.R. SP No. 100188 are hereby REVERSED and SET
ASIDE.
The respondent, St. Scholastica’s College Westgrove, is hereby
declared guilty of illegal dismissal and is hereby ORDERED to
pay the petitioner, Cheryll Santos Leus, the following: (a)
separation pay in lieu of actual reinstatement equivalent to one (1)
month pay for every year of service, with a fraction of at least six
(6) months considered as one (1) whole year from the time of her
dismissal up to the finality of this Decision; (b) full backwages
from the time of her illegal dismissal up to the finality of this
Decision; and (c) attorney’s fees equivalent to ten percent (10%) of
the total monetary award. The monetary awards herein granted
shall earn legal interest at the rate of six percent (6%) per
annum from the date of the finality of this Decision until fully paid.
The case is REMANDED to the Labor Arbiter for the computation
of petitioner’s monetary awards.
SO ORDERED.
SECOND DIVISION
G.R. No. 164774             April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO &
SEBASTIAN CHUA, Petitioners, 
vs. RONALDO D. SIMBOL, WILFREDA N. COMIA &
LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the
policy of the employer banning spouses from working in the same
company violates the rights of the employee under the Constitution
and the Labor Code or is a valid exercise of management
prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the
Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477
reversing the decision of the National Labor Relations Commission
(NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation
engaged in trading – principally of paper products. Josephine
Ongsitco is its Manager of the Personnel and Administration
Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D.
Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E.
Estrella (Estrella) were all regular employees of the company. 1
Simbol was employed by the company on October 27, 1993. He
met Alma Dayrit, also an employee of the company, whom he
married on June 27, 1998. Prior to the marriage, Ongsitco advised
the couple that should they decide to get married, one of them
should resign pursuant to a company policy promulgated in
1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she
has [a] relative, up to [the] 3rd degree of relationship, already
employed by the company.
2. In case of two of our employees (both singles [sic], one male
and another female) developed a friendly relationship during the
course of their employment and then decided to get married, one of
them should resign to preserve the policy stated above. 3
Simbol resigned on June 20, 1998 pursuant to the company policy. 4
Comia was hired by the company on February 5, 1997. She met
Howard Comia, a co-employee, whom she married on June 1,
2000. Ongsitco likewise reminded them that pursuant to company
policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuñiga
(Zuñiga), also a co-worker. Petitioners stated that Zuñiga, a
married man, got Estrella pregnant. The company allegedly could
have terminated her services due to immorality but she opted to
resign on December 21, 1999.6
The respondents each signed a Release and Confirmation
Agreement. They stated therein that they have no money and
property accountabilities in the company and that they release the
latter of any claim or demand of whatever nature. 7
Respondents offer a different version of their dismissal. Simbol
and Comia allege that they did not resign voluntarily; they were
compelled to resign in view of an illegal company policy. As to
respondent Estrella, she alleges that she had a relationship with co-
worker Zuñiga who misrepresented himself as a married but
separated man. After he got her pregnant, she discovered that he
was not separated. Thus, she severed her relationship with him to
avoid dismissal due to the company policy. On November 30,
1999, she met an accident and was advised by the doctor at the
Orthopedic Hospital to recuperate for twenty-one (21) days. She
returned to work on December 21, 1999 but she found out that her
name was on-hold at the gate. She was denied entry. She was
directed to proceed to the personnel office where one of the staff
handed her a memorandum. The memorandum stated that she was
being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days
and has not been given a chance to explain. The management asked
her to write an explanation. However, after submission of the
explanation, she was nonetheless dismissed by the company. Due
to her urgent need for money, she later submitted a letter of
resignation in exchange for her thirteenth month pay. 8
Respondents later filed a complaint for unfair labor practice,
constructive dismissal, separation pay and attorney’s fees. They
averred that the aforementioned company policy is illegal and
contravenes Article 136 of the Labor Code. They also contended
that they were dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario
dismissed the complaint for lack of merit, viz.:
[T]his company policy was decreed pursuant to what the
respondent corporation perceived as management prerogative. This
management prerogative is quite broad and encompassing for it
covers hiring, work assignment, working method, 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 workers. Except as provided for or limited
by special law, an employer is free to regulate, according to his
own discretion and judgment all the aspects of
employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of
the Labor Arbiter on January 11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by
the NLRC in a Resolution11 dated August 8, 2002. They appealed
to respondent court via Petition for Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals
reversed the NLRC decision, viz.:
WHEREFORE, premises considered, the May 31, 2002
(sic)12 Decision of the National Labor Relations Commission is
hereby REVERSED and SET ASIDE and a new one is entered as
follows:
(1) Declaring illegal, the petitioners’ dismissal from employment
and ordering private respondents to reinstate petitioners to their
former positions without loss of seniority rights with full
backwages from the time of their dismissal until actual
reinstatement; and
(2) Ordering private respondents to pay petitioners attorney’s fees
amounting to 10% of the award and the cost of this suit. 13
On appeal to this Court, petitioners contend that the Court of
Appeals erred in holding that:
1. x x x the subject 1995 policy/regulation is violative of the
constitutional rights towards marriage and the family of employees
and of Article 136 of the Labor Code; and
2. x x x respondents’ resignations were far from voluntary. 14
We affirm.
The 1987 Constitution15 states our policy towards the protection of
labor under the following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social
economic force. It shall protect the rights of workers and promote
their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor,
local and overseas, organized and unorganized, and promote full
employment and equality of 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.
The State shall promote the principle of shared responsibility
between workers and employers, recognizing the right of labor to
its just share in the fruits of production and the right of enterprises
to reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following
provisions:
Art. 1700. The relation between capital and labor are not merely
contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
Art. 1702. 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.
The Labor Code is the most comprehensive piece of legislation
protecting labor. The case at bar involves Article 136 of the Labor
Code which provides:
Art. 136. It shall be unlawful for an employer to require as a
condition of employment or continuation of employment that a
woman employee shall not get married, or to stipulate expressly or
tacitly that upon getting married a woman employee shall be
deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by
reason of her marriage.
Respondents submit that their dismissal violates the above
provision. Petitioners allege that its policy "may appear to be
contrary to Article 136 of the Labor Code" but it assumes a new
meaning if read together with the first paragraph of the rule. The
rule does not require the woman employee to resign. The employee
spouses have the right to choose who between them should resign.
Further, they are free to marry persons other than co-employees.
Hence, it is not the marital status of the employee, per se, that is
being discriminated. It is only intended to carry out its no-
employment-for-relatives-within-the-third-degree-policy which is
within the ambit of the prerogatives of management. 16
It is true that the policy of petitioners prohibiting close relatives
from working in the same company takes the nature of an anti-
nepotism employment policy. Companies adopt these policies to
prevent the hiring of unqualified persons based on their status as a
relative, rather than upon their ability.17 These policies focus upon
the potential employment problems arising from the perception of
favoritism exhibited towards relatives.
With more women entering the workforce, employers are also
enacting employment policies specifically prohibiting spouses
from working for the same company. We note that two types of
employment policies involve spouses: policies banning only
spouses from working in the same company (no-spouse
employment policies), and those banning all immediate family
members, including spouses, from working in the same
company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on
marital discrimination,19 there are twenty state statutes20 in the
United States prohibiting marital discrimination. Some state
courts21 have been confronted with the issue of whether no-spouse
policies violate their laws prohibiting both marital status and sex
discrimination.
In challenging the anti-nepotism employment policies in the United
States, complainants utilize two theories of employment
discrimination: the disparate treatment and the disparate
impact. Under the disparate treatment analysis, the plaintiff
must prove that an employment policy is discriminatory on its face.
No-spouse employment policies requiring an employee of
a particular sex to either quit, transfer, or be fired are facially
discriminatory. For example, an employment policy prohibiting the
employer from hiring wives of male employees, but not husbands
of female employees, is discriminatory on its face. 22
On the other hand, to establish disparate impact, the complainants
must prove that a facially neutral policy has a disproportionate
effect on a particular class. For example, although most
employment policies do not expressly indicate which spouse will
be required to transfer or leave the company, the policy often
disproportionately affects one sex.23
The state courts’ rulings on the issue depend on their interpretation
of the scope of marital status discrimination within the meaning of
their respective civil rights acts. Though they agree that the term
"marital status" encompasses discrimination based on a person's
status as either married, single, divorced, or widowed, they are
divided on whether the term has a broader meaning. Thus, their
decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a
person's status as married, single, divorced, or widowed reason that
if the legislature intended a broader definition it would have either
chosen different language or specified its intent. They hold that the
relevant inquiry is if one is married rather than to whom one is
married. They construe marital status discrimination to include
only whether a person is single, married, divorced, or widowed and
not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and
ruled that they did not violate the marital status discrimination
provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status"
rule that it encompassed the identity, occupation and employment
of one's spouse. They strike down the no-spouse employment
policies based on the broad legislative intent of the state statute.
They reason that the no-spouse employment policy violate the
marital status provision because it arbitrarily discriminates against
all spouses of present employees without regard to the actual effect
on the individual's qualifications or work performance. 27 These
courts also find the no-spouse employment policy invalid for
failure of the employer to present any evidence of business
necessity other than the general perception that spouses in the
same workplace might adversely affect the business. 28 They hold
that the absence of such a bona fide occupational
qualification29 invalidates a rule denying employment to one
spouse due to the current employment of the other spouse in the
same office.30 Thus, they rule that unless the employer can prove
that the reasonable demands of the business require a distinction
based on marital status and there is no better available or
acceptable policy which would better accomplish the business
purpose, an employer may not discriminate against an employee
based on the identity of the employee’s spouse.31 This is known as
the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational
qualification justifies an employer’s no-spouse rule, the exception
is interpreted strictly and narrowly by these state courts. There
must be a compelling business necessity for which no alternative
exists other than the discriminatory practice. 32 To justify a bona
fide occupational qualification, the employer must prove two
factors: (1) that the employment qualification is reasonably related
to the essential operation of the job involved; and, (2) that there is a
factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the
duties of the job.33
The concept of a bona fide occupational qualification is not foreign
in our jurisdiction. We employ the standard of reasonableness of
the company policy which is parallel to the bona fide occupational
qualification requirement. In the recent case of Duncan
Association of Detailman-PTGWO and Pedro Tecson v. Glaxo
Wellcome Philippines, Inc.,34 we passed on the validity of the
policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company. We held
that Glaxo has a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other confidential programs and
information from competitors. We considered the prohibition
against personal or marital relationships with employees of
competitor companies upon Glaxo’s employees reasonable under
the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed
company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain
access to its secrets and procedures.35
The requirement that a company policy must be reasonable under
the circumstances to qualify as a valid exercise of management
prerogative was also at issue in the 1997 case of Philippine
Telegraph and Telephone Company v. NLRC.36 In said case, the
employee was dismissed in violation of petitioner’s policy of
disqualifying from work any woman worker who contracts
marriage. We held that the company policy violates the right
against discrimination afforded all women workers under Article
136 of the Labor Code, but established a permissible
exception, viz.:
[A] requirement that a woman employee must remain unmarried
could be justified as a "bona fide occupational qualification," or
BFOQ, where the particular requirements of the job would justify
the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of
that nature would be valid provided it reflects an inherent
quality reasonably necessary for satisfactory job
performance.37(Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement
of reasonableness must be clearly established to uphold the
questioned employment policy. The employer has the burden to
prove the existence of a reasonable business necessity. The burden
was successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to
have two (2) or more of its employees related between the third
degree by affinity and/or consanguinity"38 is lame. That the second
paragraph was meant to give teeth to the first paragraph of the
questioned rule39 is evidently not the valid reasonable business
necessity required by the law.
It is significant to note that in the case at bar, respondents were
hired after they were found fit for the job, but were asked to resign
when they married a co-employee. Petitioners failed to show how
the marriage of Simbol, then a Sheeting Machine Operator, to
Alma Dayrit, then an employee of the Repacking Section, could be
detrimental to its business operations. Neither did petitioners
explain how this detriment will happen in the case of Wilfreda
Comia, then a Production Helper in the Selecting Department, who
married Howard Comia, then a helper in the cutter-machine. The
policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule
without valid justification, the employer can create policies based
on an unproven presumption of a perceived danger at the expense
of an employee’s right to security of tenure.
Petitioners contend that their policy will apply only when one
employee marries a co-employee, but they are free to marry
persons other than co-employees. The questioned policy may not
facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory, the
only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate,
effect. The failure of petitioners to prove a legitimate business
concern in imposing the questioned policy cannot prejudice the
employee’s right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one
company.40
Lastly, the absence of a statute expressly prohibiting marital
discrimination in our jurisdiction cannot benefit the petitioners.
The protection given to labor in our jurisdiction is vast and
extensive that we cannot prudently draw inferences from the
legislature’s silence41 that married persons are not protected under
our Constitution and declare valid a policy based on a prejudice or
stereotype. Thus, for failure of petitioners to present undisputed
proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management
prerogative. Corollarily, the issue as to whether respondents
Simbol and Comia resigned voluntarily has become moot and
academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based
their ruling on the singular fact that her resignation letter was
written in her own handwriting. Both ruled that her resignation was
voluntary and thus valid. The respondent court failed to
categorically rule whether Estrella voluntarily resigned but ordered
that she be reinstated along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter
because she was in dire need of money. We examined the records
of the case and find Estrella’s contention to be more in accord with
the evidence. While findings of fact by administrative tribunals like
the NLRC are generally given not only respect but, at times,
finality, this rule admits of exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999
but was dismissed due to her alleged immoral conduct. At first, she
did not want to sign the termination papers but she was forced to
tender her resignation letter in exchange for her thirteenth month
pay.
The contention of petitioners that Estrella was pressured to resign
because she got impregnated by a married man and she could not
stand being looked upon or talked about as immoral43 is
incredulous. If she really wanted to avoid embarrassment and
humiliation, she would not have gone back to work at all. Nor
would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself
from employment. It is done with the intention of relinquishing an
office, accompanied by the act of abandonment. 44 Thus, it is
illogical for Estrella to resign and then file a complaint for illegal
dismissal. Given the lack of sufficient evidence on the part of
petitioners that the resignation was voluntary, Estrella’s dismissal
is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in
CA-G.R. SP No. 73477 dated August 3, 2004
is AFFIRMED.1avvphil.net
SO ORDERED.
FIRST DIVISION
G.R. No. 163269             April 19, 2006
ROLANDO C. RIVERA, Petitioner,  required to sign an undated Undertaking as a supplement to the
vs.SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the
Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 52235
as well as its Resolution2 denying the Motion for Partial
Reconsideration of petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July
1, 1977.3 He was initially employed as an Audit Clerk, then as
Credit Investigator, Senior Clerk, Assistant Accountant, and
Assistant Manager. Prior to his retirement, he became the Manager
of the Credit Investigation and Appraisal Division of the
Consumer’s Banking Group. In the meantime, Rivera and his
brother-in-law put up a poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to
its employees: (a) the Ordinary Retirement Program (ORP), under
which an employee would receive 85% of his monthly basic salary
multiplied by the number of years in service; and (b) the Special
Retirement Program (SRP), under which a retiring employee
would receive 250% of the gross monthly salary multiplied by the
number of years in service.4 Since Rivera was only 45 years old, he
was not qualified for retirement under the ORP. Under the SRP, he
was entitled to receive P1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in
Cavite, Rivera applied for retirement under the SRP. Solidbank
approved the application and Rivera was entitled to receive the net
amount of P963,619.28. This amount included his performance
incentive award (PIA), and his unearned medical, dental and
optical allowances in the amount of P1,666.67, minus his total
accountabilities to Solidbank amounting to P106,973.00.6 Rivera
received the amount and confirmed his separation from Solidbank
on February 25, 1995.7
Subsequently, Solidbank required Rivera to sign an undated
Release, Waiver and Quitclaim, which was notarized on March 1,
1995.8 Rivera acknowledged receipt of the net proceeds of his
separation and retirement benefits and promised that "[he] would
not, at any time, in any manner whatsoever, directly or indirectly
engage in any unlawful activity prejudicial to the interest of
Solidbank, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information
concerning the business of Solidbank, its manner or operation, its
plans, processes, or data of any kind."9
Aside from acknowledging that he had no cause of action against
Solidbank or its affiliate companies, Rivera agreed that the bank
may bring any action to seek an award for damages resulting from
his breach of the Release, Waiver and Quitclaim, and that such
award would include the return of whatever sums paid to him by
virtue of his retirement under the SRP.10 Rivera was likewise
Release, Waiver and Quitclaim in favor of Solidbank in which he
declared that he received in full his entitlement under the law
(salaries, benefits, bonuses and other emoluments), including his
separation pay in accordance with the SRP. In this Undertaking, he
promised that "[he] will not seek employment with a competitor
bank or financial institution within one (1) year from February 28,
1995, and that any breach of the Undertaking or the provisions of
the Release, Waiver and Quitclaim would entitle Solidbank to a
cause of action against him before the appropriate courts of
law.11 Unlike the Release, Waiver and Quitclaim, the Undertaking
was not notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable)
employed Rivera as Manager of its Credit Investigation and
Appraisal Division of its Consumers’ Banking Group.12 Upon
discovering this, Solidbank First Vice-President for Human
Resources Division (HRD) Celia J.L. Villarosa wrote a letter dated
May 18, 1995, informing Rivera that he had violated the
Undertaking. She likewise demanded the return of all the monetary
benefits he received in consideration of the SRP within five (5)
days from receipt; otherwise, appropriate legal action would be
taken against him.13
When Rivera refused to return the amount demanded within the
given period, Solidbank filed a complaint for Sum of Money with
Prayer for Writ of Preliminary Attachment14 before the Regional
Trial Court (RTC) of Manila on June 26, 1995. Solidbank, as
plaintiff, alleged therein that in accepting employment with a
competitor bank for the same position he held in Solidbank before
his retirement, Rivera violated his Undertaking under the SRP.
Considering that Rivera accepted employment with Equitable
barely three months after executing the Undertaking, it was clear
that he had no intention of honoring his commitment under said
deed.
Solidbank prayed that Rivera be ordered to return the net amount
of P963,619.28 plus interests therein, and attorney’s fees, thus:
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a
bond in such amount as this Honorable Court may fix, a writ of
preliminary attachment be forthwith issued against the properties
of the defendant as satisfaction of any judgment that plaintiff may
secure;
2. After trial, judgment be rendered ordering defendant to pay
plaintiff the following sums: NINE HUNDRED SIXTY-THREE
THOUSAND SIX HUNDRED NINETEEN AND 28/100 ONLY
(P963,619.28) PESOS, Philippine Currency, as of 23 May 1995,
plus legal interest of 12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00
for every appearance by way of attorney’s fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the
premises.15
Solidbank appended the Affidavit of HRD First Vice-President
Celia Villarosa and a copy of the Release, Waiver and Quitclaim
and Undertaking which Rivera executed.16
In an Order dated July 6, 1995, the trial court issued a Writ of
Preliminary Attachment17 ordering Deputy Sheriff Eduardo
Centeno to attach all of Rivera’s properties not exempt from
execution. Thus, the Sheriff levied on a parcel of land owned by
Rivera.
In his Answer with Affirmative Defenses and Counterclaim,
Rivera admitted that he received the net amount of P963,619.28 as
separation pay. However, the employment ban provision in the
Undertaking was never conveyed to him until he was made to sign
it on February 28, 1995. He emphasized that, prior to said date,
Solidbank never disclosed any condition to the retirement scheme,
nor did it impose such employment ban on the bank officers and
employees who had previously availed of the SRP. He alleged that
the undertaking not to "seek employment with any competitor bank
or financial institution within one (1) year from February 28, 1995"
was void for being contrary to the Constitution, the law and public
policy, that it was unreasonable, arbitrary, oppressive,
discriminatory, cruel, unjust, inhuman, and violative of his human
rights. He further claimed that the Undertaking was a contract of
adhesion because it was prepared solely by Solidbank without his
participation; considering his moral and economic disadvantage, it
must be liberally construed in his favor and strictly against the
bank.
On August 15, 1995, Solidbank filed a Verified Motion for
Summary Judgment, alleging therein that Rivera raised no genuine
issue as to any material fact in his Answer except as to the amount
of damages. It prayed that the RTC render summary judgment
against Rivera. Solidbank alleged that whether or not the
employment ban provision contained in the Undertaking is
unreasonable, arbitrary, or oppressive is a question of law. It
insisted that Rivera signed the Undertaking voluntarily and for
valuable consideration; and under the Release, Waiver and
Quitclaim, he was obliged to return the P963,619.28 upon
accepting employment from a competitor bank within the one-year
proscribed period. Solidbank appended to its motion the Affidavit
of Villarosa, where she declared that Rivera was employed by
Equitable on May 1, 1995 for the same position he held before his
retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the
pleadings of the parties as well as Villarosa’s Affidavit, there are
genuine issues as to material facts which call for the presentation
of evidence. He averred that there was a need for the parties to
adduce evidence to prove that he did not sign the Undertaking
voluntarily. He claimed that he would not have been allowed to
avail of the SRP if he had not signed it, and consequently, his
retirement benefits would not have been paid. This was what Ed
Nallas, Solidbank Assistant Vice-President for HRD and
Personnel, told him when he received his check on February 28,
1995. Senior Vice-President Henry Valdez, his superior in the
Consumers’ Banking Group, also did not mention that he would
have to sign such Undertaking which contained the assailed
provision. Thus, he had no choice but to sign it. He insisted that the
question of whether he violated the Undertaking is a genuine issue
of fact which called for the presentation of evidence during the
hearing on the merits of the case. He also asserted that he could not
cause injury or prejudice to Solidbank’s interest since he never
acquired any sensitive or delicate information which could
prejudice the bank’s interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove
that he had been faithful to the provisions of the Release, Waiver
and Quitclaim, and the Undertaking, and had not committed any
act or done or said anything to cause injury to Solidbank. 18
Rivera appended to his Opposition his Counter-Affidavit in which
he reiterated that he had to sign the Undertaking containing the
employment ban provision, otherwise his availment of the SRP
would not push through. There was no truth to the bank’s
allegation that, "in exchange for receiving the larger amount
of P1,045,258.95 under the SRP, instead of the very much smaller
amount of P224,875.81 under the ORP, he agreed that he will not
seek employment in a competitor bank or financial institution
within one year from February 28, 1995." It was the bank which
conceived the SRP to streamline its organization and all he did was
accept it. He stressed that the decision whether to allow him to
avail of the SRP belonged solely to Solidbank. He also pointed out
that the employment ban provision in the Undertaking was not a
consideration for his availment of the SRP, and that if he did not
avail of the retirement program, he would have continued working
for Solidbank for at least 15 more years, earning more than what he
received under the SRP. He alleged that he intended to go full time
into the poultry business, but after about two months, found out
that, contrary to his expectations, the business did not provide
income sufficient to support his family. Being the breadwinner, he
was then forced to look for a job, and considering his training and
experience as a former bank employee, the job with Equitable was
all he could find. He insisted that he had remained faithful to
Solidbank and would continue to do so despite the case against
him, the attachment of his family home, and the resulting mental
anguish, torture and expense it has caused them. 19
In his Supplemental Opposition, Rivera stressed that, being a
former bank employee, it was the only kind of work he knew. The
ban was, in fact, practically absolute since it applied to all financial
institutions for one year from February 28, 1995. He pointed out
that he could not work in any other company because he did not
have the qualifications, especially considering his age. Moreover,
after one year from February 28, 1995, he would no longer have
any marketable skill, because by then, it would have been rendered
obsolete by non-use and rapid technological advances. He insisted
that the ban was not necessary to protect the interest of Solidbank,
as, in the first place, he had no access to any "secret" information
which, if revealed would be prejudicial to Solidbank’s interest. In
any case, he was not one to reveal whatever knowledge or
information he may have acquired during his employment with
said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the
Undertaking from the 1995 SRP is purely a management
prerogative. It was not for Rivera to question and decry the bank’s
policy to protect itself from unfair competition and disclosure of its
trade secrets. The substantial monetary windfall given the retiring
officers was meant to tide them over the one-year period of hiatus,
and did not prevent them from engaging in any kind of business or
bar them from being employed except with competitor
banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary
Judgment.22 The fallo of the decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in
favor of plaintiff and against defendant ordering the latter to pay to
plaintiff bank the amount of NINE HUNDRED SIXTY-THREE
THOUSAND SIX HUNDRED NINETEEN AND 28/100
(P963,619.28) PESOS, Philippine Currency, as of May 23, 1995,
plus legal interest at 12% per annum until fully paid, and the costs
of the suit.
FURTHER, NEVERTHELESS, both parties are hereby
encouraged as they are directed to meet again and sit down to find
out how they can finally end this rift and litigation, all in the name
of equity, for after all, defendant had worked for the bank for some
18 years.23
The trial court declared that there was no genuine issue as to a
matter of fact in the case since Rivera voluntarily executed the
Release, Waiver and Quitclaim, and the Undertaking. He had a
choice not to retire, but opted to do so under the SRP, and, in fact,
received the benefits under it.
According to the RTC, the prohibition incorporated in the
Undertaking was not unreasonable. To allow Rivera to be excused
from his undertakings in said deed and, at the same time, benefit
therefrom would be to allow him to enrich himself at the expense
of Solidbank. The RTC ruled that Rivera had to return
the P963,619.28 he received from Solidbank, plus interest of 12%
per annum from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered
judgment on June 14, 2002 partially granting the appeal. The fallo
of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The
decision appealed from is AFFIRMED with the modification that
the attachment and levy upon the family home covered by TCT
No. 51621 of the Register of Deeds, Las Piñas, Metro Manila, is
hereby SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any
material fact except as to the amount of damages. It ratiocinated
that the agreement between Rivera and Solidbank was the law
between them, and that the interpretation of the stipulations therein
could not be left upon the whims of Rivera. According to the CA,
Rivera never denied signing the Release, Waiver, and Quitclaim,
including the Undertaking regarding the employment prohibition.
He even admitted joining Equitable as an employee within the
proscribed one-year period. The alleged defenses of Rivera, the CA
declared, could not prevail over the admissions in his
pleadings.1avvphil.net Moreover, Rivera’s justification for taking
the job with Equitable, "dire necessity," was not an acceptable
ground for annulling the Undertaking since there were no earmarks
of coercion, undue influence, or fraud in its execution. Having
executed the said deed and thereafter receiving the benefits under
the SRP, he is deemed to have waived the right
to assail the same, hence, is estopped from insisting or retaining the
said amount of P963,619.28.
However, the CA ruled that the attachment made upon Rivera’s
family home was void, and, pursuant to the mandate of Article 155,
in relation to Article 153 of the Family Code, must be discharged.
Hence, this recourse to the Court.
Petitioner avers that –
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE
PROPRIETY OF THE SUMMARY JUDGMENT RENDERED
BY THE TRIAL COURT CONSIDERING THE EXISTENCE OF
GENUINE ISSUES AS TO MATERIAL FACTS WHICH CALL
FOR THE PRESENTATION OF EVIDENCE IN A TRIAL ON
THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE
ONE-YEAR EMPLOYMENT BAN IMPOSED BY
RESPONDENT SOLIDBANK UPON HEREIN PETITIONER
NULL AND VOID FOR BEING UNREASONABLE AND
OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF
TRADE WHICH VIOLATES PUBLIC POLICY AS
ENUNCIATED IN OUR CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE
TRIAL COURT’S DECISION ORDERING HEREIN
RESPONDENT TO PAY SOLIDBANK THE AMOUNT
OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL
INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED
IN AFFIRMING THE PORTION OF THE SUMMARY
JUDGMENT ORDERING PETITIONER TO PAY SOLIDBANK
LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY
PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a
genuine issue in their pleadings, affidavits, and documents, that is,
whether the employment ban incorporated in the Undertaking
which petitioner executed upon his retirement is unreasonable,
oppressive, hence, contrary to public policy; and (2) whether
petitioner is liable to respondent for the restitution of P963,619.28
representing his retirement benefits, and interest thereon at 12%
per annum as of May 23, 1995 until payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of
the parties, and the documents and affidavits appended thereto,
genuine issues as to matters of fact were raised therein. He insists
that the resolution of the issue of whether the employment ban is
unreasonable requires the presentation of evidence on the
circumstances which led to respondent bank’s offer of the SRP and
ORP, and petitioner’s eventual acceptance and signing of the
Undertaking on March 1, 1995. There is likewise a need to adduce
evidence on whether the employment ban is necessary to protect
respondent’s interest, and whether it is an undue restraint on
petitioner’s constitutional right to earn a living to support his
family. He further insists that respondent is burdened to prove that
it sustained damage or injury by reason of his alleged breach of the
employment ban since neither the Release, Waiver and Quitclaim,
and Undertaking he executed contain any provision that respondent
is automatically entitled to the restitution of the P963,619.28.
Petitioner points out that all the deeds provide is that, in case of
breach thereof, respondent is entitled to protection before the
appropriate courts of law.
On the second issue, petitioner avers that the prohibition
incorporated in the Release, Waiver and Quitclaim barring him as
retiree from engaging directly or indirectly in any unlawful activity
and disclosing any information concerning the business of
respondent bank, as well as the employment ban contained in the
Undertaking he executed, are oppressive, unreasonable, cruel and
inhuman because of its overbreath. He reiterates that it is against
public policy, an unreasonable restraint of trade, because it
prohibits him to work for one year in the Philippines, ultimately
preventing him from supporting his family. He points out that a
breadwinner in a family of four minor daughters who are all
studying, with a wife who does not work, one would have a very
difficult time meeting the financial obligations even with a steady,
regular-paying job. He insists that the Undertaking deprives him of
the means to support his family, and ultimately, his children’s
chance for a good education and future. He reiterates that the
returns in his poultry business fell short of his expectations, and
unfortunately, the business was totally destroyed by typhoon
"Rosing" in November 1995.
Petitioner further maintains that respondent’s management
prerogative does not give it a license to entice its employees to
retire at a very young age and prohibit them from seeking
employment in a so-called competitor bank or financial institution,
thus prevent them from working and supporting their families
(considering that banking is the only kind of work they know).
Petitioner avers that "management’s prerogative must be without
abuse of discretion. A line must be drawn between management
prerogative regarding business operations per se and those which
affect the rights of the employees. In treating its employees,
management should see to it that its employees are at least properly
informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he
received was his retirement benefit which he earned after serving
the bank for 18 years. It was not a mere gift or gratuity given by
respondent bank, without the latter giving up something of value in
return. On the contrary, respondent bank received "valuable
consideration," that is, petitioner quit his job at the relatively young
age of 45, thus enabling respondent to effect its reorganization plan
and forego the salary, benefits, bonuses, and promotions he would
have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be
entitled to a cause of action against him before the appropriate
courts of law if he had violated the employment ban. He avers that
respondent must prove its entitlement to the P963,619.28. The
Undertaking contains no provision that he would have to return the
amount he received under the SRP; much less does it provide that
he would have to pay 12% interest per annum on said amount. On
the other hand, the Release, Waiver and Quitclaim does not contain
the provision prohibiting him from being employed with any
competitor bank or financial institution within one year from
February 28, 1995. Petitioner insists that he acted in good faith
when he received his retirement benefits; hence, he cannot be
punished by being ordered to return the sum of P963,619.28 which
was given to him for and in consideration of his early retirement.
Neither can petitioner be subjected to the penalty of paying 12%
interest per annum on his retirement pay of P963,619.28 from May
23, 1995, as it is improper and oppressive to him and his family.
As of July 3, 2002, the interest alone would amount
to P822,609.67, thus doubling the amount to be returned to
respondent bank under the decision of the RTC and the CA. The
imposition of interest has no basis because the Release, Waiver and
Quitclaim, and the Undertaking do not provide for payment of
interest. The deeds only state that breach thereof would entitle
respondent to bring an action to seek damages, to include the return
of the amount that may have been paid to petitioner by virtue
thereof. On the other hand, any breach of the Undertaking or the
Release, Waiver and Quitclaim would only entitle respondent to a
cause of action before the appropriate courts of law. Besides, the
amount received by petitioner was not a loan and, therefore, should
not earn interest pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking
employment with another bank within one year from February 28,
1995 because he needed to earn a living to support his family and
finance his children’s education. Hence, the imposition of interest,
which is a penalty, is unwarranted.
By way of Comment on the petition, respondent avers that the
Undertaking is the law between it and petitioner. As such, the latter
could not assail the deed after receiving the retirement benefit
under the SRP. As gleaned from the averments in his petition,
petitioner admitted that he executed the Undertaking after having
been informed of the nature and consequences of his refusal to sign
the same, i.e., he would not be able to receive the retirement
benefit under the SRP.
Respondent maintains that courts have no power to relieve parties
of obligations voluntarily entered into simply because their
contracts turned out to be disastrous deeds. Citing the ruling of this
Court in Eastern Shipping Lines, Inc. v. Court of
Appeals,26 respondent avers that petitioner is obliged to pay 12%
per annum interest of the P963,619.28 from judicial or
extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it
sustained damages, including the amount thereof, and that neither
the Release, Waiver and Quitclaim nor the Undertaking obliged
him to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure
provide:
Section 1. Summary judgment for claimant. – A party seeking to
recover upon a claim, counterclaim, or cross-claim or to obtain a
declaratory relief may, at any time after the pleading in answer
thereto has been served, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor
upon all or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. – The motion shall be
served at least ten (10) days before the time specified for the
hearing. The adverse party may serve opposing affidavits,
depositions, or admissions at least three (3) days before the
hearing. After the hearing, the judgment sought shall be rendered
forthwith if the pleadings, supporting affidavits, depositions, and
admissions on file, show that, except as to the amount of damages,
there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish
two requisites: (a) there must be no genuine issue as to any
material fact, except for the amount of damages; and (b) the party
presenting the motion for summary judgment must be entitled to a
judgment as a matter of law.27 Where, on the basis of the pleadings
of a moving party, including documents appended thereto, no
genuine issue as to a material fact exists, the burden to produce a
genuine issue shifts to the opposing party. If the opposing party
fails, the moving party is entitled to a summary judgment. 28
A genuine issue is an issue of fact which requires the presentation
of evidence as distinguished from an issue which is a sham,
fictitious, contrived or a false claim. The trial court can determine a
genuine issue on the basis of the pleadings, admissions, documents,
affidavits or counteraffidavits submitted by the parties. When the
facts as pleaded appear uncontested or undisputed, then there is no
real or genuine issue or question as to any fact and summary
judgment called for. On the other hand, where the facts pleaded by
the parties are disputed or contested, proceedings for a summary
judgment cannot take the place of a trial. 29 The evidence on record
must be viewed in light most favorable to the party opposing the
motion who must be given the benefit of all favorable inferences as
can reasonably be drawn from the evidence.30
Courts must be critical of the papers presented by the moving party
and not of the papers/documents in opposition
thereto.31 Conclusory assertions are insufficient to raise an issue of
material fact.32 A party cannot create a genuine dispute of material
fact through mere speculations or compilation of differences. 33 He
may not create an issue of fact through bald assertions,
unsupported contentions and conclusory statements.34 He must do
more than rely upon allegations but must come forward with
specific facts in support of a claim. Where the factual context
makes his claim implausible, he must come forward with more
persuasive evidence demonstrating a genuine issue for trial. 35
Where there are no disputed material facts, the determination of
whether a party breached a contract is a question of law and is
appropriate for summary judgment.36 When interpreting an
ambiguous contract with extrinsic evidence, summary judgment is
proper so long as the extrinsic evidence presented to the court
supports only one of the conflicting interpretations.37 Where
reasonable men could differ as to the contentions shown from the
evidence, summary judgment might be denied.
In United Rentals (North America), Inc. v. Keizer, 38 the U.S.
Circuit Court of Appeals resolved the issue of whether a summary
judgment is proper in a breach of contract action involving the
interpretation of such contract, and ruled that:
[A] contract can be interpreted by the court on summary judgment
if (a) the contract’s terms are clear, or (b) the evidence supports
only one construction of the controverted provision,
notwithstanding some ambiguity. x x x If the court finds no
ambiguity, it should proceed to interpret the contract – and it may
do so at the summary judgment stage. If, however, the court
discerns an ambiguity, the next step – involving an examination of
extrinsic evidence – becomes essential. x x x Summary judgment
may be appropriate even if ambiguity lurks as long as the extrinsic
evidence presented to the court supports only one of the conflicting
interpretations.39
In this case, there is no dispute between the parties that, in
consideration for his availment of the SRP, petitioner executed the
Release, Waiver and Quitclaim, and the Undertaking as
supplement thereto, and that he received retirement pay amounting
to P963,619.28 from respondent. On May 1, 1995, within the one-
year ban and without prior knowledge of respondent, petitioner
was employed by Equitable as Manager of its Credit Investigation
and Appraisal Division, Consumers’ Banking Group. Despite
demands, petitioner failed to return the P963,619.28 to respondent
on the latter’s allegation that he had breached the one-year ban by
accepting employment from Equitable, which according to
respondent was a competitor bank.
We agree with petitioner’s contention that the issue as to whether
the post-retirement competitive employment ban incorporated in
the Undertaking is against public policy is a genuine issue of fact,
requiring the parties to present evidence to support their respective
claims.
As gleaned from the records, petitioner made two undertakings.
The first is incorporated in the Release, Waiver and Quitclaim that
he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or
indirectly engage in any unlawful activity prejudicial to the interest
of the BANK, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information
concerning the business of the BANK, its manner or operation, its
plans, processes or data of any kind.40
The second undertaking is incorporated in the Undertaking
following petitioner’s execution of the Release, Waiver and
Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in
favor of Solidbank on FEBRUARY 28, 1995, I hereby expressly
undertake that I will not seek employment with any competitor
bank or financial institution within one (1) year from February 28,
1995.41
In the Release, Waiver and Quitclaim, petitioner declared that
respondent may bring "an action for damages which may include,
but not limited to the return of whatever sums he may have
received from respondent under said deed if he breaks his
undertaking therein."42 On the other hand, petitioner declared in the
Undertaking that "any breach on his part of said Undertaking or the
terms and conditions of the Release, Waiver and Quitclaim will
entitle respondent to a cause of action against [petitioner] for
protection before the appropriate courts of law."43
Article 1306 of the New Civil Code provides that the contracting
parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public
policy. The freedom of contract is both a constitutional and
statutory right.44 A contract is the law between the parties and
courts have no choice but to enforce such contract as long as it is
not contrary to law, morals, good customs and against public
policy.
The well-entrenched doctrine is that the law does not relieve a
party from the effects of an unwise, foolish or disastrous contract,
entered into with full awareness of what he was doing and entered
into and carried out in good faith. Such a contract will not be
discarded even if there was a mistake of law or fact. Courts have
no jurisdiction to look into the wisdom of the contract entered into
by and between the parties or to render a decision different
therefrom. They have no power to relieve parties from obligation
voluntarily assailed, simply because their contracts turned out to be
disastrous deals.45
On the other hand, retirement plans, in light of the constitutional
mandate of affording full protection to labor, must be liberally
construed in favor of the employee, it being the general rule that
pension or retirement plans formulated by the employer are to be
construed against it.46 Retirement benefits, after all, are intended to
help the employee enjoy the remaining years of his life, releasing
him from the burden of worrying for his financial support, and are
a form of reward for being loyal to the employer. 47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law
countries and in the United States and the Philippines:
By "public policy," as defined by the courts in the United States
and England, is intended that principle of the law which holds that
no subject or citizen can lawfully do that which has a tendency to
be injurious to the public or against the public good, which may be
termed the "policy of the law," or "public policy in relation to the
administration of the law." (Words & Phrases Judicially Defined,
vol. 6, p. 5813, and cases cited.) Public policy is the principle
under which freedom of contract or private dealing is restricted by
law for the good of the public. (Id., Id.) In determining whether a
contract is contrary to public policy the nature of the subject matter
determines the source from which such question is to be solved.
(Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed.
904, 906.)
The foregoing is sufficient to show that there is no difference in
principle between the public policy (orden publico) in the two
jurisdictions (the United States and the Philippine Islands) as
determined by the Constitution, laws, and judicial decisions. 49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried
on for subsistence or profit. Anderson’s Dictionary of Law gives
the following definition: "Generally equivalent to occupation,
employment, or business, whether manual or mercantile; any
occupation, employment or business carried on for profit, gain, or
livelihood, not in the liberal arts or in the learned professions." In
Abbott’s Law Dictionary, the word is defined as "an occupation,
employment or business carried on for gain or profit." Among the
definitions given in the Encyclopaedic Dictionary is the following:
"The business which a person has learnt, and which he carries on
for subsistence or profit; occupation; particularly employment,
whether manual or mercantile, as distinguished from the liberal arts
or the learned professions and agriculture." Bouvier limits the
meaning to commerce and traffic, and the handicraft of mechanics.
(In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply
the broader meaning given by the lexicographers. 50
In the present case, the trial court ruled that the prohibition against
petitioner accepting employment with a competitor bank or
financial institution within one year from February 28, 1995 is not
unreasonable. The appellate court held that petitioner was estopped
from assailing the post-retirement competitive employment ban
because of his admission that he signed the Undertaking and had
already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial court’s ruling, for the simple
reason that it rendered summary judgment and thereby foreclosed
the presentation of evidence by the parties to prove whether the
restrictive covenant is reasonable or not. Moreover, on the face of
the Undertaking, the post-retirement competitive employment ban
is unreasonable because it has no geographical limits; respondent is
barred from accepting any kind of employment in any competitive
bank within the proscribed period. Although the period of one year
may appear reasonable, the matter of whether the restriction is
reasonable or unreasonable cannot be ascertained with finality
solely from the terms and conditions of the Undertaking, or even in
tandem with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and
received P963,619.28 from respondent. However, petitioner is not
proscribed, by waiver or estoppel, from assailing the post-
retirement competitive employment ban since under Article 1409
of the New Civil Code, those contracts whose cause, object or
purpose is contrary to law, morals, good customs, public order or
public policy are inexistent or void from the beginning. Estoppel
cannot give validity to an act that is prohibited by law or one that is
against public policy.51
Respondent, as employer, is burdened to establish that a restrictive
covenant barring an employee from accepting a competitive
employment after retirement or resignation is not an unreasonable
or oppressive, or in undue or unreasonable restraint of trade, thus,
unenforceable for being repugnant to public policy. As the Court
stated in Ferrazzini v. Gsell,52 cases involving contracts in restraint
of trade are to be judged according to their circumstances, to wit:
x x x There are two principal grounds on which the doctrine is
founded that a contract in restraint of trade is void as against public
policy. One is, the injury to the public by being deprived of the
restricted party’s industry; and the other is, the injury to the party
himself by being precluded from pursuing his occupation, and thus
being prevented from supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the
court stated the rule thus:
Public welfare is first considered, and if it be not involved, and the
restraint upon one party is not greater than protection to the other
party requires, the contract may be sustained. The question is,
whether, under the particular circumstances of the case and the
nature of the particular contract involved in it, the contract is, or is
not, unreasonable.53
In cases where an employee assails a contract containing a
provision prohibiting him or her from accepting competitive
employment as against public policy, the employer has to adduce
evidence to prove that the restriction is reasonable and not greater
than necessary to protect the employer’s legitimate business
interests.54 The restraint may not be unduly harsh or oppressive in
curtailing the employee’s legitimate efforts to earn a livelihood and
must be reasonable in light of sound public policy.55
Courts should carefully scrutinize all contracts limiting a man’s
natural right to follow any trade or profession anywhere he pleases
and in any lawful manner. But it is just as important to protect the
enjoyment of an establishment in trade or profession, which its
employer has built up by his own honest application to every day
duty and the faithful performance of the tasks which every day
imposes upon the ordinary man. What one creates by his own labor
is his. Public policy does not intend that another than the producer
shall reap the fruits of labor; rather, it gives to him who labors the
right by every legitimate means to protect the fruits of his labor and
secure the enjoyment of them to himself.56 Freedom to contract
must not be unreasonably abridged. Neither must the right to
protect by reasonable restrictions that which a man by industry,
skill and good judgment has built up, be denied.57
The Court reiterates that the determination of reasonableness is
made on the particular facts and circumstances of each case. 58 In
Esmerson Electric Co. v. Rogers,59 it was held that the question of
reasonableness of a restraint requires a thorough consideration of
surrounding circumstances, including the subject matter of the
contract, the purpose to be served, the determination of the parties,
the extent of the restraint and the specialization of the business of
the employer. The court has to consider whether its enforcement
will be injurious to the public or cause undue hardships to the
employee, and whether the restraint imposed is greater than
necessary to protect the employer. Thus, the court must have
before it evidence relating to the legitimate interests of the
employer which might be protected in terms of time, space and the
types of activity proscribed.60
Consideration must be given to the employee’s right to earn a
living and to his ability to determine with certainty the area within
which his employment ban is restituted. A provision on territorial
limitation is necessary to guide an employee of what constitutes as
violation of a restrictive covenant and whether the geographic
scope is co-extensive with that in which the employer is doing
business. In considering a territorial restriction, the facts and
circumstances surrounding the case must be considered. 61
Thus, in determining whether the contract is reasonable or not, the
trial court should consider the following factors: (a) whether the
covenant protects a legitimate business interest of the employer;
(b) whether the covenant creates an undue burden on the employee;
(c) whether the covenant is injurious to the public welfare; (d)
whether the time and territorial limitations contained in the
covenant are reasonable; and (e) whether the restraint is reasonable
from the standpoint of public policy.62
Not to be ignored is the fact that the banking business is so
impressed with public interest where the trust and interest of the
public in general is of paramount importance such that the
appropriate standard of diligence must be very high, if not the
highest degree of diligence.63
We are not impervious of the distinction between restrictive
covenants barring an employee to accept a post-employment
competitive employment or restraint on trade in employment
contracts and restraints on post-retirement competitive employment
in pension and retirement plans either incorporated in employment
contracts or in collective bargaining agreements between the
employer and the union of employees, or separate from said
contracts or collective bargaining agreements which provide that
an employee who accepts post retirement competitive employment
will forfeit retirement and other benefits or will be obliged to
restitute the same to the employer. The strong weight of authority
is that forfeitures for engaging in subsequent competitive
employment included in pension and retirement plans are valid
even though unrestricted in time or geography. The raison d’etre is
explained by the United States Circuit Court of Appeals in
Rochester Corporation v. W.L. Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious
distinction between restraints on competitive employment in
employment contracts and in pension plans. The strong weight of
authority holds that forfeitures for engaging in subsequent
competitive employment, included in pension retirement plans, are
valid, even though unrestricted in time or geography. The
reasoning behind this conclusion is that the forfeiture, unlike the
restraint included in the employment contract, is not a prohibition
on the employee’s engaging in competitive work but is merely a
denial of the right to participate in the retirement plan if he does so
engage. A leading case on this point is Van Pelt v. Berefco, Inc.,
supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture
provision similar to that here, the Court said:
"A restriction in the contract which does not preclude the employee
from engaging in competitive activity, but simply provides for the
loss of rights or privileges if he does so is not in restraint of trade."
(emphasis added)65
A post-retirement competitive employment restriction is designed
to protect the employer against competition by former employees
who may retire and obtain retirement or pension benefits and, at
the same time, engage in competitive employment. 66
We have reviewed the Undertaking which respondent impelled
petitioner to sign, and find that in case of failure to comply with the
promise not to accept competitive employment within one year
from February 28, 1995, respondent will have a cause of action
against petitioner for "protection in the courts of law." The words
"cause of action for protection in the courts of law" are so broad
and comprehensive, that they may also include a cause of action
for prohibitory and mandatory injunction against petitioner,
specific performance plus damages, or a damage suit (for actual,
moral and/or exemplary damages), all inclusive of the restitution of
the P963,619.28 which petitioner received from respondent. The
Undertaking and the Release, Waiver and Quitclaim do not provide
for the automatic forfeiture of the benefits petitioner received
under the SRP upon his breach of said deeds. Thus, the post-
retirement competitive employment ban incorporated in the
Undertaking of respondent does not, on its face, appear to be of the
same class or genre as that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be
awarded for breach of contracts. Actual damages are primarily
intended to simply make good or replace the loss covered by said
breach.67 They cannot be presumed. Even if petitioner had admitted
to having breached the Undertaking, respondent must still prove
that it suffered damages and the amount thereof. 68 In determining
the amount of actual damages, the Court cannot rely on mere
assertions, speculations, conjectures or guesswork but must depend
on competent proof and on the best evidence obtainable regarding
the actual amount of losses.69 The benefit to be derived from a
contract which one of the parties has absolutely failed to perform is
of necessity to some extent a matter of speculation of the injured
party.
On the assumption that the competitive employment ban in the
Undertaking is valid, petitioner is not automatically entitled to
return the P963,619.28 he received from respondent. To reiterate,
the terms of the Undertaking clearly state that any breach by
petitioner of his promise would entitle respondent to a cause of
action for protection in the courts of law; as such, restitution of
the P963,619.28 will not follow as a matter of course. Respondent
is still burdened to prove its entitlement to the aforesaid amount by
producing the best evidence of which its case is susceptible. 70
IN LIGHT OF ALL THE FOREGOING, the petition is
GRANTED. The Decision of the Court of Appeals in CA-G.R. CV
No. 52235 is SET ASIDE. Let this case be REMANDED to the
Regional Trial Court of Manila for further proceedings
conformably with this decision of the Court.
SO ORDERED.
SECOND DIVISION
G.R. No. 196539               October 10, 2012
MARIETTA N. PORTILLO, Petitioner, 
vs. RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF
APPEALS Respondents.
DECISION
PEREZ, J.:
Before us is a petition for certiorari assailing the
Resolution 1 dated 14 October 2010 of the Court of Appeals in CA-
G.R. SP No. I 065g I which modified its Decision2 dated 31 March
2009, thus allowing the legal compensation or petitioner Marietta
N. Portillo's (Portillo) monetary claims against respondent
corporation Rudolf Lietz, Inc.'s (Lietz Inc.)3 claim for liquidated
damages arising from Portillo’s alleged violation of the "Goodwill
Clause" in the employment contract executed by the parties.
The facts are not in dispute.
In a letter agreement dated 3 May 1991, signed by individual
respondent Rudolf Lietz (Rudolf) and conformed to by Portillo, the
latter was hired by the former under the following terms and
conditions:
A copy of [Lietz Inc.’s] work rules and policies on personnel is
enclosed and an inherent part of the terms and conditions of
employment.
We acknowledge your proposal in your application specifically to
the effect that you will not engage in any other gainful employment
by yourself or with any other company either directly or indirectly
without written consent of [Lietz Inc.], and we hereby accept and
henceforth consider your proposal an undertaking on your part, a
breach of which will render you liable to [Lietz Inc.] for liquidated
damages.
If you are in agreement with these terms and conditions of
employment, please signify your conformity below.4
On her tenth (10th) year with Lietz Inc., specifically on 1 February
2002, Portillo was promoted to Sales Representative and received a
corresponding increase in basic monthly salary and sales quota. In
this regard, Portillo signed another letter agreement containing a
"Goodwill Clause:"
It remains understood and you agreed that, on the termination of
your employment by act of either you or [Lietz Inc.], and for a
period of three (3) years thereafter, you shall not engage directly or
indirectly as employee, manager, proprietor, or solicitor for
yourself or others in a similar or competitive business or the same
character of work which you were employed by [Lietz Inc.] to do
and perform. Should you breach this good will clause of this
Contract, you shall pay [Lietz Inc.] as liquidated damages the
amount of 100% of your gross compensation over the last 12
months, it being agreed that this sum is reasonable and just. 5
Three (3) years thereafter, on 6 June 2005, Portillo resigned from
Lietz Inc. During her exit interview, Portillo declared that she
intended to engage in business—a rice dealership, selling rice in
wholesale.
On 15 June 2005, Lietz Inc. accepted Portillo’s resignation and
reminded her of the "Goodwill Clause" in the last letter agreement
she had signed. Upon receipt thereof, Portillo jotted a note thereon
that the latest contract she had signed in February 2004 did not
contain any "Goodwill Clause" referred to by Lietz Inc. In response
thereto, Lietz Inc. categorically wrote:
Please be informed that the standard prescription of prohibiting
employees from engaging in business or seeking employment with
organizations that directly or indirectly compete against [Lietz
Inc.] for three (3) years after resignation remains in effect.
The documentation you pertain to is an internal memorandum of
your salary increase, not an employment contract. The absence of
the three-year prohibition clause in this document (or any
document for that matter) does not cancel the prohibition itself. We
did not, have not, and will not issue any cancellation of such in the
foreseeable future[.] [T]hus[,] regretfully, it is erroneous of you to
believe otherwise.6
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo
and supposed that the exchange of correspondence between them
regarding the "Goodwill Clause" in the employment contract was a
moot exercise since Portillo’s articulated intention to go into
business, selling rice, will not compete with Lietz Inc.’s products.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed
Keller Philippines, Limited to head its Pharma Raw Material
Department. Ed Keller Limited is purportedly a direct competitor
of Lietz Inc.
Meanwhile, Portillo’s demands from Lietz Inc. for the payment of
her remaining salaries and commissions went unheeded. Lietz Inc.
gave Portillo the run around, on the pretext that her salaries and
commissions were still being computed.
On 14 September 2005, Portillo filed a complaint with the National
Labor Relations Commission (NLRC) for non-payment of 1½
months’ salary, two (2) months’ commission, 13th month pay, plus
moral, exemplary and actual damages and attorney’s fees.
In its position paper, Lietz Inc. admitted liability for Portillo’s
money claims in the total amount of P110,662.16. However, Lietz
Inc. raised the defense of legal compensation: Portillo’s money
claims should be offset against her liability to Lietz Inc. for
liquidated damages in the amount of ₱869,633.097 for Portillo’s
alleged breach of the "Goodwill Clause" in the employment
contract when she became employed with Ed Keller Philippines,
Limited.
On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillo’s
complaint:
WHEREFORE, judgment is hereby rendered ordering respondents
Rudolf Lietz, Inc. to pay complainant Marietta N. Portillo the
amount of Php110,662.16, representing her salary and
commissions, including 13th month pay.8
On appeal by respondents, the NLRC, through its Second Division,
affirmed the ruling of Labor Arbiter Daniel J. Cajilig. On motion
for reconsideration, the NLRC stood pat on its ruling.
Expectedly, respondents filed a petition for certiorari before the
Court of Appeals, alleging grave abuse of discretion in the labor
tribunals’ rulings.
As earlier adverted to, the appellate court initially affirmed the
labor tribunals:
WHEREFORE, considering the foregoing premises, judgment is
hereby rendered by us DENYING the petition filed in this case.
The Resolution of the National Labor Relations Commission
(NLRC), Second Division, in the labor case docketed as NLRC
NCR Case No. 00-09- 08113-2005 [NLRC LAC No. 07-001965-
07(5)] is hereby AFFIRMED.9
The disposition was disturbed. The Court of Appeals, on motion
for reconsideration, modified its previous decision, thus:
WHEREFORE, in view of the foregoing premises, we
hereby MODIFY the decision promulgated on March 31, 2009 in
that, while we uphold the monetary award in favor of the
[petitioner] in the aggregate sum of ₱110,662.16 representing the
unpaid salary, commission and 13th month pay due to her, we
hereby allow legal compensation or set-off of such award of
monetary claims by her liability to [respondents] for liquidated
damages arising from her violation of the "Goodwill Clause" in her
employment contract with them.10
Portillo’s motion for reconsideration was denied.
Hence, this petition for certiorari listing the following acts as
grave abuse of discretion of the Court of Appeals:
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION BY EVADING TO RECOGNIZE (sic) THAT THE
RESPONDENTS’ EARLIER PETITION IS FATALLY
DEFECTIVE;
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION BY OVERSTEPPING THE BOUNDS OF
APPELLATE JURISDICTION[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION BY MODIFYING ITS PREVIOUS DECISION
BASED ON AN ISSUE THAT WAS RAISED ONLY ON THE
FIRST INSTANCE AS AN APPEAL BUT WAS NEVER AT
THE TRIAL COURT AMOUNTING TO DENIAL OF DUE
PROCESS[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION BY EVADING THE POSITIVE DUTY TO
UPHOLD THE RELEVANT LAWS[.]11
Simply, the issue is whether Portillo’s money claims for unpaid
salaries may be offset against respondents’ claim for liquidated
damages.
Before anything else, we address the procedural error committed
by Portillo, i.e., filing a petition for certiorari, a special civil action
under Rule 65 of the Rules of Court, instead of a petition for
review on certiorari, a mode of appeal, under Rule 45 thereof. On
this score alone, the petition should have been dismissed outright.
Section 1, Rule 45 of the Rules of Court expressly provides that a
party desiring to appeal by certiorari from a judgment or final
order or resolution of the Court of Appeals may file a verified
petition for review on certiorari. Considering that, in this case,
appeal by certiorari was available to Portillo, that available
recourse foreclosed her right to resort to a special civil action
for certiorari, a limited form of review and a remedy of last
recourse, which lies only where there is no appeal or plain, speedy
and adequate remedy in the ordinary course of law. 12
A petition for review on certiorari under Rule 45 and a petition
for certiorari under Rule 65 are mutually exclusive
remedies. Certiorari cannot co-exist with an appeal or any other
adequate remedy.13 If a petition for review is available, even
prescribed, the nature of the questions of law intended to be raised
on appeal is of no consequence. It may well be that those questions
of law will treat exclusively of whether or not the judgment or final
order was rendered without or in excess of jurisdiction, or with
grave abuse of discretion. This is immaterial. The remedy is
appeal, not certiorari as a special civil action.14
Be that as it may, on more than one occasion, to serve the ultimate
purpose of all rules of procedures—attaining substantial justice as
expeditiously as possible15 —we have accepted procedurally
incorrect petitions and decided them on the merits. We do the same
here.
The Court of Appeals anchors its modified ruling on the ostensible
causal connection between Portillo’s money claims and Lietz Inc.’s
claim for liquidated damages, both claims apparently arising from
the same employment relations. Thus, did it say:
x x x This Court will have to take cognizance of and consider the
"Goodwill Clause" contained [in] the employment contract signed
by and between [respondents and Portillo]. There is no gainsaying
the fact that such "Goodwill Clause" is part and parcel of the
employment contract extended to [Portillo], and such clause is not
contrary to law, morals and public policy. There is thus a causal
connection between [Portillo’s] monetary claims against
[respondents] and the latter’s claim for liquidated damages against
the former. Consequently, we should allow legal compensation or
set-off to take place. [Respondents and Portillo] are both bound
principally and, at the same time, are creditors of each other.
[Portillo] is a creditor of [respondents] in the sum of ₱110,662.16
in connection with her monetary claims against the latter. At the
same time, [respondents] are creditors of [Portillo] insofar as their
claims for liquidated damages in the sum of ₱980,295.2516 against
the latter is concerned.17
We are not convinced.
Paragraph 4 of Article 217 of the Labor Code appears to have
caused the reliance by the Court of Appeals on the "causal
connection between [Portillo’s] monetary claims against
[respondents] and the latter’s claim from liquidated damages
against the former."
Art. 217. Jurisdiction of Labor Arbiters and the Commission. –
(a) Except as otherwise provided under this code, the 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 case involving all workers,
whether agricultural or nonagricultural:
xxxx
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations; (Underscoring
supplied)
Evidently, the Court of Appeals is convinced that the claim for
liquidated damages emanates from the "Goodwill Clause of the
employment contract and, therefore, is a claim for damages arising
from the employeremployee relations."
As early as Singapore Airlines Limited v. Paño,18 we established
that not all disputes between an employer and his employee(s) fall
within the jurisdiction of the labor tribunals. We differentiated
between abandonment per se and the manner and consequent
effects of such abandonment and ruled that the first, is a labor case,
while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present
controversy must be held to belong to the civil Courts. While
seemingly petitioner's claim for damages arises from employer-
employee relations, and the latest amendment to Article 217 of the
Labor Code under PD No. 1691 and BP Blg. 130 provides that all
other claims arising from employer-employee relationship are
cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure
and refusal" without just cause of private respondent Cruz to report
for duty despite repeated notices served upon him of the
disapproval of his application for leave of absence without pay.
This, coupled with the further averment that Cruz "maliciously and
with bad faith" violated the terms and conditions of the conversion
training course agreement to the damage of petitioner removes the
present controversy from the coverage of the Labor Code and
brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per
se by private respondent Cruz of his job—as the latter was not
required in the Complaint to report back to work—but on
the manner and consequent effects of such abandonment of work
translated in terms of the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs.
Sta. Ines Melale Veneer & Plywood, Inc. [citation omitted], the
pertinent portion of which reads:
"Although the acts complained of seemingly appear to constitute
'matter involving employee-employer' relations as Quisaba's
dismissal was the severance of a pre-existing employee-employer
relations, his complaint is grounded not on his dismissal per se, as
in fact he does not ask for reinstatement or backwages, but on the
manner of his dismissal and the consequent effects of such
dismissal.
"Civil law consists of that 'mass of precepts that determine or
regulate the relations . . . that exist between members of a society
for the protection of private interest (1 Sanchez Roman 3).
"The 'right' of the respondents to dismiss Quisaba should not be
confused with the manner in which the right was exercised and the
effects flowing therefrom. If the dismissal was done anti-socially
or oppressively as the complaint alleges, then the respondents
violated Article 1701 of the Civil Code which prohibits acts of
oppression by either capital or labor against the other, and Article
21, which makes a person liable for damages if he wilfully causes
loss or injury to another in a manner that is contrary to morals,
good customs or public policy, the sanction for which, by way of
moral damages, is provided in article 2219, No. 10. [citation
omitted]"
Stated differently, petitioner seeks protection under the civil
laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach of a
contractual obligation. The other items demanded are not
labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.19 (Emphasis supplied)
Subsequent rulings amplified the teaching in Singapore
Airlines. The reasonable causal connection rule was discussed.
Thus, in San Miguel Corporation v. National Labor Relations
Commission,20 we held:
While paragraph 3 above refers to "all money claims of workers,"
it is not necessary to suppose that the entire universe of money
claims that might be asserted by workers against their employers
has been absorbed into the original and exclusive jurisdiction of
Labor Arbiters. In the first place, paragraph 3 should be read not in
isolation from but rather within the context formed by paragraph 1
(relating to unfair labor practices), paragraph 2 (relating to claims
concerning terms and conditions of employment), paragraph 4
(claims relating to household services, a particular species of
employer-employee relations), and paragraph 5 (relating to certain
activities prohibited to employees or to employers). It is evident
that there is a unifying element which runs through paragraph 1 to
5 and that is, that they all refer to cases or disputes arising out of or
in connection with an employer-employee relationship. This is, in
other words, a situation where the rule of noscitur a sociis may be
usefully invoked in clarifying the scope of paragraph 3, and any
other paragraph of Article 217 of the Labor Code, as amended. We
reach the above conclusion from an examination of the terms
themselves of Article 217, as last amended by B.P. Blg. 227, and
even though earlier versions of Article 217 of the Labor Code
expressly brought within the jurisdiction of the Labor Arbiters and
the NLRC "cases arising from employer-employee relations,
[citation omitted]" which clause was not expressly carried over, in
printer's ink, in Article 217 as it exists today. For it cannot be
presumed that money claims of workers which do not arise out of
or in connection with their employer-employee relationship, and
which would therefore fall within the general jurisdiction of
regular courts of justice, were intended by the legislative authority
to be taken away from the jurisdiction of the courts and lodged
with Labor Arbiters on an exclusive basis. The Court, therefore,
believes and so holds that the "money claims of workers"
referred to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the employer-
employee relationship, or some aspect or incident of such
relationship. Put a little differently, that money claims of
workers which now fall within the original and exclusive
jurisdiction of Labor Arbiters are those money claims which
have some reasonable causal connection with the employer-
employee relationship.21 (Emphasis supplied)
We thereafter ruled that the "reasonable causal connection with the
employer-employee relationship" is a requirement not only in
employees’ money claims against the employer but is, likewise, a
condition when the claimant is the employer.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama,
Jr.,22 which reiterated the San Miguel ruling and allied
jurisprudence, we pronounced that a non-compete clause, as in the
"Goodwill Clause" referred to in the present case, with a stipulation
that a violation thereof makes the employee liable to his former
employer for liquidated damages, refers to post-employment
relations of the parties.
In Dai-Chi, the trial court dismissed the civil complaint filed by the
employer to recover damages from its employee for the latter’s
breach of his contractual obligation. We reversed the ruling of the
trial court as we found that the employer did not ask for any relief
under the Labor Code but sought to recover damages agreed upon
in the contract as redress for its employee’s breach of contractual
obligation to its "damage and prejudice." We iterated that Article
217, paragraph 4 does not automatically cover all disputes between
an employer and its employee(s). We noted that the cause of action
was within the realm of Civil Law, thus, jurisdiction over the
controversy belongs to the regular courts. At bottom, we
considered that the stipulation referred to post-employment
relations of the parties.
That the "Goodwill Clause" in this case is likewise a
postemployment issue should brook no argument. There is no
dispute as to the cessation of Portillo’s employment with Lietz
Inc.23 She simply claims her unpaid salaries and commissions,
which Lietz Inc. does not contest. At that juncture, Portillo was no
longer an employee of Lietz Inc.24The "Goodwill Clause" or the
"Non-Compete Clause" is a contractual undertaking effective after
the cessation of the employment relationship between the parties.
In accordance with jurisprudence, breach of the undertaking is a
civil law dispute, not a labor law case.
It is clear, therefore, that while Portillo’s claim for unpaid salaries
is a money claim that arises out of or in connection with an
employer-employee relationship, Lietz Inc.’s claim against Portillo
for violation of the goodwill clause is a money claim based on an
act done after the cessation of the employment relationship. And,
while the jurisdiction over Portillo’s claim is vested in the labor
arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular
courts. Thus:
As it is, petitioner does not ask for any relief under the Labor
Code. It merely seeks to recover damages based on the parties'
contract of employment as redress for respondent's breach thereof.
Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts.
More so must this be in the present case, what with the reality that
the stipulation refers to the postemployment relations of the parties.
For sure, a plain and cursory reading of the complaint will readily
reveal that the subject matter is one of claim for damages arising
from a breach of contract, which is within the ambit of the regular
court's jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined
upon the allegations made in the complaint, irrespective of whether
or not the plaintiff is entitled to recover upon the claim asserted
therein, which is a matter resolved only after and as a result of a
trial. Neither can jurisdiction of a court be made to depend upon
the defenses made by a defendant in his answer or motion to
dismiss. If such were the rule, the question of jurisdiction would
depend almost entirely upon the defendant.25 [citation omitted]
xxxx
Whereas this Court in a number of occasions had applied the
jurisdictional provisions of Article 217 to claims for damages filed
by employees [citation omitted], we hold that by the designating
clause "arising from the employer-employee relations" Article 217
should apply with equal force to the claim of an employer for
actual damages against its dismissed employee, where the basis for
the claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the illegal
dismissal case.26
xxxx
This is, of course, to distinguish from cases of actions for
damages where the employer-employee relationship is merely
incidental and the cause of action proceeds from a different
source of obligation. Thus, the jurisdiction of regular courts
was upheld where the damages, claimed for were based on
tort [citation omitted], malicious prosecution [citation omitted],
or breach of contract, as when the claimant seeks to recover a
debt from a former employee [citation omitted] or seeks
liquidated damages in enforcement of a prior employment
contract. [citation omitted]
Neither can we uphold the reasoning of respondent court that
because the resolution of the issues presented by the complaint
does not entail application of the Labor Code or other labor laws,
the dispute is intrinsically civil. Article 217(a) of the Labor Code,
as amended, clearly bestows upon the Labor Arbiter original and
exclusive jurisdiction over claims for damages arising from
employer-employee relations─in other words, the Labor Arbiter
has jurisdiction to award not only the reliefs provided by labor
laws, but also damages governed by the Civil Code. 27 (Emphasis
supplied)
In the case at bar, the difference in the nature of the credits that one
has against the other, conversely, the nature of the debt one owes
another, which difference in turn results in the difference of the
forum where the different credits can be enforced, prevents the
application of compensation. Simply, the labor tribunal in an
employee’s claim for unpaid wages is without authority to allow
the compensation of such claims against the post employment
claim of the former employer for breach of a post employment
condition. The labor tribunal does not have jurisdiction over the
civil case of breach of contract.
We are aware that in Bañez v. Hon. Valdevilla, we mentioned that:
Whereas this Court in a number of occasions had applied the
jurisdictional provisions of Article 217 to claims for damages filed
by employees [citation omitted], we hold that by the designating
clause "arising from the employer-employee relations" Article 217
should apply with equal force to the claim of an employer for
actual damages against its dismissed employee, where the basis for
the claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the illegal
dismissal case.28
While on the surface, Bañez supports the decision of the Court of
Appeals, the facts beneath premise an opposite conclusion. There,
the salesman-employee obtained from the NLRC a final favorable
judgment of illegal dismissal. Afterwards, the employer filed with
the trial court a complaint for damages for alleged nefarious
activities causing damage to the employer. Explaining further why
the claims for damages should be entered as a counterclaim in the
illegal dismissal case, we said:
Even under Republic Act No. 875 (the ‘Industrial Peace Act,’ now
completely superseded by the Labor Code), jurisprudence was
settled that where the plaintiff’s cause of action for damages arose
out of, or was necessarily intertwined with, an alleged unfair labor
practice committed by the union, the jurisdiction is exclusively
with the (now defunct) Court of Industrial Relations, and the
assumption of jurisdiction of regular courts over the same is a
nullity. To allow otherwise would be "to sanction split jurisdiction,
which is prejudicial to the orderly administration of justice." Thus,
even after the enactment of the Labor Code, where the damages
separately claimed by the employer were allegedly incurred as a
consequence of strike or picketing of the union, such complaint for
damages is deeply rooted from the labor dispute between the
parties, and should be dismissed by ordinary courts for lack of
jurisdiction. As held by this Court in National Federation of Labor
vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the
view that on policy grounds, and equally so in the interest of
greater promptness in the disposition of labor matters, a court is
spared the often onerous task of determining what essentially is a
factual matter, namely, the damages that may be incurred by either
labor or management as a result of disputes or controversies arising
from employer-employee relations.29
Evidently, the ruling of the appellate court is modeled after the
basis used in Bañez which is the "intertwined" facts of the claims
of the employer and the employee or that the "complaint for
damages is deeply rooted from the labor dispute between the
parties." Thus, did the appellate court say that:
There is no gainsaying the fact that such "Goodwill Clause" is part
and parcel of the employment contract extended to [Portillo], and
such clause is not contrary to law, morals and public policy. There
is thus a causal connection between [Portillo’s] monetary claims
against [respondents] and the latter’s claim for liquidated damages
against the former. Consequently, we should allow legal
compensation or set-off to take place.30
The Court of Appeals was misguided. Its conclusion was incorrect.
There is no causal connection between the petitioner employees’
claim for unpaid wages and the respondent employers’ claim for
damages for the alleged "Goodwill Clause" violation. Portillo’s
claim for unpaid salaries did not have anything to do with her
alleged violation of the employment contract as, in fact, her
separation from employment is not "rooted" in the alleged
contractual violation. She resigned from her employment. She was
not dismissed. Portillo’s entitlement to the unpaid salaries is not
even contested. Indeed, Lietz Inc.’s argument about legal
compensation necessarily admits that it owes the money claimed
by Portillo.
The alleged contractual violation did not arise during the existence
of the employer-employee relationship. It was a post-employment
matter, a post-employment violation. Reminders are apt. That is
provided by the fairly recent case of Yusen Air and Sea Services
Phils., Inc. v. Villamor,31 which harked back to the previous rulings
on the necessity of "reasonable causal connection" between the
tortious damage and the damage arising from the employer-
employee relationship. Yusen proceeded to pronounce that the
absence of the connection results in the absence of jurisdiction of
the labor arbiter. Importantly, such absence of jurisdiction cannot
be remedied by raising before the labor tribunal the tortious
damage as a defense. Thus:
When, as here, the cause of action is based on a quasi-delict or tort,
which has no reasonable causal connection with any of the claims
provided for in Article 217, jurisdiction over the action is with the
regular courts. [citation omitted]
As it is, petitioner does not ask for any relief under the Labor
Code. It merely seeks to recover damages based on the parties’
contract of employment as redress for respondent’s breach thereof.
Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts.
More so must this be in the present case, what with the reality that
the stipulation refers to the postemployment relations of the parties.
For sure, a plain and cursory reading of the complaint will readily
reveal that the subject matter is one of claim for damages arising
from a breach of contract, which is within the ambit of the regular
court’s jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined
upon the allegations made in the complaint, irrespective of whether
or not the plaintiff is entitled to recover upon the claim asserted
therein, which is a matter resolved only after and as a result of a
trial. Neither can jurisdiction of a court be made to depend upon
the defenses made by a defendant in his answer or motion to
dismiss. If such were the rule, the question of jurisdiction would
depend almost entirely upon the defendant.32 (Underscoring
supplied).
The error of the appellate court in its Resolution of 14 October
2010 is basic. The original decision, the right ruling, should not
have been reconsidered.
Indeed, the application of compensation in this case is effectively
barred by Article 113 of the Labor Code which prohibits wage
deductions except in three circumstances:
ART. 113. Wage Deduction. – No employer, in his own behalf or
in behalf of any person, shall make any deduction from wages of
his employees, except:
(a) In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer for the
amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his
union to check-off has been recognized by the employer or
authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations
issued by the Secretary of Labor.
WHEREFORE, the petition is GRANTED. The Resolution of the
Court of Appeals in CA-G.R. SP No. I 06581 dated 14 October 20
I 0 is SET ASIDE. The Decision of the Court of Appeals in CA-
G.R. SP No. I 06581 dated 3 I March :2009 is REINSTATED. No
costs.
SO ORDERED.
THIRD DIVISION
July 20, 2016
G.R. No. 183934
ERNESTO GALANG and MA. OLGA JASMIN
CHAN, Petitioners,  feelings on petitioners' part.14 They believed that Villanueva did
vs BOIE TAKEDA CHEMICALS, INC. and/or KAZUHIKO
NOMURA, Respondents.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1under Rule 45 of the
Revised Rules of Court filed by Ernesto M. Galang and Ma. Olga
Jasmin Chan (petitioners) from the Court of Appeals' (CA)
Decision2 dated February 26, 2008 (CA Decision) and the
Resolution3 dated July 28, 2008 (collectively, Assailed Decision) in
CA-G.R. SP No. 96861. In the Assailed Decision, the CA affirmed
the National Labor Relations Commission (NLRC) Decision 4 dated
March 7, 2006 reversing the Labor Arbiter's ruling that petitioners
were illegally dismissed, viz:
WHEREFORE, premises considered, the instant Petition is
hereby DENIED. Accordingly, the assailed March 7, 2006
Decision of the NLRC as well as the October 25, 2006 Resolution
denying Petitioners' Motion for Reconsideration are AFFIRMED.
SO ORDERED.5(Emphases in the original.)
Statement of Facts
Respondent pharmaceutical company Boie Takeda Chemicals, Inc.
(BTCI) hired petitioners Ernesto Galang and Ma. Olga Jasmin
Chan in August 28, 1975 and July 20, 1983, respectively.6 Through
the years, petitioners rose from the ranks and were promoted to
Regional Sales Managers in 2000. Petitioners held these positions
until their separation from BTCI on May 1, 2004.7
As Regional Sales Managers, they belong to the sales department
of BTCI. They primarily managed regional sales budget and target,
and were responsible for market share and company growth within
their respective regions. Within the organizational hierarchy, they
reported to the National Sales Director.8 In 2002, when the
National Sales Director position became vacant (after the
retirement of Melchor Barretto), petitioners assumed and shared
(with the general manager) the functions and responsibilities of this
higher position, and reported directly to the General Manager. 9
In February 2003, the new General Manager, Kazuhiko Nomura
(Nomura), asked petitioners to apply for the position of National
Sales Director.10 Simultaneously, Nomura also asked Edwin
Villanueva (Villanueva) and Mimi Escarte, both Group Product
Managers in the marketing depatiment, to apply for the position of
Marketing Director. All four employees submitted themselves to
interviews with the management. In the end, Nomura hired an
outsider from Novartis Company as Marketing Director, while the
position of National Sales Director remained vacant. 11
Later, however, petitioners were informed that BTCI promoted
Villanueva as National Sales Director effective May
1,2004.12 BTCI explained that the appointment was pursuant to its
management prerogative, and that it arrived at such decision only
"after careful assessment of the situation, the needs of the position
and the qualifications of the respective candidates." 13 The
promotion of Villanueva as the National Sales Director caused ill-
not apply for the position; has only three years of experience in
sales; and was reportedly responsible for losses in the marketing
depmiment.15 Petitioners further resented Villanueva's appointment
because they heard that the appointment was made only because he
threatened to leave the office along with the company's top cardio-
medical doctors.16
After Villanueva's promotion, petitioners claimed that Nomura
threatened to dismiss them from office if they failed to perform
well under the newly appointed National Sales Director. 17 This
prompted petitioners to inquire if they could avail of early
retirement package due to health reasons. Specifically, they
requested Nomura if they could avail of the early retirement
package of 150% plus 120% of monthly salary for every year of
service tax free, and full ownership of service vehicle tax
free.18 They claimed that this is the same retirement package given
to previous retirees namely, former Regional Sales Director Jose
Sarmiento, Jr. (Sarmiento), and former National Sales Director
Melchor Barretto.19 Nomura, however, insisted that such retirement
package does not exist20 and Sarmiento's case was exceptional
since he was just a few years shy from the normal retirement age. 21
On April 28, 2004, petitioners intimated their intention to retire in
a joint written letter of resignation22 dated April 28, 2002 (sic) to
Nomura, effective on April 30, 2004. Thereafter, petitioners
received their retirement package and other monetary pay from
BTCI. Chan received two checks23 in the total amount of P2,
187,236.6424 computed as follows:
1) Retirement pay (P70,000.00 x
P1,764,000.00
120% x 21years) =
2) Salaries from May to December
P560,000.00
2004 (P70,000.00 x 8 mos.) =
3) Allowances (from May to
P69,328.00
December 2004) =
4) Rice Subsidy (April-December)
P6,000.00
=
5) Conversion of Leave Credits
P461,833.00
(138 days) =
6) 13th month pay (pro-rata) = P35,000.00
[Gross Amount] P2,896,161.00
Less: Accountabilities P595,952.76
 Taxes P110,971.00 WHEREFORE, premises considered, judgment is hereby rendered, printed in higher quality paper; (4) merely lifted the arguments of
declaring complainants' dismissal from their employment to be BTCI in contrast to the NLRC's February Decision which directly
illegal.  Accordingly, respondents are jointly and severally liable: reviewed the findings of the Labor Arbiter; and (5) was attached to
a notice signed by merely a Labor Arbiter Associate, and not by
[Net Amount] P2, 187,236.6425
1) To pay complainants the amounts opposite their respective the Executive Clerk of the Division.39 Petitioners also reiterated
names: that BTCI dismissed them under the guise of management
Galang received checks26 in the total amount of prerogative, and that Villanueva's appointment as National Sales
P3,754,306.5627 computed as follows:   Backwagcs Separation Salary Director was an abuse of exercise of such prerogative. They also
Pay/ Differentials claimed that their departure from the office was not voluntary but
1) Retirement Pay (P70,000 x 160% x 29 Differential
P3,248,000.00 was prompted by the circumstances after the BTCI preferred
years)= Pay Villanueva's application over theirs.40
2) Salaries ffrom] May [to] Dec. 2004 = P560,000.00
E. Galang P398,854.1 189,000.00 830,000.00
3) Allowances (May to December 2004) 6 On October 25, 2006, the NLRC issued a Resolution41 which
P69,328.00
= 3045,000.00 680,000.00 denied petitioners' motion for reconsideration, and therefore upheld
the NLRC's March Decision. The NLRC clarified that the official
4) Rice Subsidy (April to December)=
Ma. OJ Chan 398,954.16 189,000.00 830,000.00 decision is the March Decision, and that the February Decision
P6,000.00
cannot be considered as the official decision because it was merely
5) Conversion of Leave Credits (35 days) a draft decision.
P117,131.00 2,205,000.00 680,000.00
=
6) 13th month pay (pro-rata) = P35,000.00 Petitioners filed a petition for certiorari42under Rule 65 of the
2) To pay complainants, the amount P227, 164.10 for Olga Chan Revised Rules of Court with the CA, which denied the petition in
and the sum of P27,374.85 for Ernesto Galang, representing the the Assailed Decision. The CA said that the "NLRC having thus
refund of the deducted car loan; chosen to uphold its Decision dated March 7, 2006 as the authentic
Gross Amount P4,035,459.00
one, this Court must therefore, consider the same as the version
Less: Accountabilities P275.553.63 3) To pay complainants the amount of P500,000.00 each, herein submitted for review."43 The CA also found that the March
Taxes P5,598.81 representing moral damages, and the amount of P500.000.00 each, Decision was more in tune with law and jurisprudence. 44 It
as for exemplary damages; reviewed and reassessed the facts and evidence on record and made
a finding that the NLRC did not commit grave abuse of discretion.
P3, 4) To pay complainant the amount equivalent to ten (10%) percent
[Net Amount] of the total judgment award, as and for attorney's fees. Thus, petitioners filed before this Court a petition for review
754,306.5628
on certiorari under Rule 45 of the Revised Rules of Court. They
allege that the CA erred in sustaining the decision of the NLRC.
Upon petitioners' retirement, the positions of Regional Sales SO ORDERED.33
The Arguments
Manager were abolished, and a new position of Operations On June 30, 2005, BTCI appealed the LA Decision with the
Petitioners argue that they were constructively dismissed because
Manager was created.29 NLRC.34
of the acts of BTCI 's General Manager Nomura. They claim that
Petitioners allegedly received a Notice of Decision 35 dated March
they were forced into resigning because instead of promoting them
l0, 2006 from the NLRC. The notice informed petitioners that a
On October 20, 2004, petitioners filed the complaint for to the position of National Sales Directors, BTCI hired Villanueva
decision was promulgated by the NLRC on February 7, 2006. The
constructive dismissal and money claims before the NLRC who only had three years of service in the company, who has no
attached decision in the notice, however, was dated March 7, 2006.
Regional Arbitration Branch.30 background or experience in sales to speak of and who was
The decision dated March 7, 200636 (March Decision) reversed
allegedly responsible for almost the bankruptcy of the company.
and set asidethe LA Decision, and dismissed the complaint. In said
They allege that Nomura threatened to dismiss them if they do not
In a Decision dated May 16, 2005 (LA Decision),31 the Labor decision, the NLRC ruled that petitioners failed to prove that they
perform well under the newly-appointed National Sales Director.
Arbiter ruled that petitioners were constructively dismissed. 32 The were constructively dismissed.
Labor Arbiter explained that petitioners were forced to retire
because Villanueva's appointment constituted an abuse of exercise Petitioners also argue that the retirement package given to them is
Petitioners filed a motion to declare the March Decision null and
of management prerogative; and that subsequent events, such as lower compared to others who were holding the similar position at
void by way of motion for reconsideration37 dated March 22, 2006.
the abolition of the positions of Regional Sales Managers and the the time of their retirement. By way of example, petitioners cite the
Petitioners alleged that prior to the Notice of Decision, they
creation of the position of the Operations Manager show that case of one Sarmiento, who was promoted with them to the same
personally received a decision allegedly promulgated on February
petitioners' easing out from service were orchestrated. It also found position, and who opted for early retirement in 2001. Sarmiento
7, 200638 (February Decision) which affirmed the LA Decision,
that petitioners were discriminated as to their retirement package. allegedly received a more generous package of 150% of his
but with modification as to the amount of moral and exemplary
The dispositive pmiion of the decision stated, thus: monthly salary for every year of service on top of the 120%
damages. Petitioners pointed out that the March Decision: (1)
retirement package for his 22 years of service. Petitioners contend
lacked one signature in page 19; (2) contained two different
that this was the same retirement package given to other employees
specimens signature for Commissioner Gacutan; (3) had pages
such as Anita Ducay, Marcielo Rafael, Rolando Arada, Sarmiento,
which do not contain the initials of the one preparing it; (4) was
and Melchor Barretto.45
For its part, BCTI claims that the complaint is only an attempt to
extort additional benefits from the company.
BTCI denies having constructively dismissed petitioners. It argues
that no constructive dismissal can occur because there was no
movement or transfer of position or diminution of salaries or
benefits. Neither was there any circumstance that would make
petitioners' continued employment unreasonable or
impossible.46 The appointment of Villanueva was within the sphere
of management's prerogatives, and was arrived at after careful
consideration. It did not have any adverse effect on petitioners'
positions as Regional Sales Managers. According to BTCI,
petitioner's decision to retire was voluntary and of their own
volition.47
As to the payment of retirement benefits, BTCI insists that
petitioners have been paid according to the Collective Bargaining
Agreement (CBA) between BTCI and BTCI Supervisory Union.
Although petitioners are managers (and are not covered by the
CBA), BTCI by practice grants the same retirement benefits to
managers. BTCI admits that it gave Sarmiento additional financial
assistance because of serious health problems, and because he was
merely three years away from normal retirement. Other employees
cited by petitioners all received retirement benefits computed on
the CBA provisions.48
Issues
Thus, the issues before this Court are the following:
I. Whether petitioners were constructively dismissed from service;
and
II. Whether petitioners are entitled to a higher retirement package.
Our Ruling
We deny the petition.
In its Resolution dated October 25, 2006, the NLRC denied
petitioners' motion for reconsideration, and declared the March
Decision as the official decision. It ruled that the February
Decision (in petitioners' possession) is merely a draft
decision.49 This Court recognizes that it is common practice that
more than one decision may be drafted because more often,
members of a collegiate body change their positions during
deliberations.50 This finding of the NLRC, coupled by the fact that
the March Decision is complete in form and substance pursuant to
Section 4(c) and Section 13 of Rule VII of the 2005 NLRC Rules
of Procedure, cannot be characterized as an exercise of grave abuse
of discretion amounting to lack or excess of jurisdiction. The issue
of which between the two decisions is the correct one delves into
the substantive arguments of the case, which the CA has already
decided after review and reassessment of the facts and evidence of
the entire records.
I. Petitioners voluntarily retired from the service, thus were not
constructively dismissed.
Constructive dismissal has often been defined as a "dismissal in
disguise" or "an act amounting to dismissal but made to appear as
if it were not."51 It exists where there is cessation of work because
continued employment is rendered impossible, unreasonable or
unlikely, as an offer involving a demotion in rank and a diminution
in pay. In some cases, while no demotion in rank or diminution in
pay may be attendant, constructive dismissal may still exist when
continued employment has become so unbearable because of acts
of clear discrimination, insensibility or disdain by the employer,
that the employee has no choice but to resign. 52 Under these two
definitions, what is essentially lacking is the voluntariness in the
employee's separation from employment.
In this case, petitioners were neither demoted nor did they receive a
diminution in pay and benefits. Petitioners also failed to show that
employment is rendered impossible, unreasonable or unlikely.
Petitioners admitted that they have previously intended to retire
and were actually the ones who requested to avail of an early
retirement.53 More, the circumstances which petitioners claim to
have forced them into early retirement are not of such character
that rendered their continued employment with BTCI as
impossible.
Petitioners allege that Nomura appointed Villanueva in order to
ease them out from the company. Petitioners claim that Villanueva
was unqualified for the position compared to their experiences; that
Villanueva did not apply for the position of National Sales
Director; and that he lacked the experience for the job. Such
arguments only affirm the NLRC and CA's finding that petitioners'
resignation was prompted by their general disagreement with the
appointment of Villanueva, and not by the acts of discrimination
by the management.
Our labor laws respect the employer's inherent right to control and
manage effectively its enterprise and do not normally allow
interference with the employer's judgment in the conduct of his
business.54 Management has exclusive prerogatives to determine
the qualifications and fitness of workers for hiring and firing,
promotion or reassignment.55 It is only in instances of unlawful
discrimination, limitations imposed by law and collective
bargaining agreement can this prerogative of management be
reviewed.56
The reluctance to interfere with management's prerogative in
determining who to promote all the more applies when we consider
that the position of National Sales Director is a managerial
position. Managerial positions are offices which can only be held
by persons who have the trust of the corporation and its
officers.57 The promotion of employees to managerial or executive
positions rests upon the discretion of management.58 Thus, we have
repeatedly reminded that the Labor Arbiters, the different
Divisions of the NLRC, and even courts, are not vested with
managerial authority.59 The employer's exercise of management
prerogatives, with or without reason, does not per se constitute
unjust discrimination, unless there is a showing of grave abuse of
discretion.60 In this case, there is none.
Petitioners did not present any evidence showing BTCI's adopted
rules and policies laying out the standards of promotion of an
employee to National Sales Director. They did not present the
qualification standards (which BTCl did not allegedly follow)
needed for the position. Petitioners merely assumed that one of
them was better for the job compared to Villanueva. Mere
allegations without proof cannot sustain petitioners' claim. In any
case, a perusal of Villanueva's resume shows that he has combined
experiences in both sales and marketing.61 The NLRC also found
that an independent consulting agency, K Search Asia Consulting,
was engaged by BTCI to determine who to appoint as National
Sales Director.62 The consulting agency recommended Villanueva
to the position.63 In the absence of any qualification standards that
BTCI allegedly gravely abused to refuse to follow, we cannot
substitute our own judgment on the qualifications of Villanueva.
Petitioners' allegation that Villanueva was appointed only because
of the threats the latter made to management militates against their
claim. If BTCI management was merely forced to appoint
Villanueva, petitioners cannot claim that BTCI intentionally and
maliciously orchestrated their easement from the company.
Petitioners cannot also argue that BTCI's caution to dismiss them if
they do not perform well under the newly-appointed National Sales
Director constituted a threat to their employment. This is merely a
warning for them to cooperate with the new National Sales
Director. Such warning is expected of management as part of its
supervision and disciplining power over petitioners given their
unwelcoming reactions to Villanueva's appointment.
The other acts of discrimination complained of by petitioners refer
to post-employment matters, or those that transpired after their
retirement. These include payment of alleged "lesser" retirement
package, and the abolition of the positions of Regional Sales
Manager. These events transpired only after they voluntary availed
of the early retirement. We stress, however, that the circumstances
contemplated in constructive dismissal cases are clear acts of
discrimination, insensibility or disdain which
necessarily precedes the apparent "voluntary" separation from
work. If they happened after the fact of separation, it could not be
said to have contributed to employee's decision to involuntary
resign, or in this case, retire.
It is true that in constructive dismissal cases, the employer is
charged with the burden of proving that its conduct and action or
the transfer of an employee are for valid and legitimate grounds
such as genuine business necessity.64However, it is likewise true
that in constructive dismissal cases, the employee has the burden to
prove first the fact of dismissal by substantial evidence. 65 Only then
when the dismissal is established that the burden shifts to the
employer to prove that the dismissal was for just and/or authorized
causc.66 The logic is simple-if there is no dismissal, there can be no
question as to its legality or illegality.67
In Portuguez v. GSIS Family Bank (Comsavings Bank),68 we were
confronted with the same facts where an employee who opted for
voluntary retirement claimed that he was constructively dismissed.
In that case, we ruled that it is the employee who has the onus to
prove his allegation that his availment of the early voluntary
retirement program was, in fact, done involuntarily:
Again, we are not persuaded. We are not unaware of the statutory
rule that in illegal dismissal cases, the employer has the onus
prohandi to show that the employee's separation from employment
is not motivated by discrimination, made in bad faith, or cffocled
as a form of punishment or demotion without sufficient cause. It
bears stressing, however, that this legal principle presupposes that
there is indeed an involuntary separation from employment and the
facts attendant to such forced separation was clearly established.
This legal principle has no application in the instant controversy
for as we have succinctly pointed above, petitioner failed to
establish that indeed he was discriminated against and on account
of such discrimination, he was forced to sever his employment
from the respondent bank. What is undisputed is the fact that
petitioner availed himself of respondent bank's
early voluntary retirement program and accordingly received his
retirement pay in the amount of P1.324 Million under such
program. Consequently, the burden of proof will not vest on
respondent bank to prove the legality of petitioner's separation
from employment but aptly remains with the petitioner to prove his
allegation that his availment of the early voluntary retirement
program was, in fact, done involuntarily.
As we have explicitly ruled in Machica v. Roosevelt Service
Center, Inc.:
"The rule is that one who alleges a fact has the burden of
proving it; thus, petitioners were burdened to prove their
allegation that respondents dismissed them from their
employment. It must be stressed that the evidence to prove this
fact must be clear, positive and convincing. The rule that the
employer bears the burden of proof in illegal dismissal cases finds
no application here because the respondents deny having dismissed
the petitioners."
Verily, petitioner did not present any clear, positive or convincing
evidence in the present case to support his claims. Indeed, he never
presented any evidence at all other than his own self-serving
declarations. We must bear in mind the legal dictum that, "he who
asserts, not he who denies, must prove."69 (Citations omitted,
emphases in the original.)
Here, records show that petitioners failed to establish the fact of
their dismissal when they failed to prove that their decision to
retire is involuntary. Consequently, no constructive dismissal can
be found.
II. Petitioners were not discriminated against in terms of their
retirement package.
The 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.70 Based on both parties' evidence, petitioners arc not
covered by any agreement. There is also no dispute that petitioners
received more than what is mandated by Article 287 71 of the Labor
Code. Petitioners, however, claim that they should have received a
larger pay because BTCI has given more than what they received
to previous retirees. In essence, they claim that they were
discriminated against because BTCI did not give them the package
of 150% of monthly salary for every year of service on top of the
normal retirement package.
In Vergara v. Coca-Cola Bottlers Philippines, Inc.,72we explained
that the burden of proof that the benefit has ripened into company
practice, i.e., giving of the benefit is done over a long period of
time, and that it has been made consistently and deliberately, rests
with the employee:
To he considered as a regular company practice the employee
must prove by substantial evidence that the giving of the
benefit is done over a long period of time, and that it has been
made consistently and deliberately. Jurisprudence has not laid
down any hard-and-fast rule as to the length of time that company
practice should have been exercised in order to constitute voluntary
employer practice. The common denominator in previously
decided cases appears to be the regularity and deliberateness of the
grant of benefits over a significant period of time. It requires an
indubitable showing that the employer agreed to continue
giving the benefit knowing fully well that the employees are not
covered by any provision of the law or agreement requiring
payment thereof.In sum, the benefit must be characterized by
regularity, voluntary and deliberate intent of the employer to grant
the benefit over a considerable period of time. 73 (Citations omitted,
emphases supplied.)
We agree with the CA when it ruled that "[t]his concession given
to such an employee was not proved (sic) to be company practice
or policy such that petitioners can demand of it over and above
what has been specified in the collective bargaining agreement." 74
To prove that their claim on the additional grant of 150% of salary,
petitioners presented evidence showing that Anita
Ducay,75 Rolando Arada,76 Marcielo Rafael,77 and
Sarmiento,78 received significantly larger retirement benefits.
However, the cases of Ducay, Arada, and Rafael cannot be used as
precedents to prove this specific company practice because these
employees were not shown to be similarly situated in terms of
rank, nor are the applicable retirement packages corresponding to
their ranks alike. Also, these employees, including Sarmiento, all
retired in the same year of 2001, or only within a one-year period.
Definitely, a year cannot be considered long enough to constitute
the grant of retirement benefits to these employees as company
practice.
In fact, the affidavit79 of Anita Ducay affirms BTCI's position that
in practice, the CBA provisions govern the employees' retirement
pay. And while it may also support petitioners' allegation that in
some cases, a more generous package is given to retiring
employees higher than that provided in the CBA, the affidavit
candidly states that the retirement package given to Sarmiento,
Melchor Barreto, Marcielo Rafael, and Rolando Arada was not in
accordance with standard of merit or company practice.
It cannot therefore be disputed that petitioners already received the
benefits as specified in the CBA between BTCI and BTCI
Supervisory Union.80 Petitioner Chan, for her 21 years of service,
received a total of Pl,764,000.00 as retirement benefits following
the formula of P70,000.00 x 120% x 21 years. Petitioner Galang,
for his 29 years of service, received a total of P3,248,000.00 as
retirement benefits following the formula of P70,000.00 x 160% x
29 years.
In sum, we hold that petitioners voluntarily retired from service
and received their complete retirement package and other monetary
claims from BTCI.
WHEREFORE, the petition for review
on certiorari is DENIED. No costs. SO ORDERED.
EN BANC
November 22, 2016
G.R. No. 223625
NATIONAL TRANSMISSION CORPORATION, Petitioner 
vs. COMMISSION ON AUDIT (COA) and COA
CHAIRPERSON MICHAEL G. AGUINALDO, Respondents
DECISION
MENDOZA, J.:
This petition for certiorari under Rule 64 of the Revised Rules of
Court seeks to reverse and set aside the March 19, 2015
Decision1 and December 23, 2015 Resolution2 of the Commission
on Audit (COA) which affirmed the August 7, 2013 Decision3 of
the COA Corporate Government Sector Cluster 3 (COA-CGS).
Petitioner National Transmission Corporation (TransCo) is a
government owned and controlled corporation (GOCC) created
under Republic Act (R.A.) No. 9136 or the Electric Industry
Reform Act of 2001 (EPIRA).4 On March 1, 2003, it began to
operate and manage the power transmission system that links
power plants to the electric distribution utilities nationwide. 5
On April 1, 2003, Transco engaged the services of Benjamin B.
Miranda (Miranda) until his services were terminated on June 30,
2009. From April 1, 2003 to March 21, 2004, however, Miranda
was a contractual employee with the position of Senior Engineer
pursuant to the Service Agreement.6
In December 2007, a public bidding was conducted which awarded
the concession to the National Grid Corporation of the
Philippines (NGCP), which was eventually granted a congressional
franchise to operate the transmission network through the
enactment of R.A. No. 9511. On February 28, 2008, the Power
Sector Assets and Liabilities Management and Transco executed a
Concession Agreement with NGCP setting forth the parties' rights
and obligations for the concession.7
On January 15, 2009, TransCo turned over the management and
operation of its nationwide transmission system to NGCP. As such,
several Transco personnel, including Miranda, were terminated on
June 30, 2009.8 Miranda received his separation pay benefits in the
aggregate amount of ₱401,91 l.90 pursuant to Transco Resolution
No. TC 2009-005.9
On January 26, 2011, Transco received the Notice of
Disallowance (ND) No. 11-003-(10),10 which disallowed in audit
the amount of ₱55, 758.26 corresponding to inclusion of Miranda's
service from April 1, 2003 to April 15, 2004 in computing his
separation benefits. Aggrieved, it appealed the said ND to the
COA-CGS.
COA-CGS Ruling
In its August 7, 2013 decision, the COA-CGS upheld the ND. It
noted that the terms of the Service Agreement clearly stated that
there shall be no employer-employee relationship between Miranda
and Transco and that the services rendered are not considered or
will not be credited as government service. The COA-CGS ruled
that Transco Board Resolution No. 2009-005 cannot be used as
basis as it did not conform to the laws, rules or regulations
pertinent to the grant of separation benefits. Thus, it concluded that
the Transco Board of Directors (BOD) erred in including the
contractual employees in availing separation benefits.
Unconvinced, Transco appealed before the COA.
COA Ruling
In its March 19, 2015 decision, the COA sustained the COA-CGS
decision. It emphasized that the grant of separation benefits to
separated or displaced Transco employees as a result of the
restructuring of the electric industry must be in accordance with the
EPIRA. The COA noted that under the EPIRA and its
implementing rules and regulations (IRR), separation benefits may
be extended to casual or contractual employees, provided their
appointments were approved or attested to by the Civil Service
Commission (CSC), and they had rendered services for at least one
(1) year at the time of the effectivity of the EPIRA. It explained
that Miranda was not entitled to separation benefits for the period
in question as there was nothing in the records which would prove
that his appointment was duly approved or attested to by the CSC.
Moreover, the COA expounded that the Service Agreement
explicitly stated that no employer-employee relationship existed
between Miranda and Transco and that he was not entitled to the
benefits enjoyed by government employees. Likewise, it averred
that the BOD of Transco cannot issue resolutions contrary to the
provisions of the EPIRA. The COA highlighted Section 63 of the
EPIRA which requires that the creation of new positions and the
levels of or increase in salaries and all other emoluments and
benefits of Transco personnel shall be subject to the approval of
the President.
Lastly, the COA ruled that good faith cannot be appreciated in
favor of Miranda and the BOD of Transco. As such, it concluded
that Miranda and the BOD should be held solidarily liable for the
disallowed amount.
Transco moved for reconsideration but it was denied by the COA
in its December 23, 2015 resolution.
Hence, this present petition raising the following issues:
ISSUES
I Likewise, the COA opined that Miranda was bound to refund the
WHETHER OR NOT THE GRANT OF FINANCIAL
ASSISTANCE/SEPARATION BENEFIT TO FORMER
TRANSCO PERSONNEL ENGAGED BY VIRTUE OF
SERVICE AGREEMENTS IS PROHIBITED;
II
WHETHER OR NOT IT IS WITHIN THE TRANSCO
BOARD'S POWER TO GRANT FINANCIAL
ASSISTANCE/SEPARATION BENEFIT TO PERSONNEL
ENGAGED BY VIRTUE OF SERVICE AGREEMENTS;
AND
III
WHETHER OR NOT COA COMMITTED GRAVE ABUSE
OF DISCRETION WHEN IT AFFIRMED DECISION NO.
2013-04 AND NOTICE OF DISALLOWANCE NO. 11-
003(10). 11
Transco argues that it was within its corporate powers to grant
separation benefits to its personnel separated due to the
privatization of its operations. It explains that it was for this reason
it passed the resolution providing separation benefit to all
employees, whether appointed on permanent, contractual or casual
basis. Transco bewails that Miranda was entitled to the separation
benefits despite the provisions of the service contract, and the fact
this his appointment lacked CSC approval.
It cites Lopez v. MWSS12 (Lopez) where the Court had ruled that
therein petitioners were entitled to severance pay notwithstanding
the fact the contracts of service stated that they were not
government employees, and that the same was not approved by the
CSC. Thus, Transco argues that similar to the employees
in Lopez, Miranda was a regular employee entitled to separation
benefits. Moreover, it manifests that neither the EPIRA nor R.A.
No. 9511 limit to permanent employees the award of separation
benefits. Lastly, Transco faults the COA in not appreciating good
faith in the disbursements in question.
In its Comment,13 dated July 29, 2016, the COA countered that it
did not commit grave abuse of discretion in upholding the subject
ND as the disbursement in question was contrary to law. It
explained that Miranda's appointment from April 1, 2003 to April
15, 2004 was neither approved nor attested to by the CSC. The
COA surmised that pursuant to the EPIRA and its IRR, casual and
contractual employees are entitled to separation benefits only if
their contract of service had been approved or attested by the CSC.
It reiterated that the contract of service explicitly stated that
Miranda's services shall not be deemed as government service and
that no employer-employee relationship existed.
The COA disagreed that good faith may be appreciated in favor of
Miranda and the approving officials. It noted that the concerned
officials granted the subject benefit notwithstanding the knowledge
that, under the service agreement and the clear provisions of the
EPIRA and its IRR, Miranda was not entitled to the same.
excess of his separation benefits on the principle of solutio;
indebiti because he had no legal right to receive and retain the
questioned benefits.
In its Reply,14 dated August 30, 2016, Transco argued that the IRR
cannot expand the provisions of the EPIRA because the latter did
not qualify which employees are entitled to separation benefits-
specifically for casual and contractual employees. It opined that the
provisions of the EPIRA should govern, and, thus, all employees of
the national government service who are displaced from service as
a result of the restructuring of the electricity industry are entitled to
separation benefits.
Transco emphasized that the lack of CSC approval did not negate
the presence of an employer-employee relationship. It posited that
the approving officials acted in good faith as they were merely
implementing the provisions of the EPIRA, and wished to provide
financial assistance to its displaced employees. Further, Transco
averred that Miranda acted in good faith as it was his honest
intention that he was entitled to receive the disallowed benefits.
The Court's Ruling
The denial of the subject disbursement is anchored primarily on
two things: first, that the service contract of Miranda categorically
stated that the service shall not be deemed as government service
and that no employer-employee relationship exists; second, that as
a contractual employee, Miranda is entitled to separation benefits
under the EPIRA and its IRR only if his appointment had been
approved or attested to by the CSC.
On the other hand, Transco argued that Miranda, based on the
nature of his functions, was a regular employee entitled to
separation benefits pursuant to the EPIRA. It relied on the
pronouncements made by this Court in Lopez.
The Court finds that the COA did not gravely abuse its discretion
in upholding the questioned ND.
GOCCs employees are bound by the provisions of the GOCC 's
special charter and civil service laws
It is undisputed that Transco is a GOCC as it was created by virtue
of the EPIRA. As such, it was bound by civil service laws. 15 Under
the Constitution,16 the Civil Service Commission (CSC) is the
central personnel agency of the government, including GOCCs. It
primarily deals with matters affecting the career development,
rights and welfare of government employees.17
In addition, Transco is bound by the provisions of its charter. Thus,
a review of the law creating Transco and pertinent CSC issuances
is in order to determine the propriety of the benefits Miranda
received.
Section 63 of the EPIRA provides for the separation benefits to be
awarded to officials and employees displaced by the restructuring
electricity industry and privatization of NPC assets, to wit:
SECTION 63. Separation Benefits of Officials and Employees of
Affected Agencies. - National Government employees displaced or
separated from the service as a result of the restructuring of the
electricity industry and privatization of NPC assets pursuant to this
Act, shall be entitled to either a separation pay and other
benefits in accordance with existing laws, rules or regulations or
be entitled to avail of the privileges provided under a separation
plan which shall be one and one-half month salary for every year
of service in the government: Provided, however, That those who
avail of such privileges shall start their government service anew if
absorbed by any government-owned successor company. In no
case shall there be any diminution of benefits under the separation
plan until the full implementation of the restructuring and
privatization.
Displaced or separated personnel as a result of the privatization, if
qualified, shall be given preference in the hiring of the manpower
requirements of the privatized companies.
The salaries of employees of NPC shall continue to be exempt
from the coverage of Republic Act No. 6758, otherwise known as
"The Salary Standardization Act".
With respect to employees who are not retained by NPC, the
Government, through the Department of Labor and Employment,
shall endeavor to implement re-training, job counseling, and job
placement programs. [Emphasis supplied]
In turn, Rule 33, Section 1 of the IRR of the EPIRA provides:
SECTION 1. General Statement on Coverage. -
This Rule shall apply to all employees in the National Government
service as of 26 June 2001 regardless of position, designation or
status, who are displaced or separated from the service as a result
of the Restructuring of the electricity industry and Privatization of
NPC assets: Provided, however, That the coverage for casual or
contractual employees shall be limited to those whose
appointments were approved or attested by the Civil Service
Commission (CSC).
Thus, it is clear that based on the EPIRA and its IRR that all
employees of Transco are entitled to separation benefits, with an
additional requirement imposed on casual or contractual employees
- their appointments must have been approved or attested by the
CSC. Hence, the COA correctly disallowed Miranda's separation
benefit in the amount of ₱55,758.26 because it pertained to
services rendered under the service contract which was not attested
to by the CSC.
Lopez revisited
In an attempt to justify the award of separation benefits covering
the entire period of Miranda's employment, Transco relies on the
pronouncement of this Court in Lopez. In the said case, the Court
ruled that the lack of CSC approval or attestation alone could not
negate government employment, viz:
Petitioners are indeed regular employees of the MWSS. The
primary standard of determining regular employment is the
reasonable connection between the particular activity
performed by the employee in relation to the usual business or
trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation
to the scheme of the particular business or trade in its entirety.
Likewise, the repeated and continuing need for the
performance of the job has been deemed sufficient evidence of
the necessity, if not indispensability of the activity to the
business. Some of the petitioners had rendered more than two
decades of service to the MWSS. The continuous and repeated
rehiring of these bill collectors indicate the necessity and
desirability of their services, as well as the importance of the role
of bill collectors in the MWSS.
We agree with the CSC when it stated that the authority of
government agencies to contract services is an authority recognized
under civil service rules. However, said authority cannot be used to
circumvent the laws and deprive employees of such agencies from
receiving what is due them.
The CSC goes further to say that petitioners were unable to present
proof that their appointments were contractual in nature and
submitted to the CSC for its approval, and that submission to and
approval of the CSC are important as these show that their services
had been credited as government service. The point is of no
moment. Petitioners were able to attach only two of
such Agreements which bore the stamp of approval by the CSC
and these are simply inadequate to prove that the other agreements
were similarly approved. Even petitioners admit that subsequently
such Agreements were no longer submitted to the CSC for its
approval. Still, the failure to submit the documents for approval
of the CSC cannot militate against the existence of employer-
employee relationship between petitioners and MWSS. MWSS
cannot raise its own inaction to buttress its adverse
position.18[Emphases supplied]
In finding for therein petitioners that they were regular government
employees, the Court applied the four-fold test, and found that the
functions they performed reasonably necessary to the business of
the MWSS. For the said reasons, they were considered regular
government employees despite the absence of approval or
attestation by the CSC.
It must be remembered, however, that the rules of employment in
private practice differs from government service. 19As astutely
explained by our colleague Justice Marvic Leanen, that while a
private employer should apply the four-fold test in determining
employer-employee relationship as it is strictly bound by the labor
code, a government employer or GOCC, must, apart from applying
the four-fold test, comply with the rules of the CSC in determining
the existence of employer-employee relationship.
The difference between private and public employment is readily
apparent in our legal landscape. For one, the Labor
Code20 recognizes that the terms and conditions of employment of
all government employees, including those of GOCCs, shall be
governed by the civil service law, rules and regulations.
Particularly, in cases of GOCCs created by special law, the terms
and conditions of employment of its employees are particularly
governed by its charter.
Thus, it is high time that the pronouncements in Lopez be
abandoned.  The authorities cited in the said case pertained to
private employers. As such, it was expected that the four-fold test,
the reasonable necessity of the duties performed and other
standards set forth in the Labor Code were used in determining
employer-employee relationship. None of the cases cited involved
the government as the employer, which poses a different employer-
employee relationship from that which is present in private
employment.
Also, the Lopez case was never cited as an authority in determining
employer-employee relationship between the government and its
employees. Consequently, it is best that Lopez be abandoned
because it sets a precarious precedent as it fixes employer-
employee relationship in the public sector in disregard of civil
service laws, rules and regulations.
To summarize, employer-employee relationship in the public
sector is primarily determined by special laws, civil service laws,
rules and regulations. While the four-fold test and other standards
set forth in the labor code may aid in ascertaining the relationship
between the government and its purported employees, they cannot
be overriding factors over the conditions and requirements for
public employment as provided for by civil service laws, rules and
regulations.
Disallowed amount need not be refunded
The Court, nevertheless, finds that Transco and Miranda be
excused from refunding the disallowed amount notwithstanding the
propriety of the ND in question. In view of TransCo's reliance
on Lopez, which the Court now abandons, the Court grants
Transco' s petition pro hac vice and absolved it from any liability
in refunding the disallowed amount.
On another note, even if the ND is to be upheld, Miranda should
not be solidarily liable to refund the same.  In Silang v. COA,21 the
Court had ruled that passive recipients of the disallowed
disbursements, who acted in good faith, are absolved from
refunding the same, viz:
By way of exception, however, passive recipients or payees of
disallowed salaries, emoluments, benefits, and other allowances
need not refund such disallowed amounts if they received the
same in good faith. Stated otherwise, government officials and
employees who unwittingly received disallowed benefits or
allowances are not liable for their reimbursement if there is no
finding of bad faith. In Lumayna v. COA, the Court declared that
notwithstanding the disallowance of benefits by COA, the affected
personnel who received the said benefits in good faith should not
be ordered to refund the disallowed benefits. Xxx
In this case, the majority of the petitioners are the LGU of Tayabas,
Quezon's rank-and-file employees and bona fide members of UNG
KAT (named-below) who received the 2008 and 2009 CNA
Incentives on the honest belief that UNGKAT was fully clothed
with the authority to represent them in the CNA negotiations. As
the records bear out, there was no indication that these rank-and-
file employees, except the UNGKAT officers or members of its
Board of Directors named below, had participated in any of the
negotiations or were, in any manner, privy to the internal workings
related to the approval of said incentives; hence, under such
limitation, the reasonable conclusion is that they were mere passive
recipients who cannot be charged with knowledge of any
irregularity attending the disallowed disbursement. Verily, good
faith is anchored on an honest belief that one is legally entitled
to the benefit, as said employees did so believe in this
case. Therefore, said petitioners should not be held liable to refund
what they had unwittingly received. [Emphases supplied]
In the present case, Miranda was a mere passive recipient as he had
no involvement when the BOD passed the resolution22 granting
separation benefits to all Transco employees. Thus, Miranda acted
in good faith as he merely received the benefits to which he
believed he was entitled to.
WHEREFORE, the petition is GRANTED pro hac vice. The
March 19, 2015 Decision and December 23, 2015 Resolution of
the Commission on Audit are REVERSED and SET ASIDE. The
Notice of Disallowance No. 11-003-(10) is DISMISSED.
SO ORDERED.
EN BANC
G.R. No. 192571               July 23, 2013
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A.
TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T.
YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, Petitioners,  be hereinafter promulgated.
vs. PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated December 10,2009 and Resolution3 dated June 9,
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 101045
which pronounced that the National Labor Relations Commission
(NLRC) did not gravely abuse its discretion when it ruled that
respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally
dismissed from her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines
(Abbott) caused the publication in a major broadsheet newspaper
of its need for a Medical and Regulatory Affairs Manager
(Regulatory Affairs Manager) who would: (a) be responsible for
drug safety surveillance operations, staffing, and budget; (b) lead
the development and implementation of standard operating
procedures/policies for drug safety surveillance and vigilance; and
(c) act as the primary interface with internal and external customers
regarding safety operations and queries.4 Alcaraz - who was then a
Regulatory Affairs and Information Manager at Aventis Pasteur
Philippines, Incorporated (another pharmaceutical company like
Abbott) – showed interest and submitted her application on
October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the
abovementioned position which was an item under the company’s
Hospira Affiliate Local Surveillance Unit (ALSU) department. 6 In
Abbott’s offer sheet.7 it was stated that Alcaraz was to be employed
on a probationary basis.8 Later that day, she accepted the said offer
and received an electronic mail (e-mail) from Abbott’s
Recruitment Officer, petitioner Teresita C. Bernardo (Bernardo),
confirming the same. Attached to Bernardo’s e-mail were Abbott’s
organizational chart and a job description of Alcaraz’s work. 9
On February 12, 2005, Alcaraz signed an employment contract
which stated, inter alia, that she was to be placed on probation for a
period of six (6) months beginning February 15, 2005 to August
14, 2005. The said contract was also signed by Abbott’s General
Manager, petitioner Edwin Feist (Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment
requirements, you are hereby appointed as follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : ₱110,000.00/ month
It is understood that you agree to abide by all existing policies,
rules and regulations of the company, as well as those, which may
Unless renewed, probationary appointment expires on the date
indicated subject to earlier termination by the Company for any
justifiable reason.
If you agree to the terms and conditions of your employment,
please signify your conformity below and return a copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcaraz’s pre-employment orientation, petitioner Allan G.
Almazar (Almazar), Hospira’s Country Transition Manager,
briefed her on her duties and responsibilities as Regulatory Affairs
Manager, stating that: (a) she will handle the staff of Hospira
ALSU and will directly report to Almazar on matters regarding
Hopira’s local operations, operational budget, and performance
evaluation of the Hospira ALSU Staff who are on probationary
status; (b) she must implement Abbott’s Code of Good Corporate
Conduct (Code of Conduct), office policies on human resources
and finance, and ensure that Abbott will hire people who are fit in
the organizational discipline; (c) petitioner Kelly Walsh (Walsh),
Manager of the Literature Drug Surveillance Drug Safety of
Hospira, will be her immediate supervisor; (d) she should always
coordinate with Abbott’s human resource officers in the
management and discipline of the staff; (e) Hospira ALSU will
spin off from Abbott in early 2006 and will be officially
incorporated and known as Hospira, Philippines. In the interim,
Hospira ALSU operations will still be under Abbott’s
management, excluding the technical aspects of the operations
which is under the control and supervision of Walsh; and (f) the
processing of information and/or raw material data subject of
Hospira ALSU operations will be strictly confined and controlled
under the computer system and network being maintained and
operated from the United States. For this purpose, all those
involved in Hospira ALSU are required to use two identification
cards: one, to identify them as Abbott’s employees and another, to
identify them as Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa),
Abbott’s Human Resources (HR) Director, sent Alcaraz an e-mail
which contained an explanation of the procedure for evaluating the
performance of probationary employees and further indicated that
Abbott had only one evaluation system for all of its employees.
Alcaraz was also given copies of Abbott’s Code of Conduct and
Probationary Performance Standards and Evaluation (PPSE) and
Performance Excellence Orientation Modules (Performance
Modules) which she had to apply in line with her task of evaluating
the Hospira ALSU staff.12
Abbott’s PPSE procedure mandates that the job performance of a
probationary employee should be formally reviewed and discussed
with the employee at least twice: first on the third month and
second on the fifth month from the date of employment. The
necessary Performance Improvement Plan should also be made
during the third-month review in case of a gap between the
employee’s performance and the standards set. These performance
standards should be discussed in detail with the employee within
the first two (2) weeks on the job. It was equally required that a
signed copy of the PPSE form must be submitted to Abbott’s
Human Resources Department (HRD) and shall serve as
documentation of the employee’s performance during his/her
probationary period. This shall form the basis for recommending
the confirmation or termination of the probationary employment. 13
During the course of her employment, Alcaraz noticed that some of
the staff had disciplinary problems. Thus, she would reprimand
them for their unprofessional behavior such as non-observance of
the dress code, moonlighting, and disrespect of Abbott officers.
However, Alcaraz’s method of management was considered by
Walsh to be "too strict."14 Alcaraz approached Misa to discuss
these concerns and was told to "lie low" and let Walsh handle the
matter. Misa even assured her that Abbott’s HRD would support
her in all her management decisions.15
On April 12, 2005, Alcaraz received an e-mail from Misa
requesting immediate action on the staff’s performance evaluation
as their probationary periods were about to end. This Alcaraz
eventually submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille
Terrible (Terrible), Abbott’s former HR Director, to discuss certain
issues regarding staff performance standards. In the course thereof,
Alcaraz accidentally saw a printed copy of an e-mail sent by Walsh
to some staff members which essentially contained queries
regarding the former’s job performance. Alcaraz asked if Walsh’s
action was the normal process of evaluation. Terrible said that it
was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and
Terrible where she was informed that she failed to meet the
regularization standards for the position of Regulatory Affairs
Manager.18 Thereafter, Walsh and Terrible requested Alcaraz to
tender her resignation, else they be forced to terminate her services.
She was also told that, regardless of her choice, she should no
longer report for work and was asked to surrender her office
identification cards. She requested to be given one week to decide
on the same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude
Gonzales (Gonzales), that she would be on leave for that day.
However, Gonzales told her that Walsh and Terrible already
announced to the whole Hospira ALSU staff that Alcaraz already
resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally
handed to Alcaraz a letter stating that her services had been
terminated effective May 19, 2005.21 The letter detailed the reasons
for Alcaraz’s termination – particularly, that Alcaraz: (a) did not
manage her time effectively; (b) failed to gain the trust of her staff
and to build an effective rapport with them; (c) failed to train her
staff effectively; and (d) was not able to obtain the knowledge and
ability to make sound judgments on case processing and article
review which were necessary for the proper performance of her
duties.22 On May 27, 2005, Alcaraz received another copy of the
said termination letter via registered mail. 23
Alcaraz felt that she was unjustly terminated from her employment
and thus, filed a complaint for illegal dismissal and damages
against Abbott and its officers, namely, Misa, Bernardo, Almazar,
Walsh, Terrible, and Feist.24 She claimed that she should have
already been considered as a regular and not a probationary
employee given Abbott’s failure to inform her of the reasonable
standards for her regularization upon her engagement as required
under Article 29525 of the Labor Code. In this relation, she
contended that while her employment contract stated that she was
to be engaged on a probationary status, the same did not indicate
the standards on which her regularization would be based. 26 She
further averred that the individual petitioners maliciously connived
to illegally dismiss her when: (a) they threatened her with
termination; (b) she was ordered not to enter company premises
even if she was still an employee thereof; and (c) they publicly
announced that she already resigned in order to humiliate her. 27
On the contrary, petitioners maintained that Alcaraz was validly
terminated from her probationary employment given her failure to
satisfy the prescribed standards for her regularization which were
made known to her at the time of her engagement. 28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s
complaint for lack of merit.
The LA rejected Alcaraz’s argument that she was not informed of
the reasonable standards to qualify as a regular employee
considering her admissions that she was briefed by Almazar on her
work during her pre-employment orientation meeting30 and that she
received copies of Abbott’s Code of Conduct and Performance
Modules which were used for evaluating all types of Abbott
employees.31 As Alcaraz was unable to meet the standards set by
Abbott as per her performance evaluation, the LA ruled that the
termination of her probationary employment was justified. 32 Lastly,
the LA found that there was no evidence to conclude that Abbott’s
officers and employees acted in bad faith in terminating Alcaraz’s
employment.33
Displeased with the LA’s ruling, Alcaraz filed an appeal with the
National Labor Relations Commission (NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a
Decision,34 annulling and setting aside the LA’s ruling, the
dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March
2006 [sic] is hereby reversed, annulled and set aside and judgment
is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to
have committed illegal dismissal;
2. Respondents are ordered to immediately reinstate complainant to
her former position without loss of seniority rights immediately
upon receipt hereof;
3. To jointly and severally pay complainant backwages computed
from 16 May 2005 until finality of this decision. As of the date
hereof the backwages is computed at
a. Backwages for 15 months - PhP 1,650,000.00
b. 13th month pay - 110,000.00
TOTAL PhP 1,760,000.00
4. Respondents are ordered to pay complainant moral damages of
₱50,000.00 and exemplary damages of ₱50,000.00.
5. Respondents are also ordered to pay attorney’s fees of 10% of
the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was
no evidence showing that Alcaraz had been apprised of her
probationary status and the requirements which she should have
complied with in order to be a regular employee. 36 It held that
Alcaraz’s receipt of her job description and Abbott’s Code of
Conduct and Performance Modules was not equivalent to her being
actually informed of the performance standards upon which she
should have been evaluated on.37 It further observed that Abbott
did not comply with its own standard operating procedure in
evaluating probationary employees.38 The NLRC was also not
convinced that Alcaraz was terminated for a valid cause given that
petitioners’ allegation of Alcaraz’s "poor performance" remained
unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by
the NLRC in a Resolution dated July 31, 2007.40
Aggrieved, petitioners filed with the CA a Petition for Certiorari
with Prayer for Issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction, docketed as CA G.R. SP No.
101045 (First CA Petition), alleging grave abuse of discretion on
the part of NLRC when it ruled that Alcaraz was illegally
dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the
execution of the NLRC’s Decision before the LA, which
petitioners strongly opposed. The LA denied the said motion in an
Order dated July 8, 2008 which was, however, eventually reversed
on appeal by the NLRC.42 Due to the foregoing, petitioners filed
another Petition for Certiorari with the CA, docketed as CA G.R.
SP No. 111318 (Second CA Petition), assailing the propriety of the
execution of the NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision 44 dated
December 10, 2009, affirmed the ruling of the NLRC and held that
the latter did not commit any grave abuse of discretion in finding
that Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her
employment of the reasonable standards under which she could
qualify as a regular employee.45 This was based on its examination
of the employment contract which showed that the same did not
contain any standard of performance or any stipulation that Alcaraz
shall undergo a performance evaluation before she could qualify as
a regular employee.46 It also found that Abbott was unable to prove
that there was any reasonable ground to terminate Alcaraz’s
employment.47 Abbott moved for the reconsideration of the
aforementioned ruling which was, however, denied by the CA in a
Resolution48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution
dated May 18, 2010 (May 18, 2010 Resolution) and ruled that the
NLRC was correct in upholding the execution of the NLRC
Decision.49 Thus, petitioners filed a motion for reconsideration.
While the petitioners’ motion for reconsideration of the CA’s May
18, 2010 Resolution was pending, Alcaraz again moved for the
issuance of a writ of execution before the LA. On June 7, 2010,
petitioners received the LA’s order granting Alcaraz’s motion for
execution which they in turn appealed to the NLRC – through a
Memorandum of Appeal dated June 16, 2010 (June 16, 2010
Memorandum of Appeal ) – on the ground that the implementation
of the LA’s order would render its motion for reconsideration moot
and academic.50
Meanwhile, petitioners’ motion for reconsideration of the CA’s
May 18, 2010 Resolution in the Second CA Petition was denied via
a Resolution dated October 4, 2010.51 This attained finality on
January 10, 2011 for petitioners’ failure to timely appeal the
same.52 Hence, as it stands, only the issues in the First CA petition
are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz
also alleges that petitioners were guilty of forum shopping when
they filed the Second CA Petition pending the resolution of their
motion for reconsideration of the CA’s December 10, 2009
Decision i.e., the decision in the First CA Petition. 53 She also
contends that petitioners have not complied with the certification
requirement under Section 5, Rule 7 of the Rules of Court when
they failed to disclose in the instant petition the filing of the June
16, 2010 Memorandum of Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Court’s resolution:
(a) whether or not petitioners are guilty of forum shopping and
have violated the certification requirement under Section 5, Rule 7
of the Rules of Court; (b) whether or not Alcaraz was sufficiently
informed of the reasonable standards to qualify her as a regular
employee; (c) whether or not Alcaraz was validly terminated from
her employment; and (d) whether or not the individual petitioners
herein are liable.
The Court’s Ruling
A. Forum Shopping and Violation of Section 5, Rule 7 of the Rules
of Court.
At the outset, it is noteworthy to mention that the prohibition
against forum shopping is different from a violation of the
certification requirement under Section 5, Rule 7 of the Rules of
Court. In Sps. Ong v. CA,55 the Court explained that:
x x x The distinction between the prohibition against forum
shopping and the certification requirement should by now be too
elementary to be misunderstood. To reiterate, compliance with the
certification against forum shopping is separate from and
independent of the avoidance of the act of forum shopping itself.
There is a difference in the treatment between failure to comply
with the certification requirement and violation of the prohibition
against forum shopping not only in terms of imposable sanctions
but also in the manner of enforcing them. The former constitutes
sufficient cause for the dismissal without prejudice to the filing of
the complaint or initiatory pleading upon motion and after hearing,
while the latter is a ground for summary dismissal thereof and for
direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files
multiple suits involving the same parties, either simultaneously or
successively, to secure a favorable judgment. It exists where the
elements of litis pendentia are present, namely: (a) identity of
parties, or at least such parties who represent the same interests in
both actions; (b) identity of rights asserted and relief prayed for,
the relief being founded on the same facts; and (c) the identity with
respect to the two preceding particulars in the two (2) cases is such
that any judgment that may be rendered in the pending case,
regardless of which party is successful, would amount to res
judicata in the other case.57
In this case, records show that, except for the element of identity of
parties, the elements of forum shopping do not exist. Evidently, the
First CA Petition was instituted to question the ruling of the NLRC
that Alcaraz was illegally dismissed. On the other hand, the Second
CA Petition pertains to the propriety of the enforcement of the
judgment award pending the resolution of the First CA Petition and
the finality of the decision in the labor dispute between Alcaraz
and the petitioners. Based on the foregoing, a judgment in the
Second CA Petition will not constitute res judicata insofar as the
First CA Petition is concerned. Thus, considering that the two
petitions clearly cover different subject matters and causes of
action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners
violated the certification requirement under Section 5, Rule 7 of
the Rules of Court58 by not disclosing the fact that it filed the June
16, 2010 Memorandum of Appeal before the NLRC in the instant
petition.
In this regard, Section 5(b), Rule 7 of the Rules of Court requires
that a plaintiff who files a case should provide a complete
statement of the present status of any pending case if the latter
involves the same issues as the one that was filed. If there is no
such similar pending case, Section 5(a) of the same rule provides
that the plaintiff is obliged to declare under oath that to the best of
his knowledge, no such other action or claim is pending.
Records show that the issues raised in the instant petition and those
in the June 16, 2010 Memorandum of Appeal filed with the NLRC
likewise cover different subject matters and causes of action. In
this case, the validity of Alcaraz’s dismissal is at issue whereas in
the said Memorandum of Appeal, the propriety of the issuance of a
writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to
disclose in the present petition the filing of their June 16, 2010
Memorandum of Appeal with the NLRC. In any event, considering
that the issue on the propriety of the issuance of a writ of execution
had been resolved in the Second CA Petition – which in fact had
already attained finality – the matter of disclosing the June 16,
2010 Memorandum of Appeal is now moot and academic.
Having settled the foregoing procedural matter, the Court now
proceeds to resolve the substantive issues.
B. Probationary employment; grounds for termination.
A probationary employee, like a regular employee, enjoys security
of tenure. However, in cases of probationary employment, aside
from just or authorized causes of termination, an additional ground
is provided under Article 295 of the Labor Code, i.e., the
probationary employee may also be terminated for failure to
qualify as a regular employee in accordance with the reasonable
standards made known by the employer to the employee at the time
of the engagement.59 Thus, the services of an employee who has
been engaged on probationary basis may be terminated for any of
the following: (a) a just or (b) an authorized cause; and (c) when he
fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer. 60
Corollary thereto, Section 6(d), Rule I, Book VI of the
Implementing Rules of the Labor Code provides that if the
employer fails to inform the probationary employee of the
reasonable standards upon which the regularization would be based
on at the time of the engagement, then the said employee shall be
deemed a regular employee, viz.:
(d) In all cases of probationary employment, the employer shall
make known to the employee the standards under which he will
qualify as a regular employee at the time of his engagement. Where
no standards are made known to the employee at that time, he shall
be deemed a regular employee.
In other words, the employer is made to comply with two (2)
requirements when dealing with a probationary employee: first, the
employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such
communication at the time of the probationary employee’s
engagement. If the employer fails to comply with either, the
employee is deemed as a regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made
known the standards that would qualify a probationary employee to
be a regular employee when it has exerted reasonable efforts to
apprise the employee of what he is expected to do or accomplish
during the trial period of probation. This goes without saying that
the employee is sufficiently made aware of his probationary status
as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in
nature, for instance, in the case of maids, cooks, drivers, or
messengers.61 Also, in Aberdeen Court, Inc. v. Agustin,62 it has
been held that the rule on notifying a probationary employee of the
standards of regularization should not be used to exculpate an
employee who acts in a manner contrary to basic knowledge and
common sense in regard to which there is no need to spell out a
policy or standard to be met. In the same light, an employee’s
failure to perform the duties and responsibilities which have been
clearly made known to him constitutes a justifiable basis for a
probationary employee’s non-regularization.
In this case, petitioners contend that Alcaraz was terminated
because she failed to qualify as a regular employee according to
Abbott’s standards which were made known to her at the time of
her engagement. Contrarily, Alcaraz claims that Abbott never
apprised her of these standards and thus, maintains that she is a
regular and not a mere probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had
indeed complied with the above-stated requirements. This
conclusion is largely impelled by the fact that Abbott clearly
conveyed to Alcaraz her duties and responsibilities as Regulatory
Affairs Manager prior to, during the time of her engagement, and
the incipient stages of her employment. On this score, the Court
finds it apt to detail not only the incidents which point out to the
efforts made by Abbott but also those circumstances which would
show that Alcaraz was well-apprised of her employer’s
expectations that would, in turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major
broadsheet newspaper of its need for a Regulatory Affairs
Manager, indicating therein the job description for as well as the
duties and responsibilities attendant to the aforesaid position; this
prompted Alcaraz to submit her application to Abbott on October
4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated that
Alcaraz was to be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract
which specifically stated, inter alia, that she was to be placed on
probation for a period of six (6) months beginning February 15,
2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer,
Bernardo sent her copies of Abbott’s organizational structure and
her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation
where Almazar informed her that she had to implement Abbott’s
Code of Conduct and office policies on human resources and
finance and that she would be reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part
of her orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct and
Performance Modules from Misa who explained to her the
procedure for evaluating the performance of probationary
employees; she was further notified that Abbott had only one
evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another
pharmaceutical company and had admitted to have an "extensive
training and background" to acquire the necessary skills for her
job.63
Considering the totality of the above-stated circumstances, it
cannot, therefore, be doubted that Alcaraz was well-aware that her
regularization would depend on her ability and capacity to fulfill
the requirements of her position as Regulatory Affairs Manager
and that her failure to perform such would give Abbott a valid
cause to terminate her probationary employment.
Verily, basic knowledge and common sense dictate that the
adequate performance of one’s duties is, by and of itself, an
inherent and implied standard for a probationary employee to be
regularized; such is a regularization standard which need not be
literally spelled out or mapped into technical indicators in every
case. In this regard, it must be observed that the assessment of
adequate duty performance is in the nature of a management
prerogative which when reasonably exercised – as Abbott did in
this case – should be respected. This is especially true of a
managerial employee like Alcaraz who was tasked with the vital
responsibility of handling the personnel and important matters of
her department.
In fine, the Court rules that Alcaraz’s status as a probationary
employee and her consequent dismissal must stand. Consequently,
in holding that Alcaraz was illegally dismissed due to her status as
a regular and not a probationary employee, the Court finds that the
NLRC committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on the
premise that Alcaraz’s receipt of her job description and Abbott’s
Code of Conduct and Performance Modules was not equivalent to
being actually informed of the performance standards upon which
she should have been evaluated on.64 It, however, overlooked the
legal implication of the other attendant circumstances as detailed
herein which should have warranted a contrary finding that Alcaraz
was indeed a probationary and not a regular employee – more
particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same
would lead to her non-regularization and eventually, her
termination.
Accordingly, by affirming the NLRC’s pronouncement which is
tainted with grave abuse of discretion, the CA committed a
reversible error which, perforce, necessitates the reversal of its
decision.
C. Probationary employment; termination procedure.
A different procedure is applied when terminating a probationary
employee; the usual two-notice rule does not govern. 65 Section 2,
Rule I, Book VI of the Implementing Rules of the Labor Code
states that "if the termination is brought about by the x x x failure
of an employee to meet the standards of the employer in case of
probationary employment, it shall be sufficient that a written notice
is served the employee, within a reasonable time from the effective
date of termination."
As the records show, Alcaraz's dismissal was effected through a
letter dated May 19, 2005 which she received on May 23, 2005 and
again on May 27, 2005. Stated therein were the reasons for her
termination, i.e., that after proper evaluation, Abbott determined
that she failed to meet the reasonable standards for her
regularization considering her lack of time and people management
and decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs
Manager.66 Undeniably, this written notice sufficiently meets the
criteria set forth above, thereby legitimizing the cause and manner
of Alcaraz’s dismissal as a probationary employee under the
parameters set by the Labor Code.67
D. Employer’s violation of company policy and procedure.
Nonetheless, despite the existence of a sufficient ground to
terminate Alcaraz’s employment and Abbott’s compliance with the
Labor Code termination procedure, it is readily apparent that
Abbott breached its contractual obligation to Alcaraz when it failed
to abide by its own procedure in evaluating the performance of a
probationary employee.
Veritably, a company policy partakes of the nature of an implied
contract between the employer and employee. In Parts Depot, Inc.
v. Beiswenger,68 it has been held that:
Employer statements of policy . . . can give rise to contractual
rights in employees without evidence that the parties mutually
agreed that the policy statements would create contractual rights in
the employee, and, hence, although the statement of policy is
signed by neither party, can be unilaterally amended by the
employer without notice to the employee, and contains no
reference to a specific employee, his job description or
compensation, and although no reference was made to the policy
statement in pre-employment interviews and the employee does not
learn of its existence until after his hiring. Toussaint, 292 N.W .2d
at 892. The principle is akin to estoppel. Once an employer
establishes an express personnel policy and the employee continues
to work while the policy remains in effect, the policy is deemed an
implied contract for so long as it remains in effect. If the employer
unilaterally changes the policy, the terms of the implied contract
are also thereby changed.  (Emphasis and underscoring supplied.)
Hence, given such nature, company personnel policies create an
obligation on the part of both the employee and the employer to
abide by the same.
Records show that Abbott’s PPSE procedure mandates, inter alia,
that the job performance of a probationary employee should be
formally reviewed and discussed with the employee at least twice:
first on the third month and second on the fifth month from the
date of employment. Abbott is also required to come up with a
Performance Improvement Plan during the third month review to
bridge the gap between the employee’s performance and the
standards set, if any.69 In addition, a signed copy of the PPSE form
should be submitted to Abbott’s HRD as the same would serve as
basis for recommending the confirmation or termination of the
probationary employment.70
In this case, it is apparent that Abbott failed to follow the above-
stated procedure in evaluating Alcaraz. For one, there lies a hiatus
of evidence that a signed copy of Alcaraz’s PPSE form was
submitted to the HRD. It was not even shown that a PPSE form
was completed to formally assess her performance. Neither was the
performance evaluation discussed with her during the third and
fifth months of her employment. Nor did Abbott come up with the
necessary Performance Improvement Plan to properly gauge
Alcaraz’s performance with the set company standards.
While it is Abbott’s management prerogative to promulgate its
own company rules and even subsequently amend them, this right
equally demands that when it does create its own policies and
thereafter notify its employee of the same, it accords upon itself the
obligation to faithfully implement them. Indeed, a contrary
interpretation would entail a disharmonious relationship in the
work place for the laborer should never be mired by the uncertainty
of flimsy rules in which the latter’s labor rights and duties would,
to some extent, depend.
In this light, while there lies due cause to terminate Alcaraz’s
probationary employment for her failure to meet the standards
required for her regularization, and while it must be further pointed
out that Abbott had satisfied its statutory duty to serve a written
notice of termination, the fact that it violated its own company
procedure renders the termination of Alcaraz’s employment
procedurally infirm, warranting the payment of nominal damages.
A further exposition is apropos.
Case law has settled that an employer who terminates an employee
for a valid cause but does so through invalid procedure is liable to
pay the latter nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where
the dismissal is for a just cause, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual.
However, the employer should indemnify the employee for the
violation of his statutory rights.72 Thus, in Agabon, the employer
was ordered to pay the employee nominal damages in the amount
of ₱30,000.00.73
Proceeding from the same ratio, the Court modified Agabon in the
case of Jaka Food Processing Corporation v. Pacot (Jaka)74 where it
created a distinction between procedurally defective dismissals due
to a just cause, on one hand, and those due to an authorized cause,
on the other.
It was explained that if the dismissal is based on a just cause under
Article 282 of the Labor Code (now Article 296) but the employer
failed to comply with the notice requirement, the sanction to be
imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the
employee; if the dismissal is based on an authorized cause under
Article 283 (now Article 297) but the employer failed to comply
with the notice requirement, the sanction should be stiffer because
the dismissal process was initiated by the employer’s exercise of
his management prerogative.75 Hence, in Jaka, where the employee
was dismissed for an authorized cause of retrenchment 76 – as
contradistinguished from the employee in Agabon who was
dismissed for a just cause of neglect of duty77 – the Court ordered
the employer to pay the employee nominal damages at the higher
amount of ₱50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed
from the necessity to deter employers from future violations of the
statutory due process rights of employees.78 In similar regard, the
Court deems it proper to apply the same principle to the case at bar
for the reason that an employer’s contractual breach of its own
company procedure – albeit not statutory in source – has the
parallel effect of violating the laborer’s rights. Suffice it to state,
the contract is the law between the parties and thus, breaches of the
same impel recompense to vindicate a right that has been violated.
Consequently, while the Court is wont to uphold the dismissal of
Alcaraz because a valid cause exists, the payment of nominal
damages on account of Abbott’s contractual breach is warranted in
accordance with Article 2221 of the Civil Code. 79
Anent the proper amount of damages to be awarded, the Court
observes that Alcaraz’s dismissal proceeded from her failure to
comply with the standards required for her regularization. As such,
it is undeniable that the dismissal process was, in effect, initiated
by an act imputable to the employee, akin to dismissals due to just
causes under Article 296 of the Labor Code. Therefore, the Court
deems it appropriate to fix the amount of nominal damages at the
amount of ₱30,000.00, consistent with its rulings in both Agabon
and Jaka.
E. Liability of individual petitioners as corporate officers.
It is hornbook principle that personal liability of corporate
directors, trustees or officers attaches only when: (a) they assent to
a patently unlawful act of the corporation, or when they are guilty
of bad faith or gross negligence in directing its affairs, or when
there is a conflict of interest resulting in damages to the
corporation, its stockholders or other persons; (b) they consent to
the issuance of watered down stocks or when, having knowledge of
such issuance, do not forthwith file with the corporate secretary
their written objection; (c) they agree to hold themselves
personally and solidarily liable with the corporation; or (d) they are
made by specific provision of law personally answerable for their
corporate action.80
In this case, Alcaraz alleges that the individual petitioners acted in
bad faith with regard to the supposed crude manner by which her
probationary employment was terminated and thus, should be held
liable together with Abbott. In the same vein, she further attributes
the loss of some of her remaining belongings to them.81
Alcaraz’s contention fails to persuade.
A judicious perusal of the records show that other than her
unfounded assertions on the matter, there is no evidence to support
the fact that the individual petitioners herein, in their capacity as
Abbott’s officers and employees, acted in bad faith or were
motivated by ill will in terminating
Alcaraz’s services. The fact that Alcaraz was made to resign and
not allowed to enter the workplace does not necessarily indicate
bad faith on Abbott’s part since a sufficient ground existed for the
latter to actually proceed with her termination. On the alleged loss
of her personal belongings, records are bereft of any showing that
the same could be attributed to Abbott or any of its officers. It is a
well-settled rule that bad faith cannot be presumed and he who
alleges bad faith has the onus of proving it. All told, since Alcaraz
failed to prove any malicious act on the part of Abbott or any of its
officers, the Court finds the award of moral or exemplary damages
unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated
December 10, 2009 and Resolution dated June 9, 2010 of the Court
of Appeals in CA-G.R. SP No. 101045 are hereby REVERSED
and SET ASIDE. Accordingly, the Decision dated March 30, 2006
of the Labor Arbiter is REINSTATED with the MODIFICATION
that petitioner Abbott Laboratories, Philippines be ORDERED to
pay respondent Pearlie Ann F. Alcaraz nominal damages in the
amount of ₱30,000.00 on account of its breach of its own company
procedure.
SO ORDERED.
THIRD DIVISION
G.R. No. 185829               April 25, 2012
ARMANDO ALILING, Petitioner,  Nonong
vs. JOSE B. FELICIANO, MANUEL F. SAN MATEO III,
JOSEPH R. LARIOSA, and WIDE WIDE WORLD EXPRESS
CORPORATION, Respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and
seeks to set aside the July 3, 2008 Decision1 and December 15,
2008 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No.
101309, entitled Armando Aliling v. National Labor Relations
Commission, Wide Wide World Express Corporation, Jose B.
Feliciano, Manuel F. San Mateo III and Joseph R. Lariosa. The
assailed issuances modified the Resolutions dated May 31,
20073 and August 31, 20074 rendered by the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 00-10-
11166-2004, affirming the Decision dated April 25, 20065 of the
Labor Arbiter.
The Facts
Via a letter dated June 2, 2004,6 respondent Wide Wide World
Express Corporation (WWWEC) offered to employ petitioner
Armando Aliling (Aliling) as "Account Executive (Seafreight
Sales)," with the following compensation package: a monthly
salary of PhP 13,000, transportation allowance of PhP 3,000,
clothing allowance of PhP 800, cost of living allowance of PhP
500, each payable on a per month basis and a 14th month pay
depending on the profitability and availability of financial
resources of the company. The offer came with a six (6)-month
probation period condition with this express caveat: "Performance
during [sic] probationary period shall be made as basis for
confirmation to Regular or Permanent Status."
On June 11, 2004, Aliling and WWWEC inked an Employment
Contract7 under the following terms, among others:
 Conversion to regular status shall be determined on the
basis of work performance; and
 Employment services may, at any time, be terminated for
just cause or in accordance with the standards defined at
the time of engagement.8
Training then started. However, instead of a Seafreight Sale
assignment, WWWEC asked Aliling to handle Ground Express
(GX), a new company product launched on June 18, 2004
involving domestic cargo forwarding service for Luzon. Marketing
this product and finding daily contracts for it formed the core of
Aliling’s new assignment.
Barely a month after, Manuel F. San Mateo III (San Mateo),
WWWEC Sales and Marketing Director, emailed Aliling 9to
express dissatisfaction with the latter’s performance, thus:
Armand,
My expectations is [sic] that GX Shuttles should be 80% full by the
3rd week (August 5) after launch (July 15). Pls. make that happen.
It has been more than a month since you came in. I am expecting
sales to be pumping in by now. Thanks.
Thereafter, in a letter of September 25, 2004, 10 Joseph R. Lariosa
(Lariosa), Human Resources Manager of WWWEC, asked Aliling
to report to the Human Resources Department to explain his
absence taken without leave from September 20, 2004.
Aliling responded two days later. He denied being absent on the
days in question, attaching to his reply-letter11 a copy of his
timesheet12 which showed that he worked from September 20 to 24,
2004. Aliling’s explanation came with a query regarding the
withholding of his salary corresponding to September 11 to 25,
2004.
In a separate letter dated September 27, 2004, 13 Aliling wrote San
Mateo stating: "Pursuant to your instruction on September 20,
2004, I hereby tender my resignation effective October 15, 2004."
While WWWEC took no action on his tender, Aliling nonetheless
demanded reinstatement and a written apology, claiming in a
subsequent letter dated October 1, 200414 to management that San
Mateo had forced him to resign.
Lariosa’s response-letter of October 1, 2004,15 informed Aliling
that his case was still in the process of being evaluated. On October
6, 2004,16 Lariosa again wrote, this time to advise Aliling of the
termination of his services effective as of that date owing to his
"non-satisfactory performance" during his probationary period.
Records show that Aliling, for the period indicated, was paid his
outstanding salary which consisted of:
PhP 4,988.18 (salary for the September 25, 2004 payroll)
1,987.28 (salary for 4 days in October 2004)
-----------------
-
PhP 6,975.46 Total
Earlier, however, or on October 4, 2004, Aliling filed a
Complaint17 for illegal dismissal due to forced resignation,
nonpayment of salaries as well as damages with the NLRC against
WWWEC. Appended to the complaint was Aliling’s Affidavit
dated November 12, 2004,18 in which he stated: "5. At the time of
my engagement, respondents did not make known to me the
standards under which I will qualify as a regular employee."
Refuting Aliling’s basic posture, WWWEC stated in its Position
Paper dated November 22, 200419 that, in addition to the letter-offer
and employment contract adverted to, WWWEC and Aliling have
signed a letter of appointment20 on June 11, 2004 containing the
following terms of engagement:
Additionally, upon the effectivity of your probation, you and your
immediate superior are required to jointly define your objectives
compared with the job requirements of the position. Based on the
pre-agreed objectives, your performance shall be reviewed on the
3rd month to assess your competence and work attitude. The 5th
month Performance Appraisal shall be the basis in elevating or
confirming your employment status from Probationary to Regular.
Failure to meet the job requirements during the probation stage
means that your services may be terminated without prior notice
and without recourse to separation pay.
WWWEC also attached to its Position Paper a memo dated
September 20, 200421 in which San Mateo asked Aliling to explain
why he should not be terminated for failure to meet the expected
job performance, considering that the load factor for the GX
Shuttles for the period July to September was only 0.18% as
opposed to the allegedly agreed upon load of 80% targeted for
August 5, 2004. According to WWWEC, Aliling, instead of
explaining himself, simply submitted a resignation letter.
In a Reply-Affidavit dated December 13, 2004,22 Aliling denied
having received a copy of San Mateo’s September 20, 2004 letter.
Issues having been joined, the Labor Arbiter issued on April 25,
200623 a Decision declaring Aliling’s termination as unjustified. In
its pertinent parts, the decision reads:
The grounds upon which complainant’s dismissal was based did
not conform not only the standard but also the compliance required
under Article 281 of the Labor Code, Necessarily, complainant’s
termination is not justified for failure to comply with the mandate
the law requires. Respondents should be ordered to pay salaries
corresponding to the unexpired portion of the contract of
employment and all other benefits amounting to a total of THIRTY
FIVE THOUSAND EIGHT HUNDRED ELEVEN PESOS
(P35,811.00) covering the period from October 6 to December 7,
2004, computed as follows:
Unexpired Portion of the Contract:
Basic Salary P13,000.00
Transportation 3,000.00
Clothing
800.00
Allowance
ECOLA 500.00
-----------------
P17,300.00
10/06/04 – 12/07/04
P17,300.00 x 2.7 mos. = P35,811.00
Complainant’s 13th month pay proportionately for 2004 was not
shown to have been paid to complainant, respondent be made
liable to him therefore computed at SIX THOUSAND FIVE
HUNDRED THIRTY TWO PESOS AND 50/100 (P6,532.50).
For engaging the services of counsel to protect his interest,
complainant is likewise entitled to a 10% attorney’s fees of the
judgment amount. Such other claims for lack of basis sufficient to
support for their grant are unwarranted.
WHEREFORE, judgment is hereby rendered ordering respondent
company to pay complainant Armando Aliling the sum of
THIRTY FIVE THOUSAND EIGHT HUNDRED ELEVEN
PESOS (P35,811.00) representing his salaries and other benefits as
discussed above.
Respondent company is likewise ordered to pay said complainant
the amount of TEN THOUSAND SEVEN HUNDRED SIXTY
SIX PESOS AND 85/100 ONLY (10.766.85) representing his
proportionate 13th month pay for 2004 plus 10% of the total
judgment as and by way of attorney’s fees.
Other claims are hereby denied for lack of merit. (Emphasis
supplied.)
The labor arbiter gave credence to Aliling’s allegation about not
receiving and, therefore, not bound by, San Mateo’s purported
September 20, 2004 memo. The memo, to reiterate, supposedly
apprised Aliling of the sales quota he was, but failed, to meet.
Pushing the point, the labor arbiter explained that Aliling cannot be
validly terminated for non-compliance with the quota threshold
absent a prior advisory of the reasonable standards upon which his
performance would be evaluated.
Both parties appealed the above decision to the NLRC, which
affirmed the Decision in toto in its Resolution dated May 31, 2007.
The separate motions for reconsideration were also denied by the
NLRC in its Resolution dated August 31, 2007.
Therefrom, Aliling went on certiorari to the CA, which eventually
rendered the assailed Decision, the dispositive portion of which
reads:
WHEREFORE, the petition is PARTLY GRANTED. The assailed
Resolutions of respondent (Third Division) National Labor
Relations Commission are AFFIRMED, with the following
MODIFICATION/CLARIFICATION: Respondents Wide Wide
World Express Corp. and its officers, Jose B. Feliciano, Manuel F.
San Mateo III and Joseph R. Lariosa, are jointly and severally
liable to pay petitioner Armando Aliling: (A) the sum of Forty Two
Thousand Three Hundred Thirty Three & 50/100 (P42,333.50) as
the total money judgment, (B) the sum of Four Thousand Two
Hundred Thirty Three & 35/100 (P4,233.35) as attorney’s fees, and
(C) the additional sum equivalent to one-half (1/2) month of
petitioner’s salary as separation pay.
SO ORDERED.24 (Emphasis supplied.)
The CA anchored its assailed action on the strength of the
following premises: (a) respondents failed to prove that Aliling’s
dismal performance constituted gross and habitual neglect
necessary to justify his dismissal; (b) not having been informed at
the time of his engagement of the reasonable standards under
which he will qualify as a regular employee, Aliling was deemed to
have been hired from day one as a regular employee; and (c) the
strained relationship existing between the parties argues against the
propriety of reinstatement.
Aliling’s motion for reconsideration was rejected by the CA
through the assailed Resolution dated December 15, 2008.
Hence, the instant petition.
The Issues
Aliling raises the following issues for consideration:
A. The failure of the Court of Appeals to order reinstatement
(despite its finding that petitioner was illegally dismissed from
employment) is contrary to law and applicable jurisprudence.
B. The failure of the Court of Appeals to award backwages (even if
it did not order reinstatement) is contrary to law and applicable
jurisprudence.
C. The failure of the Court of Appeals to award moral and
exemplary damages (despite its finding that petitioner was
dismissed to prevent the acquisition of his regular status) is
contrary to law and applicable jurisprudence.25
In their Comment,26 respondents reiterated their position that
WWWEC hired petitioner on a probationary basis and fired him
before he became a regular employee.
The Court’s Ruling
The petition is partly meritorious.
Petitioner is a regular employee
On a procedural matter, petitioner Aliling argues that WWWEC,
not having appealed from the judgment of CA which declared
Aliling as a regular employee from the time he signed the
employment contract, is now precluded from questioning the
appellate court’s determination as to the nature of his employment.
Petitioner errs. The Court has, when a case is on appeal, the
authority to review matters not specifically raised or assigned as
error if their consideration is necessary in reaching a just
conclusion of the case. We said as much in Sociedad Europea de
Financiacion, SA v. Court of Appeals,27 "It is axiomatic that an
appeal, once accepted by this Court, throws the entire case open to
review, and that this Court has the authority to review matters not
specifically raised or assigned as error by the parties, if their
consideration is necessary in arriving at a just resolution of the
case."
The issue of whether or not petitioner was, during the period
material, a probationary or regular employee is of pivotal import.
Its resolution is doubtless necessary at arriving at a fair and just
disposition of the controversy.
The Labor Arbiter cryptically held in his decision dated April 25,
2006 that:
Be that as it may, there appears no showing that indeed the said
September 20, 2004 Memorandum addressed to complainant was
received by him. Moreover, complainant’s tasked where he was
assigned was a new developed service. In this regard, it is noted:
"Due process dictates that an employee be apprised beforehand of
the conditions of his employment and of the terms of advancement
therein. Precisely, implicit in Article 281 of the Labor Code is the
requirement that reasonable standards be previously made known
by the employer to the employee at the time of his engagement
(Ibid, citing Sameer Overseas Placement Agency, Inc. vs. NLRC,
G.R. No. 132564, October 20, 1999).28
From our review, it appears that the labor arbiter, and later the
NLRC, considered Aliling a probationary employee despite finding
that he was not informed of the reasonable standards by which his
probationary employment was to be judged.
The CA, on the other hand, citing Cielo v. National Labor
Relations Commission,29 ruled that petitioner was a regular
employee from the outset inasmuch as he was not informed of the
standards by which his probationary employment would be
measured. The CA wrote:
Petitioner was regularized from the time of the execution of the
employment contract on June 11, 2004, although respondent
company had arbitrarily shortened his tenure. As pointed out,
respondent company did not make known the reasonable standards
under which he will qualify as a regular employee at the time of his
engagement. Hence, he was deemed to have been hired from day
one as a regular employee.30 (Emphasis supplied.)
WWWEC, however, excepts on the argument that it put Aliling on
notice that he would be evaluated on the 3rd and 5th months of his
probationary employment. To WWWEC, its efforts translate to
sufficient compliance with the requirement that a probationary
worker be apprised of the reasonable standards for his
regularization. WWWEC invokes the ensuing holding in Alcira v.
National Labor Relations Commission31 to support its case:
Conversely, an employer is deemed to substantially comply with
the rule on notification of standards if he apprises the employee
that he will be subjected to a performance evaluation on a
particular date after his hiring. We agree with the labor arbiter
when he ruled that:
In the instant case, petitioner cannot successfully say that he was
never informed by private respondent of the standards that he must
satisfy in order to be converted into regular status. This rans (sic)
counter to the agreement between the parties that after five months
of service the petitioner’s performance would be evaluated. It is
only but natural that the evaluation should be made vis-à-vis the
performance standards for the job.  Private respondent Trifona
Mamaradlo speaks of such standard in her affidavit referring to the
fact that petitioner did not perform well in his assigned work and
his attitude was below par compared to the company’s standard
required of him. (Emphasis supplied.)
WWWEC’s contention is untenable.
Alcira is cast under a different factual setting. There, the labor
arbiter, the NLRC, the CA, and even finally this Court were one in
their findings that the employee concerned knew, having been duly
informed during his engagement, of the standards for becoming a
regular employee. This is in stark contrast to the instant case where
the element of being informed of the regularizing standards does
not obtain. As such, Alcira cannot be made to apply to the instant
case.
To note, the June 2, 2004 letter-offer itself states that the
regularization standards or the performance norms to be used are
still to be agreed upon by Aliling and his supervisor. WWWEC has
failed to prove that an agreement as regards thereto has been
reached. Clearly then, there were actually no performance
standards to speak of. And lest it be overlooked, Aliling was
assigned to GX trucking sales, an activity entirely different to the
Seafreight Sales he was originally hired and trained for. Thus, at
the time of his engagement, the standards relative to his assignment
with GX sales could not have plausibly been communicated to him
as he was under Seafreight Sales. Even for this reason alone, the
conclusion reached in Alcira is of little relevant to the instant case.
Based on the facts established in this case in light of extant
jurisprudence, the CA’s holding as to the kind of employment
petitioner enjoyed is correct. So was the NLRC ruling, affirmatory
of that of the labor arbiter. In the final analysis, one common
thread runs through the holding of the labor arbiter, the NLRC and
the CA, i.e., petitioner Aliling, albeit hired from management’s
standpoint as a probationary employee, was deemed a regular
employee by force of the following self-explanatory provisions:
Article 281 of the Labor Code
ART. 281. Probationary employment. - Probationary employment
shall not exceed six (6) months from the date the employee started
working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has
been engaged on a probationary basis may be terminated for a just
cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall
be considered a regular employee. (Emphasis supplied.)
Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A
of the Labor Code
Sec. 6. Probationary employment. – There is probationary
employment where the employee, upon his engagement, is made to
undergo a trial period where the employee determines his fitness to
qualify for regular employment, based on reasonable standards
made known to him at the time of engagement.
Probationary employment shall be governed by the following rules:
x x x x (d) In all cases of probationary employment, the employer
shall make known to the employee the standards under which he
will qualify as a regular employee at the time of his engagement.
Where no standards are made known to the employee at that time,
he shall be deemed a regular employee. (Emphasis supplied.)
To repeat, the labor arbiter, NLRC and the CA are agreed, on the
basis of documentary evidence adduced, that respondent WWWEC
did not inform petitioner Aliling of the reasonable standards by
which his probation would be measured against at the time of his
engagement. The Court is loathed to interfere with this factual
determination. As We have held:
Settled is the rule that the findings of the Labor Arbiter, when
affirmed by the NLRC and the Court of Appeals, are binding on
the Supreme Court, unless patently erroneous. It is not the function
of the Supreme Court to analyze or weigh all over again the
evidence already considered in the proceedings below. The
jurisdiction of this Court in a petition for review on certiorari is
limited to reviewing only errors of law, not of fact, unless the
factual findings being assailed are not supported by evidence on
record or the impugned judgment is based on a misapprehension of
facts.32
The more recent Peñafrancia Tours and Travel Transport, Inc., v.
Sarmiento33 has reaffirmed the above ruling, to wit:
Finally, the CA affirmed the ruling of the NLRC and adopted as its
own the latter's factual findings. Long-established is the doctrine
that findings of fact of quasi-judicial bodies x x x are accorded
respect, even finality, if supported by substantial evidence. When
passed upon and upheld by the CA, they are binding and
conclusive upon this Court and will not normally be disturbed.
Though this doctrine is not without exceptions, the Court finds that
none are applicable to the present case.
WWWEC also cannot validly argue that "the factual findings being
assailed are not supported by evidence on record or the impugned
judgment is based on a misapprehension of facts." Its very own
letter-offer of employment argues against its above posture.
Excerpts of the letter-offer:
Additionally, upon the effectivity of your probation, you and your
immediate superior are required to jointly define your objectives
compared with the job requirements of the position. Based on the
pre-agreed objectives, your performance shall be reviewed on the
3rd month to assess your competence and work attitude. The 5th
month Performance Appraisal shall be the basis in elevating or
confirming your employment status from Probationary to Regular.
Failure to meet the job requirements during the probation stage
means that your services may be terminated without prior notice
and without recourse to separation pay. (Emphasis supplied.)
Respondents further allege that San Mateo’s email dated July 16,
2004 shows that the standards for his regularization were made
known to petitioner Aliling at the time of his engagement. To
recall, in that email message, San Mateo reminded Aliling of the
sales quota he ought to meet as a condition for his continued
employment, i.e., that the GX trucks should already be 80% full by
August 5, 2004. Contrary to respondents’ contention, San Mateo’s
email cannot support their allegation on Aliling being informed of
the standards for his continued employment, such as the sales
quota, at the time of his engagement. As it were, the email message
was sent to Aliling more than a month after he signed his
employment contract with WWWEC. The aforequoted Section 6 of
the Implementing Rules of Book VI, Rule VIII-A of the Code
specifically requires the employer to inform the probationary
employee of such reasonable standards at the time of his
engagement, not at any time later; else, the latter shall be
considered a regular employee. Thus, pursuant to the explicit
provision of Article 281 of the Labor Code, Section 6(d) of the
Implementing Rules of Book VI, Rule VIII-A of the Labor Code
and settled jurisprudence, petitioner Aliling is deemed a regular
employee as of June 11, 2004, the date of his employment contract.
Petitioner was illegally dismissed
To justify fully the dismissal of an employee, the employer must,
as a rule, prove that the dismissal was for a just cause and that the
employee was afforded due process prior to dismissal. As a
complementary principle, the employer has the onus of proving
with clear, accurate, consistent, and convincing evidence the
validity of the dismissal.34
WWWEC had failed to discharge its twin burden in the instant
case.
First off, the attendant circumstances in the instant case aptly show
that the issue of petitioner’s alleged failure to achieve his quota, as
a ground for terminating employment, strikes the Court as a mere
afterthought on the part of WWWEC. Consider: Lariosa’s letter of
September 25, 2004 already betrayed management’s intention to
dismiss the petitioner for alleged unauthorized absences. Aliling
was in fact made to explain and he did so satisfactorily. But, lo and
behold, WWWEC nonetheless proceeded with its plan to dismiss
the petitioner for non-satisfactory performance, although the
corresponding termination letter dated October 6, 2004 did not
even specifically state Aliling’s "non-satisfactory performance," or
that Aliling’s termination was by reason of his failure to achieve
his set quota.
What WWWEC considered as the evidence purportedly showing it
gave Aliling the chance to explain his inability to reach his quota
was a purported September 20, 2004 memo of San Mateo
addressed to the latter. However, Aliling denies having received
such letter and WWWEC has failed to refute his contention of non-
receipt. In net effect, WWWEC was at a loss to explain the exact
just reason for dismissing Aliling.
At any event, assuming for argument that the petitioner indeed
failed to achieve his sales quota, his termination from employment
on that ground would still be unjustified.
Article 282 of the Labor Code considers any of the following acts
or omission on the part of the employee as just cause or ground for
terminating employment:
(a) Serious misconduct or willful disobedience by the employee of
the lawful orders of his employer or representative in connection
with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in
him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or
his duly authorized representatives; and
(e) Other causes analogous to the foregoing. (Emphasis supplied)
In Lim v. National Labor Relations Commission,35 the Court
considered inefficiency as an analogous just cause for termination
of employment under Article 282 of the Labor Code:
We cannot but agree with PEPSI that "gross inefficiency" falls
within the purview of "other causes analogous to the foregoing,"
this constitutes, therefore, just cause to terminate an employee
under Article 282 of the Labor Code. One is analogous to another
if it is susceptible of comparison with the latter either in general or
in some specific detail; or has a close relationship with the latter.
"Gross inefficiency" is closely related to "gross neglect," for both
involve specific acts of omission on the part of the employee
resulting in damage to the employer or to his business. In Buiser
vs. Leogardo, this Court ruled that failure to observed prescribed
standards to inefficiency may constitute just cause for dismissal.
(Emphasis supplied.)
It did so anew in Leonardo v. National Labor Relations
Commission36 on the following rationale:
An employer is entitled to impose productivity standards for its
workers, and in fact, non-compliance may be visited with a penalty
even more severe than demotion. Thus, [t]he practice of a company
in laying off workers because they failed to make the work quota
has been recognized in this jurisdiction. (Philippine American
Embroideries vs. Embroidery and Garment Workers, 26 SCRA
634, 639). In the case at bar, the petitioners' failure to meet the
sales quota assigned to each of them constitute a just cause of their
dismissal, regardless of the permanent or probationary status of
their employment. Failure to observe prescribed standards of work,
or to fulfill reasonable work assignments due to inefficiency may
constitute just cause for dismissal. Such inefficiency is understood
to mean failure to attain work goals or work quotas, either by
failing to complete the same within the allotted reasonable period,
or by producing unsatisfactory results. This management
prerogative of requiring standards may be availed of so long as
they are exercised in good faith for the advancement of the
employer's interest. (Emphasis supplied.)
In fine, an employee’s failure to meet sales or work quotas falls
under the concept of gross inefficiency, which in turn is analogous
to gross neglect of duty that is a just cause for dismissal under
Article 282 of the Code. However, in order for the quota imposed
to be considered a valid productivity standard and thereby validate
a dismissal, management’s prerogative of fixing the quota must be
exercised in good faith for the advancement of its interest. The
duty to prove good faith, however, rests with WWWEC as part of
its burden to show that the dismissal was for a just cause.
WWWEC must show that such quota was imposed in good faith.
This WWWEC failed to do, perceptibly because it could not. The
fact of the matter is that the alleged imposition of the quota was a
desperate attempt to lend a semblance of validity to Aliling’s
illegal dismissal. It must be stressed that even WWWEC’s sales
manager, Eve Amador (Amador), in an internal e-mail to San
Mateo, hedged on whether petitioner performed below or above
expectation:
Could not quantify level of performance as he as was tasked to
handle a new product (GX). Revenue report is not yet administered
by IT on a month-to-month basis. Moreover, this in a way is an
experimental activity. Practically you have a close monitoring with
Armand with regards to his performance. Your assessment of him
would be more accurate.
Being an experimental activity and having been launched for the
first time, the sales of GX services could not be reasonably
quantified. This would explain why Amador implied in her email
that other bases besides sales figures will be used to determine
Aliling’s performance. And yet, despite such a neutral observation,
Aliling was still dismissed for his dismal sales of GX services. In
any event, WWWEC failed to demonstrate the reasonableness and
the bona fides on the quota imposition.
Employees must be reminded that while probationary employees
do not enjoy permanent status, they enjoy the constitutional
protection of security of tenure. They can only be terminated for
cause or when they otherwise fail to meet the reasonable standards
made known to them by the employer at the time of their
engagement.37 Respondent WWWEC miserably failed to prove the
termination of petitioner was for a just cause nor was there
substantial evidence to demonstrate the standards were made
known to the latter at the time of his engagement. Hence,
petitioner’s right to security of tenure was breached.
Aliling’s right to procedural due process was violated
As earlier stated, to effect a legal dismissal, the employer must
show not only a valid ground therefor, but also that procedural due
process has properly been observed. When the Labor Code speaks
of procedural due process, the reference is usually to the two (2)-
written notice rule envisaged in Section 2 (III), Rule XXIII, Book
V of the Omnibus Rules Implementing the Labor Code, which
provides:
Section 2. Standard of due process: requirements of notice. — In
all cases of termination of employment, the following standards of
due process shall be substantially observed.
I. For termination of employment based on just causes as defined
in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground
or grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned,
with the assistance of counsel if the employee so desires, is given
opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice [of] termination served on the employee
indicating that upon due consideration of all the circumstance,
grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the
employee’s last known address.
MGG Marine Services, Inc. v. NLRC38 tersely described the
mechanics of what may be considered a two-part due process
requirement which includes the two-notice rule, "x x x one, of the
intention to dismiss, indicating therein his acts or omissions
complained against, and two, notice of the decision to dismiss; and
an opportunity to answer and rebut the charges against him, in
between such notices."
King of Kings Transport, Inc. v. Mamac39 expounded on this
procedural requirement in this manner:
(1) The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them,
and a directive that the employees are given the opportunity to
submit their written explanation within a reasonable period.
"Reasonable opportunity" under the Omnibus Rules means every
kind of assistance that management must accord to the employees
to enable them to prepare adequately for their defense. This should
be construed as a period of at least five calendar days from receipt
of the notice xxxx Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice
should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice
should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 288 [of the
Labor Code] is being charged against the employees
(2) After serving the first notice, the employees should schedule
and conduct a hearing or conference wherein the employees will be
given the opportunity to (1) explain and clarify their defenses to
the charge against them; (2) present evidence in support of their
defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are
given the chance to defend themselves personally, with the
assistance of a representative or counsel of their choice x x x.
(3) After determining that termination is justified, the employer
shall serve the employees a written notice of termination indicating
that: (1) all the circumstances involving the charge against the
employees have been considered; and (2) grounds have been
established to justify the severance of their employment.
(Emphasis in the original.)
Here, the first and second notice requirements have not been
properly observed, thus tainting petitioner’s dismissal with
illegality.
The adverted memo dated September 20, 2004 of WWWEC
supposedly informing Aliling of the likelihood of his termination
and directing him to account for his failure to meet the expected
job performance would have had constituted the "charge sheet,"
sufficient to answer for the first notice requirement, but for the fact
that there is no proof such letter had been sent to and received by
him. In fact, in his December 13, 2004 Complainant’s Reply
Affidavit, Aliling goes on to tag such letter/memorandum as
fabrication. WWWEC did not adduce proof to show that a copy of
the letter was duly served upon Aliling. Clearly enough, WWWEC
did not comply with the first notice requirement.
Neither was there compliance with the imperatives of a hearing or
conference. The Court need not dwell at length on this particular
breach of the due procedural requirement. Suffice it to point out
that the record is devoid of any showing of a hearing or conference
having been conducted. On the contrary, in its October 1, 2004
letter to Aliling, or barely five (5) days after it served the notice of
termination, WWWEC acknowledged that it was still evaluating
his case. And the written notice of termination itself did not
indicate all the circumstances involving the charge to justify
severance of employment.
Aliling is entitled to backwages
and separation pay in lieu of reinstatement
As may be noted, the CA found Aliling’s dismissal as having been
illegally effected, but nonetheless concluded that his employment
ceased at the end of the probationary period. Thus, the appellate
court merely affirmed the monetary award made by the NLRC,
which consisted of the payment of that amount corresponding to
the unserved portion of the contract of employment.
The case disposition on the award is erroneous.
As earlier explained, Aliling cannot be rightfully considered as a
mere probationary employee. Accordingly, the probationary period
set in the contract of employment dated June 11, 2004 was of no
moment. In net effect, as of that date June 11, 2004, Aliling
became part of the WWWEC organization as a regular employee
of the company without a fixed term of employment. Thus, he is
entitled to backwages reckoned from the time he was illegally
dismissed on October 6, 2004, with a PhP 17,300.00 monthly
salary, until the finality of this Decision. This disposition hews
with the Court’s ensuing holding in Javellana v. Belen:40
Article 279 of the Labor Code, as amended by Section 34 of
Republic Act 6715 instructs:
Art. 279. Security of Tenure. - In cases of regular employment, the
employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. (Emphasis supplied)
Clearly, the law intends the award of backwages and similar
benefits to accumulate past the date of the Labor Arbiter’s decision
until the dismissed employee is actually reinstated. But if, as in this
case, reinstatement is no longer possible, this Court has
consistently ruled that backwages shall be computed from the time
of illegal dismissal until the date the decision becomes final.
(Emphasis supplied.)
Additionally, Aliling is entitled to separation pay in lieu of
reinstatement on the ground of strained relationship.
In Golden Ace Builders v. Talde,41 the Court ruled:
The basis for the payment of backwages is different from that for
the award of separation pay.  Separation pay is granted where
reinstatement is no longer advisable because of strained relations
between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected
because of the unjust dismissal. The basis for computing
backwages is usually the length of the employee's service while
that for separation pay is the actual period when the employee was
unlawfully prevented from working.
As to how both awards should be computed, Macasero v. Southern
Industrial Gases Philippines instructs:
[T]he award of separation pay is inconsistent with a finding that
there was no illegal dismissal, for under Article 279 of the Labor
Code and as held in a catena of cases, an employee who is
dismissed without just cause and without due process is entitled to
backwages and reinstatement or payment of separation pay in lieu
thereof:
Thus, an illegally dismissed employee is entitled to two reliefs:
backwages and reinstatement. The two reliefs provided are separate
and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the
employer, separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal, then,
are reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no
longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to
payment of backwages. x x x
Velasco v. National Labor Relations Commission emphasizes:
The accepted doctrine is that separation pay may avail in lieu of
reinstatement if reinstatement is no longer practical or in the best
interest of the parties. Separation pay in lieu of reinstatement may
likewise be awarded if the employee decides not to be reinstated.
(emphasis in the original; italics supplied)
Under the doctrine of strained relations, the payment of separation
pay is considered an acceptable alternative to reinstatement when
the latter option is no longer desirable or viable. On one hand, such
payment liberates the employee from what could be a highly
oppressive work environment. On the other hand, it releases the
employer from the grossly unpalatable obligation of maintaining in
its employ a worker it could no longer trust.
Strained relations must be demonstrated as a fact, however, to be
adequately supported by evidence — substantial evidence to show
that the relationship between the employer and the employee is
indeed strained as a necessary consequence of the judicial
controversy.
In the present case, the Labor Arbiter found that actual animosity
existed between petitioner Azul and respondent as a result of the
filing of the illegal dismissal case. Such finding, especially when
affirmed by the appellate court as in the case at bar, is binding
upon the Court, consistent with the prevailing rules that this Court
will not try facts anew and that findings of facts of quasi-judicial
bodies are accorded great respect, even finality. (Emphasis
supplied.)
As the CA correctly observed, "To reinstate petitioner [Aliling]
would only create an atmosphere of antagonism and distrust, more
so that he had only a short stint with respondent company."42 The
Court need not belabor the fact that the patent animosity that had
developed between employer and employee generated what may be
considered as the arbitrary dismissal of the petitioner.
Following the pronouncements of this Court Sagales v. Rustan’s
Commercial Corporation,43 the computation of separation pay in
lieu of reinstatement includes the period for which backwages were
awarded:
Thus, in lieu of reinstatement, it is but proper to award petitioner
separation pay computed at one-month salary for every year of
service, a fraction of at least six (6) months considered as one
whole year. In the computation of separation pay, the period where
backwages are awarded must be included. (Emphasis supplied.)
Thus, Aliling is entitled to both backwages and separation pay (in
lieu of reinstatement) in the amount of one (1) month’s salary for
every year of service, that is, from June 11, 2004 (date of
employment contract) until the finality of this decision with a
fraction of a year of at least six (6) months to be considered as one
(1) whole year. As determined by the labor arbiter, the basis for the
computation of backwages and separation pay will be Aliling’s
monthly salary at PhP 17,300.
Finally, Aliling is entitled to an award of PhP 30,000 as nominal
damages in consonance with prevailing jurisprudence44 for
violation of due process.
Petitioner is not entitled to moral and exemplary damages
In Nazareno v. City of Dumaguete,45 the Court expounded on the
requisite elements for a litigant’s entitlement to moral damages,
thus:
Moral damages are awarded if the following elements exist in the
case: (1) an injury clearly sustained by the claimant; (2) a culpable
act or omission factually established; (3) a wrongful act or
omission by the defendant as the proximate cause of the injury
sustained by the claimant; and (4) the award of damages predicated
on any of the cases stated Article 2219 of the Civil Code. In
addition, the person claiming moral damages must prove the
existence of bad faith by clear and convincing evidence for the law
always presumes good faith. It is not enough that one merely
suffered sleepless nights, mental anguish, and serious anxiety as
the result of the actuations of the other party. Invariably such
action must be shown to have been willfully done in bad faith or
with ill motive. Bad faith, under the law, does not simply connote
bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong, a breach of
a known duty through some motive or interest or ill will that
partakes of the nature of fraud. (Emphasis supplied.)
In alleging that WWWEC acted in bad faith, Aliling has the burden
of proof to present evidence in support of his claim, as ruled in
Culili v. Eastern Telecommunications Philippines, Inc.: 46
According to jurisprudence, "basic is the principle that good faith
is presumed and he who alleges bad faith has the duty to prove the
same." By imputing bad faith to the actuations of ETPI, Culili has
the burden of proof to present substantial evidence to support the
allegation of unfair labor practice. Culili failed to discharge this
burden and his bare allegations deserve no credit.
This was reiterated in United Claimants Association of NEA
(UNICAN) v. National Electrification Administration (NEA), 47 in
this wise:
It must be noted that the burden of proving bad faith rests on the
one alleging it. As the Court ruled in Culili v. Eastern
Telecommunications, Inc., "According to jurisprudence, ‘basic is
the principle that good faith is presumed and he who alleges bad
faith has the duty to prove the same.’" Moreover, in Spouses
Palada v. Solidbank Corporation, the Court stated, "Allegations of
bad faith and fraud must be proved by clear and convincing
evidence."
Similarly, Aliling has failed to overcome such burden to prove bad
faith on the part of WWWEC. Aliling has not presented any clear
and convincing evidence to show bad faith. The fact that he was
illegally dismissed is insufficient to prove bad faith. Thus, the CA
correctly ruled that "[t]here was no sufficient showing of bad faith
or abuse of management prerogatives in the personal action taken
against petitioner."48 In Lambert Pawnbrokers and Jewelry
Corporation v. Binamira,49 the Court ruled:
A dismissal may be contrary to law but by itself alone, it does not
establish bad faith to entitle the dismissed employee to moral
damages. The award of moral and exemplary damages cannot be
justified solely upon the premise that the employer dismissed his
employee without authorized cause and due process.
The officers of WWWEC cannot be held
jointly and severally liable with the company
The CA held the president of WWWEC, Jose B. Feliciano, San
Mateo and Lariosa jointly and severally liable for the monetary
awards of Aliling on the ground that the officers are considered
"employers" acting in the interest of the corporation. The CA cited
NYK International Knitwear Corporation Philippines (NYK) v.
National Labor Relations Commission50 in support of its argument.
Notably, NYK in turn cited A.C. Ransom Labor Union-CCLU v.
NLRC.51
Such ruling has been reversed by the Court in Alba v.
Yupangco,52 where the Court ruled:
By Order of September 5, 2007, the Labor Arbiter denied
respondent’s motion to quash the 3rd alias writ. Brushing aside
respondent’s contention that his liability is merely joint, the Labor
Arbiter ruled:
Such issue regarding the personal liability of the officers of a
corporation for the payment of wages and money claims to its
employees, as in the instant case, has long been resolved by the
Supreme Court in a long list of cases [A.C. Ransom Labor Union-
CLU vs. NLRC (142 SCRA 269) and reiterated in the cases of
Chua vs. NLRC (182 SCRA 353), Gudez vs. NLRC (183 SCRA
644)]. In the aforementioned cases, the Supreme Court has
expressly held that the irresponsible officer of the corporation (e.g.
President) is liable for the corporation’s obligations to its workers.
Thus, respondent Yupangco, being the president of the respondent
YL Land and Ultra Motors Corp., is properly jointly and severally
liable with the defendant corporations for the labor claims of
Complainants Alba and De Guzman. x x x
xxxx
As reflected above, the Labor Arbiter held that respondent’s
liability is solidary.
There is solidary liability when the obligation expressly so states,
when the law so provides, or when the nature of the obligation so
requires. MAM Realty Development Corporation v. NLRC, on
solidary liability of corporate officers in labor disputes, enlightens:
x x x A corporation being a juridical entity, may act only through
its directors, officers and employees. Obligations incurred by them,
acting as such corporate agents are not theirs but the direct
accountabilities of the corporation they represent. True solidary
liabilities may at times be incurred but only when exceptional
circumstances warrant such as, generally, in the following cases:
1. When directors and trustees or, in appropriate cases, the officers
of a corporation:
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the
corporate affairs; x x x x
In labor cases, for instance, the Court has held corporate directors
and officers solidarily liable with the corporation for the
termination of employment of employees done with malice or in
bad faith.
A review of the facts of the case does not reveal ample and
satisfactory proof that respondent officers of WWEC acted in bad
faith or with malice in effecting the termination of petitioner
Aliling. Even assuming arguendo that the actions of WWWEC are
ill-conceived and erroneous, respondent officers cannot be held
jointly and solidarily with it. Hence, the ruling on the joint and
solidary liability of individual respondents must be recalled.
Aliling is entitled to Attorney’s Fees and Legal Interest
Petitioner Aliling is also entitled to attorney’s fees in the amount of
ten percent (10%) of his total monetary award, having been forced
to litigate in order to seek redress of his grievances, pursuant to
Article 111 of the Labor Code and following our ruling in Exodus
International Construction Corporation v. Biscocho,53 to wit:
In Rutaquio v. National Labor Relations Commission, this Court
held that:
It is settled that in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to protect
his rights and interest, the award of attorney’s fees is legally and
morally justifiable.
In Producers Bank of the Philippines v. Court of Appeals this
Court ruled that:
Attorney’s fees may be awarded when a party is compelled to
litigate or to incur expenses to protect his interest by reason of an
unjustified act of the other party.
While in Lambert Pawnbrokers and Jewelry Corporation, 54 the
Court specifically ruled:
However, the award of attorney’s fee is warranted pursuant to
Article 111 of the Labor Code. Ten (10%) percent of the total
award is usually the reasonable amount of attorney’s fees awarded.
It is settled that where an employee was forced to litigate and, thus,
incur expenses to protect his rights and interest, the award of
attorney’s fees is legally and morally justifiable.
Finally, legal interest shall be imposed on the monetary awards
herein granted at the rate of 6% per annum from October 6, 2004
(date of termination) until fully paid.
WHEREFORE, the petition is PARTIALLY GRANTED. The July
3, 2008 Decision of the Court of Appeals in CA-G.R. SP No.
101309 is hereby MODIFIED to read:
WHEREFORE, the petition is PARTIALLY GRANTED. The
assailed Resolutions of respondent (Third Division) National Labor
Relations Commission are AFFIRMED, with the following
MODIFICATION/CLARIFICATION: Respondent Wide Wide
World Express Corp. is liable to pay Armando Aliling the
following: (a) backwages reckoned from October 6, 2004 up to the
finality of this Decision based on a salary of PhP 17,300 a month,
with interest at 6% per annum on the principal amount from
October 6, 2004 until fully paid; (b) the additional sum equivalent
to one (1) month salary for every year of service, with a fraction of
at least six (6) months considered as one whole year based on the
period from June 11, 2004 (date of employment contract) until the
finality of this Decision, as separation pay; (c) PhP 30,000 as
nominal damages; and (d) Attorney’s Fees equivalent to 10% of
the total award.
SO ORDERED.
FIRST DIVISION
G.R. No. 181490               April 23, 2014
MIRANT (PHILIPPINES) CORPORATION AND
EDGARDO A. BAUTISTA, Petitioners,  attorney’s fees. Respondent posits the following allegations in his
vs. JOSELITO A. CARO, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision2 and Resolution3 of
the Court of Appeals (CA) dated June 26, 2007 and January 11,
2008, respectively, which reversed and set aside the Decision 4 of
the National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 046551-05 (NCR-00-03-02511-05). The NLRC decision
vacated and set aside the Decision5 of the Labor Arbiter which
found that respondent Joselito A. Caro (Caro) was illegally
dismissed by petitioner Mirant (Philippines) Corporation (Mirant).
Petitioner corporation is organized and operating under and by
virtue of the laws of the Republic of the Philippines. It is a holding
company that owns shares in project companies such as Mirant
Sual Corporation and Mirant Pagbilao Corporation (Mirant
Pagbilao) which operate and maintain power stations located in
Sual, Pangasinan and Pagbilao, Quezon, respectively. Petitioner
corporation and its related companies maintain around 2,000
employees detailed in its main office and other sites. Petitioner
corporation had changed its name to CEPA Operations in 1996 and
to Southern Company in 2001. In 2002, Southern Company was
sold to petitioner Mirant whose corporate parent is an Atlanta-
based power producer in the United States of America. 6 Petitioner
corporation is now known as Team Energy Corporation.7
Petitioner Edgardo A. Bautista (Bautista) was the President of
petitioner corporation when respondent was terminated from
employment.8
Respondent was hired by Mirant Pagbilao on January 3, 1994 as its
Logistics Officer. In 2002, when Southern Company was sold to
Mirant, respondent was already a Supervisor of the Logistics and
Purchasing Department of petitioner. At the time of the severance
of his employment, respondent was the Procurement Supervisor of
Mirant Pagbilao assigned at petitioner corporation’s corporate
office. As Procurement Supervisor, his main task was to serve as
the link between the Materials Management Department of
petitioner corporation and its staff, and the suppliers and service
contractors in order to ensure that procurement is carried out in
conformity with set policies, procedures and practices. In addition,
respondent was put incharge of ensuring the timely, economical,
safe and expeditious delivery of materials at the right quality and
quantity to petitioner corporation’s plant. Respondent was also
responsible for guiding and overseeing the welfare and training
needs of the staff of the Materials Management Department. Due
to the nature of respondent’s functions, petitioner corporation
considers his position as confidential.9
The antecedent facts follow:
Respondent filed a complaint10 for illegal dismissal and money
claims for 13th and 14th month pay, bonuses and other benefits, as
well as the payment of moral and exemplary damages and
Position Paper:11
On January 3, 1994, respondent was hired by petitioner corporation
as its Logistics Officer and was assigned at petitioner corporation’s
corporate office in Pasay City. At the time of the filing of the
complaint, respondent was already a Supervisor at the Logistics
and Purchasing Department with a monthly salary of ₱39,815.00.
On November 3, 2004, petitioner corporation conducted a random
drug test where respondent was randomly chosen among its
employees who would be tested for illegal drug use. Through an
Intracompany Correspondence,12 these employees were informed
that they were selected for random drug testing to be conducted on
the same day that they received the correspondence. Respondent
was duly notified that he was scheduled to be tested after lunch on
that day. His receipt of the notice was evidenced by his signature
on the correspondence.
Respondent avers that at around 11:30 a.m. of the same day, he
received a phone call from his wife’s colleague who informed him
that a bombing incident occurred near his wife’s work station in
Tel Aviv, Israel where his wife was then working as a caregiver.
Respondent attached to his Position Paper a Press Release13 of the
Department of Foreign Affairs (DFA) in Manila to prove the
occurrence of the bombing incident and a letter14 from the
colleague of his wife who allegedly gave him a phone call from Tel
Aviv.
Respondent claims that after the said phone call, he proceeded to
the Israeli Embassy to confirm the news on the alleged bombing
incident. Respondent further claims that before he left the office on
the day of the random drug test, he first informed the secretary of
his Department, Irene Torres (Torres), at around 12:30 p.m. that he
will give preferential attention to the emergency phone call that he
just received. He also told Torres that he would be back at the
office as soon as he has resolved his predicament. Respondent
recounts that he tried to contact his wife by phone but he could not
reach her. He then had to go to the Israeli Embassy to confirm the
bombing incident. However, he was told by Eveth Salvador
(Salvador), a lobby attendant at the Israeli Embassy, that he could
not be allowed entry due to security reasons.
On that same day, at around 6:15 p.m., respondent returned to
petitioner corporation’s office. When he was finally able to charge
his cellphone at the office, he received a text message from Tina
Cecilia (Cecilia), a member of the Drug Watch Committee that
conducted the drug test, informing him to participate in the said
drug test. He immediately called up Cecilia to explain the reasons
for his failure to submit himself to the random drug test that day.
He also proposed that he would submit to a drug test the following
day at his own expense. Respondent never heard from Cecilia
again.
On November 8, 2004, respondent received a Show Cause
Notice15 from petitioner corporation through Jaime Dulot (Dulot),
his immediate supervisor, requiring him to explain in writing why
he should not be charged with "unjustified refusal to submit to
random drug testing." Respondent submitted his written
explanation16 on November 11, 2004. Petitioner corporation further
required respondent on December 14, 2004 to submit additional
pieces of supporting documents to prove that respondent was at the
Israeli Embassy in the afternoon of November 3, 2004 and that the
said bombing incident actually occurred. Respondent requested for
a hearing to explain that he could not submit proof that he was
indeed present at the Israeli Embassy during the said day because
he was not allegedly allowed entry by the embassy due to security
reasons. On January 3, 2005, respondent submitted the required
additional supporting documents.17
On January 13, 2005, petitioner corporation’s Investigating Panel
issued an Investigating Report18 finding respondent guilty of
"unjustified refusal to submit to random drug testing" and
recommended a penalty of four working weeks suspension without
pay, instead of termination, due to the presence of mitigating
circumstances. In the same Report, the Investigating Panel also
recommended that petitioner corporation should review its policy
on random drug testing, especially of the ambiguities cast by the
term "unjustified refusal."
On January 19, 2005, petitioner corporation’s Asst. Vice President
for Material Management Department, George K. Lamela, Jr.
(Lamela), recommended19 that respondent be terminated from
employment instead of merely being suspended. Lamela argued
that even if respondent did not outrightly refuse to take the random
drug test, he avoided the same. Lamela averred that "avoidance"
was synonymous with "refusal."
On February 14, 2005, respondent received a letter20 from
petitioner corporation’s Vice President for Operations, Tommy J.
Sliman (Sliman), terminating him on the same date. Respondent
filed a Motion to Appeal21 his termination on February 23, 2005.
The motion was denied by petitioner corporation on March 1,
2005.
It is the contention of respondent that he was illegally dismissed by
petitioner corporation due to the latter’s non-compliance with the
twin requirements of notice and hearing. He asserts that while there
was a notice charging him of "unjustified refusal to submit to
random drug testing," there was no notice of hearing and petitioner
corporation’s investigation was not the equivalent of the "hearing"
required under the law which should have accorded respondent the
opportunity to be heard.
Respondent further asserts that he was illegally dismissed due to
the following circumstances:
1. He signed the notice that he was randomly selected as a
participant to the company drug testing;
2. Even the Investigating Panel was at a loss in interpreting the
charge because it believed that the term "refusal" was ambiguous,
and therefore such doubt must be construed in his favor; and
3. He agreed to take the drug test the following day at his own
expense, which he says was clearly not an indication of evasion
from the drug test.
Petitioner corporation counters with the following allegations:
On November 3, 2004, a random drug test was conducted on
petitioner corporation’s employees at its Corporate Office at the
CTC Bldg. in Roxas Blvd., Pasay City. The random drug test was
conducted pursuant to Republic Act No. 9165, otherwise known as
the "Comprehensive Dangerous Drugs Act of 2002." Respondent
was randomly selected among petitioner’s employees to undergo
the said drug test which was to be carried out by Drug Check
Philippines, Inc.22
When respondent failed to appear at the scheduled drug test,
Cecilia prepared an incident report addressed to Dulot, the
Logistics Manager of the Materials Management
Department.23 Since it was stated under petitioner corporation’s
Mirant Drugs Policy Employee Handbook to terminate an
employee for "unjustified refusal to submit to a random drug test"
for the first offense, Dulot sent respondent a Show Cause
Notice24 dated November 8, 2004, requiring him to explain why no
disciplinary action should be imposed for his failure to take the
random drug test. Respondent, in a letter dated November 11,
2004, explained that he attended to an emergency call from his
wife’s colleague and apologized for the inconvenience he had
caused. He offered to submit to a drug test the next day even at his
expense.25 Finding respondent’s explanation unsatisfactory,
petitioner corporation formed a panel to investigate and
recommend the penalty to be imposed on respondent.26 The
Investigating Panel found respondent’s explanations as to his
whereabouts on that day to be inconsistent, and recommended that
he be suspended for four weeks without pay. The Investigating
Panel took into account that respondent did not directly refuse to
be subjected to the drug test and that he had been serving the
company for ten years without any record of violation of its
policies. The Investigating Panel further recommended that the
Mirant Drug Policy be reviewed to clearly define the phrase
"unjustified refusal to submit to random drug testing."27 Petitioner
corporation’s Vice-President for Operations, Sliman, however
disagreed with the Investigating Panel’s recommendations and
terminated the services of respondent in accordance with the
subject drug policy. Sliman likewise stated that respondent’s
violation of the policy amounted to willful breach of trust and loss
of confidence.28
A cursory examination of the pleadings of petitioner corporation
would show that it concurs with the narration of facts of
respondent on material events from the time that Cecilia sent an
electronic mail at about 9:23 a.m. on November 3, 2004 to all
employees of petitioner corporation assigned at its Corporate
Office advising them of the details of the drug test – up to the time
of respondent’s missing his schedule to take the drug test.
Petitioner corporation and respondent’s point of disagreement,
however, is whether respondent’s proffered reasons for not being
able to take the drug test on the scheduled day constituted valid
defenses that would have taken his failure to undergo the drug test
out of the category of "unjustified refusal." Petitioner corporation
argues that respondent’s omission amounted to "unjustified
refusal" to submit to the random drug test as he could not proffer a
satisfactory explanation why he failed to submit to the drug test:
1. Petitioner corporation is not convinced that there was indeed
such a phone call at noon of November 3, 2004 as respondent
could not even tell who called him up.
2. Respondent could not even tell if he received the call via the
landline telephone service at petitioner corporation’s office or at
his mobile phone.
3. Petitioner corporation was also of the opinion that granting there
was such a phone call, there was no compelling reason for
respondent to act on it at the expense of his scheduled drug testing.
Petitioner corporation principally pointed out that the call merely
stated that a bomb exploded near his wife’s work station without
stating that his wife was affected. Hence, it found no point in
confirming it with extraordinary haste and forego the drug test
which would have taken only a few minutes to accomplish. If at
all, respondent should have undergone the drug testing first before
proceeding to confirm the news so as to leave his mind free from
this obligation.
4. Petitioner corporation maintained that respondent could have
easily asked permission from the Drug Watch Committee that he
was leaving the office since the place where the activity was
conducted was very close to his work station.29
To the mind of petitioners, they are not liable for illegal dismissal
because all of these circumstances prove that respondent really
eluded the random drug test and was therefore validly terminated
for cause after being properly accorded with due process.
Petitioners further argue that they have already fully settled the
claim of respondent as evidenced by a Quitclaim which he duly
executed. Lastly, petitioners maintain that they are not guilty of
unfair labor practice as respondent’s dismissal was not intended to
curtail his right to self-organization; that respondent is not entitled
to the payment of his 13th and 14th month bonuses and other
incentives as he failed to show that he is entitled to these amounts
according to company policy; that respondent is not entitled to
reinstatement, payment of full back wages, moral and exemplary
damages and attorney’s fees due to his termination for cause.
In a decision dated August 31, 2005, Labor Arbiter Aliman D.
Mangandog found respondent to have been illegally dismissed.
The Labor Arbiter also found that the quitclaim purportedly
executed by respondent was not a bona fide quitclaim which
effectively discharged petitioners of all the claims of respondent in
the case at bar. If at all, the Labor Arbiter considered the execution
of the quitclaim as a clear attempt on the part of petitioners to
mislead its office into thinking that respondent no longer had any
cause of action against petitioner corporation. The decision stated,
viz.:
WHEREFORE, premises considered, this Office finds respondents
GUILTY of illegal dismissal, and hereby ordered to jointly and
severally reinstate complainant back to his former position without
loss on seniority rights and benefits and to pay him his backwages
and other benefits from the date he was illegally dismissed up to
the time he is actually reinstated, partially computed as of this date
in the amount of ₱258,797.50 (₱39,815.00 x 6.5 mos.) plus his
13th and 14th month pay in the amount of ₱43,132.91 or in the
total amount of ₱301,930.41.
Respondents are also ordered to pay complainant the amount of
₱3,000,000.00 as and by way of moral and exemplary damages,
and to pay complainant the amount equivalent to ten percent (10%)
of the total awards as and by way of attorney’s fees.
SO ORDERED.30
The Labor Arbiter stated that while petitioner corporation observed
the proper procedure in the termination of an employee for a
purported authorized cause, such just cause did not exist in the case
at bar. The decision did not agree with the conclusions reached by
petitioner corporation’s own Investigating Panel that while
respondent did not refuse to submit to the questioned drug test and
merely "avoided" it on the designated day, "avoidance" and
"refusal" are one and the same. It also held that the terms
"avoidance" and "refusal" are separate and distinct and that "the
two words are not even synonymous with each other."31 The Labor
Arbiter considered as more tenable the stance of respondent that
his omission merely resulted to a "failure" to submit to the said
drug test – and not an "unjustified refusal." Even if respondent’s
omission is to be considered as refusal, the Labor Arbiter opined
that it was not tantamount to "unjustified refusal" which constitutes
as just cause for his termination. Finally, the Labor Arbiter found
that respondent was entitled to moral and exemplary damages and
attorney’s fees.
On appeal to the NLRC, petitioners alleged that the decision of the
Labor Arbiter was rendered with grave abuse of discretion for
being contrary to law, rules and established jurisprudence, and
contained serious errors in the findings of facts which, if not
corrected, would cause grave and irreparable damage or injury to
petitioners. The NLRC, giving weight and emphasis to the
inconsistencies in respondent’s explanations, considered his
omission as "unjustified refusal" in violation of petitioner
corporation’s drug policy. Thus, in a decision dated May 31, 2006,
the NLRC ruled, viz.:
x x x [Respondent] was duly notified as shown by copy of the
notice x x x which he signed to acknowledge receipt thereof on the
said date. [Respondent] did not refute [petitioner corporation’s]
allegation that he was also personally reminded of said drug test on
the same day by Ms. Cecilia of [petitioner corporation’s] drug
watch committee. However, [respondent] was nowhere to be found
at [petitioner corporation’s] premises at the time when he was
supposed to be tested. Due to his failure to take part in the random
drug test, an incident report x x x was prepared by the Drug Cause
Notice x x x to explain in writing why no disciplinary action
should be taken against him for his unjustified refusal to submit to
random drug test, a type D offense punishable with termination.
Pursuant to said directive, [respondent] submitted an explanation x
x x on 11 November 2004, pertinent portions of which read:
"I was scheduled for drug test after lunch that day of November 3,
2004 as confirmed with Tina Cecilia. I was having my lunch when
a colleague of my wife abroad called up informing me that there
was something wrong [that] happened in their neighborhood,
where a bomb exploded near her workstation. Immediately, I [left]
the office to confirm said information but at around 12:30 P.M.
that day, I informed MS. IRENE TORRES, our Department
Secretary[,] that I would be attending to this emergency call. Did
even [inform] her that I’ll try to be back as soon as possible but
unfortunately, I was able to return at 6:15 P.M. I didn’t know that
Tina was the one calling me on my cell that day. Did only receive
her message after I charged my cell at the office that night. I was
able to call back Tina Cecilia later [that] night if it’s possible to
have it (drug test) the next day.
My apology [for] any inconvenience to the Drug Watch
Committee, that I forgot everything that day including my
scheduled drug test due to confusion of what had happened. It
[was] not my intention not to undergo nor refuse to have a drug test
knowing well that it’s a company policy and it’s mandated by law."
In the course of the investigation, [respondent] was requested to
present proof pertaining to the alleged call he received on 3
November 2004 from a colleague of his wife regarding the bomb
explosion in Tel Aviv, his presence at the Israel Embassy also on 3
November 2004. [Respondent], thereafter, submitted a facsimile
which he allegedly received from his wife's colleague confirming
that she called and informed him of the bombing incident.
However, a perusal of said facsimile x x x reveals that the same
cannot be given any probative value because, as correctly observed
by [petitioners], it can barely be read and upon inquiry with PLDT,
the international area code of Israel which is 00972 should appear
on the face of the facsimile if indeed said facsimile originated from
Israel. [Respondent] also could not present proof of his presence at
the Israel Embassy on said time and date. He instead provided the
name of a certain Ms. Eveth Salvador of said embassy who could
certify that he was present thereat. Accordingly, Mr. Bailon, a
member of the investigation panel, verified with Ms. Salvador who
told him that she is only the telephone operator of the Israel
Embassy and that she was not in a position to validate
[respondent’s] presence at the Embassy. Mr. Bailon was then
referred to a certain Ms. Aimee Zandueta, also of said embassy,
who confirmed that based on their records, [respondent] did not
visit the embassy nor was he attended to by any member of said
embassy on 3 November 2004. Ms. Zandueta further informed Mr.
Bailon that no bombing occurred in Tel Aviv on 3 November 2004
and that the only reported incident of such nature occurred on 1
November 2004. A letter x x x to this effect was written by Consul
Ziva Samech of the Embassy of Israel. A press release x x x of the
Department of Foreign Affairs confirm[ed] that the bombing
occurred on 1 November 2004.
In his explanation, the [respondent] stated that the reason why he
had to leave the office on 3 November 2004 was to verify an
information at the Israel Embassy of the alleged bombing incident
on the same day. However, [petitioners] in their position paper
alleged that Ms. Torres of [petitioner] company received a text
message from him at around 12:47 p.m. informing her that he will
try to be back since he had a lot of things to do and asking her if
there was a signatory on that day. [Respondent] did not deny
sending said text messages to Ms. Torres in his reply and rejoinder
x x x. He actually confirmed that he was involved in the CIIS
registration with all companies that was involved with [petitioner]
company and worked on the registration of [petitioner] company’s
vehicles with TRO.
It is also herein noted that [respondent] had initially reported to
Ms. Torres that it was his mother in law who informed him about
the problem concerning his wife. However, in his written
explanation x x x, the [respondent] stated that it was a friend of his
wife, whom he could not even identify, who informed him of the
alleged bombing incident in Tel Aviv, Israel. [Respondent] also did
not deny receiving a cellphone call from Ms. Cecilia that day. He
merely stated that he did not know that it was Ms. Cecilia calling
him up in a cellphone and it was only after he charged his
cellphone at the office that night that he received her message. In
effect, [respondent] asserted that his cellphone battery was running
low or drained. [Petitioners] were able to refute [these] averments
of [respondent] when they presented [respondent’s] Smart Billing
Statement
x x x showing that he was able to make a cellphone call at 5:29
p.m. to [petitioner corporation’s] supplier, Mutico for a duration of
two (2) minutes.32
Given the foregoing facts, the NLRC stated that the offer of
respondent to submit to another drug test the following day, even at
his expense, cannot operate to free him from liability. The NLRC
opined that taking the drug test on the day following the scheduled
random drug test would affect both the integrity and the accuracy
of the specimen which was supposed to be taken from a randomly
selected employee who was notified of his/her selection on the
same day that the drug test was to be administered. The NLRC
further asserted that a drug test, conducted many hours or a day
after the employee was notified, would compromise its results
because the employee may have possibly taken remedial measures
to metabolize or eradicate whatever drugs s/he may have ingested
prior to the drug test.
The NLRC further stated that these circumstances have clearly
established the falsity of respondent’s claims and found no
justifiable reason for respondent to refuse to submit to the
petitioner corporation’s random drug test. While the NLRC
acknowledged that it was petitioner corporation’s own
Investigating Panel that considered respondent’s failure to take the
required drug test as mere "avoidance" and not "unjustified
refusal," it concluded that such finding was merely
recommendatory to guide top management on what action to take.
The NLRC also found that petitioner corporation’s denial of
respondent’s motion to reconsider his termination was in order.
Petitioner corporation’s reasons for such denial are quoted in the
NLRC decision, viz.:
"Your appeal is anchored on your claim that you responded to an
emergency call from someone abroad informing you that a bomb
exploded near the work station of your wife making you unable to
undergo the scheduled drug testing. This claim is groundless taking
into account the following:
We are not convinced that there was indeed that call which you
claim to have received noon of November 3, 2004. On the
contrary, our belief is based on the fact that you could not tell who
called you up or how the call got to you. If you forgot to ask the
name of the person who called you up, surely you would have
known how the call came to you. You said you were having lunch
at the third floor of the CTC building when you received the call.
There were only two means of communication available to you
then: the land line telephone service in your office and your mobile
phone. If your claim were (sic) not fabricated, you would be able to
tell which of these two was used.
Granting that you indeed received that alleged call, from your own
account, there was no compelling reason for you to act on it at the
expense of your scheduled drug testing. The call, as it were, merely
stated that ‘something wrong happened (sic) in their neighborhood,
where a bomb exploded near her workstation.’ Nothing was said if
your wife was affected. There is no point in confirming it with
extraordinary haste and forego the drug test which would have
taken only a few minutes to accomplish. If at all, you should have
undergone the drug testing first before proceeding to confirm the
news so as to leave your mind free from this obligation.
Additionally, if it was indeed necessary that you skip the scheduled
drug testing to verify that call, why did you not ask permission
from the Drug Watch [C]ommittee that you were leaving? The
place where the activity was being conducted was very close to
your workstation. It was absolutely within your reach to inform
any of its members that you were attending to an emergency call.
Why did you not do so?
All this undisputedly proves that you merely eluded the drug
testing. Your claim that you did not refuse to be screened carries
no value. Your act was a negation of your words."33
The NLRC found that respondent was not only validly dismissed
for cause – he was also properly accorded his constitutional right to
due process as shown by the following succession of events:
1. On November 8, 2004, respondent was given a show-cause
notice requiring him to explain in writing within three days why no
disciplinary action should be taken against him for violation of
company policy on unjustified refusal to submit to random drug
testing – a type D offense which results in termination.
2. Respondent submitted his explanation on November 11, 2004.
3. On December 9, 2004, respondent was given a notice of
investigation34 informing him of a meeting on December 13, 2004
at 9:00 a.m. In this meeting, respondent was allowed to explain his
side, present his evidences and witnesses, and confront the
witnesses presented against him.
4. On February 14, 2005, respondent was served a letter of
termination which clearly stated the reasons therefor. 35
The NLRC, notwithstanding its finding that respondent was
dismissed for cause and with due process, granted financial
assistance to respondent on equitable grounds. It invoked the past
decisions of this Court which allowed the award of financial
assistance due to factors such as long years of service or the
Court’s concern and compassion towards labor where the
infraction was not so serious. Thus, considering respondent’s 10
years of service with petitioner corporation without any record of
violation of company policies, the NLRC ordered petitioner
corporation to pay respondent financial assistance equivalent to
one-half (1/2) month pay for every year of service in the amount of
One Hundred Ninety-Nine Thousand Seventy-Five Pesos
(₱199,075.00). The NLRC decision states thus:
WHEREFORE, the decision dated 31 August 2005 is VACATED
and SET ASIDE. The instant complaint is dismissed for lack of
merit. However, respondent Mirant [Philippines] Corp. is ordered
to pay complainant financial assistance in the amount of one
hundred ninety-nine thousand seventy five pesos (₱199,075.00).
SO ORDERED.36
Respondent filed a motion for reconsideration,37 while petitioners
filed a motion for partial reconsideration38 of the NLRC decision.
In a Resolution39 dated June 30, 2006, the NLRC denied both
motions.
In a petition for certiorari before the CA, respondent raised the
following issues: whether the NLRC acted without or in excess of
its jurisdiction, or with grave abuse of discretion amounting to lack
or excess of its jurisdiction when it construed that the terms
"failure," "avoidance," "refusal" and "unjustified refusal" have
similar meanings; reversed the factual findings of the Labor
Arbiter; and held that respondent deliberately breached petitioner’s
Anti-Drugs Policy.40 Respondent further argued before the
appellate court that his failure to submit himself to the random
drug test was justified because he merely responded to an
emergency call regarding his wife’s safety in Tel Aviv, and that
such failure cannot be considered synonymous with "avoidance" or
"refusal" so as to mean "unjustified refusal" in order to be meted
the penalty of termination.41
The CA disagreed with the NLRC and ruled that it was immaterial
whether respondent failed, refused, or avoided being tested. To the
appellate court, the singular fact material to this case was that
respondent did not get himself tested in clear disobedience of
company instructions and policy. Despite such disobedience,
however, the appellate court considered the penalty of dismissal to
be too harsh to be imposed on respondent, viz.:
x x x While it is a management prerogative to terminate its erring
employee for willful disobedience, the Supreme Court has
recognized that such penalty is too harsh depending on the
circumstances of each case. "There must be reasonable
proportionality between, on the one hand, the willful disobedience
by the employee and, on the other hand, the penalty imposed
therefor" x x x.
In this case, [petitioner corporation’s] own investigating panel has
revealed that the penalty of dismissal is too harsh to impose on
[respondent], considering that this was the first time in his 10-year
employment that the latter violated its company policies. The
investigating panel even suggested that a review be had of the
company policy on the term "unjustified refusal" to clearly define
what constitutes a violation thereof. The recommendation of the
investigating panel is partially reproduced as follows:
"VII. Recommendation
However, despite having violated the company policy, the panel
recommends 4 working weeks suspension without pay (twice the
company policy’s maximum of 2 working weeks suspension)
instead of termination due to the following mitigating
circumstances.
1. Mr. Joselito A. Caro did not directly refuse to be subjected to the
random drug test scheduled on November 3, 2004.
2. In the case of Mr. Joselito A. Caro, the two conditions for
termination (Unjustified and Refusal) were not fully met as he
expressly agreed to undergo drug test.
3. Mr. Joselito A. Caro voluntarily offered himself to undergo drug
test the following day at his own expense.
Doubling the maximum of 2 weeks suspension to 4 weeks is
indicative of the gravity of the offense committed. The panel
believes that although mitigating factors partially offset reasons for
termination, the 2 weeks maximum suspension is too lenient
penalty for such an offense.
The Panel also took into consideration that Mr. Joselito A. Caro
has served the company for ten (10) years without any record of
violation of the company policies.
x x x x The Panel also recommends that Management review the
Mirant Drug Policy specifically ‘Unjustified [R]efusal to submit to
random drug testing.’ The Panel believes that the term refusal casts
certain ambiguities and should be clearly defined." 42
The CA however found that award of moral and exemplary
damages is without basis due to lack of bad faith on the part of the
petitioner corporation which merely acted within its management
prerogative. In its assailed Decision dated June 26, 2007, the CA
ruled, viz.:
IN VIEW OF ALL THE FOREGOING, the instant petition is
GRANTED. The assailed Decision dated May 31, 2006 and
Resolution dated June 30, 2006 rendered by the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 046551-05
(NCR-00-03-02511-05) are REVERSED and SET ASIDE. The
Labor Arbiter’s Decision dated August 31, 2005 is hereby
REINSTATED with MODIFICATION by omitting the award of
moral and exemplary damages as well as attorney’s fees, and that
the petitioner’s salary equivalent to four (4) working weeks at the
time he was terminated be deducted from his backwages. No cost.
SO ORDERED.43
Petitioner moved for reconsideration. In its assailed Resolution
dated January 11, 2008, the CA denied petitioners’ motion for
reconsideration for lack of merit. It ruled that the arguments in the
motion for reconsideration were already raised in their past
pleadings.
In this instant Petition, petitioners raise the following grounds:
I. THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR WHEN IT FAILED TO CONSIDER THAT:
A. THE PETITION FOR CERTIORARI FILED BY
RESPONDENT CARO SHOULD HAVE BEEN SUMMARILY
DISMISSED CONSIDERING THAT IT LACKED THE
REQUISITE VERIFICATION AND CERTIFICATION
AGAINST FORUM SHOPPING REQUIRED BY THE RULES
OF COURT; OR
B. AT THE VERY LEAST, THE SAID PETITION FOR
CERTIORARI FILED BY RESPONDENT CARO SHOULD
HAVE BEEN CONSIDERED MOOT SINCE RESPONDENT
CARO HAD ALREADY PREVIOUSLY EXECUTED A
QUITCLAIM DISCHARGING THE PETITIONERS FROM ALL
HIS MONETARY CLAIMS.
II. THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN A
WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT,
CONSIDERING THAT:
A. THE COURT OF APPEALS REVERSED THE DECISION
DATED 31 MAY 2006 OF THE NLRC ON THE GROUND
THAT THERE WAS GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION
NOTWITHSTANDING THE FACT THAT IT AFFIRMED THE
NLRC’S FINDINGS THAT RESPONDENT CARO
DELIBERATELY DISOBEYED PETITIONER MIRANT’S
ANTI-DRUGS POLICY.
B. THE PENALTY OF TERMINATION SHOULD HAVE BEEN
SUSTAINED BY THE COURT OF APPEALS GIVEN ITS
POSITIVE FINDING THAT RESPONDENT CARO
DELIBERATELY AND WILLFULLY DISOBEYED
PETITIONER MIRANT’S ANTI-DRUGS POLICY.
C. IN INVALIDATING RESPONDENT CARO’S DISMISSAL,
THE COURT OF APPEALS SUBSTITUTED WITH ITS OWN
DISCRETION A CLEAR MANAGEMENT PREROGATIVE
BELONGING ONLY TO PETITIONER MIRANT IN THE
INSTANT CASE.
D. THE WILLFUL AND DELIBERATE VIOLATION OF
PETITIONER MIRANT’S ANTI-DRUGS POLICY
AGGRAVATED RESPONDENT CARO’S WRONGFUL
CONDUCT WHICH JUSTIFIED HIS TERMINATION.
E. IN INVALIDATING RESPONDENT CARO’S DISMISSAL,
THE COURT OF APPEALS, IN EFFECT, BELITTLED THE
IMPORTANCE AND SERIOUSNESS OF PETITIONER
MIRANT’S ANTI-DRUGS POLICY AND CONSEQUENTLY
HAMPERED THE EFFECTIVE IMPLEMENTATION OF THE
SAME.
F. THE EXISTENCE OF OTHER GROUNDS FOR CARO’S
DISMISSAL, SUCH AS WILLFUL DISOBEDIENCE AND
[LOSS] OF TRUST AND CONFIDENCE, JUSTIFIED HIS
TERMINATION FROM EMPLOYMENT.
III. NONETHELESS, THE AWARD OF FINANCIAL
ASSISTANCE IN FAVOR OF RESPONDENT CARO IS NOT
WARRANTED CONSIDERING THAT RESPONDENT CARO’S
WILLFUL AND DELIBERATE REFUSAL TO SUBJECT
HIMSELF TO PETITIONER MIRANT’S DRUG TEST AND HIS
SUBSEQUENT EFFORTS TO CONCEAL THE SAME SHOWS
HIS DEPRAVED MORAL CHARACTER.
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN
IT HELD PETITIONER BAUTISTA PERSONALLY LIABLE
FOR [RESPONDENT] CARO’S UNFOUNDED CLAIMS
CONSIDERING THAT, ASIDE FROM RESPONDENT CARO’S
DISMISSAL BEING LAWFUL, PETITIONER BAUTISTA
MERELY ACTED WITHIN THE SCOPE OF HIS FUNCTIONS
IN GOOD FAITH.44
We shall first rule on the issue raised by petitioners that the petition
for certiorari filed by respondent with the CA should have been
summarily dismissed as it lacked the requisite verification and
certification against forum shopping under Sections 4 and 5, Rule 7
of the Rules, viz.:
SEC. 4. Verification. – Except when otherwise specifically
required by law or rule, pleadings need not be under oath, verified
or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the
pleading and that the allegations therein are true and correct of his
knowledge and belief.
A pleading required to be verified which contains a verification
based on "information and belief," or upon "knowledge,
information and belief," or lacks a proper verification, shall be
treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. – The plaintiff or
principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any
claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending
action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action
or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or noncompliance
with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping,
the same shall be ground for summary dismissal with prejudice and
shall constitute direct contempt, as well as a cause for
administrative sanctions.
It is the contention of petitioners that due to respondent’s failure to
subscribe the Verification and Certification of Non-Forum
Shopping before a Notary Public, the said verification and
certification cannot be considered to have been made under oath.
Accordingly, such omission is fatal to the entire petition for not
being properly verified and certified. The CA therefore erred when
it did not dismiss the petition.
This jurisdiction has adopted in the field of labor protection a
liberal stance towards the construction of the rules of procedure in
order to serve the ends of substantial justice. This liberal
construction in labor law emanates from the mandate that the
workingman’s welfare should be the primordial and paramount
consideration.45 Thus, if the rules of procedure will stunt courts
from fulfilling this mandate, the rules of procedure shall be relaxed
if the circumstances of a case warrant the exercise of such
liberality. If we sustain the argument of petitioners in the case at
bar that the petition for certiorari should have been dismissed
outright by the CA, the NLRC decision would have reached
finality and respondent would have lost his remedy and denied his
right to be protected against illegal dismissal under the Labor
Code, as amended.
It is beyond debate that petitioner corporation’s enforcement of its
Anti-Drugs Policy is an exercise of its management prerogative. It
is also a conceded fact that respondent "failed" to take the random
drug test as scheduled, and under the said company policy, such
failure metes the penalty of termination for the first offense. A
plain, simple and literal application of the said policy to the
omission of respondent would have warranted his outright
dismissal from employment – if the facts were that simple in the
case at bar. Beyond debate – the facts of this case are not – and this
disables the Court from permitting a straight application of an
otherwise prima facie straightforward rule if the ends of substantial
justice have to be served.
It is the crux of petitioners’ argument that respondent’s omission
amounted to "unjust refusal" because he could not sufficiently
support with convincing proof and evidence his defenses for failing
to take the random drug test. For petitioners, the inconsistencies in
respondent’s explanations likewise operated to cast doubt on his
real reasons and motives for not submitting to the random drug test
on schedule. In recognition of these inconsistencies and the lack of
convincing proof from the point of view of petitioners, the NLRC
reversed the decision of the Labor Arbiter. The CA found the
ruling of the Labor Arbiter to be more in accord with the facts, law
and existing jurisprudence.
We agree with the disposition of the appellate court that there was
illegal dismissal in the case at bar.
While the adoption and enforcement by petitioner corporation of
its Anti-Drugs Policy is recognized as a valid exercise of its
management prerogative as an employer, such exercise is not
absolute and unbridled. Managerial prerogatives are subject to
limitations provided by law, collective bargaining agreements, and
the general principles of fair play and justice. 46 In the exercise of its
management prerogative, an employer must therefore ensure that
the policies, rules and regulations on work-related activities of the
employees must always be fair and reasonable and the
corresponding penalties, when prescribed, commensurate to the
offense involved and to the degree of the infraction. 47 The Anti-
Drugs Policy of Mirant fell short of these requirements.
Petitioner corporation’s subject Anti-Drugs Policy fell short of
being fair and reasonable.
First. The policy was not clear on what constitutes "unjustified
refusal" when the subject drug policy prescribed that an
employee’s "unjustified refusal" to submit to a random drug test
shall be punishable by the penalty of termination for the first
offense. To be sure, the term "unjustified refusal" could not
possibly cover all forms of "refusal" as the employee’s resistance,
to be punishable by termination, must be "unjustified." To the mind
of the Court, it is on this area where petitioner corporation had
fallen short of making it clear to its employees – as well as to
management – as to what types of acts would fall under the
purview of "unjustified refusal." Even petitioner corporation’s own
Investigating Panel recognized this ambiguity, viz.:
The Panel also recommends that Management review the Mirant
Drug Policy specifically "Unjustified [R]efusal to submit to
random drug testing." The Panel believes that the term "refusal"
casts certain ambiguities and should be clearly defined. 48
The fact that petitioner corporation’s own Investigating Panel and
its Vice President for Operations, Sliman, differed in their
recommendations regarding respondent’s case are first-hand proof
that there, indeed, is ambiguity in the interpretation and application
of the subject drug policy. The fact that petitioner corporation’s
own personnel had to dissect the intended meaning of "unjustified
refusal" is further proof that it is not clear on what context the term
"unjustified refusal" applies to. It is therefore not a surprise that the
Labor Arbiter, the NLRC and the CA have perceived the term
"unjustified refusal" on different prisms due to the lack of
parameters as to what comes under its purview. To be sure, the fact
that the courts and entities involved in this case had to engage in
semantics – and come up with different constructions – is yet
another glaring proof that the subject policy is not clear creating
doubt that respondent’s dismissal was a result of petitioner
corporation’s valid exercise of its management prerogative.
It is not a mere jurisprudential principle, but an enshrined provision
of law, that all doubts shall be resolved in favor of labor. Thus, in
Article 4 of the Labor Code, as amended, "[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." In Article 1702 of the New Civil Code,
a similar provision states 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." Applying these provisions
of law to the circumstances in the case at bar, it is not fair for this
Court to allow an ambiguous policy to prejudice the rights of an
employee against illegal dismissal. To hold otherwise and sustain
the stance of petitioner corporation would be to adopt an
interpretation that goes against the very grain of labor protection in
this jurisdiction. As correctly stated by the Labor Arbiter, "when a
conflicting interest of labor and capital are weighed on the scales
of social justice, the heavier influence of the latter must be counter-
balanced by the sympathy and compassion the law must accord the
underprivileged worker."49
Second. The penalty of termination imposed by petitioner
corporation upon respondent fell short of being reasonable.
Company policies and regulations are generally valid and binding
between the employer and the employee unless shown to be
grossly oppressive or contrary to law50 – as in the case at bar.
Recognizing the ambiguity in the subject policy, the CA was more
inclined to adopt the recommendation of petitioner corporation’s
own Investigating Panel over that of Sliman and the NLRC. The
appellate court succinctly but incisively pointed out, viz.:
x x x We find, as correctly pointed out by the investigating panel,
that the [petitioner corporation’s] Anti-Drug Policy is excessive in
terminating an employee for his "unjustified refusal" to subject
himself to the random drug test on first offense, without clearly
defining what amounts to an "unjustified refusal."
Thus, We find that the recommended four (4) working weeks’
suspension without pay as the reasonable penalty to be imposed on
[respondent] for his disobedience. x x x51 (Additional emphasis
supplied.)
To be sure, the unreasonableness of the penalty of termination as
imposed in this case is further highlighted by a fact admitted by
petitioner corporation itself: that for the ten-year period that
respondent had been employed by petitioner corporation, he did
not have any record of a violation of its company policies.
As to the other issue relentlessly being raised by petitioner
corporation that respondent’s petition for certiorari before the CA
should have been considered moot as respondent had already
previously executed a quitclaim discharging petitioner corporation
from all his monetary claims, we cannot agree. Quitclaims
executed by laborers are ineffective to bar claims for the full
measure of their legal rights,52 especially in this case where the
evidence on record shows that the amount stated in the quitclaim
exactly corresponds to the amount claimed as unpaid wages by
respondent under Annex A53 of his Reply54 filed with the Labor
Arbiter. Prima facie, this creates a false impression that
respondent’s claims have already been settled by petitioner
corporation – discharging the latter from all of respondent’s
monetary claims. In truth and in fact, however, the amount paid
under the subject quitclaim represented the salaries of respondent
that remained unpaid at the time of his termination – not the
amounts being claimed in the case at bar.
We believe that this issue was extensively discussed by both the
Labor Arbiter and the CA and we find no reversible error on the
disposition of this issue, viz.:
A review of the records show that the alluded quitclaim, which was
undated and not even notarized although signed by the petitioner,
was for the amount of ₱59,630.05. The said quitclaim was attached
as Annex 26 in the [petitioners’] Position Paper filed before the
Labor Arbiter. As fully explained by [respondent] in his Reply
filed with the Labor Arbiter, the amount stated therein was his last
pay due to him when he was terminated, not the amount
representing his legitimate claims in this labor suit x x x. To bolster
his defense, [respondent] submitted the pay form issued to him by
the [petitioner corporation], showing his net pay at ₱59,630.05
exactly the amount stated in the quitclaim x x x. Then, too, as
stated on the quitclaim itself, the intention of the waiver executed
by the [respondent] was to release [petitioner corporation] from
any liability only on the said amount representing [respondent’s]
"full and final payment of [his] last salary/separation pay" x x x. It
did not in any way waive [respondent’s] right to pursue his
legitimate claims regarding his dismissal in a labor suit. Thus, We
gave no credence to [petitioners’] private defense that alleged
quitclaim rendered the instant petition moot. 55
Finally, the petition avers that petitioner Bautista should not be
held personally liable for respondent’s dismissal as he acted in
good faith and within the scope of his official functions as then
president of petitioner corporation. We agree with petitioners.
Both decisions of the Labor Arbiter and the CA did not discuss the
basis of the personal liability of petitioner Bautista, and yet the
dispositive portion of the decision of the Labor Arbiter - which was
affirmed by the appellate court - held him jointly and severally
liable with petitioner corporation, viz.:
WHEREFORE, premises considered, this Office finds respondents
GUILTY of illegal dismissal, and hereby ordered to jointly and
severally reinstate complainant back to his former position without
loss on seniority rights and benefits and to pay him his backwages
and other benefits from the date he was illegally dismissed up to
the time he is actually reinstated, partially computed as of this date
in the amount of ₱258,797.50 (₱39,815.00 x 6.5 mos.) plus his
13th and 14th month pay in the amount of ₱43,132.91 or in the
total amount of ₱301,930.41. Respondents are also ordered to pay
complainant the amount of ₱3,000,000.00 as and by way of moral
and exemplary damages, and to pay complainant the amount
equivalent to ten percent (10%) of the total awards as and by way
of attorney's fees.
SO ORDERED.56 (Emphasis supplied.)
A corporation has a personality separate and distinct from its
officers and board of directors who may only be held personally
liable for damages if it is proven that they acted with malice or bad
faith in the dismissal of an employee.57 Absent any evidence on
record that petitioner Bautista acted maliciously or in bad faith in
effecting the termination of respondent, plus the apparent lack of
allegation in the pleadings of respondent that petitioner Bautista
acted in such manner, the doctrine of corporate fiction dictates that
only petitioner corporation should be held liable for the illegal
dismissal of respondent.
WHEREFORE, the petition for review on certiorari is DENIED.
The assailed Decision dated June 26, 2007 and the Resolution
dated January 11, 2008 in CA-G.R. SP No. 96153 are AFFIRMED
with the MODIFICATION that only petitioner corporation is found
GUILTY of the illegal dismissal of respondent Joselito A. Caro.
Petitioner Edgardo A. Bautista is not held personally liable as then
President of petitioner corporation at the time of the illegal
dismissal.
No pronouncement as to costs.
SO ORDERED.