Labor Cases2

G.R. No. 208908, March 11, 2015 - THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC.
AND
WALDEN CHU, Petitioners, v. ROLLY P. ARENAS, Respondent.
SECOND DIVISION
G.R. No. 208908, March 11, 2015
THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC. AND WALDEN
CHU, Petitioners, v. ROLLY P. ARENAS, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the Court of Appeals’ (CA)
decision2dated March 26, 2013 and resolution3 dated August 30, 2013 in CA-G.R. SP No.
117822. These assailed CA rulings affirmed the National Labor Relations Commission’s (NLRC)
decision4 dated August 13, 2010, which also affirmed the Labor Arbiter’s (LA) February 28, 2010
decision.
The Antecedent Facts
On April 1, 2008, the Coffee Bean and Tea Leaf Philippines, Inc. (CBTL) hired Rolly P. Arenas
(Arenas) to work as a “barista” at its Paseo Center Branch. His principal functions included taking
orders from customers and preparing their ordered food and beverages.5 Upon signing the
employment contract,6Arenas was informed of CBTL’s existing employment policies.
To ensure the quality of its crew’s services, CBTL regularly employs a “mystery guest shopper”
who poses as a customer, for the purpose of covertly inspecting the baristas’ job performance.7
In April 2009, a mystery guest shopper at the Paseo Center Branch submitted a report stating that
on March 30, 2009, Arenas was seen eating non-CBTL products at CBTL’s al fresco dining area
while on duty. As a result, the counter was left empty without anyone to take and prepare the
customers’ orders.8
On another occasion, or on April 28, 2009, Katrina Basallo (Basallo), the duty manager of CBTL,
conducted a routine inspection of the Paseo Center Branch. While inspecting the store’s products,
she noticed an iced tea bottle being chilled inside the bin where the ice for the customers’ drinks
is stored; thus, she called the attention of the staff on duty. When asked, Arenas muttered,
“kaninong iced tea?” and immediately picked the bottle and disposed it outside the store.9
After inspection, Basallo prepared a store manager’s report which listed Arenas’ recent infractions,
as follows:
1. Leaving the counter unattended and eating chips in an unauthorized area while on duty
(March 30, 2009);
2. Reporting late for work on several occasions (April 1, 3 and 22); and
3. Placing an iced tea bottle in the ice bin despite having knowledge of company policy
prohibiting the same (April 28, 2009).10
Based on the mystery guest shopper and duty manager’s reports, Arenas was required to explain
his alleged violations. However, CBTL found Arenas’ written explanation unsatisfactory, hence
CBTL terminated his employment.11
Arenas filed a complaint for illegal dismissal. After due proceedings, the LA ruled in his favor,
declaring that he had been illegally dismissed. On appeal, the NLRC affirmed the LA’s decision.
CBTL filed a petition for certiorari under Rule 65 before the CA. CBTL insisted that Arenas’
infractions amounted to serious misconduct or willful disobedience, gross and habitual neglect of
duties, and breach of trust and confidence. To support these allegations, CBTL presented Arenas’
letter12 where he admitted his commission of the imputed violations.
On March 26, 2013, the CA issued its decision dismissing the petition. The CA ruled that Arenas’
offenses fell short of the required legal standards to justify his dismissal; and that these do not
constitute serious misconduct or willful disobedience, and gross negligence, to merit his
termination from service. The CA denied CBTL’s motion for reconsideration opening the way for
this present appeal via a petition for review on certiorari.
The main issue before us is whether CBTL illegally dismissed Arenas from employment.
The Petition
CBTL argues that under the terms and conditions of the employment contract, Arenas agreed to
abide and comply with CBTL’s policies,
procedures, rules and regulations, as provided for under CBTL’s table
of offenses and penalties and/or employee handbook.13 CBTL cites serious misconduct as the
primary reason for terminating Arenas’ employment. CBTL also imputes dishonesty on the part
of Arenas for not immediately admitting that he indeed left his bottled iced tea inside the ice bin.
Our Ruling
We DENY the petition.
As a rule, in certiorari proceedings under Rule 65 of the Rules of Court, the CA does not assess
and weigh each piece of evidence introduced in the case. The CA only examines the factual
findings of the NLRC to determine whether its conclusions are supported by substantial evidence,
whose absence points to grave abuse of discretion amounting to lack or excess of jurisdiction.14 In
the case of Mercado v. AMA Computer College,15 we emphasized that:
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court
does not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC
based their conclusion. The query in this proceeding is limited to the determination of whether or
not the NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in
rendering its decision. x x x16 [Italics supplied]
Our review of the records shows that the CA did not err in affirming the LA and the NLRC’s rulings.
No grave abuse of discretion tainted these rulings, thus, the CA’s decision also warrants this
Court’s affirmation. The infractions which Arenas committed do not justify the application of the
severe penalty of termination from service.
First, Arenas was found eating non-CBTL products inside the store’s premises while on duty.
Allegedly, he left the counter unattended without anyone to entertain the incoming customers.
Second, he chilled his bottled iced tea inside the ice bin, in violation of CBTL’s sanitation and
hygiene policy. CBTL argues that these violations constitute willful disobedience, thus meriting
dismissal from employment.
We disagree with CBTL.
For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the
employee’s assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made known
to the employee, and must pertain to the duties which he had been engaged to discharge.17
Tested against these standards, it is clear that Arenas’ alleged infractions do not amount to such
a wrongful and perverse attitude. Though Arenas may have admitted these wrongdoings, these
do not amount to a wanton disregard of CBTL’s company policies. As Arenas mentioned in his
written explanation, he was on a scheduled break when he was caught eating at CBTL’s al
fresco dining area. During that time, the other service crews were the one in charge of manning
the counter. Notably, CBTL’s employee handbook imposes only the penalty of written
warning for the offense of eating non-CBTL products inside the store’s premises.
CBTL also imputes gross and habitual neglect of duty to Arenas for coming in late in three separate
instances.
Gross negligence implies a want or absence of, or failure to exercise even a slight care or diligence,
or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting
any effort to avoid them.18 There is habitual neglect if based on the circumstances, there is a
repeated failure to perform one’s duties for a period of time.19
In light of the foregoing criteria, we rule that Arenas’ three counts of tardiness cannot be
considered as gross and habitual neglect of duty. The infrequency of his tardiness already removes
the character of habitualness. These late attendances were also broadly spaced out, negating the
complete absence of care on Arenas’ part in the performance of his duties. Even CBTL admitted in
its notice to explain that this violation does not merit yet a disciplinary action and is only an
aggravating circumstance to Arenas’ other violations.20
To further justify Arenas’ dismissal, CBTL argues that he committed serious misconduct when he
lied about using the ice bin as cooler for his bottled iced tea. Under CBTL’s employee handbook,
dishonesty, even at the first instance, warrants the penalty of termination from service.21
For misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b)
it must relate to the performance of the employee’s duties; and (c) it must show that the
employee has become unfit to continue working for the employer.22
However, the facts on record reveal that there was no active dishonesty on the part of Arenas.
When questioned about who placed the bottled iced tea inside the ice bin, his immediate reaction
was not to deny his mistake, but to remove the bottle inside the bin and throw it outside. More
importantly, when he was asked to make a written explanation of his action, he admitted that the
bottled iced tea was his.
Thus, even if there was an initial reticence on Arenas’ part, his subsequent act of owing to his
mistake only shows the absence of a deliberate intent to lie or deceive his CBTL superiors. On this
score, we conclude that Arenas’ action did not amount to serious misconduct.
Moreover, the imputed violations of Arenas, whether taken singly or as a whole, do not necessitate
the imposition of the strict and harsh penalty of dismissal from service. The LA, NLRC and the
CA all consistently ruled that these offenses are not grave enough to qualify as just causes for
dismissal. Factual findings of the labor tribunals especially if affirmed by the CA must be
given great weight, and merit the Court’s respect.
As a final remark, we note that petitioner Walden Chu (Chu) should not be held jointly and
severally liable with CBTL for Arenas’ adjudged monetary awards. The LA and the NLRC ruled for
their solidary liability but the CA failed to dispose this issue in its decision.
A corporation is a juridical entity with a legal personality separate and distinct from those acting
for and in its behalf and, in general, from the people comprising it.23 Thus, as a general rule, an
officer may not be held liable for the corporation’s labor obligations unless he acted with evident
malice and/or bad faith in dismissing an employee.24
In the present case, there was no showing of any evident malice or bad faith on Chu’s part as
CBTL’s president. His participation in Arenas’ termination was not even sufficiently alleged and
argued. Hence, he cannot be held solidarily liable for CBTL’s liabilities to Arenas.
WHEREFORE, in light of these considerations, we hereby DENY the petition for lack of merit. The
Court of Appeals committed no grave abuse of discretion in its decision of March 26, 2013 and its
resolution of August 30, 2013 in CA-G.R. SP No. 117822, except with respect to the liability of
petitioner Walden Chu. We thus absolve petitioner Walden Chu from paying in his personal
capacity the monetary awards of respondent Rolly P. Arenas. No costs.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, Mendoza, and Leonen, JJ., concur.

EXODUS INTERNATIONAL G.R. No. 166109
CONSTRUCTION CORPORATION
and ANTONIO P. JAVALERA,
Petitioners, Present:
-versus- CORONA, C. J., Chairperson,

VELASCO, JR.,
NACHURA,⃰
GUILLERMO BISCOCHO, DEL CASTILLO, and
FERNANDO PEREDA, FERDINAND PEREZ, JJ.
MARIANO, GREGORIO BELLITA
and MIGUEL BOBILLO, Promulgated:
Respondents. February 23, 2011
x-------------------------------------------------------------------x
In illegal dismissal cases, it is incumbent upon the employees to first establish the fact of their dismissal before the burden is shifted to
the employer to prove that the dismissal was legal.
This Petition for Review on Certiorari[1] assails the Decision[2] dated August 10, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
79800, which dismissed the petition for certiorari challenging the Resolutions dated January 17, 2003[3] and July 31, 2003[4] of the
National Labor Relations Commission (NLRC) in NLRC NCR CASE Nos. 30-11-04656-00[5] and 30-12-04714-00.
Factual Antecedents
Petitioner Exodus International Construction Corporation (Exodus) is a duly licensed labor contractor for the painting of
residential houses, condominium units and commercial buildings. Petitioner Antonio P. Javalera is the President and General Manager
of Exodus.
On February 1, 1999, Exodus obtained from Dutch Boy Philippines, Inc. (Dutch Boy) a contract[6] for the painting of
the Imperial Sky Garden located at Ongpin Street, Binondo, Manila. On July 28, 1999, Dutch Boy awarded another contract[7] to
Exodus for the painting of Pacific Plaza Towers in Fort Bonifacio, Taguig City.
In the furtherance of its business, Exodus hired respondents as painters on different dates with the corresponding wages
appearing opposite their names as hereunder listed:
NAME DATE EMPLOYED DAILY SALARY

1. Guillermo B. Biscocho Feb. 8, 1999 P 222.00
2. Fernando S. Pereda Feb. 8, 1999 235.00
3. Ferdinand M. Mariano April 12, 1999 235.00
4. Gregorio S. Bellita May 20, 1999 225.00 Guillermo Biscocho
5. Miguel B. Bobillo March 10, 2000 220.00 (Guillermo) was assigned at
the Imperial Sky Garden from February 8, 1999 to February 8, 2000. Fernando Pereda (Fernando) worked in the same project from
February 8, 1999 to June 17, 2000. Likewise, Ferdinand Mariano (Ferdinand) worked there from April 12, 1999 to February 17, 2000.
All of them were then transferred to Pacific Plaza Towers.
Gregorio S. Bellita (Gregorio) was assigned to work at the house of Mr. Teofilo Yap in Ayala Alabang, Muntinlupa City from
May 20, 1999 to December 4, 1999. Afterwards he was transferred to Pacific Plaza Towers.
Miguel B. Bobillo (Miguel) was hired and assigned at Pacific Plaza Towers on March 10, 2000.
On November 27, 2000, Guillermo, Fernando, Ferdinand, and Miguel filed a complaint[8] for illegal dismissal and non-payment
of holiday pay, service incentive leave pay, 13th month pay and night-shift differential pay. This was docketed as NLRC NCR CASE
No. 30-11-04656-00.
On December 1, 2000, Gregorio also filed a complaint[9] which was docketed as NLRC NCR CASE No. 30-12-04714-00. He
claimed that he was dismissed from the service on September 12, 2000 while Guillermo, Fernando, Ferdinand, and Miguel were orally
notified of their dismissal from the service on November 25, 2000.
Petitioners denied respondents allegations. As regards Gregorio, petitioners averred that on September 15, 2000, he absented
himself from work and applied as a painter with SAEI-EEI which is the general building contractor of Pacific Plaza Towers. Since then,
he never reported back to work.
Guillermo absented himself from work without leave on November 27, 2000. When he reported for work the following day,
he was reprimanded for being Absent Without Official Leave (AWOL). Because of the reprimand, he worked only half-day and
thereafter was unheard of until the filing of the instant complaint.
Fernando, Ferdinand, and Miguel were caught eating during working hours on November 25, 2000 for which they were
reprimanded by their foreman. Since then they no longer reported for work.
Ruling of the Labor Arbiter
On March 21, 2002, the Labor Arbiter rendered a Decision[10] exonerating petitioners from the charge of illegal dismissal as
respondents chose not to report for work. The Labor Arbiter ruled that since there is neither illegal dismissal nor abandonment of job,
respondents should be reinstated but without any backwages. She disallowed the claims for premium pay for holidays and rest days and
nightshift differential pay as respondents failed to prove that actual service was rendered on such non-working days. However, she
allowed the claims for holiday pay, service incentive leave pay and 13th month pay. The dispositive portion of the Labor Arbiters
Decision reads:
WHEREFORE, premises considered, respondents Exodus International Construction Corporation and/or

Antonio Javalera are hereby ordered to reinstate complainants to their former positions as painters without loss of
seniority rights and other benefits appurtenant thereto without any backwages.
Respondents are likewise hereby ordered to pay complainants the following:
1. Guillermo Biscocho
P 1,968.75 - Service Incentive Leave Pay
10,237.50 - 13th Month Pay
3,600.00 - Holiday Pay
P 15,806.25 - Sub-Total
+ 1,580.87 - 10% Attorneys Fees
P 17,386.86 Total
2. Fernando Pereda
10,692.50 - 13th Month Pay
P 16,273.75 - Sub-Total
P 17,901.12 Total
3. Miguel Bobillo
P 3,813.34 - 13th Month Pay
P 5,133.34 - Sub-Total
+ 513.33 - 10% Attorneys Fees
P 5,646.67 Total
4. Ferdinand Mariano
9,674.19 - 13th Month Pay
P 14,589.61 - Sub-Total
P 16,048.57 Total
5. Gregorio Bellita
7,800.00 - 13th Month Pay
P 12,000.00 - Sub-Total
P 13,200.00 Total
or the total aggregate sum of Seventy Thousand, One Hundred Eighty Three and 23/100 (P70,183.23) Pesos, inclusive
of the ten (10%) percent of the award herein by way of attorneys fees, all within ten (10) days from receipt hereof;
The rest of complainants claims for lack of merit are hereby Dismissed.
SO ORDERED.[11]
Ruling of the National Labor Relations Commission
Petitioners sought recourse to the NLRC limiting their appeal to the award of service incentive leave pay, 13th month pay,
holiday pay and 10% attorneys fees in the sum of P70,183.23.
On January 17, 2003, the NLRC dismissed the appeal. It ruled that petitioners, who have complete control over the records of the
company, could have easily rebutted the monetary claims against it. All that it had to do was to present the vouchers showing payment
of the same. However, they opted not to lift a finger, giving an impression that they never paid said benefits.
As to the award of attorneys fees, the NLRC found the same to be proper because respondents were forced to litigate in order to validate
their claim.
The NLRC thus affirmed the Decision of the Labor Arbiter, viz:
Accordingly, premises considered, the decision appealed from is hereby AFFIRMED and the appeal
DISMISSED for lack of merit.
SO ORDERED.[12]
Petitioners filed a Motion for Reconsideration[13] which was denied by the NLRC in a Resolution[14] dated July 31, 2003
Ruling of the Court of Appeals
Aggrieved, petitioners filed with the CA a petition for certiorari. The CA through a Resolution[15] dated October 22, 2003, directed the
respondents to file their comment. On December 4, 2003, respondents filed their comment.[16] On January 12, 2004, petitioners filed
their reply.[17]
On August 10, 2004, the CA dismissed the petition and affirmed the findings of the Labor Arbiter and the NLRC. It opined that in a
situation where the employer has complete control over the records and could thus easily rebut any monetary claims against it but opted
not to lift any finger, the burden is on the employer and not on the complainants. This is so because the latter are definitely not in a
position to adduce any documentary evidence, the control of which being not with them.
However, in addition to the reliefs awarded to respondents in the March 21, 2002 Decision of the Labor Arbiter which was affirmed by
the NLRC in a Resolution dated January 17, 2003, the petitioners were directed by the CA to solidarily pay full backwages, inclusive
of all benefits the respondents should have received had they not been dismissed.
The dispositive portion of the CA Decision reads:
WHEREFORE, the instant petition for certiorari is dismissed. However, in addition to the reliefs awarded to
private respondents in the decision dated March 21, 2002 of Labor Arbiter Aldas and resolution of the NLRC dated
January 17, 2003, the petitioners are directed to solidarily pay private respondents full backwages, inclusive of all
benefits they should have received had they not been dismissed, computed from the time their wages were withheld
until the time they are actually reinstated. Such award of full backwages shall be included in the computation of public
respondents award of ten percent (10%) attorneys fees.
SO ORDERED.[18]
Petitioners moved for reconsideration,[19] but to no avail. Hence, this appeal anchored on the following grounds:
Issues
I.
The Honorable Court of Appeals erred and committed grave abuse of discretion in ordering the reinstatement of
respondents to their former positions which were no longer existing because its findings of facts are premised on
misappreciation of facts.
II.
The Honorable Court of Appeals also seriously erred and committed grave abuse of discretion in affirming the award
of service incentive leave pay, 13th month pay, and holiday pay in the absence of evidentiary and legal basis therefor.
III.
The Honorable Court of Appeals likewise seriously erred and committed grave abuse of discretion in affirming the
award of attorney's fees even in the absence of counsel on record to handle and prosecute the case.
IV.
The Honorable Court of Appeals also seriously erred and gravely abused its discretion in holding individual petitioner
solidarily liable with petitioner company without specific evidence on which the same was based.[20]
Petitioners Arguments
Petitioners contend that, contrary to their allegations, respondents were never dismissed from the service. If respondents find themselves
no longer in the service of petitioners, it is simply because of their refusal to report for work. Further, granting that they were dismissed,
respondents prolonged absences is tantamount to abandonment which is a valid ground for the termination of their employment. As to
respondents monetary claims, it is incumbent upon them to prove the same because the burden of proof rests on their shoulders. But
since respondents failed to prove the same, their claims should be denied.
Respondents Arguments
Respondents, in support of their claim that they were illegally dismissed, argue that as painters, they performed activities which were
necessary and desirable in the usual business of petitioners, who are engaged in the business of contracting painting jobs. Hence, they
are regular employees who, under the law, cannot just be dismissed from the service without prior notice and without any just or valid
cause. According to the respondents, they did not abandon their job. For abandonment to serve as basis for a valid termination of their
employment, it must first be established that there was a deliberate and unjustified refusal on their part to resume work. Mere absences
are not sufficient for these must be accompanied by overt acts pointing to the fact that they simply do not want to work
anymore. Petitioners failed to prove this. Furthermore, the filing of a complaint for illegal dismissal ably defeats the theory of
abandonment of the job.
Our Ruling
The petition is partly meritorious.
[T]his Court is not unmindful of the rule that in cases of illegal dismissal, the employer bears the burden of proof to prove that the
termination was for a valid or authorized cause.[21] But [b]efore the [petitioners] must bear the burden of proving that the dismissal was
legal, [the respondents] must first establish by substantial evidence that indeed they were dismissed. [I]f there is no dismissal, then there
can be no question as to the legality or illegality thereof.[22]
There was no dismissal in this case, hence, there is no question that can be
entertained regarding its legality or illegality.
As found by the Labor Arbiter, there was no evidence that respondents were dismissed nor were they prevented from returning to their
work. It was only respondents unsubstantiated conclusion that they were dismissed. As a matter of fact, respondents could not name the
particular person who effected their dismissal and under what particular circumstances.
In Machica v. Roosevelt Services Center, Inc.,[23] this Court sustained the employer's denial as against the employees' categorical
assertion of illegal dismissal. In so ruling, this Court held that:
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.
In this case, petitioners were able to show that they never dismissed respondents. As to the case of Fernando, Miguel and Ferdinand, it
was shown that on November 25, 2000, at around 7:30 a.m., the petitioners foreman, Wenifredo Lalap (Wenifredo) caught the three
still eating when they were supposed to be working already. Wenifredo reprimanded them and, apparently, they resented it so they no
longer reported for work. In the case of Gregorio, he absented himself from work on September 15, 2000 to apply as a painter with
SAEI-EEI, the general contractor of Pacific Plaza Towers. Since then he never reported back to work. Lastly, in the case of Guillermo,
he absented himself without leave on November 27, 2000, and so he was reprimanded when he reported for work the following
day. Because of the reprimand, he did not report for work anymore.
Hence, as between respondents general allegation of having been orally dismissed from the service vis-a-vis those of petitioners which
were found to be substantiated by the sworn statement of foreman Wenifredo, we are persuaded by the latter. Absent any showing of
an overt or positive act proving that petitioners had dismissed respondents, the latters claim of illegal dismissal cannot be
sustained. Indeed, a cursory examination of the records reveal no illegal dismissal to speak of.
There was also no abandonment of work on the part of the respondents.
The Labor Arbiter is also correct in ruling that there was no abandonment on the part of respondents that would justify their dismissal
from their employment.
It is a settled rule that [m]ere absence or failure to report for work x x x is not enough to amount to abandonment of
work.[24] Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.[25]
In Northwest Tourism Corporation v. Former Special 3rd Division of the Court of Appeals[26] this Court held that [t]o constitute
abandonment of work, two elements must concur, [namely]:
(1) the employee must have failed to report for work or must have been absent without valid or justifiable reason;
and
(2) there must have been a clear intention on the part of the employee to sever the employer-employee relationship
manifested by some overt act.
It is the employer who has the burden of proof to show a deliberate and unjustified refusal of the employee to resume his
employment without any intention of returning.[27] It is therefore incumbent upon petitioners to ascertain the respondents interest or non-
interest in the continuance of their employment. However, petitioners failed to do so.
Respondents must be reinstated and paid their holiday pay, service incentive
leave pay, and 13th month pay.
Clearly therefore, there was no dismissal, much less illegal, and there was also no abandonment of job to speak of. The Labor
Arbiter is therefore correct in ordering that respondents be reinstated but without any backwages.
However, petitioners are of the position that the reinstatement of respondents to their former positions, which were no longer
existing, is impossible, highly unfair and unjust. The project was already completed by petitioners on September 28, 2001. Thus the
completion of the project left them with no more work to do. Having completed their tasks, their positions automatically ceased to
exist. Consequently, there were no more positions where they can be reinstated as painters.
Petitioners are misguided. They forgot that there are two types of employees in the construction industry. The first is referred
to as project employees or those employed in connection with a particular construction project or phase thereof and such employment
is coterminous with each project or phase of the project to which they are assigned. The second is known as non-project employees or
those employed without reference to any particular construction project or phase of a project.
The second category is where respondents are classified. As such they are regular employees of petitioners. It is clear from the
records of the case that when one project is completed, respondents were automatically transferred to the next project awarded to
petitioners. There was no employment agreement given to respondents which clearly spelled out the duration of their employment, the
specific work to be performed and that such is made clear to them at the time of hiring. It is now too late for petitioners to claim that
respondents are project employees whose employment is coterminous with each project or phase of the project to which they are
assigned.
Nonetheless, assuming that respondents were initially hired as project employees, petitioners must be reminded of our ruling
in Maraguinot, Jr. v. National Labor Relations Commission[28] that [a] project employee x x x may acquire the status of a regular
employee when the following [factors] concur:
1. There is a continuous rehiring of project employees even after cessation of a project; and
2. The tasks performed by the alleged project employee are vital, necessary and indespensable to the usual
business or trade of the employer.
In this case, the evidence on record shows that respondents were employed and assigned continuously to the various projects
of petitioners. As painters, they performed activities which were necessary and desirable in the usual business of petitioners, who are
engaged in subcontracting jobs for painting of residential units, condominium and commercial buildings. As regular employees,
respondents are entitled to be reinstated without loss of seniority rights.
Respondents are also entitled to their money claims such as the payment of holiday pay, service incentive leave pay, and
13th month pay. Petitioners as the employer of respondents and having complete control over the records of the company could have
easily rebutted the monetary claims against it. All that they had to do was to present the vouchers or payrolls showing payment of the
same. However, they decided not to provide the said documentary evidence. Our conclusion therefore is that they never paid said
benefits and therefore they must be ordered to settle their obligation with the respondents.
Respondents are also entitled to the payment of attorneys fees.
Even though respondents were not represented by counsel in most of the stages of the proceedings of this case, the award of
attorneys fees as ruled by the Labor Arbiter, the NLRC and the CA to the respondents is still proper. In Rutaquio v. National Labor
Relations Commission,[29] 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 attorneys fees is legally and morally justifiable.
In Producers Bank of the Philippines v. Court of Appeals[30] this Court ruled that:
Attorneys 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.
In this case, respondents filed a complaint for illegal dismissal with claim for payment of their holiday pay, service incentive leave pay,
and 13th month pay. The Labor Arbiter, the NLRC and the CA were one in ruling that petitioners did not pay the respondents their
holiday pay, service incentive leave pay, and 13th month pay as mandated by law. For sure, this unjustified act of petitioners had
compelled the respondents to institute an action primarily to protect their rights and interests.
The CA erred when it ordered reinstatement of respondents with payment of full

backwages.
It must be noted that the Labor Arbiters disposition directed petitioners to reinstate respondents without any backwages and awarded
the payment of service incentive leave pay, holiday pay, 13th month pay, and 10% attorneys fees in the sum of P70,183.23.
On appeal to the NLRC, petitioners limited their appeal to the award of service incentive leave pay, holiday pay, 13th month pay, and
10% attorneys fees. No appeal was made on the order of reinstatement.
In the proceedings before the CA, it is only the award of service incentive leave pay, holiday pay, 13th month pay, and 10% attorneys
fees that were raised by the petitioners. The CA in fact dismissed the petition. However, the CA further concluded in its Decision that
since there is no abandonment to speak about, it is therefore indisputable that respondents were illegally dismissed. Therefore, they
deserve not only reinstatement but also the payment of full backwages.
We do not agree with this ruling of the CA.
In cases where there is no evidence of dismissal, the remedy is
reinstatement but without backwages. In this case, both the Labor Arbiter and the NLRC made a finding that there was no dismissal
much less an illegal one. It is settled that factual findings of quasi-judicial agencies are generally accorded respect and finality so long
as these are supported by substantial evidence.[31]
In Leonardo v. National Labor Relations Commission,[32] this Court held that:
In a case where the employees failure to work was occasioned neither by his abandonment nor by a
termination, the burden of economic loss is not rightfully shifted to the employer; each party must bear his own loss.
Thus, inasmuch as no finding of illegal dismissal had been made, and considering that the absence of such finding is supported
by the records of the case, this Court is bound by such conclusion and cannot allow an award of the payment of backwages.
Lastly, since there was no need to award backwages to respondents, the ruling of the CA that Javalera is solidarily liable with
Exodus International Construction Corporation in paying full backwages need not be discussed.
WHEREFORE, the instant petition for review on certiorari is PARTLY GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 79800 dated August 10, 2004, is AFFIRMED with MODIFICATION that the award of full backwages
is DELETED for lack of legal basis.
PHILIPPINE LONG DISTANCE G.R. No. 165199
TELEPHONE COMPANY,
Petitioner, Present:
CARPIO, J.,
Chairperson,LEONARDO-DE
CASTRO,*
BRION,
- versus - DEL CASTILLO, and
ABAD, JJ.
INOCENCIO B. BERBANO, JR., Promulgated:

Respondent. November 27, 2009
x-----------------------------------------------------------------------------------------x
The Case
This is a petition for review[1] of the Court of Appeals Decision[2] dated 21 January 2004 and Resolution dated 9
September 2004 in CA-G.R. SP No. 75125.The Court of Appeals reversed the Decision[3] dated 29 May 2002 and Resolution
dated 29 October 2002 of the National Labor Relations Commission (NLRC).
The facts, as summarized by the Labor Arbiter and adopted by the NLRC and the Court of Appeals, are as follows:
In his position paper, complainant [Inocencio B. Berbano, Jr.] alleged that he was hired by the respondent
Philippine Long Distance [Telephone] Company (PLDT, for brevity) on June 1, 1988 as Engineering
Assistant. After his probationary period of three months, he was issued an appointment letter with a status
of a regular employee of respondent. After several promotions, complainant finally held the position of
Computer Assistant M-2 on June 16, 1993 in the Sampaloc Exchange Department/Operation and
Maintenance Center of the respondent. Although his function is Computer Assistant M-2, complainant
further alleges that he performed the functions of a Specialist for EWSD who was responsible for handling,
operations and maintenance of the whole EWSD Network handling network database, fault clearance,
database modification alarm monitoring, traffic routing, trunk administration, password and tariff
administration and others.
Being trained as EW[S]D OMC Specialist, complainant claims that respondent expected him to have depth of understanding
in continuous painstaking research and study. Thus, he initiated a study of hi-tech EWSD Switching Equipment, a part of
which is the software installation of various subscriber service features and control operation. It is at this time that
complainant tapped his brother-in-laws number (911-8234) without the latters knowledge and installed service features in
it for study. Such service features included:
1. Security Code
2. Conference Call Three (Three-way calling)
3. Abbreviated Dialing
4. Hot Line Delayed
5. Call Diversion Immediate
6. Call Diversion Dont Answer
7. Call Hold
8. Non-Changeable
Later, on April 21, 1994, complainant learned that the phone number 911-8234 is under investigation by the Quality Control
Inspection Office due to the unauthorized installation of service features thereto. Complainant admitted that he was
responsible for such installation for purposes of study and testing.
Formal investigation ensued on April 22, 1994 and subsequently, on July 6, 1994, complainant received a Memorandum
from the Department Head of the Sampaloc Exchange asking him to explain within 72 hours upon receipt why an
[a]dministrative [a]ction should not be taken against complainant regarding the matter of the unauthorized installations
mentioned at the phone number 911-8234.
On July 11, 1994, complainant submitted a written explanation claiming that the aforementioned installation of service
features was for purposes of study and research.
Finding unacceptable the complainants explanation, respondent PLDT dismissed complainant from the service effective
August 16, 1994.
On the other hand, respondent submits that upon discovery of the installation of service features to the phone number 911-
8234 without the authorization and approval of the respondent, and after investigation, complainant readily admitted having
programmed the said features and that this installation was without prior authorization. Respondents position paper further
avers that having worked as [a] Computer Assistant, complainant took advantage of his position and his access to respondent
companys computer to favor his brother-in-laws telephone by irregularly providing it with special features. Such special
features included the following:
1. Push Button
2. Test Call Only
3. Malicious Call Identification
4. Non-chargeable (Calls to subscriber with this class of service are free of charge for the caller)
5. Three-way Calling (Allows a third party to be linked to an existing call)
6. Call Hold
7. Abbreviated dialing 90 numbers
8. Hotline delay
9. Pin Code
10. Call Diversion Immediate
11. Call Diversion to Fixed Announcement
12. Traffic Restr. Class Act Auth. (Authorization to activate traffic restriction classes)
13. Call Diversion Dont Answer (Authorization to enter a destination no. for call diversion on no answer)
14. Traffic Restriction Class 1
15. Abbreviated Dial Number Mod. Auth. (Authorization for subs controlled entry and and modification of abbreviated
nos.)
16. Call Diversion Immediate (Modification Authorization)
17. Hotline Delay Mod. Auth.(Modification Authorization)
Respondent also found complainants explanation that the installment was for testing purposes,
unmeritorious and unjustified considering that said special features were only deleted upon discovery, two
months after their installations. Further, testings, according to the respondent companys rules should only
last for one day.[4]
On 28 September 1998, the Labor Arbiter[5] rendered a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the reinstatement of

the complainant to his previous position of Computer Assistant M-2 without loss of seniority
rights. Furthermore, respondent is hereby ordered to pay to the complainant the amount of FIVE
HUNDRED THIRTY SEVEN THOUSAND FOUR HUNDRED TWENTY PESOS (P537,420.00)
representing the backwages of the complainant from the time that he was terminated in August 1994 up to
the present, minus any possible income earned elsewhere since complainants dismissal. The equivalent ten
(10%) percent attorneys fees of the total award in the amount of P53,742.00 is also granted.
SO ORDERED.[6]
On 29 May 2002, the NLRC rendered a Decision reversing that of the Labor Arbiter, with the following dispositive portion:
WHEREFORE, premises considered, the assailed decision is hereby reversed and set aside. Respondents
are adjudged not guilty of illegal dismissal. Accordingly, the award of backwages and attorneys fees is
hereby deleted from the decision.
SO ORDERED.[7]
On 15 August 2002, Berbano filed a Motion for Reconsideration, but this was denied by the NLRC in its Resolution dated
29 October 2002.[8]
The Court of Appeals Ruling
Berbano filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the 1997 Revised Rules of Civil
Procedure. On 21 January 2004, the Court of Appeals rendered judgment granting the petition and reversing the NLRC
decision. We quote the dispositive portion of the Court of Appeals decision below.
WHEREFORE, premises considered, the petition is GRANTED. The decision of the public
respondent NLRC promulgated on May 29, 2002 is REVERSED and SET ASIDE and the decision dated
September 28, 1998 of the Honorable Labor Arbiter Romulus S. Prota[s]io is hereby REINSTATED in all
respect. Private respondent PLDT is ordered to pay the backwages to which the petitioner is entitled from
January 15, 2003, the date of his dismissal, until his actual reinstatement.
SO ORDERED.[9]
PLDT filed a Motion for Reconsideration, but this was denied by the Court of Appeals in its Resolution of 9 September
2004.[10]
Hence, this appeal
The Issues
Petitioner PLDT raises the following issues for our consideration:
1. Whether the Court of Appeals erred in reversing the NLRC decision despite its finding that
respondent committed the infraction that caused his dismissal;
2. Whether the Court of Appeals erred in ordering petitioner to pay respondent backwages and
attorneys fees;
3. Whether respondent Inocencio Berbano, Jr. was denied due process of law; and
4. Whether the Court of Appeals had jurisdiction over the Petition for Certiorari filed by respondent.
The Courts Ruling
We find the appeal without merit.
On whether the Court of Appeals had jurisdiction over the Petition for Certiorari filed by respondent
We first consider the issue on jurisdiction raised by petitioner. Petitioner contends that the NLRC Decision dated 29 May
2002 was received by respondent on 29 June 2002; hence, respondent had only ten (10) days, or up to 09 July 2002, to file
a motion for reconsideration of the NLRC decision. Without a motion for reconsideration timely filed, the NLRC decision
would become final and executory, pursuant to Section 2, paragraphs (a), (b) and (c) of Rule VIII [now Section 14 of Rule
VII] of the New Rules of Procedure of the NLRC. Petitioner claims that when respondent filed a motion for reconsideration
of the NLRC decision on 15 August 2002, which was beyond the 10-day reglementary period imposed by law, the decision
was already final and executory. Consequently, the Court of Appeals had no jurisdiction over the petition for certiorari
(assailing the NLRC decision) filed by respondent on 10 February 2003.
The New Rules of Procedure of the NLRC mandate that a motion for reconsideration of the NLRC decision must be filed
within 10 calendar days from receipt of said decision, otherwise, the decision shall become final and executory. [11] A motion
for reconsideration of the NLRC decision must be filed before the remedy of a petition for certiorari may be availed of, to
enable the commission to pass upon and correct its mistakes without the intervention of the courts.[12] Failure to file a motion
for reconsideration of the decision is a procedural defect that generally warrants a dismissal of the petition for
certiorari.[13] However, in Surima v. NLRC,[14]we held that despite procedural lapses, fundamental consideration of
substantial justice may warrant this Court to decide a case on the merits rather than dismiss it on a technicality. In so doing,
we exercise our prerogative in labor cases that no undue sympathy is to be accorded to any claim of procedural misstep, the
idea being that our power must be exercised according to justice and equity and substantial merits of the controversy. [15] In
the instant case, we are persuaded that the rigid rules of procedure must give way to the demands of substantial justice, and
that the case must be decided on the merits. Moreover, the petition filed with the Court of Appeals sought the issuance of a
writ of certiorari which is a prerogative writ, not demandable as a matter of right, but issued in the exercise of judicial
discretion.[16] Thus, the Court of Appeals committed no error when it admitted the petition for certiorari filed by respondent,
and had jurisdiction over said petition.
On whether the Court of Appeals erred in reversing the NLRC decision despite its finding that respondent committed
the infraction that caused his dismissal
Petitioner contends that the Court of Appeals erred when it found respondent to have committed an infraction, i.e.,
programming and installing special features in his (respondents) brother-in-laws telephone line without prior
authorization from petitioner, but nonetheless ruled that the infraction was not serious enough to warrant
respondents dismissal from service. Petitioner also asserts that, contrary to respondents claim, due process was
observed in the dismissal of respondent.
Well-settled is the rule that no employee shall be validly dismissed from employment without the observance of substantive
and procedural due process. The minimum standards of due process are prescribed under Article 277(b) of the Labor Code
of the Philippines (Labor Code) to wit:
Art. 277. Miscellaneous Provisions.
xxx
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of notice
under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be
terminated a written notice containing a statement of the cause for termination and shall afford the latter
ample opportunity to be heard and to defend himself with the assistance of his representative, if he so
desires, in accordance with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. x x x
The above provision is implemented by Section 2, Rule XXIII of Book V of the Omnibus Rules Implementing the Labor
Code, which states:
Section 2. Standards of due process: requirements of notice. In all cases of termination of

employment, the following standards of due process shall be substantially observed:
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
circumstances, grounds have been established to justify his termination. x x x.
Thus, dismissal from service of an employee is valid if the following requirements are complied with: (a) substantive due
process which requires that the ground for dismissal is one of the just or authorized causes enumerated in the Labor Code,
and (b) procedural due process which requires that the employee be given an opportunity to be heard and defend
himself.[17] The employee must be furnished two written notices the first notice apprises the employee of the particular act
or omission for which his dismissal is sought, and the second notice informs the employee of the employers decision to
dismiss him.[18]
In this case, petitioner formally notified respondent of the complaint against him through an inter-office memorandum dated
6 July 1994. The memorandum enumerated the service features allegedly installed by respondent in his brother-in-laws
telephone line (911-8234), and stated the acts of the respondent complained of, viz:
You readily admitted to QCI that subscriber of subject telephone is your brother-in-law and that
you installed the features claiming it was for testing purposes.
Records show that subject telephone was temporarily disconnected last March 24, 1994 for non-
payment, reconnect order was faxed to DataControl Unit of OMCC at 1:30PM. In the process of
reconnection at OMCC, subject telephone was found already working.[19]
In the same memorandum, petitioner asked respondent to explain within 72 hours upon receipt thereof why an administrative
action should not be imposed against him.[20] On 11 July 1994, respondent submitted his written explanation or reply to the
complaint against him.[21] More than a month thereafter, or on 9 August 1994, petitioner issued another inter-office
memorandum informing respondent that his act of installing special features in his brother-in-laws telephone line without
authorization from petitioner constituted gross misconduct and was grossly violative of existing company rules and
regulations, hence, warranting his termination from service.[22] Clearly, petitioner complied with the requirement of
procedural due process.
As regards substantial due process, the grounds for termination of employment must be based on just or authorized
causes. Article 282 of the Labor Code enumerates the just causes for termination of employment by the employer, to wit:
Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing. (Emphasis supplied)
The notice of termination sent by petitioner to respondent indicated that the latter was dismissed from service due to
unauthorized installation of service features in his brother-in-laws telephone line, which allegedly constituted gross
misconduct. Thus, we are left with the issue on whether the said unauthorized act of the respondent constitutes a serious
misconduct which warrants dismissal from service under Article 282(a) of the Labor Code.
Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent
and not mere error of judgment.[23] Ordinary misconduct would not justify the termination of services of the
employee as the Labor Code is explicit that the misconduct must be serious.[24] To be serious, the misconduct
must be of such grave and aggravated character and not merely trivial and unimportant. [25] Such misconduct,
however serious, must nevertheless be in connection with the employees work to constitute just cause for his
separation.[26] As amplified by jurisprudence, misconduct, to be a just cause for dismissal, must (a) be serious;
(b) relate to the performance of the employees duties; and (c) show that the employee has become unfit to
continue working for the employer.[27] Moreover, in National Labor Relations Commission v.
Salgarino,[28] this Court stressed that [i]n order to constitute serious misconduct which will warrant the
dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act
or conduct complained of has violated some established rules or policies. It is equally important and required
that the act or conduct must have been performed with wrongful intent.
We believe that the misconduct of respondent is not of serious nature as to warrant respondents dismissal from service. The
records of this case are bereft of any showing that the alleged misconduct was performed by respondent with wrongful
intent. On the contrary, respondent readily admitted having installed the service features in his brother-in-laws telephone
line for purposes of study and research which could have benefitted petitioner. Respondent explained the installation of the
service features in the written explanation he sent to petitioner as follows:
xxx
There had been a time on that period where I conducted special study on service features of EWSD. It includes testing the
integrity of its actual operation in all digital exchanges connected to our OMC.
During which [sic] I conducted my study of these features for Cubao there was no available test number at OMC for code
911 and 912. So to complete my study I decided to use the number 9118234 at home temporarily and remove those features
after the test.[29]
Moreover, as pointed out by the appellate court, respondents misconduct did not result in any economic loss on the part of
petitioner since the service features were not yet available in the market at the time respondent caused its unauthorized
installation.
We also note that respondents dedicated service to petitioner for almost six (6) years, prior to his commission of the
misconduct, is apparent from the records. His employment was untainted with any irregularity. He had been promoted
several times, and had been chosen by petitioner on several occasions to attend various trainings to improve his craft. He
conducted advance research based on his training background and technical expertise, and had even compiled a service
feature manual which served as quick reference guide of his colleagues for inquiries regarding subscriber operation of
special (or service) features.[30]
Based on the foregoing, we consider respondents offense to be a simple misconduct which does not merit termination of
his employment. The penalty of dismissal from service is not commensurate to respondents offense. Although petitioner,
as an employer, has the right to discipline its erring employees, exercise of such right should be tempered with compassion
and understanding. The magnitude of the infraction committed by an employee must be weighed and equated with the
penalty prescribed and must be commensurate thereto, in view of the gravity of the penalty of dismissal or termination from
the service.[31] The employer should bear in mind that in termination cases, what is at stake is not simply the employees job
or position but his very livelihood.
On whether the Court of Appeals erred in ordering petitioner to pay respondent backwages and attorneys fees
Since respondent was illegally dismissed, he is entitled to reinstatement without loss of seniority rights, and to payment of
backwages. Article 279 of the Labor Code, as amended by Section 34 of Rep. Act No. 6715, provides as follows:
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.
Thus, an illegally dismissed employee is entitled to the twin reliefs of (a) either reinstatement or separation pay, if
reinstatement is no longer viable, and (b) backwages.[32] These reliefs are given to alleviate the economic damage suffered
by the illegally dismissed employee.[33]
Finally, we find no error in the award of attorneys fees. In San Miguel Corporation v. Aballa,[34] we held that in actions for
recovery of wages or where an employee was forced to litigate and thus incur expenses to protect his rights and interests, a
maximum of 10% of the total monetary award by way of attorneys fees is justifiable under Article 111 of the Labor
Code;[35] Section 8, Rule VIII of Book III of the Omnibus Rules Implementing the Labor Code;[36] and paragraph 7, Article
2208 of the Civil Code.[37] The award of attorneys fees is proper and there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid
accordingly.[38]
WHEREFORE, we DENY the petition. We AFFIRM the Court of Appeals Decision dated 21 January 2004 in CA-G.R.
SP No. 75125.
SO ORDERED.
JACKQUI R. MORENO, G.R. No. 175283
Petitioner,
Present:
AUSTRIA-MARTINEZ, J.,
Acting Chairperson,
- versus - TINGA,*
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
SAN SEBASTIAN COLLEGE-RECOLETOS, Promulgated:

MANILA,
Respondent.
March 28, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court is the Decision[2] of the Court
of Appeals dated 7 November 2006 in CA-G.R. SP No. 90083. The appellate courts Decision granted the Special Civil Action
for Certiorari filed by respondent San Sebastian College-Recoletos, Manila(SSC-R), and annulled the Decision[3] dated 23
November 2004 and the Resolution[4] dated 31 March 2005 of the National Labor Relations Commission (NLRC) in NLRC-
NCR-CA No. 037175-03.
The undisputed facts of the case are as follows:
Respondent SSC-R is a domestic corporation and an educational institution duly registered under the laws of
the Philippines, located in C. M. Recto Avenue, Quiapo, Manila.
On 16 January 1999, SSC-R employed petitioner Jackqui R. Moreno (Moreno) as a teaching fellow. On 23 October
2000, Moreno was appointed as a full-time college faculty member.[5] Then, on 22 October 2001, Moreno became a
member of the permanent college faculty.[6] She was also offered the chairmanship[7] of the Business Finance and
Accountancy Department of her college on 13 September 2002.
Subsequently, reports and rumors of Morenos unauthorized external teaching engagements allegedly circulated and
reached SSC-R. The Human Resource Department of the school thereafter conducted a formal investigation on the said
activities. On 24 October 2002, the Department submitted its report,[8] which stated that Moreno indeed had
unauthorized teaching assignments at the Centro Escolar University during the first semester of the School Year 2002-
2003, and at the College of the Holy Spirit, Manila, during the School Years 2000-2001, 2001-2002 and the first semester
of School Year 2002-2003.
On 27 October 2002, Moreno received a memorandum[9] from the Dean of her college, requiring her to explain the reports
regarding her unauthorized teaching engagements. The said activities allegedly violated Section 2.2 of Article II of SSC-
Rs Faculty Manual,[10] which reads:
Administrative permission is required for all full-time faculty members to teach part-time elsewhere. If
ever teaching permission is granted, the total teaching load should not exceed the maximum allowed by
CHED rules and regulations. Faculty members are required to report all other teaching assignments
elsewhere within two (2) weeks from start of the classes every semester.
On 28 October 2002, Moreno sent a written explanation[11] in which she admitted her failure to secure any written
permission before she taught in other schools.Moreno explained that the said teaching engagements were merely
transitory in nature as the aforesaid schools urgently needed lecturers and that she was no longer connected with
them. Moreno further stated that it was never her intention to jeopardize her work in SSC-R and that she merely wanted
to improve her familys poor financial conditions.
A Special Grievance Committee was then formed in order to investigate and make recommendations regarding Morenos
case. The said committee was composed of Dean Abraham Espejo of the College of Law, as chairman, and Messrs. Dindo
Bunag and Ramon Montierro, as members.
In a letter[12] dated 11 November 2002, the grievance committee required Moreno to answer the following series of
questions concerning her case, to wit:
1. Did you teach in other schools without first obtaining the consent of your superiors in SSC-R?
2. Did you ever go beyond the maximum limit for an outside load?
3. Did you ever truthfully disclose completely to your superiors at SSC-R any outside Load?
4. Do you deny teaching in CEU?
5. Do you deny teaching at Holy Spirit?

Moreno answered the above queries in a letter[13] dated 12 November 2002. Moreno admitted she did not formally
disclose her teaching loads at the College of the Holy Spirit and at the Centro Escolar University for fear that the priest
administrators may no longer grant her permission, as prior similar requests had already been declined; that the Dean of
her college was aware of her external teaching loads; that she went beyond the maximum limit for an outside load in the
School Years 2000 until 2002, because she needed to support her mother and sister, her masteral studies, and her sisters
canteen business, all of which coincided with the payment of the emergency loan from the SSC-R administrators that paid
for her mothers illness; that she did not deny teaching part-time in the aforementioned schools; and that she did not wish
to resign because she felt she deserved a second chance.
On the same day that Moreno sent her letter, the grievance committee issued its resolution,[14] which unanimously found
that she violated the prohibition against a full-time faculty having an unauthorized external teaching load. The majority of
the grievance committee members recommended Morenos dismissal from employment in accordance with the school
manual, but Dean Espejo dissented and called only for a suspension for one semester.
Thereafter, SSC-R sent a letter[15] to Moreno that was signed by the College President, informing her that they had
approved and adopted the findings and recommendations of the grievance committee and, in accordance therewith, her
employment was to be terminated effective 16 November 2002.
Moreno thus instituted with the NLRC a complaint for illegal termination against SSC-R, docketed as NLRC-NCR Case No.
11-10077-02, seeking reinstatement, money claims, backwages, separation pay if reinstatement is not viable, and
attorneys fees.
In the Decision[16] dated 30 April 2003, Labor Arbiter Veneranda C. Guerrero dismissed Morenos complaint for lack of
merit, thus:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal
dismissal for lack of merit. Respondent San Sebastian College-Recoletos is hereby ordered to pay
complainant Jackqui R. Moreno the amount of NINE THOUSAND ONE HUNDRED FORTY THREE AND
75/100 PESOS (P9,143.75) representing her unpaid salaries.
All other claims are DISMISSED for lack of merit.
The Labor Arbiter ruled that Morenos due acceptance of the appointment as a member of the Permanent Faculty meant
that she was bound to the condition therein not to accept any outside teaching assignments without permission. Morenos
admission of her violation was likewise said to have rendered her liable for the penalty of dismissal as provided for in the
SSC-R Faculty Manual. The Labor Arbiter held that SSC-R had adequately discharged the burden of proof imposed by law
in dismissing Moreno. Except for her unpaid salary for fifteen (15) days, which was not controverted, the rest of Morenos
money claims were denied for being unsubstantiated.
On appeal by Moreno, the NLRC reversed the rulings of the Labor Arbiter in a Decision dated 23 November 2004, the
relevant portion of which reads:
The four (4) applications for leave of absence adduced in evidence by the respondent [SSC-R] are all
undated. If the absences indicated in the said documents were the only absences incurred by the
complainant [Moreno] in her four-year tenure, it cannot be said that she had a poor attendance. In fact,
the contrary would be true. On the other hand, it is conceded that in the yearly evaluation of the
performance of teachers, she consistently landed among the five best teachers. Thus, neither can it be
said that her moonlighting activities adversely affected her work performance. Likewise, the undisputed
fact that she was asked to be the chairman of Business Finance and Accountancy for SY 2002-2003 should
be considered. This last circumstance could only mean that she was very good at her job.
There are other extenuating circumstances that should have been taken into consideration in
determining the propriety of the penalty of dismissal meted upon the complainant.These circumstances
are the fact that it was her first offense in four years of unblemished employment, and the fact that she
candidly admitted her fault. x x x
Moreover, it is settled that the existence of some rules agreed upon between the employer and
employee on the subject of dismissal cannot preclude the State from inquiring whether its rigid
application would work too harshly on the employee. (Gelmart Industries Phils. Inc. vs. NLRC, 176 SCRA
295 cited in Caltex Refinery Employees Association vs. NLRC, 246 SCRA 271).
Thus, in the instant case, it must be concluded that the penalty of dismissal meted upon the complainant
[Moreno] was too harsh and unreasonable under the circumstances. At most, a one-year suspension with
a warning against the repetition of the same offense would have been more in keeping with the generally
accepted principles of law.
WHEREFORE, the decision appealed from is hereby REVERSED. The respondent [SSC-R] is hereby ordered
to REINSTATE the complainant [Moreno] to her former position, and to pay her full backwages counted
from November 16, 2003 up to the date of her actual reinstatement.[17]
SSC-R filed a Motion for Reconsideration[18] of the NLRC Decision, which was denied for lack of merit in a
Resolution[19] dated 31 March 2005.
Thus, SSC-R instituted with the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules of Court, with a prayer
for the issuance of a temporary restraining order and/or a writ of preliminary injunction,[20] docketed as CA-G.R. SP No.
90083, alleging grave abuse of discretion on the part of the NLRC.
In a Decision[21] dated 7 November 2006, the appellate court granted the petition and annulled the Decision dated 23
November 2004, and Resolution dated 31 March 2005 of the NLRC. In reinstating the Decision of the Labor Arbiter
dated 30 April 2003, the Court of Appeals ruled in this wise:
In the case at bar, there is clearly grave abuse of discretion on the part of the NLRC when it reversed the
Decision of the Labor Arbiter. Its conclusions are highly prejudicial to the interests of herein petitioner
[SSC-R], considering the glaring infractions committed by private respondent [Moreno], which she even
expressly admitted.
xxxx
Willful disobedience of the employers lawful orders, as a just cause for dismissal of an employee,
envisages the concurrence of at least two (2) requisites: the employees assailed conduct must have been
willful or intentional, the willfulness being characterized by a wrongful or perverse attitude; and the order
violated must have been reasonable, lawful, made known to the employee and must pertain to the duties
which he had been engaged to discharge.
The foregoing requisites are all present in this case. The prohibition against unauthorized outside
teaching engagements found in the Faculty Manual and in private respondents [Moreno] appointment
letter are deemed reasonable under the circumstances. In fact, the petitioners [SSC-R] policy is actually
permissive since it allows other teaching engagements so long as its president approves of the same.
Concededly, this policy was made known to private respondent [Moreno] for as mentioned earlier, it is
found not only in the Faculty Manual, but more importantly, it is explicitly stated in her appointment
letter. By her own admission, it cannot be clearer that, in spite of her knowledge thereof, private
respondent [Moreno] willfully disobeyed the said prohibition. When she accepted the teaching
opportunities offered to her by other schools and altogether concealed the same from the petitioner
[SSC-R], she risked being administratively held liable therefor. Thus, the excuses she raised upon the
petitioners [SSC-R] discovery of such concealment deserve scant consideration.
The policy is obviously in connection with the private respondents [Moreno] duties as a faculty
member. It is designed to ensure that the petitioners [SSC-R] teaching staff is well fit to function
accordingly, not only for its benefit, but chiefly, for the students who are under their care and
instruction. Private respondent [Moreno] argues that notwithstanding her violations, her commitments
with petitioner [SSC-R] were never compromised. Be that as it may, this fact cannot absolve her. She may
be fit at the time when her infractions were revealed, but there is no assurance that her health would
not deteriorate in time if she persists in carrying on a heavy workload.
xxxx
WHEREFORE, the instant petition is GRANTED. The 23 November 2004 Decision and the 31 March
2005 Resolution of the National Labor Relations Commission (Second Division) are hereby ANNULLED
and SET ASIDE. The National Labor Relations Commission is permanently enjoined from executing its 31
March 2005 Resolution. The Decision of the Labor Arbiter dated 30 April 2003 is hereby REINSTATED and
AFFIRMED.
Accordingly, Moreno now impugns before this Court the Court of Appeals Decision dated 07 November 2006 raising the
following issues:
I.
WHETHER OR NOT THE DISMISSAL OF PETITIONER WAS PROPER AND LAWFUL.
II.
WHETHER OR NOT PETITIONER IS ENTITLED TO THE RELIEF SHE SEEKS AGAINST
RESPONDENT.
Moreno insists that her right to security of tenure is a more significant consideration in this case than the strict
application of a school policy. She laments that her dismissal from employment for failing to secure the necessary
permission is too harsh and undeserved a penalty.
The most basic of tenets in employee termination cases is that no worker shall be dismissed from employment
without the observance of substantive and procedural due process. Substantive due process means that the ground upon
which the dismissal is based is one of the just or authorized causes enumerated in the Labor Code. Procedural due process,
on the other hand, requires that an employee be apprised of the charge against him, given reasonable time to answer the
same, allowed ample opportunity to be heard and defend himself, and assisted by a representative if the employee so
desires.[22] The employee must be furnished two written notices: the first notice apprises the employee of the particular
acts or omissions for which his dismissal is sought, and the second is a subsequent notice which informs the employee of
the employer's decision to dismiss him.[23]
Article 282 of the Labor Code provides for the just causes for the termination of employment, to wit:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. When
there is no showing of a clear, valid and legal cause for the termination of employment, the law considers the matter a
case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid or authorized
cause.[24]
Respondent SSC-R contends that Morenos dismissal from employment was valid because she knowingly violated
the prohibition embodied in the aforementioned Section 2.2 of Art. II of the SSC-R Faculty Manual, in accordance with
Section 45[25] of the Manual of Regulations for Private Schools, and which prohibition was likewise contained in Morenos
employment contract.[26] In so doing, Moreno allegedly committed serious misconduct and willful disobedience against
the school, and thereby submitted herself to the corresponding penalty provided for in both the Faculty Manual and the
employment contract, which is termination for cause.
On the basis of the evidence on record, the Court finds that Moreno has indeed committed misconduct against respondent
SSC-R. Her admitted failure to obtain the required permission from the school before she engaged in external teaching
engagements is a clear transgression of SSC-Rs policy. However, said misconduct falls below the required level of gravity
that would warrant dismissal as a penalty.
Under Art. 282(a) of the Labor Code, willful disobedience of the employers lawful orders as a just cause for
termination of employment envisages the concurrence of at least two requisites: (1) the employees assailed conduct must
have been willful or intentional, the willfulness being characterized by a "wrongful and perverse attitude"; and (2) the
order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he has
been engaged to discharge.[27]
Similarly, with respect to serious misconduct, the Court has already ruled in National Labor Relations Commission
v. Salgarino[28] that:
Misconduct is defined as improper or wrong conduct. It is the transgression of some established

and definite rule of action, a forbidden act, a dereliction of duty, willful in character and implies wrongful
intent and not mere error of judgment. The misconduct to be serious within the meaning of the act must
be of such a grave and aggravated character and not merely trivial or unimportant. Such misconduct,
however serious, must nevertheless be in connection with the work of the employee to constitute just
cause from his separation.
In order to constitute serious misconduct which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of
has violated some established rules or policies. It is equally important and required that the act or
conduct must have been performed with wrongful intent. (Emphasis ours.)
After examining the records of the case, the Court finds that SSC-R miserably failed to prove that Morenos
misconduct was induced by a perverse and wrongful intent as required in Art. 282(a) of the Labor Code. SSC-R merely
anchored Morenos alleged bad faith on the fact that she had full knowledge of the policy that was violated and that it was
relatively easy for her to secure the required permission before she taught in other schools. This posture is utterly lacking.
It bears repeating that it is the employer that has the burden of proving the lawful cause sustaining the dismissal of
the employee. Even equipoise is not enough; the employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause.[29]
In the present case, SSC-R failed to adduce any concrete evidence to prove that Moreno indeed harbored perverse
or corrupt motivations in violating the aforesaid school policy. In her letter of explanation to the grievance committee
dated 12 November 2002, Moreno explained in detail her role as the breadwinner and the grave financial conditions of her
family. As previous requests for permission had already been denied, Moreno was thus prompted to engage in illicit
teaching activities in other schools, as she desperately needed them to augment her income. Instead of submitting
controverting evidence, SSC-R simply dismissed the above statements as nothing more than a lame excuse[30] and are clearly
an afterthought,[31] considering that no evidence was offered to support them and that Morenos salary was allegedly one of
the highest among the universities in the country.
In addition, even if dismissal for cause is the prescribed penalty for the misconduct herein committed, in accordance
with the SSC-R Faculty Manual and Morenos employment contract, the Court finds the same to be disproportionate to the
offense.
Time and again, we have ruled that while an employer enjoys a wide latitude of discretion in the promulgation of
policies, rules and regulations on work-related activities of the employees, those directives, however, must always be fair
and reasonable, and the corresponding penalties, when prescribed, must be commensurate to the offense involved and to the
degree of the infraction.[32]
Special circumstances were present in the case at bar which should have been properly taken into account in the
imposition of the appropriate penalty. Moreno, in this case, had readily admitted her misconduct, which was undisputedly
the first she has ever committed against the school. Her teaching abilities and administrative skills remained apparently
unaffected by her external teaching engagements, as she was found by the grievance committee to be one of the better
professors in the Accounting Department[33] and she was even offered the Chairmanship of her college.[34] Also, the fact
that Moreno merely wanted to alleviate her familys poor financial conditions is a justification that SSC-R failed to
refute. SSC-R likewise failed to prove any resulting material damage or prejudice on its part as a consequence of Morenos
misconduct. The claim by SSC-R that the imposition of a lesser penalty would set a bad precedent[35] for the other faculty
members who comply with the school policies is too speculative for this Court to even consider.
Finally, the Court notes that in Morenos contract of employment,[36] one of the provisions therein categorically
stated that should a violation of any of the terms and conditions thereof be committed, the penalty that will be imposed
would either be suspension or dismissal from employment. Thus, contrary to its position from the beginning, SSC-R
clearly had the discretion to impose a lighter penalty of suspension and was not at all compelled to dismiss Moreno under
the circumstances, just because the Faculty Manual said so.
With regard to the observance of procedural due process, neither of the parties has put the same into issue. Indeed, based
on the evidence on record, Moreno was served with the required twin notices and was afforded the opportunity to be
heard. The first notice was embodied in the memorandum[37] dated 27 October 2002sent by her College Dean, which
required her to explain her unauthorized teaching assignments. The letter[38] by SSC-R that informed Moreno that her
services were being terminated effective 16 November 2002 constituted the second required notice. Moreno was also given
the opportunity to explain her side when the special grievance committee asked her a series of questions pertaining to their
investigation in a letter[39] dated 11 November 2002 and to which she replied likewise through a letter[40] dated 12 November
2002.
In light of the foregoing, the Court holds that the dismissal of petitioner Moreno failed to comply with the substantive aspect
of due process. Despite SSC-Rs observance of procedural due process, it nonetheless failed to discharge its burden of
proving the legality of Morenos termination from employment. Thus, the imposed penalty of dismissal is hereby declared
as invalid.
In so ruling, this Court does not depreciate the misconduct committed by Moreno. Indeed, SSC-R has adequate reasons to
impose sanctions on her. However, this should not be dismissal from employment. Because of the serious implications of
this penalty, our Labor Code decrees that an employee cannot be dismissed, except for the most serious causes.[41]
Considering the presence of extenuating circumstances in the instant case, the Court deems it appropriate to impose the
penalty of suspension of one (1) year on Moreno, to be counted from 16 November 2002, the effective date of her illegal
dismissal. However, given the period of time in which Moreno was actually prevented from working in the respondent
school, the said suspension should already be deemed served.
Furthermore, the Court holds that Moreno should be reinstated to her former position, without loss of seniority rights
and other privileges, but without payment of backwages.
As a general rule, the normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the
employee becomes entitled to reinstatement without loss of seniority rights; and secondly, the payment of backwages
corresponding to the period from his illegal dismissal up to his actual reinstatement. The two forms of relief are, however,
distinct and separate from each other. Though the grant of reinstatement commonly carries with it an award of
backwages, the appropriateness or non-availability of one does not carry with it the inappropriateness or non-availability
of the other.[42]
In accordance with Durabuilt Recapping Plant & Co. v. National Labor Relations Commission,[43] the Court may not only
mitigate, but also absolve entirely, the liability of the employer to pay backwages where good faith is evident. Likewise,
backwages may be withheld from a dismissed employee where exceptional circumstances are availing.[44]
In the present case, the good faith of SSC-R is apparent. The termination of Moreno from her employment cannot be said
to have been carried out in a malevolent, arbitrary or oppressive manner. Indeed, the only mistake that the respondent school
has committed was to strictly apply the provisions of its Faculty Manual and its contract with Moreno without regard for
the aforementioned special circumstances that were attendant in this case. Even then, Morenos right to procedural due
process was fully respected, as she was given the required twin notices and an ample opportunity to be heard. This fact was
not even disputed by Moreno herself.
With respect to Morenos claim for moral and exemplary damages, the same were never satisfactorily pleaded and
substantiated.[45] Thus, they are hereby denied.Neither is Moreno entitled to the award of the monetary claims[46] in her
petition, as no basis and proof for the grant thereof were ever adduced.
The Court cannot likewise award attorneys fees to Moreno in view of the above-mentioned finding of good faith on the part
of SSC-R[47]. It is a well-settled principle that even if a claimant is compelled to litigate with third persons or to incur
expenses to protect the claimants rights, attorneys fees may still not be awarded where no sufficient showing of bad faith
could be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause. [48]
WHEREFORE, the Petition for Review is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No 90083
dated 7 November 2006 is hereby REVERSED. Respondent San Sebastian College-Recoletos, Manila, is hereby ordered
to reinstate Petitioner Jackqui R. Moreno without loss of seniority rights and other privileges. No pronouncement as to cost.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173189 February 13, 2013
JONATHAN I. SANG-AN, Petitioner,

vs.
EQUATOR KNIGHTS DETECTIVE AND SECURITY AGENCY, INC., Respondents.
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 filed by petitioner Jonathan I. Sang-an assailing the
decision2 dated September 29, 2005 and the resolution3 dated May 29, 2006 of the Court of Appeals (CA) in CA-
G.R. SP. No. 86677. TheCA set aside the decision4 dated December 15, 2003 of the National Labor Relations
Commission (NLRC) and reinstated the decision5 dated July 30, 200 I of Labor Arbiter Geoffrey P.
Villahermosa (LA).
The Facts
Jonathan was the Assistant Operation Manager of respondent Equator Knights Detective and Security Agency,
Inc. (Equator). He was tasked, among others, with the duty of assisting in the operations of the security services;
he was also in charge of safekeeping Equator’s firearms.
On April 21, 2001, Equator discovered that two firearms were missing from its inventory. The investigation
revealed that it was Jonathan who might have been responsible for the loss.6 On April 24, 2001, Jonathan
was temporarily suspended from work pending further investigation.
On May 8, 2001, while Jonathan was under suspension, a security guard from Equator was apprehended by
policemen for violating the Commission on Elections’ gun ban rule. The security guard stated in his
affidavit7 that the unlicensed firearm had been issued to him by Jonathan.
On May 24, 2001, Jonathan filed with the NLRC a complaint for illegal suspension with prayer for
reinstatement.8 In his position paper, however, he treated his case as one for illegal dismissal and alleged that
he had been denied due process when he was dismissed.9 Equator, on the other hand, argued that Jonathan’s
dismissal was not illegal but was instead for a just cause under Article 282 of the Labor Code. 10
On July 30, 2001, the LA rendered a decision11 dismissing the complaint. It declared that no illegal dismissal
took place as Jonathan’s services were terminated pursuant to a just cause. The LA found that Jonathan was
dismissed due to the two infractions he committed:
The basis for the termination of the complainant was first, when he was suspended when he issued a firearm
[to] a security guard and then replaced it with another one, then took the respondent[’s] firearm with him and
since then both firearms were lost. x x x.
xxxx
His second offense which resulted in his being terminated was when he issued an unlicensed firearm to a
Security Guard stationed in one of the business establishment[s] in Bais City which is a client of the respondents.
xxxx
WHEREFORE, in the light of the foregoing, judgment is hereby rendered DISMISSING this case for lack of legal
and factual basis.12
Jonathan appealed the LA’s decision to the NLRC, contending that no charge had been laid against him; there
was no hearing or investigation of any kind; and he was not given any chance or opportunity to defend himself.
The NLRC sustained the findings of the LA that there had been just cause for his dismissal. However, it
found that Jonathan had been denied his right to due process when he was dismissed. It held that
Equator’s letter informing him of his temporary suspension until further notice did not satisfy the requirements of
due process for a valid dismissal. Thus, the NLRC modified the LA’s decision and ordered Equator to pay
Jonathan backwages from April 24, 2001 until the date of the NLRC’s decision. Equator moved for
reconsideration but the NLRC denied the motion, prompting the filing of a petition for certiorari under Rule 65 of
the Rules of Court with the CA. Equator argued that the NLRC committed grave abuse of discretion when it
found that Jonathan had been denied procedural due process.
The CA reversed the decision of the NLRC, finding that Equator substantially complied with the procedural
requirements of due process. It found that the letter given to Jonathan did not mean that he had been dismissed;
rather, he was only suspended – the very reason for the case for illegal suspension Jonathan filed before the
LA.1âwphi1
The CA found that Jonathan filed his complaint for illegal suspension on May 2, 2001. During the pendency of
the illegal suspension case before the LA, Jonathan committed another offense on May 8, 2001 when he issued
the unlicensed firearm to Equator’s security guard. The CA found that Equator’s June 7, 2001 position paper
brought Jonathan’s second offense before the LA for resolution; thus, Jonathan was not denied due process. The
CA reinstated the LA’s decision dismissing Jonathan’s complaint. Jonathan filed a motion for
reconsideration which the CA denied. He thereafter filed the present petition.
The Parties’ Arguments
Jonathan contends that when Equator filed a petition for certiorari under Rule 65 of the Rules of Court alleging
grave abuse of discretion by the NLRC, it failed to post a cash or surety bond as required by Article 223 of the
Labor Code. Without complying with this condition, the petition for certiorari should have been dismissed outright.
Also, Jonathan contends that the CA’s findings of fact are contrary to the findings of fact by the NLRC. Since the
findings of fact of quasi-judicial agencies are accorded respect and finality, he argues that the NLRC’s decision
must be sustained.
Equator, on the other hand, submits that the rule on posting of cash or surety bond as required by Article 223 of
the Labor Code is not applicable in a petition for certiorari under Rule 65 of the Rules of Court. It also submits
that both the LA and the NLRC concur in finding just cause for the dismissal of Jonathan; hence, Jonathan’s
subsequent dismissal is valid.
The Issues
Given the parties’ arguments, the case poses the following issues for the Court’s resolution:
1. whether the posting of a cash or surety bond is required for the filing of a petition for certiorari under
Rule 65 of the Rules of Court with the CA; and
2. whether Jonathan was validly dismissed.
The Court’s Ruling
We find the petition partially meritorious.
A cash/surety bond is not needed in a Petition for Certiorari under Rule 65
The requirement of a cash or surety bond as provided under Article 223 of the Labor Code only applies to appeals
from the orders of the LA to the NLRC. It does not apply to special civil actions such as a petition
for certiorari under Rule 65 of the Rules of Court. In fact, nowhere under Rule 65 does it state that a bond is
required for the filing of the petition.
A petition for certiorari is an original and independent action and is not part of the proceedings that resulted in
the judgment or order assailed before the CA. It deals with the issue of jurisdiction, and may be directed against
an interlocutory order of the lower court or tribunal prior to an appeal from the judgment, or to a final judgment
where there is no appeal or any plain, speedy or adequate remedy provided by law or by the rules.
Jonathan filed a complaint for illegal dismissal
Contrary to the findings of the CA, Jonathan was not merely suspended but was dismissed from the service.
While Jonathan initially filed an action for illegal suspension, the position papers both parties filed treated the
case as one for illegal dismissal. Jonathan alleged in his position paper that "the [r]espondent illegally
SUSPENDED (DISMISSED) the x x x complainant[,]" and claimed that his dismissal lacked the required due
process.13 Similarly, Equator’s position paper states that after the commission of the second offense on May 8,
2001, "[management] made up a decision to dismiss [Jonathan]."14 Even the LA treated the case before him
as "a case for illegal dismissal[.]"15 In Equator’s memorandum to this Court, it admitted that Jonathan was
dismissed.16
We also find that Jonathan did not file his complaint for illegal suspension on May 2, 2001. The records of the
case disclose that the receiving date stamped on the complaint is May 24, 2001. The date relied upon by the
CA, May 2, 2001, was the date when the complaint was subscribed and sworn to before a notary public. 17 Due
to the second offense committed by Jonathan on May 8, 2001, Equator decided to dismiss him. Therefore, when
the LA tried the case, Jonathan had already been dismissed.
Equator failed to comply with the procedural due process
In order to validly dismiss an employee, it is fundamental that the employer observe both substantive and
procedural due process – the termination of employment must be based on a just or authorized cause and the
dismissal can only be effected, after due notice and hearing.18
This Court finds that Equator complied with the substantive requirements of due process when Jonathan
committed the two offenses.
Article 282(A) of the Labor Code provides that an employee may be dismissed on the ground of serious
misconduct or willful disobedience of the lawful orders of his employer or representative in connection with his
work. Misconduct is improper or wrongful conduct; it is the transgression of some established and definite rule
of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error
of judgment. The misconduct, to be serious within the meaning of the Labor Code, must be of such grave and
aggravated character and not merely trivial or unimportant. It is also important that the misconduct be in
connection with the employee's work to constitute just cause for his separation.19
By losing two firearms and issuing an unlicensed firearm, Jonathan committed serious misconduct. He did not
merely violate a company policy; he violated the law itself (Presidential Decree No. 1866 or Codifying the Laws
on Illegal/Unlawful Possession, Manufacture, Dealing in, Acquisition or Disposition, of Firearms, Ammunition or
Explosives or Instruments Used in the Manufacture of Firearms, Ammunition or Explosives, and Imposing Stiffer
Penalties for Certain Violations Thereof and for Relevant Purposes),20 and placed Equator and its employees at
risk of being made legally liable. Thus, Equator had a valid reason that warranted Jonathan’s dismissal from
employment as Assistant Operation Manager.
The Court, however, finds that Equator failed to observe the proper procedure in terminating Jonathan’s services.
Section 2, Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code provides that:
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 Labor 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 circumstances, grounds have been established to justify his termination.21
Jurisprudence has expounded on the guarantee of due process, requiring the employer to furnish the employee
with two written notices before termination of employment can be effected: a first written notice that informs
the employee of the particular acts or omissions for which his or her dismissal is sought, and a second written
notice which informs the employee of the employer's decision to dismiss him. In considering whether the charge
in the first notice is sufficient to warrant dismissal under the second notice, the employer must afford the
employee ample opportunity to be heard.
A review of the records shows that Jonathan was not furnished with any written notice that informed him of the
acts he committed justifying his dismissal from employment. The notice of suspension given to Jonathan only
pertained to the first offense, i.e., the loss of Equator’s firearms under Jonathan’s watch.1âwphi1 With respect
to his second offense (i.e., the issuance of an unlicensed firearm to Equator’s security guard – that became the
basis for his dismissal), Jonathan was never given any notice that allowed him to air his side and to avail of the
guaranteed opportunity to be heard. That Equator brought the second offense before the LA does not serve as
notice because by then, Jonathan had already been dismissed.
In order to validly dismiss an employee, the observance of both substantive and procedural due process by the
employer is a condition sine qua non. Procedural due process requires that the employee be given a notice of
the charge against him, an ample opportunity to be heard, and a notice of termination.22
Since Jonathan had been dismissed in violation of his right to procedural due process but for a just cause,
Equator should pay him nominal damages of ₱30,000.00, in accordance with Agabon v. NLRC. 23 The decision
of the NLRC, although final, was brought to CA on a petition for certiorari and was eventually nullified for grave
abuse of discretion. When the CA ruled on the case, this Court had abandoned the ruling in Serrano v. NLRC24 in
favor of the Agabon ruling.
WHEREFORE, we hereby PARTIALLY GRANT the petition. The decision dated September 29, 2005 and the
resolution dated May 29, 2006 of the Court of Appeals in CA-G.R. SP. No. 86677
are AFFIRMED with MODIFICATION. The employer, Equator Knights Detective and Security Agency, Inc., had
sut1icient basis to terminate the employment of Jonathan I. Sang-an whose dismissal is thus declared to be
substantively valid. However, he was denied his right to procedural due process for lack of the required notice
of dismissal. Consequently, Equator Knights Detective and Security Agency, Inc. is ordered to pay petitioner
Jonathan I. Sang-an ₱30,000.00 as nominal damages for its non-compliance with procedural due process.
SO ORDERED.
THIRD DIVISION
HOTEL ENTERPRISES OF THE PHILIPPINES, G.R. No. 165756

INC. (HEPI), owner of Hyatt Regency Manila,
Petitioner,
Present:
- versus -
YNARES-SANTIAGO, J.,
Chairperson,
SAMAHAN NG MGA MANGGAGAWA SA HYATT-
NATIONAL UNION OF WORKERS IN THE CARPIO,*
HOTEL AND RESTAURANT AND ALLIED
INDUSTRIES (SAMASAH-NUWHRAIN), CORONA,**
Respondent. NACHURA, and
PERALTA, JJ.
Promulgated:
June 5, 2009
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
The Constitution affords full protection to labor, but the policy is not to be blindly followed at the expense of capital.
Always, the interests of both sides must be balanced in light of the evidence adduced and the peculiar circumstances
surrounding each case.
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals (CA)
Decision[1] dated July 20, 2004 and the Resolution[2] dated October 20, 2004 in CA-G.R. SP No. 81153. The appellate court,
in its decision and resolution, reversed the April 3, 2003 Resolution[3] of the National Labor Relations Commission (NLRC)
and reinstated the October 30, 2002 Decision[4] issued by Labor Arbiter Aliman Mangandog upholding the legality of the
strike staged by the officers and members of respondent Samahan ng mga Manggagawa sa Hyatt-National Union of Workers
in the Hotel Restaurant and Allied Industries (Union).
We trace the antecedent facts below.
Respondent Union is the certified collective bargaining agent of the rank-and-file employees of Hyatt Regency
Manila, a hotel owned by petitioner Hotel Enterprises of the Philippines, Inc. (HEPI).
In 2001, HEPIs hotel business suffered a slump due to the local and international economic slowdown, aggravated
by the events of September 11, 2001 in the United States. An audited financial report made by Sycip Gorres Velayo (SGV)
& Co. on January 28, 2002 indicated that the hotel suffered a gross operating loss amounting to P16,137,217.00 in 2001,[5] a
staggering decline compared to its P48,608,612.00 gross operating profit[6] in year 2000.[7]
2000 2001
Income from Hotel Operations P 78,434,103 P 12,230,248
--------------------------------------------------------------------------------------
Other Deductions
Provision for hotel rehabilitation 20,000,000 20,000,000
Provision for replacements of and
additions to furnishings and
equipment 9,825,491 8,367,465

29,825,491 28,367,465
Gross Operating Profit (Loss) P 48,608,612 (P 16,137,217)
According to petitioner, the management initially decided to cost-cut by implementing energy-saving schemes:
prioritizing acquisitions/purchases; reducing work weeks in some of the hotels departments; directing the employees to avail
of their vacation leaves; and imposing a moratorium on hiring employees for the year 2001 whenever practicable. [8]
Meanwhile, on August 31, 2001, the Union filed a notice of strike due to a bargaining deadlock before the National
Conciliation Mediation Board (NCMB), docketed as NCMB-NCR-NS 08-253-01.[9] In the course of the proceedings, HEPI
submitted its economic proposals for the rank-and-file employees covering the years 2001, 2002, and 2003. The proposal
included manning and staffing standards for the 248 regular rank-and-file employees. The Union accepted the economic
proposals. Hence, a new collective bargaining agreement (CBA) was signed on November 21, 2001, adopting the manning
standards for the 248 rank-and-file employees.[10]
Then, on December 21, 2001, HEPI issued a memorandum offering a Special Limited Voluntary Resignation/Retirement
Program (SLVRRP) to its regular employees. Employees who were qualified to resign or retire were given separation
packages based on the number of years of service.[11] The vacant positions, as well as the regular positions vacated, were
later filled up with contractual personnel and agency employees.[12]
Subsequently, on January 21, 2002, petitioner decided to implement a downsizing scheme after studying the operating costs
of its different divisions to determine the areas where it could obtain significant savings. It found that the hotel could save
on costs if certain jobs, such as engineering services, messengerial/courier services, janitorial and laundry services, and
operation of the employees cafeteria, which by their nature were contractable pursuant to existing laws and jurisprudence,
were abolished and contracted out to independent job contractors. After evaluating the hotels manning guide, the following
positions were identified as redundant or in excess of what was required for the hotels actual operation given the prevailing
poor business condition, viz.: a) housekeeping attendant-linen; b) tailor; c) room attendant; d) messenger/mail clerk; and e)
telephone technician.[13] The effect was to be a reduction of the hotels rank-and file employees from the agreed number of
248 down to just 150[14] but it would generate estimated savings of around P9,981,267.00 per year.[15]
On January 24, 2002, petitioner met with respondent Union to formally discuss the downsizing
program.[16] The Union opposed the downsizing plan because no substantial evidence was shown to prove that the hotel was
incurring heavy financial losses, and for being violative of the CBA, more specifically the manning/staffing standards agreed
upon by both parties in November 2001.[17] In a financial analysis made by the Union based on Hyatts financial statements
submitted to the Securities and Exchange Commission (SEC), it noted that the hotel posted a positive profit margin with
respect to its gross operating and net incomes for the years 1998, 1999, 2000, and even in 2001. [18] Moreover, figures
comprising the hotels unappropriated retained earnings showed a consistent increase from 1998 to 2001, an indication that
the company was, in fact, earning, contrary to petitioners assertion. The net income from hotel operations slightly dipped
from P78,434,103.00 in 2000 to P12,230,248.00 for the year 2001, but nevertheless remained positive.[19] With this,
the Union, through a letter, informed the management of its opposition to the scheme and proposed instead several cost-
saving measures.[20]
Despite its opposition, a list of the positions declared redundant and to be contracted out was given by the
management to the Union on March 22, 2002.[21]Notices of termination were, likewise, sent to 48 employees whose
positions were to be retrenched or declared as redundant. The notices were sent on April 5, 2002 and were to take effect on
May 5, 2002.[22] A notice of termination was also submitted by the management to the Department of Labor and
Employment (DOLE) indicating the names, positions, addresses, and salaries of the employees to be
terminated.[23] Thereafter, the hotel management engaged the services of independent job contractors to perform the
following services: (1) janitorial (previously, stewarding and public area attendants); (2) laundry; (3) sundry shop; (4)
cafeteria;[24]and (5) engineering.[25] Some employees, including one Union officer, who were affected by the downsizing
plan were transferred to other positions in order to save their employment.[26]
On April 12, 2002, the Union filed a notice of strike based on unfair labor practice (ULP) against HEPI. The case
was docketed as NCMB-NCR-NS-04-139-02.[27] On April 25, 2002, a strike vote was conducted with majority in the
bargaining unit voting in favor of the strike.[28] The result of the strike vote was sent to NCMB-NCR Director Leopoldo de
Jesus also on April 25, 2002.[29]
On April 29, 2002, HEPI filed a motion to dismiss notice of strike which was opposed by the Union. On May 3,
2002, the Union filed a petition to suspend the effects of termination before the Office of the Secretary of Labor. On May
5, 2002, the hotel management began implementing its downsizing plan immediately terminating seven (7) employees due
to redundancy and 41 more due to retrenchment or abolition of positions. [30] All were given separation pay equivalent to
one (1) months salary for every year of service.[31]
On May 8, 2002, conciliation proceedings were held between petitioner and respondent, but to no avail. On May
10, 2002, respondent Union went on strike. A petition to declare the strike illegal was filed by petitioner on May 22, 2002,
docketed as NLRC-NCR Case No. 05-03350-2002.
On June 14, 2002, Acting Labor Secretary Manuel Imson issued an order in NCM-NCR-NS-04-139-02 (thence,
NLRC Certified Case No. 000220-02), certifying the labor dispute to the NLRC for compulsory arbitration and directing
the striking workers, except the 48 workers earlier terminated, to return to work within 24 hours. On June 16, 2002, after
receiving a copy of the order, members of respondent Union returned to work.[32] On August 1, 2002, HEPI filed a
manifestation informing the NLRC of the pending petition to declare the strike illegal. Because of this, the NLRC, on
November 15, 2002, issued an order directing Labor Arbiter Aliman Mangandog to immediately suspend the proceedings
in the pending petition to declare the strike illegal and to elevate the records of the said case for consolidation with the
certified case.[33] However, the labor arbiter had already issued a Decision[34] dated October 30, 2002 declaring the strike
legal.[35]Aggrieved, HEPI filed an appeal ad cautelam before the NLRC questioning the October 30, 2002
decision.[36] The Union, on the other hand, filed a motion for reconsideration of the November 15, 2002 Order on the ground
that a decision was already issued in one of the cases ordered to be consolidated.[37]
On appeal, the NLRC reversed the labor arbiters decision. In a Resolution[38] dated April 3, 2003, it gave credence
to the financial report of SGV & Co. that the hotel had incurred huge financial losses necessitating the adoption of a
downsizing scheme. Thus, NLRC declared the strike illegal, suspended all Union officers for a period of six (6) months
without pay, and dismissed the ULP charge against HEPI.[39]
Respondent Union moved for reconsideration, while petitioner HEPI filed its partial motion for reconsideration.
Both were denied in a Resolution[40] dated September 24, 2003.
The Union filed a petition for certiorari with the CA on December 19, 2003[41] questioning in the main the validity
of the NLRCs reversal of the labor arbiters decision.[42] But while the petition was pending, the hotel management, on
December 29, 2003, issued separate notices of suspension against each of the 12 Union officers involved in the strike in
line with the April 3, 2003 resolution of the NLRC.[43]
On July 20, 2004, the CA promulgated the assailed Decision,[44] reversing the resolution of the NLRC and
reinstating the October 30, 2002 decision of the Labor Arbiter which declared the strike valid. The CA also ordered the
reinstatement of the 48 terminated employees on account of the hotel managements illegal redundancy and retrenchment
scheme and the payment of their backwages from the time they were illegally dismissed until their actual
reinstatement.[45] HEPI moved for reconsideration but the same was denied for lack of merit.[46]
Hence, this petition.
The issue boils down to whether the CAs decision, reversing the NLRC ruling, is in accordance with law and
established facts.
We answer in the negative.
To resolve the correlative issues (i.e., the validity of the strike; the charges of ULP against petitioner; the propriety
of petitioners act of hiring contractual employees from employment agencies; and the entitlement of Union officers and
terminated employees to reinstatement, backwages and strike duration pay), we answer first the most basic question: Was
petitioners downsizing scheme valid?
The pertinent provision of the Labor Code states:
ART. 283. x x x
The employer may also terminate the employment of any employee due to the installation of labor-
saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the worker and the [Department] of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment
or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year.
Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down costs for
operation particularly on salaries and wages.[47] Redundancy, on the other hand, exists where the number of employees is in
excess of what is reasonably demanded by the actual requirements of the enterprise.[48] Both are forms of downsizing and
are often resorted to by the employer during periods of business recession, industrial depression, or seasonal fluctuations,
and during lulls in production occasioned by lack of orders, shortage of materials, conversion of the plant for a new
production program, or introduction of new methods or more efficient machinery or automation.[49] Retrenchment and
redundancy are valid management prerogatives, provided they are done in good faith and the employer faithfully complies
with the substantive and procedural requirements laid down by law and jurisprudence.[50]
For a valid retrenchment, the following requisites must be complied with: (1) the retrenchment is necessary to
prevent losses and such losses are proven; (2) written notice to the employees and to the DOLE at least one month prior to
the intended date of retrenchment; and (3) payment of separation pay equivalent to one-month pay or at least one-half month
pay for every year of service, whichever is higher.[51]
In case of redundancy, the employer must prove that: (1) a written notice was served on both the employees and the
DOLE at least one month prior to the intended date of retrenchment; (2) separation pay equivalent to at least one month pay
or at least one month pay for every year of service, whichever is higher, has been paid; (3) good faith in abolishing the
redundant positions; and (4) adoption of fair and reasonable criteria in ascertaining which positions are to be declared
redundant and accordingly abolished.[52]
It is the employer who bears the onus of proving compliance with these requirements, retrenchment and redundancy
being in the nature of affirmative defenses.[53] Otherwise, the dismissal is not justified.[54]
In the case at bar, petitioner justifies the downsizing scheme on the ground of serious business losses it suffered in
2001. Some positions had to be declared redundant to cut losses. In this context, what may technically be considered as
redundancy may verily be considered as a retrenchment measure.[55] To substantiate its claim, petitioner presented a
financial report covering the years 2000 and 2001 submitted by the SGV & Co., an independent external auditing
firm.[56] From an impressive gross operating profit of P48,608,612.00 in 2000, it nose-dived to negative P16,137,217.00 the
following year. This was the same financial report submitted to the SEC and later on examined by respondent Unions
auditor. The only difference is that, in respondents analysis, Hyatt Regency Manila was still earning because its net income
from hotel operations in 2001 was P12,230,248.00. However, if provisions for hotel rehabilitation as well as replacement
of and additions to the hotels furnishings and equipments are included, which respondent Union failed to consider, the result
is indeed a staggering deficit of more than P16 million. The hotel was already operating not only on a slump in income, but
on a huge deficit as well. In short, while the hotel did earn, its earnings were not enough to cover its expenses and other
liabilities; hence, the deficit. With the local and international economic conditions equally unstable, belt-tightening measures
logically had to be implemented to forestall eventual cessation of business.
Losses or gains of a business entity cannot be fully and satisfactorily assessed by isolating or highlighting only a
particular part of its financial report. There are recognized accounting principles and methods by which a companys
performance can be objectively and thoroughly evaluated at the end of every fiscal or calendar year. What is important is
that the assessment is accurately reported, free from any manipulation of figures to suit the companys needs, so that the
companys actual financial condition may be impartially and accurately gauged.
The audit of financial reports by independent external auditors is strictly governed by national and international
standards and regulations for the accounting profession.[57] It bears emphasis that the financial statements submitted by
petitioner were audited by a reputable auditing firm and are clear and substantial enough to prove that the company was in
a precarious financial condition.
In the competitive and highly uncertain world of business, cash flow is as important as and oftentimes, even more
critical than profitability.[58] So long as the hotel has enough funds to pay its workers and satisfy costs for operations,
maintenance and other expenses, it may survive and bridge better days for its recovery. But to ensure a viable cash flow
amidst the growing business and economic uncertainty is the trick of the trade. Definitely, this cannot be achieved if the
cost-saving measures continuously fail to cap the losses. More drastic, albeit painful, measures have to be taken.
This Court will not hesitate to strike down a companys redundancy program structured to downsize its personnel,
solely for the purpose of weakening the union leadership.[59] Our labor laws only allow retrenchment or downsizing as a
valid exercise of management prerogative if all other else fail. But in this case, petitioner did implement various cost-saving
measures and even transferred some of its employees to other viable positions just to avoid the premature termination of
employment of its affected workers. It was when the same proved insufficient and the amount of loss became certain that
petitioner had to resort to drastic measures to stave off P9,981,267.00 in losses, and be able to survive.
If we see reason in allowing an employer not to keep all its employees until after its losses shall have fully
materialized,[60] with more reason should we allow an employer to let go of some of its employees to prevent further financial
slide.
This, in turn, gives rise to another question: Does the implementation of the downsizing scheme preclude petitioner
from availing the services of contractual and agency-hired employees?
In Asian Alcohol Corporation v. National Labor Relations Commission, [61] we answered in the negative. We said:
In any event, we have held that an employers good faith in implementing a redundancy program is
not necessarily destroyed by availment of the services of an independent contractor to replace the services
of the terminated employees. We have previously ruled that the reduction of the number of workers in a
company made necessary by the introduction of the services of an independent contractor is justified when
the latter is undertaken in order to effectuate more economic and efficient methods of production. In the
case at bar, private respondent failed to proffer any proof that the management acted in a malicious or
arbitrary manner in engaging the services of an independent contractor to operate the Laura wells. Absent
such proof, the Court has no basis to interfere with the bona fide decision of management to effect more
economic and efficient methods of production.
With petitioners downsizing scheme being valid, and the availment of contractual and agency-hired employees
legal, the strike staged by officers and members of respondent Union is, perforce, illegal.
Given the foregoing finding, the only remaining question that begs resolution is whether the strike was staged in
good faith. On this issue, we find for the respondent.
Procedurally, a strike to be valid must comply with Article 263 of the Labor Code, which pertinently reads:
Article 263. x x x
xxxx
(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a
notice of strike or the employer may file a notice of lockout with the [Department] at least 30 days before
the intended date thereof. In cases of unfair labor practice, the period of notice shall be 15 days and in the
absence of a duly certified or recognized bargaining agent, the notice of strike may be filed by any
legitimate labor organization in behalf of its members. However, in case of dismissal from employment of
union officers duly elected in accordance with the union constitution and by-laws, which may constitute
union busting where the existence of the union is threatened, the 15-day cooling-off period shall not apply
and the union may take action immediately.
(d) The notice must be in accordance with such implementing rules and regulations as the
[Secretary] of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the [Department] to exert all efforts at
mediation and conciliation to effect a voluntary settlement. Should the dispute remain unsettled until the
lapse of the requisite number of days from the mandatory filing of the notice, the labor union may strike or
the employer may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the total union membership in
the bargaining unit concerned, obtained by secret ballot in meetings or referenda called for that purpose. A
decision to declare a lockout must be approved by a majority of the board of directors of the corporation or
association or of the partners in a partnership, obtained by secret ballot in a meeting called for the
purpose. The decision shall be valid for the duration of the dispute based on substantially the same grounds
considered when the strike or lockout vote was taken. The [Department] may at its own initiative or upon
the request of any affected party, supervise the conduct of the secret balloting. In every case, the union or
the employer shall furnish the [Department] the results of the voting at least seven days before the intended
strike or lockout, subject to the cooling-off period herein provided.
Accordingly, the requisites for a valid strike are: (a) a notice of strike filed with the DOLE 30 days before the
intended date thereof or 15 days in case of ULP; (b) a strike vote approved by a majority of the total union membership in
the bargaining unit concerned obtained by secret ballot in a meeting called for that purpose; and (c) a notice to the DOLE
of the results of the voting at least seven (7) days before the intended strike.[62] The requirements are mandatory and failure
of a union to comply therewith renders the strike illegal.[63]
In this case, respondent fully satisfied the procedural requirements prescribed by law: a strike notice filed on April
12, 2002; a strike vote reached on April 25, 2002; notification of the strike vote filed also on April 25, 2002; conciliation
proceedings conducted on May 8, 20002; and the actual strike on May 10, 2002.
Substantively, however, there appears to be a problem. A valid and legal strike must be based on strikeable grounds,
because if it is based on a non-strikeable ground, it is generally deemed an illegal strike. Corollarily, a strike grounded on
ULP is illegal if no acts constituting ULP actually exist. As an exception, even if no such acts are committed by the employer,
if the employees believe in good faith that ULP actually exists, then the strike held pursuant to such belief may be legal. As
a general rule, therefore, where a union believes that an employer committed ULP and the surrounding circumstances
warranted such belief in good faith, the resulting strike may be considered legal although, subsequently, such allegations of
unfair labor practices were found to be groundless.[64]
Here, respondent Union went on strike in the honest belief that petitioner was committing ULP after the latter
decided to downsize its workforce contrary to the staffing/manning standards adopted by both parties under a CBA forged
only four (4) short months earlier. The belief was bolstered when the management hired 100 contractual workers to replace
the 48 terminated regular rank-and-file employees who were all Union members.[65] Indeed, those circumstances
showed prima facie that the hotel committed ULP. Thus, even if technically there was no legal ground to stage a strike
based on ULP, since the attendant circumstances support the belief in good faith that petitioners retrenchment scheme was
structured to weaken the bargaining power of the Union, the strike, by exception, may be considered legal.
Because of this, we view the NLRCs decision to suspend all the Union officers for six (6) months without pay to
be too harsh a punishment. A suspension of two (2) months without pay should have been more reasonable and just. Be it
noted that the striking workers are not entitled to receive strike-duration pay, the ULP allegation against the employer being
unfounded. But since reinstatement is no longer feasible, the hotel having permanently ceased operations on July 2,
2007,[66]we hereby order the Labor Arbiter to instead make the necessary adjustments in the computation of the separation
pay to be received by the Union officers concerned.
Significantly, the Manifestations[67] filed by petitioner with respect to the quitclaims executed by members of
respondent Union state that 34 of the 48 employees terminated on account of the downsizing program have already executed
quitclaims on various dates.[68] We, however, take judicial notice that 33 of these quitclaims failed to indicate the amounts
received by the terminated employees.[69] Because of this, petitioner leaves us no choice but to invalidate and set aside these
quitclaims. However, the actual amount received by the employees upon signing the said documents shall be deducted from
whatever remaining amount is due them to avoid double recovery of separation pay and other monetary benefits. We hereby
order the Labor Arbiter to effect the necessary computation on this matter.
For this reason, this Court strongly admonishes petitioner and its counsel for making its former employees sign
quitclaim documents without indicating therein the consideration for the release and waiver of their employees rights. Such
conduct on the part of petitioner and its counsel is reprehensible and puts in serious doubt the candor and fairness required
of them in their relations with their hapless employees. They are reminded to observe common decency and good faith in
their dealings with their unsuspecting employees, particularly in undertakings that ultimately lead to waiver of workers
rights. This Court will not renege on its duty to protect the weak against the strong, and the gullible against the wicked, be
it for labor or for capital.
However, with respect to the second batch of quitclaims signed by 85 of the remaining 160 employees who were
terminated following Hyatts permanent closure,[70] we hold that these are valid and binding undertakings. The said
documents indicate that the amount received by each of the employees represents a reasonable settlement of their monetary
claims against petitioner and were even signed in the presence of a DOLE representative. A quitclaim, with clear and
unambiguous contents and executed for a valid consideration received in full by the employee who signed the same, cannot
be later invalidated because its signatory claims that he was pressured into signing it on account of his dire financial need.
When it is shown that the person executing the waiver did so voluntarily, with full understanding of what he was doing, and
the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding
undertaking.[71]
WHEREFORE, the petition is PARTLY GRANTED. The downsizing scheme implemented by petitioner is
hereby declared a valid exercise of management prerogative. The penalty of six (6) months suspension without pay imposed
in the April 3, 2003 NLRC Resolution[72] is hereby reduced to two (2) months, to be considered in the Labor Arbiters
computation of the separation pay to be received by the Union officers concerned. The first batch of quitclaims signed by
33 of the 48 terminated employees is hereby declared invalid and illegal for failure to state the proper consideration therefor,
but the amount received by the employees concerned, if any, shall be deducted from their separation pay and other monetary
benefits, subject to the computation to be made by the Labor Arbiter. The second batch of quitclaims signed by 85 of the
160 terminated employees, following Hyatt Regency Manilas permanent closure, is declared valid and binding.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 97846 September 25, 1998
de -MEDELLIN SUGARCANE PLANTERS ASSOCIATION, INC. and HORACIO FRANCO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ASSOCIATED LABOR UNIONS, BONIFACIO MONTILIA,
JOSE YBAÑEZ JR., BERNARDO DELA RAMA, ILDEFONSO CARREDO, ROSETO CANALES,
FORTUNATO MIGABON JR. and HERACLEO MEGABON, respondents.
PANGANIBAN, J.:
To justify retrenchment, the employer must prove, among other things, serious business losses, and not just any
kind or amount of loss. Furthermore, if the requisites provided in Article 283 of the Labor Code are not fulfilled,
a deed of quitclaim and release is unavailing to exculpate an employer from liability for illegal retrenchment.
The Case
In this special civil action for certiorari filed before this Court, petitioners seek the reversal of the November 12,
1990 Decision 1 and the March 4, 1991 Resolution of the National Labor Relations Commission in NLRC NCR
Case No. RAB VII-0801-85, both of which affirmed the labor arbiter's Decision finding them liable for illegal
dismissal.
Acting on private respondents' amended Complaint for illegal dismissal and unfair labor practice, Executive Labor
Arbiter Irenea E. Ceniza rendered a Decision dated May 5, 1989, which disposed as follows: 2
WHEREFORE, premises considered, judgment is hereby rendered declaring the [Petitioners]

Bogo Medellin Sugar Cane Planters Association and Horacio Franco guilty of unfair labor practice
for dismissing the [private respondents] for their union activities; ordering the said [petitioners] to
reinstate the [private respondents] to their former position with backwages and other benefits and
without loss of seniority rights; ordering the [petitioners] jointly and severally to pay to the [private
respondents] their service incentive leave[s], backwages and 13th month from the date of their
dismissal until the date of this decision in the following amounts less the amount paid to some
[private respondents] as separation/gratuity benefits[:]
NAME 13th SERVICE BACK- SEPARATION NET
Month INCENTIVE WAGES PAY/GRATUITY
Pay PAY BENEFITS
1. BONIFACIO P4,915.24 P820.00 P61,440.00 P12,017.94 P55,157.30
MONTILLA
2. JOSE 4,915.24 820.00 61,440.00 4,745.48 62,429.76
YBAÑEZ, JR.
3. BERNARDO 4,915.24 820.00 61,440.00 2,580.84 64,594.40
DELA RAMA
4. ILDEFONSO 4,915.24 820.00 61,440.00 12,991.00 54,184.24
CARREDO
5. FORTUNATO 4,915.24 820.00 61,440.00 — 67,175.24
MIGABON, JR.
6. ROSETO 4,915.24 820.00 61,440.00 — 67,175.24
CANALES
7. HERACLEO 4,915.24 820.00 61,440.00 — 67,175.24
MEGABON ———— ———— ————— ————— —————
P34,406.68 P5,740.00 P430,080.00 P32,335.26 P437,891.42
======== ======== ========= ========= =========
and to pay the [private respondents]' counsel 10% of the foregoing amount or the sum of FORTY
THREE THOUSAND SEVEN HUNDRED EIGHTY NINE AND 14/100 (P43,789.14) as attorney's
fees; ordering further the [petitioners] to deposit the [aggregate] amount of FOUR HUNDRED
EIGHTY ONE THOUSAND SIX HUNDRED EIGHTY PESOS AND 56/100 (P481,680.56) with this
Branch of the Commission within ten (10) days from receipt of this decision.
All other claims are hereby dismissed for lack of merit.
On appeal, the National Labor Relations Commission (Cebu Branch), in its assailed Decision, affirmed with
modification the labor arbiter's judgment: 4
WHEREFORE, in view of all the foregoing, the decision appealed from is MODIFIED by setting
aside the award for the money claims of the [private respondents] as contained in the decision
and directing the recomputation thereof in accordance with Section 3, Rule XI of the NLRC Rules
to determine [the] correct amount to be awarded to the [private respondents].
Except for the foregoing modification the rest of the decision stands AFFIRMED.
5
Respondent Commission denied reconsideration in its challenged Resolution.
The Facts
As found by the labor arbiter, the facts of this case are as follows:6
. . . [T]he [private respondents] were former employees of the respondents with services ranging
as follows;
Bonifacio Montilla — 15 years
Roseto Canales — 17 years
Ildefonso Carredo — 16 years
Heracleo Megabon — 8 years
Jose Ybañez, Jr. — 6 years
Bernardo Dela Rama — 3 years
Fortunato Megabon, Jr. — 1 year
They performed the functions of computer, sampler and scalers. [O]n May 31, 1985, the [private
respondents] joined and became members of [Private Respondent] Associated Labor Unions,
with [Private Respondent] Bonifacio Montilla as its [l]ocal [p]resident. With 13 original members[,]
Bonifacio Montilla being the president actively campaigned and convinced the rest of their co-
employees to join with the union. While campaigning among his co-employees for union
membership, the [t]reasurer of respondent firm Mr. Jose Mari Miranda called [Private Respondent]
Montilla to his office and told him to withdraw his membership from the Associated Labor Unions
or else they will not be hired at the start of the milling season and will be dismissed. That he and
the [private respondents] herein did not heed the warning of Mr. Miranda and stuck to their
membership with the private respondent union. As a consequence and as earlier warned of being
dismissed if they persist[ed] in their union activities, notices of termination were sent to [Private
Respondents] Bernardo Dela Rama, Ildefonso Carredo, Bonifacio Montilla and Jose Ybañez, Jr.
(Exhibits 4-7), informing them that their services will be terminated due to financial difficulties.
While the said notices stated that their services will be terminated 30 days from date[,] they were
not allowed to work within that 30 day period and Montilla was immediately replaced by Gavino
Negapatan (TSN June 18, 1987, p. 31). The [private respondents] alleged that their dismissal was
sought due to their membership [in] the private respondent union as they have not violated any
company rules and regulations. There is also no allegation to this effect by the respondents and
the latter strongly advocated retrenchment to prevent losses as their basis in terminating the
[private respondents]. Aggrieved of the respondents' actuations they filed the present complaint
on December 20, 1985, or before the expiration of the 30 days notice dated November 28, 1985.
On December 28, 1985, or just on the 30th day of the notice of termination[,] four of the [private
respondents], namely Bonifacio Montilla, [I]ldefonso Carredo, Bernardo Dela Rama and Jose
Ybañez, Jr., were paid their corresponding separation/gratuity pay and accordingly signed their
Quitclaim and Release (Exhibit "8-11").
The respondents on the other hand strongly maintained that the dismissal of the [private
respondents] was validly carried out in accordance with corporate powers to prevent losses. To
support this stand they submitted a comparative statement of Revenue and Expenses for the crop
years 1983-1984 and 1984-1985, to show they suffered losses in the amount of P54,692.31 in
the crop year ending August 1985. In addition they claimed that the [private respondents] [were]
already barred from filing this present case by virtue of their Quitclaim and Release.
The Ruling of Respondent Commission
While Respondent Commission agreed with petitioners that management had the prerogative to terminate
employment on account of business reversals, it held, however, that petitioners failed to present adequate proof
of such losses. First, the Comparative Statement of Revenue and Expenses submitted by Petitioner Corporation
was neither sufficient nor substantial to support the claim that private respondents were retrenched pursuant to
Article 283 of the Labor Code.
Second, petitioners failed to show that, in undertaking the retrenchment, fair and reasonable standards were
used in determining who among its employees would be separated from the service.
Third, petitioners failed to show that they gave the required 30-day notice to the labor department before effecting
the retrenchment.
Fourth, petitioners hired additional personnel after the private respondents were retrenched. Such actuation
strengthened, rather than negated, private respondents' contention that their dismissal was "an orchestrated
move" to ease them out of employment due to their union activities.
Fifth, Respondent Commission gave credence to Private Respondent Montilla's testimony, thus upholding the
ruling of the labor arbiter who was "unique position [to observe] the demeanor" of the witness.
It also rejected the posturing of the petitioners that the execution of a deed of quitclaim and release exculpated
them from liability, as such undertaking did not bar the private respondents from questioning the legality of their
dismissal.
Hence, this petition. 7
Assignment of Errors
Petitioners impute the following errors to Respondent Commission: 8
[I]: Respondent . . . Commission erred in setting aside the deeds of quitclaim and
release signed and executed by individual [private respondents] as without any
legal effect to bar and preclude them from proceeding against petitioners, the same
being contrary to law and jurisprudence.
[II]: Respondent . . . Commission disregarded the fact that said deeds of quitclaim
and release were signed and executed by individual private respondents after they
filed their complaints in its regional arbitration branch.
[III]: Respondent . . . Commission erred in sustaining the findings and conclusion
of the executive labor arbiter as to the illegality of the dismissal of the [private
respondents] which is tantamount to grave abuse of discretion.
[IV]: Assuming arguendo there was illegal dismissal, it was error to find Petitioner
Horacio Franco personally liable, jointly and severally, with petitioner association.
[VI]: Respondent . . . Commission erred in giving due credence to the testimony of

Respondent Bonifacio Montilla and deciding the case in favor of [private
respondents] and finding [petitioners] liable for the alleged claims and far unfair
labor practice on the sole basis of his testimony.
[VI]: Respondent . . . Commission commit[ted] grave abuse of discretion in

rendering a decision in favor of [private respondents] who did not appear at all in
the case to prosecute their claims and support their charges against herein
petitioners, thus denying the latter due process of law guaranteed by the
Constitution.
Put differently, the issues raise by petitioners are as follows:
1. Whether private respondents' retrenchment was valid and legal under Article 283 of the Labor
Code.
2. Whether the Quitclaim and Release barred the private respondents from charging petitioners
with illegal dismissal
3. Whether a corporate officer could be held liable for illegal dismissal without a showing that he
acted maliciously and in bad faith in dismissing private respondents.
4. Whether Respondent Commission gravely abused its discretion by denying due process to
petitioners.
The Court's Ruling
The petition is devoid of merit.
First Issue:
No Proof of Business Losses
To Justify Retrenchment
Retrenchment is the termination of employment effected by management during periods of business recession,
industrial depression, seasonal fluctuations, lack of work or considerable reduction in the volume of the
employer's business. 9 Resorted to by an employer to avoid or minimize business losses, 10 it is a management
prerogative consistently recognized by this Court 11 and allowed under Article 283 of the Labor Code as follows:
Art. 283. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undue taking unless the closing is for the purpose of circumventing the
provisions of this Title by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. . . . In case of retrenchment
to prevent losses . . ., the separation pay shall be equivalent to one (1) month pay for every year
of service, which ever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.
In a number of cases, the Court has laid down the following requisites of a valid retrenchment: (1) the losses
incurred are substantial and not deminimis: (2) the losses are actual or reasonably imminent; (3) the
retrenchment is reasonably necessary and is likely to be effective in preventing the expected imminent losses
sought to be forestalled, are proven by sufficient and convincing evidence. 12 In the present case, petitioners
miserably failed to prove (1) substantial losses and (2) the reasonable necessity of the retrenchment.
No Sufficient and Substantial

Evidence of Business Loss
To justify retrenchment, the employer must prove serious business losses. 13 Indeed, not all business losses
suffered by the employer would justify retrenchment under this article. 14 The Court has held that the "loss'
referred to in Article 283 cannot be just any kind or amount of loss; otherwise, a company could easily feign
excuses to suit its whims and prejudices or to rid itself of unwanted employees." 15
In the case at bar, Petitioner Corporation claimed that there retrenchment of private respondents was justified,
because it suffered business losses, as evidenced by its Comparative Statement of Revenue and Expenses for
crop years 1983-1984 and 1984-1985. 16
On the other hand, Respondent Commission and the executive labor arbiter held that this evidence was neither
sufficient nor substantial, viz.: 17
The only evidence adduced by the [petitioners] to prove that they suffered economic losses and
[had] therefore to cut down expenses and reduce personnel is [E]xhibit "3" which is a
[C]omparative [S]tatement of Revenue and Expenses for two crop years, 1983-1984 and 1984-
1985, which was allegedly submitted to the [B]ureau of Internal Revenue on November 12, 1985.
This piece of evidence was prepared by Ligaya R. Arcenas, [o]ffice [m]anager, certified correct
by Jose Mari M. Miranda, [t]reasurer, Rosendo S. Hernaez, [a]uditor[,] and attested [to] by its
president Mr. Horacio M. France. . . . .
In the present case no financial statement, or statement of profit and loss or books of account
have been presented to substantiate the alleged losses. It is also dubious why the said
[C]omparative [S]tatement of Revenue and Expenses was prepared by the office manager instead
of their accountant. Besides the said [C]omparative [S]tatement of [R]evenue and [E]xpenses is
inconsistent with the statement of Jose Mari M. Miranda that the [petitioners had] to cut down
expenses and do some retrenchment to prevent further losses and that they [had] been incurring
losses of P54,692.21 for crop year 1984-1985, and P54,110.94 for the previous crop year 1983-
1984 (TSN December 7, 1988, [pp.] 12-13). A closer scrutiny of Exhibit "3" [C]omparative
[S]tatement of Revenue and Expenses [would] readily reveal that for the crop year 1983-1984,
the [petitioners] had a net income of P54,110.94. The total revenue indicated therein being
P798,750.20 while the total expenses is only P744,639.26. Another instance which would clearly
negate that the [petitioners] did cut down on expenses to prevent any further losses are the
marked increase in the amount of over P13,000.00 in the expenses for conferences, meetings
and conventions in 1984-1985 over the previous year, the increase in the printing of office supplies
. . . for over P13,000.00 and the National Federation dues [which] were [unpaid] in 1983-1984[,]
but in 1984-1985 the amount of P36,410.59 was paid. In this light the alleged losses become
unjustifiable to warrant the dismissal of the [private respondents]. As earlier observed the
[petitioners] should have come out with their books of accounts, profit and loss statements and
better still should have presented their accountant to competently amplify their financial position.
In their rebuttal, petitioners allege the following: (1) the comparative financial statement of the corporation duly
reflects its income and expenses in a given taxable year and, despite its different nomenclature, is substantially
the same as a profit and loss statement or any other financial statement; and (2) the National Internal Revenue
Code (NIRC) requires the certification of an independent certified public accountant only if the taxpayer's gross
receipts exceed P25,000 in any quarter of any taxable year.
The contentions of petitioners are untenable. A comparative statement of revenue and expenses for two years,
by itself, is not conclusive proof of serious business losses. The Court has previously ruled that financial
statements audited by independent external auditors constitute the normal method of proof of the profit and loss
performance of a company. 18 While Petitioner Corporation avers that it was not required to file audited financial
statements under. Section 232 of the Tax Code, it failed to establish its exemption through any evidence showing
that its quarterly gross revenues did not exceed P25,000. Thus, its claim that it did not need to have its financial
statements certified by a certified public accountant is without basis in fact and in law and does not excuse it
from complying with the usual requirement. Besides, the requirement of the Tax Code is one thing, and the
requirement of the Labor Code is quite another.
Moreover, the financial statement of Petitioner Corporation for two crop years is insufficient proof of serious
business losses that would justify the retrenchment of private respondents. Thus, the Court held in Somerville
Stainless Steel Corporation v. NLRC: 19
. . . The failure of petitioner to show its income or loss for the immediately preceding years or to
prove that it expected no abatement of such losses in the coming years bespeaks the weakness
of its cause. The financial statement for 1992, by itself, does not sufficiently prove petitioner's
allegation that it "already suffered actual serious losses," 20 because it does not show whether its
losses increased or decreased. Although petitioner posted a loss for 1992, it is also possible that
such loss was considerably less than those previously incurred, thereby indicating the company's
improving condition.
No Reasonable Necessity
of Retrenchment
Petitioner Corporation also failed to rebut the allegation that new employees were hired to replace the private
respondents after the latter had been retrenched. The executive labor arbiter found that Gavino Negapatan
replaced Private Respondent Montilla, 21 while Reynaldo Parilla and Godofredo Florita replaced the other private
respondents who had worked as sugar checkers or samplers. The employment of these replacements clearly
belies petitioners' contention that the retrenchment was necessary to prevent or offset the expected losses
effectively.
We also note the observation of the executive labor arbiter that petitioners did not consider the long years of
service rendered by the private respondents, ranging from one to sixteen years. We agree with her conclusion
that the real motive behind the retrenchment must have been to discriminate against private respondents as a
consequence of their membership in Respondent Union.22
Assessment of Credibility by
Respondent Commission
Petitioner further assail the labor arbiter and the NLRC for giving credence to Private Respondent Montilla's
testimony, as the same was "replete with substantial contradictions and material inconsistencies." Petitioners
maintain that Montilla failed to substantiate his claim that he had been forced and intimidated to sign the quitclaim
and release. They add that the new workers, who allegedly replaced the private respondents, had been working
for Petitioner Corporation several months before the retrenchment.
Montilla's testimony regarding the hiring of replacements after he and his co-private respondents had been
retrenched was given credence by Respondent Commission in this wise: 23
. . . [C]ertain persons were hired or rehired after [private respondents] were dismissed. Why would
[petitioners] take in additional workers if it had to retrench? It becomes immaterial whether the
persons hired had previously worked for [petitioners]. The fact that there was hiring of additional
personnel right after [private respondents] were retrenched is enough to destroy whatever
pretense [petitioners] ha[d] with respect to retrenchment. Whether those hired were intended to
replace [private respondents] or not is immaterial. The crucial point is that immediately after the
so-called retrenchment, [petitioners] hired other workers. Such actuation is inconsistent with
retrenchment and merely strengthen[s] the observation that there was an orchestrated move to
terminate the [private respondents] on account of their union activities.
The Court finds no sufficient reason to modify or reverse the assessments of the labor arbiter and the
Respondent Commission on the credibility of Montilla and his testimony. In fact, the testimony of Parilla, and
Florita that they used to be "extras," who substituted for absent workers, corroborate Mantilla's claims. They
were taken in after the retrenchment of the private respondents, and made to perform the tasks formerly assigned
to the latter.
It is well-settled that factual findings of Respondent Commission affirming those of the labor arbiter, when
sufficiently supported by evidence on record, are accorded respect if not finality. 24
Written Notice to DOLE a

Mandatory Requirement
Petitioners brush aside the procedural notice which Article 283 of the Code requires to be sent to the labor
department before the retrenchment can be effected. The written notice to the labor department has been
previously declared to be a mandatory requirement. 25 Although the absence of this notice renders the dismissal
merely defective, not illegal, 26 the failure of petitioners to comply with this requirement shows nonetheless the
bankruptcy of their cause.
Second Issue:
When Deed of Quitclaim and
Release Is Not Bar
Petitioners pray that the present action should be barred, because private respondents have voluntarily executed
quitclaims and releases and received their separation pay. Petitioners claim that the present suit is a "grave
derogation of the fundamental principle that obligations arising from a valid contract have the force of law
between the parties and must be complied with in good faith."
The Court disagrees. Jurisprudence holds that the constitutional guarantee of non-impairment of contracts is
subject to the police power of the state and to reasonable legislative regulations promoting public health, morals,
safety and welfare. Not all quitclaims are per se invalid or against public policy, except (1) where there is clear
proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement
are unconscionable on their face. In these cases, the law will step in to annul the questionable
transactions. 27 Such quitclaim and release agreements are regarded as ineffective to bar the workers from
claiming the full measure of their legal rights. 28
In the case at bar, the private respondent agreed to the quitclaim and release in consideration of their separation
pay. Since they were dismissed allegedly for business losses, they are entitled to separation pay under Article
283 of the Labor Code. And since there was thus no extra consideration for the private respondents to give up
their employment, such undertakings cannot be allowed to bar the action for illegal dismissal.
Third Issue
Liability of a Corporate Officer
Unless they have exceeded their authority, corporate officers are, as a general rule, not personality liable for
their official acts, because a corporation, by legal fiction, has a personality separate and distinct from its officers,
stockholders and members. 29 However, this fictional veil may be pierced whenever the corporate personality is
used as a means of perpetuating a fraud or an illegal act, evading an existing obligation, or confusing a legitimate
issue. 30 In cases of illegal dismissal, corporate directors and officers are solidarily liable with the corporation,
where terminations of employment are done with malice or in bad faith. 31
Respondent Commission adopted the executive labor arbiter's findings and held that "it can be reasonably
inferred that private respondents' dismissal was tainted with bad faith." However, nowhere in the records is there
such evidence to show malice or bad faith on Petitioner Franco's part. The executive labor arbiter found that it
was Miranda, the corporate treasurer, who told Private Respondent Montilla to withdraw membership from the
union and threatened not to rehire him and his companions if the refused. Petitioner Franco's liability is based
only on his being the chief executive officer of Petitioner Corporation and the lone signatory to the Notice of
Termination received by the private respondents. These findings, however, do not in themselves support the
allegation of bad faith or malice and are, therefore, insufficient to hold him solidarily liable with Petitioner
Corporation for illegal dismissal.
Fourth Issue:
No Violation of Due Process
Petitioners deny liability for the illegal dismissal of Private Respondents Fortunato Migabon Jr. and Roseto
Canales, since said employees neither appeared before the hearing officer nor presented any evidence to
support their claim. Therefore, to hold them liable will be a violation of their right to due process.
The Court disagrees. The amendment of the complaint 32 to include Private Respondents Fortunato Migabon Jr.
and Roseto Canales was filed on April 24, 1986 or twenty-five days before May 19, 1986, when petitioners
submitted their position paper. 33 Petitioners were not denied their day in court, because they were given an
opportunity to rebut and refute said private respondents' allegations in their position paper. The case was even
further appealed to Respondent Commission, where petitioners were undeniably accorded due process. 34
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution are hereby AFFIRMED, with
the MODIFICATION that Petitioner Franco is exempted from liability for the illegal dismissal of private
respondents. Costs against Petitioner Corporation.
SO ORDERED.
Supreme Court
Manila
FIRST DIVISION
NELSON A. CULILI, G.R. No. 165381
Petitioner,
Present:
- versus - CORONA, C.J.,
Chairperson,
VELASCO, JR.,
EASTERN TELECOMMUNICATIONS LEONARDO-DE CASTRO,

PHILIPPINES, INC., SALVADOR HIZON
(President and Chief Executive Officer), DEL CASTILLO, and
EMILIANO JURADO (Chairman of the Board),
VIRGILIO GARCIA (Vice President) and STELLA PEREZ, JJ.
GARCIA (Assistant Vice President),
Promulgated:
Respondents.
February 9, 2011
x----------------------------------------------------x
DECISION
LEONARDO-DE CASTRO, J.:
Before Us is a petition for review on certiorari[1] of the February 5, 2004 Decision[2] and September 13, 2004
Resolution[3] of the Court of Appeals in CA-G.R. SP No. 75001, wherein the Court of Appeals set aside the March 1, 2002
Decision[4] and September 24, 2002 Resolution[5] of the National Labor Relations Commission (NLRC), which affirmed the
Labor Arbiters Decision[6] dated April 30, 2001.
Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a telecommunications company engaged

mainly in the business of establishing commercial telecommunications systems and leasing of international datalines or
circuits that pass through the international gateway facility (IGF).[7] The other respondents are ETPIs officers: Salvador
Hizon, President and Chief Executive Officer; Emiliano Jurado, Chairman of the Board; Virgilio Garcia, Vice President; and
Stella Garcia, Assistant Vice President.
Petitioner Nelson A. Culili (Culili) was employed by ETPI as a Technician in its Field Operations Department on
January 27, 1981. On December 12, 1996, Culili was promoted to Senior Technician in the Customer Premises Equipment
Management Unit of the Service Quality Department and his basic salary was increased.[8]
As a telecommunications company and an authorized IGF operator, ETPI was required, under Republic Act. No.
7925 and Executive Order No. 109, to establish landlines in Metro Manila and certain provinces.[9] However, due to
interconnection problems with the Philippine Long Distance Telephone Company (PLDT), poor subscription and
cancellation of subscriptions, and other business difficulties, ETPI was forced to halt its roll out of one hundred twenty-
nine thousand (129,000) landlines already allocated to a number of its employees.[10]
In 1998, due to business troubles and losses, ETPI was compelled to implement a Right-Sizing Program which
consisted of two phases: the first phaseinvolved the reduction of ETPIs workforce to only those employees that were
necessary and which ETPI could sustain; the second phase entailed a company-wide reorganization which would result in
the transfer, merger, absorption or abolition of certain departments of ETPI.[11]
As part of the first phase, ETPI, on December 10, 1998, offered to its employees who had rendered at least fifteen
years of service, the Special Retirement Program, which consisted of the option to voluntarily retire at an earlier age and
a retirement package equivalent to two and a half (2) months salary for every year of service. [12] This offer was initially
rejected by the Eastern Telecommunications Employees Union (ETEU), ETPIs duly recognized bargaining agent, which
threatened to stage a strike. ETPI explained to ETEU the exact details of the Right-Sizing Program and the Special
Retirement Program and after consultations with ETEUs members, ETEU agreed to the implementation of both
programs.[13] Thus, on February 8, 1999, ETPI re-offered the Special Retirement Program and the corresponding retirement
package to the one hundred two (102) employees who qualified for the program.[14] Of all the employees who qualified
to avail of the program, only Culili rejected the offer.[15]
After the successful implementation of the first phase of the Right-Sizing Program, ETPI, on March 1, 1999
proceeded with the second phase which necessitated the abolition, transfer and merger of a number of ETPIs
departments.[16]
Among the departments abolished was the Service Quality Department. The functions of the Customer Premises
Equipment Management Unit, Culilis unit, were absorbed by the Business and Consumer Accounts Department. The
abolition of the Service Quality Department rendered the specialized functions of a Senior Technician unnecessary. As a
result, Culilis position was abolished due to redundancy and his functions were absorbed by Andre Andrada, another
employee already with the Business and Consumer Accounts Department.[17]
On March 5, 1999, Culili discovered that his name was omitted in ETPIs New Table of Organization. Culili, along
with three of his co-employees who were similarly situated, wrote their union president to protest such omission.[18]
In a letter dated March 8, 1999, ETPI, through its Assistant Vice President Stella Garcia, informed Culili of his
termination from employment effective April 8, 1999. The letter reads:
March 8, 1999
To: N. Culili
Thru: S. Dobbin/G. Ebue
From: AVP-HRD
------------------------------------------------------------------------------------------
As you are aware, the current economic crisis has adversely affected our operations and undermined our
earlier plans to put in place major work programs and activities. Because of this, we have to implement a
Rightsizing Program in order to cut administrative/operating costs and to avoid losses. In line with this
program, your employment with the company shall terminate effective at the close of business hours on
April 08, 1999. However, to give you ample time to look for other employment, provided you have amply
turned over your pending work and settled your accountabilities, you are no longer required to report to
work starting tomorrow. You will be considered on paid leave until April 08, 1999.
You will likewise be paid separation pay in compliance with legal requirements (see attached), as well as
other benefits accruing to you under the law, and the CBA. We take this opportunity to thank you for your
services and wish you well in your future endeavors.
(Signed)
Stella J. Garcia[19]
This letter was similar to the memo shown to Culili by the union president weeks before Culili was dismissed. The
memo was dated December 7, 1998, and was advising him of his dismissal effective January 4, 1999 due to the Right-
Sizing Program ETPI was going to implement to cut costs and avoid losses.[20]
Culili alleged that neither he nor the Department of Labor and Employment (DOLE) were formally notified of his
termination. Culili claimed that he only found out about it sometime in March 1999 when Vice President Virgilio Garcia
handed him a copy of the March 8, 1999 letter, after he was barred from entering ETPIs premises by its armed security
personnel when he tried to report for work.[21] Culili believed that ETPI had already decided to dismiss him even prior to
the March 8, 1999 letter as evidenced by the December 7, 1998 version of that letter. Moreover, Culili asserted that ETPI
had contracted out the services he used to perform to a labor-only contractor which not only proved that his functions
had not become unnecessary, but which also violated their Collective Bargaining Agreement (CBA) and the Labor
Code. Aside from these, Culili also alleged that he was discriminated against when ETPI offered some of his co-employees
an additional benefit in the form of motorcycles to induce them to avail of the Special Retirement Program, while he was
not.[22]
ETPI denied singling Culili out for termination. ETPI claimed that while it is true that they offered the Special
Retirement Package to reduce their workforce to a sustainable level, this was only the first phase of the Right-Sizing
Program to which ETEU agreed. The second phase intended to simplify and streamline the functions of the departments
and employees of ETPI. The abolition of Culilis department - the Service Quality Department - and the absorption of its
functions by the Business and Consumer Accounts Department were in line with the programs goals as the Business and
Consumer Accounts Department was more economical and versatile and it was flexible enough to handle the limited
functions of the Service Quality Department. ETPI averred that since Culili did not avail of the Special Retirement Program
and his position was subsequently declared redundant, it had no choice but to terminate Culili.[23] Culili, however,
continued to report for work.ETPI said that because there was no more work for Culili, it was constrained to serve a final
notice of termination[24] to Culili, which Culili ignored. ETPI alleged that Culili informed his superiors that he would agree
to his termination if ETPI would give him certain special work tools in addition to the benefits he was already offered. ETPI
claimed that Culilis counter-offer was unacceptable as the work tools Culili wanted were worth almost a million
pesos. Thus, on March 26, 1999, ETPI tendered to Culili his final pay check of Eight Hundred Fifty-Nine Thousand Thirty-
Three and 99/100 Pesos (P859,033.99) consisting of his basic salary, leaves, 13thmonth pay and separation pay.[25] ETPI
claimed that Culili refused to accept his termination and continued to report for work.[26] ETPI denied hiring outside
contractors to perform Culilis work and denied offering added incentives to its employees to induce them to retire
early. ETPI also explained that the December 7, 1998 letter was never given to Culili in an official capacity. ETPI claimed
that it really needed to reduce its workforce at that time and that it had to prepare several letters in advance in the event
that none of the employees avail of the Special Retirement Program. However, ETPI decided to wait for a favorable
response from its employees regarding the Special Retirement Program instead of terminating them.[27]
On February 8, 2000, Culili filed a complaint against ETPI and its officers for illegal dismissal, unfair labor practice,
and money claims before the Labor Arbiter.
On April 30, 2001, the Labor Arbiter rendered a decision finding ETPI guilty of illegal dismissal and unfair labor
practice, to wit:
WHEREFORE, decision is hereby rendered declaring the dismissal of complainant Nelson A. Culili illegal for
having been made through an arbitrary and malicious declaration of redundancy of his position and for
having been done without due process for failure of the respondent to give complainant and the DOLE
written notice of such termination prior to the effectivity thereof.
In view of the foregoing, respondents Eastern Telecommunications Philippines and the individual
respondents are hereby found guilty of unfair labor practice/discrimination and illegal dismissal and
ordered to pay complainant backwages and such other benefits due him if he were not illegally dismissed,
including moral and exemplary damages and 10% attorneys fees. Complainant likewise is to be reinstated
to his former position or to a substantially equivalent position in accordance with the pertinent provisions
of the Labor Code as interpreted in the case of Pioneer texturing [Pioneer Texturizing Corp. v. National
Labor Relations Commission], G.R. No. 11865[1], 16 October 1997. Hence, Complainant must be paid the
total amount of TWO MILLION SEVEN HUNDRED FORTY[-]FOUR THOUSAND THREE [HUNDRED] SEVENTY[-
] NINE and 41/100 (P2,744,379.41), computed as follows:
I. Backwages (from 16 March 1999 to 16 March 2001)
a. Basic Salary (P29,030 x 24 mos.) P696,720.96
b. 13th Month Pay (P692,720.96/12) 58,060.88
c. Leave Benefits
1. Vacation Leave (30 days/annum)
P1,116.54 x 60 days 66,992.40
2. Sick Leave (30 days/annum)
P1,116.54 x 60 days 66,992.40

3. Birthday Leave (1 day/annum)
P1,116.54 x 2 days 2,233.08
d. Rice and Meal Subsidy
16 March 31 July 1999
(P1,750 x 4.5 mos. = P7,875.00)
01 August 1991 31 July 2000
(P1,850 x 12 mos. = P22,200.00)
01 August 2000 16 March 2001
(P1,950 x 7.5 mos. = P14,625.00) 44,700.00
e. Uniform Allowance
P7,000/annum x 2 years __14,000.00
P949,699.72
II. Damages
a. MoralP500,000.00
b. ExemplaryP250,000.00
III. Attorneys Fees (10% of award) __94,969.97
GRAND TOTAL: P2,744,379.41[28]
The Labor Arbiter believed Culilis claim that ETPI intended to dismiss him even before his position was declared
redundant. He found the December 7, 1998 letter to be a telling sign of this intention. The Labor Arbiter held that a reading
of the termination letter shows that the ground ETPI was actually invoking was retrenchment and not redundancy, but
ETPI stuck to redundancy because it was easier to prove than retrenchment. He also did not believe that Culilis functions
were as limited as ETPI made it appear to be, and held that ETPI failed to present any reasonable criteria to justify the
declaration of Culilis position as redundant. On the issue of unfair labor practice, the Labor Arbiter agreed that the
contracting out of Culilis functions to non-union members violated Culilis rights as a union member.Moreover, the Labor
Arbiter said that ETPI was not able to dispute Culilis claims of discrimination and subcontracting, hence, ETPI was guilty of
unfair labor practice.
On appeal, the NLRC affirmed the Labor Arbiters decision but modified the amount of moral and exemplary
damages awarded, viz:
WHEREFORE, the Decision appealed from is AFFIRMED granting complainant the money claims prayed
for including full backwages, allowances and other benefits or their monetary equivalent computed from
the time of his illegal dismissal on 16 March 1999 up to his actual reinstatement except the award of moral
and exemplary damages which is modified to P200,000.00 for moral and P100,000.00 for exemplary
damages. For this purpose, this case is REMANDED to the Labor Arbiter for computation of backwages
and other monetary awards to complainant.[29]
ETPI filed a Petition for Certiorari under Rule 65 of the Rules of Civil Procedure before the Court of Appeals on the ground
of grave abuse of discretion. ETPI prayed that a Temporary Restraining Order be issued against the NLRC from
implementing its decision and that the NLRC decision and resolution be set aside.
The Court of Appeals, on February 5, 2004, partially granted ETPIs petition. The dispositive portion of the decision reads
as follows:
WHEREFORE, all the foregoing considered, the petition is PARTIALLY GRANTED. The assailed Decision of
public respondent National Labor Relations Commission is MODIFIED in that petitioner Eastern
Telecommunications Philippines Inc. (ETPI) is hereby ORDERED to pay respondent Nelson Culili full
backwages from the time his salaries were not paid until the finality of this Decision plus separation pay
in an amount equivalent to one (1) month salary for every year of service. The awards for moral and
exemplary damages are DELETED. The Writ of Execution issued by the Labor Arbiter dated September 8,
2003 is DISSOLVED.[30]
The Court of Appeals found that Culilis position was validly abolished due to redundancy. The Court of Appeals said that
ETPI had been very candid with its employees in implementing its Right-Sizing Program, and that it was highly unlikely that
ETPI would effect a company-wide reorganization simply for the purpose of getting rid of Culili. The Court of Appeals also
held that ETPI cannot be held guilty of unfair labor practice as mere contracting out of services being performed by union
members does not per se amount to unfair labor practice unless it interferes with the employees right to self-
organization. The Court of Appeals further held that ETPIs officers cannot be held liable absent a showing of bad faith or
malice. However, the Court of Appeals found that ETPI failed to observe the standards of due process as required by our
laws when it failed to properly notify both Culili and the DOLE of Culilis termination. The Court of Appeals maintained its
position in its September 13, 2004 Resolution when it denied Culilis Motion for Reconsideration and Urgent Motion to
Reinstate the Writ of Execution issued by the Labor Arbiter, and ETPIs Motion for Partial Reconsideration.
Culili is now before this Court praying for the reversal of the Court of Appeals decision and the reinstatement of the NLRCs
decision based on the following grounds:
I
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE APPLICABLE
LAW AND JURISPRUDENCE WHEN IT REVERSED THE DECISIONS OF THE NLRC AND THE LABOR ARBITER
HOLDING THE DISMISSAL OF PETITIONER ILLEGAL IN THAT:
A. CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, RESPONDENTS

CHARACTERIZATION OF PETITIONERS POSITION AS REDUNDANT WAS TAINTED
BY BAD FAITH.
B. THERE WAS NO ADEQUATE JUSTIFICATION TO DECLARE PETITIONERS

POSITION AS REDUNDANT.
II
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN FINDING THAT NO UNFAIR LABOR PRACTICE ACTS WERE COMMITTED AGAINST THE
PETITIONER.
III
JURISPRUDENCE IN DELETING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES
IN FAVOR OF PETITIONER AND IN DISSOLVING THE WRIT OF EXECUTION DATED 8 SEPTEMBER 2003
ISSUED BY THE LABOR ARBITER.
IV
JURISPRUDENCE IN ABSOLVING THE INDIVIDUAL RESPONDENTS OF PERSONAL LIABILITY.
CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE, THE COURT OF APPEALS, IN A CERTIORARI

PROCEEDING, REVIEWED THE FACTUAL FINDINGS OF THE NLRC WHICH AFFIRMED THAT OF THE LABOR
ARBITER AND, THEREAFTER, ISSUED A WRIT OF CERTIORARI REVERSING THE DECISIONS OF THE NLRC AND
THE LABOR ARBITER EVEN IN THE ABSENCE OF GRAVE ABUSE OF DISCRETION.[31]
Procedural Issue: Court of Appeals
Power to Review Facts in a Petition
For Certiorari under Rule 65

Culili argued that the Court of Appeals acted in contravention of applicable law and jurisprudence when it reexamined the
facts in this case and reversed the factual findings of the Labor Arbiter and the NLRC in a special civil action for certiorari.
This Court has already confirmed the power of the Court of Appeals, even on a Petition for Certiorari under Rule 65,[32] to
review the evidence on record, when necessary, to resolve factual issues:
The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been
settled as early as in our decision in St. Martin Funeral Home v. National Labor Relations Commission. This
Court held that the proper vehicle for such review was a Special Civil Action for Certiorari under Rule 65
of the Rules of Court, and that this action should be filed in the Court of Appeals in strict observance of
the doctrine of the hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas
Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the
Court of Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129 as amended,
known as the Judiciary Reorganization Act of 1980), the Court of Appeals pursuant to the exercise of its
original jurisdiction over Petitions for Certiorari is specifically given the power to pass upon the evidence,
if and when necessary, to resolve factual issues.[33]
While it is true that factual findings made by quasi-judicial and administrative tribunals, if supported by substantial
evidence, are accorded great respect and even finality by the courts, this general rule admits of exceptions. When there
is a showing that a palpable and demonstrable mistake that needs rectification has been committed[34] or when the factual
findings were arrived at arbitrarily or in disregard of the evidence on record, these findings may be examined by the
courts.[35]
In the case at bench, the Court of Appeals found itself unable to completely sustain the findings of the NLRC thus,
it was compelled to review the facts and evidence and not limit itself to the issue of grave abuse of discretion.
With the conflicting findings of facts by the tribunals below now before us, it behooves this Court to make an
independent evaluation of the facts in this case.
Main Issue: Legality of Dismissal
Culili asserted that he was illegally dismissed because there was no valid cause to terminate his employment. He
claimed that ETPI failed to prove that his position had become redundant and that ETPI was indeed incurring losses. Culili
further alleged that his functions as a Senior Technician could not be considered a superfluity because his tasks were
crucial and critical to ETPIs business.
Under our laws, an employee may be terminated for reasons involving measures taken by the employer due to
business necessities. Article 283 of the Labor Code provides:
Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving
a written notice on the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
There is redundancy when the service capability of the workforce is greater than what is reasonably required to
meet the demands of the business enterprise. A position becomes redundant when it is rendered superfluous by any
number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product line or
service activity previously manufactured or undertaken by the enterprise.[36]
This Court has been consistent in holding that the determination of whether or not an employees services are still
needed or sustainable properly belongs to the employer. Provided there is no violation of law or a showing that the
employer was prompted by an arbitrary or malicious act, the soundness or wisdom of this exercise of business judgment
is not subject to the discretionary review of the Labor Arbiter and the NLRC.[37]
However, an employer cannot simply declare that it has become overmanned and dismiss its employees without
producing adequate proof to sustain its claim of redundancy.[38] Among the requisites of a valid redundancy program are:
(1) the good faith of the employer in abolishing the redundant position; and (2) fair and reasonable criteria in ascertaining
what positions are to be declared redundant,[39] such as but not limited to: preferred status, efficiency, and seniority.[40]
This Court also held that the following evidence may be proffered to substantiate redundancy: the new staffing pattern,
feasibility studies/ proposal on the viability of the newly created positions, job description and the approval by the
management of the restructuring.[41]
In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing Program. Even
in the face of initial opposition from and rejection of the said program by ETEU, ETPI patiently negotiated with ETEUs
officers to make them understand ETPIs business dilemma and its need to reduce its workforce and streamline its
organization. This evidently rules out bad faith on the part of ETPI.
In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency, economy,
versatility and flexibility. It needed to reduce its workforce to a sustainable level while maintaining functions necessary to
keep it operating. The records show that ETPI had sufficiently established not only its need to reduce its workforce and
streamline its organization, but also the existence of redundancy in the position of a Senior Technician. ETPI explained
how it failed to meet its business targets and the factors that caused this, and how this necessitated it to reduce its
workforce and streamline its organization. ETPI also submitted its old and new tables of organization and sufficiently
described how limited the functions of the abolished position of a Senior Technician were and how it decided on whom
to absorb these functions.
In his affidavit dated April 10, 2000,[42] Mr. Arnel D. Reyel, the Head of both the Business Services Department and
the Finance Department of ETPI, described how ETPI went about in reorganizing its departments. Mr. Reyel said that in
the course of ETPIs reorganization, new departments were created, some were transferred, and two were
abolished. Among the departments abolished was the Service Quality Department. Mr. Reyel said that ETPI felt that the
functions of the Service Quality Department, which catered to both corporate and small and medium-sized clients,
overlapped and were too large for a single department, thus, the functions of this department were split and simplified
into two smaller but more focused and efficient departments. In arriving at the decision to abolish the position of Senior
Technician, Mr. Reyel explained:
11.3. Thus, in accordance with the reorganization of the different departments of ETPI, the Service
Quality Department was abolished and its functions were absorbed by the Business and Consumer
Accounts Department and the Corporate and Major Accounts Department.
11.4. With the abolition and resulting simplification of the Service Quality Department, one of the units
thereunder, the Customer Premises Equipment Maintenance (CPEM) unit was transferred to the Business
and Consumer Accounts Department. Since the Business and Consumer Accounts Department had to
remain economical and focused yet versatile enough to meet all the needs of its small and medium sized
clients, it was decided that, in the judgment of ETPI management, the specialized functions of a Senior
Technician in the CPEM unit whose sole function was essentially the repair and servicing of ETPIs
telecommunications equipment was no longer needed since the Business and Consumer [Accounts]
Department had to remain economical and focused yet versatile enough to meet all the multifarious
needs of its small and medium sized clients.
11.5. The business reason for the abolition of the position of Senior Technician was because in ETPIs
judgment, what was needed in the Business and Consumer Accounts Department was a versatile, yet
economical position with functions which were not limited to the mere repair and servicing of
telecommunications equipment. It was determined that what was called for was a position that could also
perform varying functions such as the actual installation of telecommunications products for medium and
small scale clients, handle telecommunications equipment inventory monitoring, evaluation of
telecommunications equipment purchased and the preparation of reports on the daily and monthly
activation of telecommunications equipment by these small and medium scale clients.
11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior Technician was to be
abolished due to redundancy. The functions of a Senior Technician was to be abolished due to
redundancy. The functions of a Senior Technician would then be absorbed by an employee assigned to
the Business and Consumer Accounts Department who was already performing the functions of actual
installation of telecommunications products in the field and handling telecommunications equipment
inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of
reports on the daily and monthly activation of telecommunications equipment. This employee would then
simply add to his many other functions the duty of repairing and servicing telecommunications equipment
which had been previously performed by a Senior Technician.[43]
In the new table of organization that the management approved, one hundred twelve (112) employees were
redeployed and nine (9) positions were declared redundant.[44] It is inconceivable that ETPI would effect a company-wide
reorganization of this scale for the mere purpose of singling out Culili and terminating him. If Culilis position were indeed
indispensable to ETPI, then it would be absurd for ETPI, which was then trying to save its operations, to abolish that one
position which it needed the most. Contrary to Culilis assertions that ETPI could not do away with his functions as long as
it is in the telecommunications industry, ETPI did not abolish the functions performed by Culili as a Senior Technician. What
ETPI did was to abolish the position itself for being too specialized and limited. The functions of that position were then
added to another employee whose functions were broad enough to absorb the tasks of a Senior Technician.
Culili maintains that ETPI had already decided to dismiss him even before the second phase of the Right-Sizing
Program was implemented as evidenced by the December 7, 1998 letter.
The December 7, 1998 termination letter signed by ETPIs AVP Stella Garcia hardly suffices to prove bad faith on
the part of the company. The fact remains that the said letter was never officially transmitted and Culili was not terminated
at the end of the first phase of ETPIs Right-Sizing Program. ETPI had given an adequate explanation for the existence of
the letter and considering that it had been transparent with its employees, through their union ETEU, so much so that
ETPI even gave ETEU this unofficial letter, there is no reason to speculate and attach malice to such act. That Culili would
be subsequently terminated during the second phase of the Right-Sizing Program is not evidence of undue discrimination
or singling out since not only Culilis position, but his entire unit was abolished and absorbed by another department.
Unfair Labor Practice
Culili also alleged that ETPI is guilty of unfair labor practice for violating Article 248(c) and (e) of the Labor Code,
to wit:
Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit
any of the following unfair labor practice:
xxxx
c. To contract out services or functions being performed by union members when such will
interfere with, restrain or coerce employees in the exercise of their rights to self-organization;
xxxx
e. To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization. Nothing in this
Code or in any other law shall stop the parties from requiring membership in a recognized collective
bargaining agent as a condition for employment, except those employees who are already members of
another union at the time of the signing of the collective bargaining agreement. Employees of an
appropriate collective bargaining unit who are not members of the recognized collective bargaining agent
may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the
recognized collective bargaining agent, if such non-union members accept the benefits under the
collective agreement: Provided, that the individual authorization required under Article 242, paragraph
(o) of this Code shall not apply to the non-members of the recognized collective bargaining agent.
Culili asserted that ETPI is guilty of unfair labor practice because his functions were sourced out to labor-only
contractors and he was discriminated against when his co-employees were treated differently when they were each offered
an additional motorcycle to induce them to avail of the Special Retirement Program.ETPI denied hiring outside contractors
and averred that the motorcycles were not given to his co-employees but were purchased by them pursuant to their Collective
Bargaining Agreement, which allowed a retiring employee to purchase the motorcycle he was assigned during his
employment.
The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair
labor practices violate the constitutional right of workers and employees to self-organization, are inimical
to the legitimate interest of both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace
and hinder the promotion of healthy and stable labor-management relations.
In the past, we have ruled that unfair labor practice refers to acts that violate the workers' right to organize. The
prohibited acts are related to the workers' right to self-organization and to the observance of a CBA.[45] We have likewise
declared that there should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to
the workers' right to self-organization.[46] Thus, an employer may only be held liable for unfair labor practice if it can be
shown that his acts affect in whatever manner the right of his employees to self-organize.[47]
There is no showing that ETPI, in implementing its Right-Sizing Program, was motivated by ill will, bad faith or
malice, or that it was aimed at interfering with its employees right to self-organize. In fact, ETPI negotiated and consulted
with ETEU before implementing its Right-Sizing Program.
Both the Labor Arbiter and the NLRC found ETPI guilty of unfair labor practice because of its failure to dispute
Culilis allegations.
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.[48] 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.
Observance of Procedural Due Process
Although the Court finds Culilis dismissal was for a lawful cause and not an act of unfair labor practice, ETPI,
however, was remiss in its duty to observe procedural due process in effecting the termination of Culili.
We have previously held that there are two aspects which characterize the concept of due process under the
Labor Code: one is substantive whether the termination of employment was based on the provision of the Labor Code or
in accordance with the prevailing jurisprudence; the other is procedural the manner in which the dismissal was effected.[49]
Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:
(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:
xxxx
For termination of employment as defined in Article 283 of the Labor Code, the requirement of
due process shall be deemed complied with upon service of a written notice to the employee and the
appropriate Regional Office of the Department of Labor and Employment at least thirty days before
effectivity of the termination, specifying the ground or grounds for termination.
In Mayon Hotel & Restaurant v. Adana,[50] we observed:
The requirement of law mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact of the loss of their jobs and
the corresponding income, but more importantly, to give the Department of Labor and Employment
(DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.[51]
ETPI does not deny its failure to provide DOLE with a written notice regarding Culilis termination. It, however, insists that
it has complied with the requirement to serve a written notice to Culili as evidenced by his admission of having received
it and forwarding it to his union president.
In Serrano v. National Labor Relations Commission,[52] we noted that a job is more than the salary that it carries. There is
a psychological effect or a stigma in immediately finding ones self laid off from work.[53] This is exactly why our labor laws
have provided for mandating procedural due process clauses. Our laws, while recognizing the right of employers to
terminate employees it cannot sustain, also recognize the employees right to be properly informed of the impending
severance of his ties with the company he is working for. In the case at bar, ETPI, in effecting Culilis termination, simply
asked one of its guards to serve the required written notice on Culili. Culili, on one hand, claims in his petition that this
was handed to him by ETPIs vice president, but previously testified before the Labor Arbiter that this was left on his
table.[54] Regardless of how this notice was served on Culili, this Court believes that ETPI failed to properly notify Culili
about his termination. Aside from the manner the written notice was served, a reading of that notice shows that ETPI
failed to properly inform Culili of the grounds for his termination.
The Court of Appeals, in finding that Culili was not afforded procedural due process, held that Culilis dismissal was
ineffectual, and required ETPI to pay Culili full backwages in accordance with our decision in Serrano v. National Labor
Relations Commission.[55] Over the years, this Court has had the opportunity to reexamine the sanctions imposed upon
employers who fail to comply with the procedural due process requirements in terminating its employees. In Agabon v.
National Labor Relations Commission,[56] this Court reverted back to the doctrine in Wenphil Corporation v. National Labor
Relations Commission[57] and held that where the dismissal is due to a just or authorized cause, but without observance of
the due process requirements, the dismissal may be upheld but the employer must pay an indemnity to the employee. The
sanctions to be imposed however, must be stiffer than those imposed in Wenphil to achieve a result fair to both the
employers and the employees.[58]
In Jaka Food Processing Corporation v. Pacot,[59] this Court, taking a cue from Agabon, held that since there is a
clear-cut distinction between a dismissal due to a just cause and a dismissal due to an authorized cause, the legal
implications for employers who fail to comply with the notice requirements must also be treated differently:
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282
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; and (2) if the dismissal is based on an authorized cause under Article 283 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.[60]
Hence, since it has been established that Culilis termination was due to an authorized cause and cannot be considered
unfair labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPIs failure to comply with the notice
requirements under the Labor Code, Culili is entitled to nominal damages in addition to his separation pay.
Personal Liability of ETPIs Officers
And Award of Damages
Culili asserts that the individual respondents, Salvador Hizon, Emiliano Jurado, Virgilio Garcia, and Stella Garcia, as
ETPIs officers, should be held personally liable for the acts of ETPI which were tainted with bad faith and
arbitrariness. Furthermore, Culili insists that he is entitled to damages because of the sufferings he had to endure and the
malicious manner he was terminated.
As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a
corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and members. To pierce
this fictional veil, it must be shown that the corporate personality was used to perpetuate fraud or an illegal act, or to
evade an existing obligation, or to confuse a legitimate issue. In illegal dismissal cases, corporate officers may be held
solidarily liable with the corporation if the termination was done with malice or bad faith. [61]
In illegal dismissal cases, moral damages are awarded only where the dismissal was attended by bad faith or fraud,
or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy.[62] Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to
warrant an award for exemplary damages.[63]
It is our considered view that Culili has failed to prove that his dismissal was orchestrated by the individual
respondents herein for the mere purpose of getting rid of him. In fact, most of them have not even dealt with Culili
personally. Moreover, it has been established that his termination was for an authorized cause, and that there was no bad
faith on the part of ETPI in implementing its Right-Sizing Program, which involved abolishing certain positions and
departments for redundancy. It is not enough that ETPI failed to comply with the due process requirements to warrant an
award of damages, there being no showing that the companys and its officers acts were attended with bad faith or were
done oppressively.
WHEREFORE, the instant petition is DENIED and the assailed February 5, 2004 Decision and September 13, 2004
Resolution of the Court of Appeals in CA-G.R. SP No. 75001 are AFFIRMED with the MODIFICATION that petitioner Nelson
A. Culilis dismissal is declared valid but respondent Eastern Telecommunications Philippines, Inc. is ordered to pay
petitioner Nelson A. Culili the amount of Fifty Thousand Pesos (P50,000.00) representing nominal damages for non-
compliance with statutory due process, in addition to the mandatory separation pay required under Article 283 of the
Labor Code.
SO ORDERED.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 174300 December 5, 2012
MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. and/or FORTUNATO V. DE

CASTRO, Petitioners,
vs.
NAGKAHIUSANG MAMUMUO SA MINTERBRO–SOUTHERN PHILIPPINES FEDERATION OF LABOR
and/or MANUEL ABELLANA, GILBERT ABELLO, SIXTO ABELLO, JR., IRENEO ABONITA, ALIEZER
ADALIM, CONSTANCIO ALBISO, NELSON ANCAJAS, ROGELIO ANOUEVO, REYNALDO ANTOQUE,
DEORIDO ARIOLA, BERNARDINO AROJADO, JAIME ATILANO, ALBERTO BAHALA, RODRISITO
BAHALA, JR., JOVITO BASTASA, TEODORO BASTASA, PACIANO BATICAN, BENJAMIN BAYNOSA,
APOLINARIO BERNALDEZ, GODOFREDO BIOCO, ERLINDO BRIGOLI, TEODRICO CABATO, ANARITO
CABUDLAN, DARIO CALIBJO, ERDIE CALIBJO, JAIME CAMINERO, BENNY CASI, EDWIN CORTEZ,
ARTURO CRISMAS, ALEJANDRO DIO, CATALINO DIONGZON, JR., MANUEL DORADO, ZACARIAS
DUMAYAC, ORLANDO EBERO, LEONARDO ENRIQUEZ, GABRIEL ESPERA, ROBERTO ESTRERA, JOEL
FERNANDEZ, EDGARDO FLORES, RUSTICO GALAN, ELIEZER GELECANA, PRIMO GELECANA, DANIEL
GIDUCOS, FELIPE GUANZON, GORDONIO HURANO, FLORENTINO IBAÑEZ, ALFRED IBORI, NICANOR
INTO, ROBERT JAMILA, JESUS JANDAYAN, EWAN JUGAN, DIEGO JULATON, JOVENCIO JULATON,
ANGELITO JULIANE, WILFREDO LACNO, LAGRAMA DOMINGO, CERILO MAGDASAL, FERNANDO
MANGARON, JOSEPH MANGARON, EDGARDO MANGILAYA, EDGARDO MANSARON, VIRGILIO
MATALANG, JEREMIAS MOLATO, CARLOS MONARES, RAMON NECESARIO, DANILO OTADAY,
ROGELIO PAL, EBELIO PALMA, GAVINO PAMAN, JR., DANILO PANDAPATAN, NOLI PATRICIO,
MODESTO PIOQUINIO, NEMENSIO PLASABAS, JULIUS QUIBOY, RUEL QUINILATAN, SANTOS
RASONABE, ROBERTO REBUCAS, ALEJANDRO REDOBLADO, SR., DARIO REYES, RODOLFO ROCA,
ROGER MAGAN, NECITO ROSOS, PANTALEON SAGAYNO, VENANCIO SAGAYNO, VICENTE SALARDE,
REYNALDO SALCEDO, JOSE SALINAS, DANIEL SAPIO, ROMY SEGOVIA, JENELITO SIOCON, RENATO
SODE, EDUARDO SOLIZA, PABLITO TAC-AN, PEPITO TAGALAWAN, ARIEL TIBUS, ARTURO TOLIBAS,
ROMEO TUBOG, ALFREDO VIDAD and ARNOLD TIBlJS, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari 1 of the Decision2 and Resolution3 dated April 21, 2006 and August 7,
2006, respectively, of the Court of Appeals in CA-G.R. SP No. 51656, which dismissed the petition for certiorari of
petitioners Mindanao Terminal and Brokerage Service, Inc. (Minterbro) and Fortunato V. De Castro.1
Minterbro is a domestic corporation managed by De Castro and engaged in the business of providing arrastre
and stevedoring services to its clientele at Port Area, Sasa, Davao City. 4 It has a Contract for Use of Pier5 with
Del Monte Philippines, Inc. (Del Monte), which provides for the exclusive use by Del Monte of the Minterbro
pier.6 Thus, at the time relevant to this controversy, Del Monte ~as Minterbro's only client.
The docking of vessels at the piers in Davao City, including that of Minterbro, is being carried out by the Davao
Pilots' Association, Inc. (DPAI).7 In a letter8 dated January 6, 1996, DPAI requested Minterbro to waive any claim
of liability against it for any damage to the pier or vessel. DPAI alleged that Minterbro’s pier vibrates everytime a
ship docks due to weak posts at the underwater portion.
In a letter9 dated January 15, 1997, Minterbro denied the request explaining that DPAI’s observation had no basis
as any damage to the pier was actually caused by a vessel under the control of DPAI which bumped the pier on
December 28, 1996. DPAI replied in a letter10 dated January 23, 1997 informing Minterbro of its intention to
refrain from docking vessels at Minterbro’s pier for security and safety reasons, until such time as Minterbro shall
have caused the restoration of the original independent fenders of the said pier.
This prompted Minterbro to bring up the matter to the Philippine Ports Authority (PPA). The PPA promptly
dispatched a team to conduct ocular inspection on Minterbro’s pier.11 In a communication12 dated February 3,
1997, on the basis of its ocular inspection, the PPA advised Minterbro "to conduct a thorough investigation of
the underdeck and underwater structures of the pier and initiate corrective measures if necessary." Thereafter,
Minterbro, DPAI, and the PPA had a meeting and agreed that Minterbro would seek the assistance of experts
for an ocular inspection and survey of the pier. Minterbro engaged the Davao Engineering Works and Marine
Services (Davao Engineering) to carry out the work.13
In its Survey Report No. 390/9714 dated May 6, 1997, Davao Engineering stated:
OBSERVATIONS:
The Pier facilities of Minterbro at Ilang, Davao City can still be used for loading and unloading of cargoes
provided, however, that docking procedures were properly carried out.
The cracks and spalled concrete on the joints of the RC Piles and Pile caps [do] not affect the strength and
capabilities of the Pier. However, immediate attention should be given to the Pier damages in order to prevent
further deterioration of its structural members which will lead to a costly [repair] later on. 15
Meanwhile, from January 1 until April 13, 1997, a total of sixteen (16) vessels were serviced at the Minterbro
pier:
January 1997 – 7 vessels
February 1997 – 3 vessels
March 1997 – 4 vessels
April 1997 – 2 vessels16
Subsequently, Minterbro decided to rehabilitate the pier on August 1, 1997 and, on the same day, sent a letter
to the Department of Labor and Employment (DOLE) to inform DOLE of Minterbro’s intention to temporarily
suspend arrastre and stevedoring operations. Minterbro alleged that, despite the condition of the pier, it was able
to service 16 vessels from January 1997 to April 13, 1997 and it was ready and awaiting vessels to dock at the
pier from April 14, 1997 to July 31, 1997 during which Minterbro’s office, motor pool, and field personnel
continued operations.17
On November 4, 1997, respondent Nagkahiusang Mamumuo sa Minterbro-Southern Philippines Federation of

Labor composed of respondents Manuel Abellana, et al., employees of Minterbro working on a rotation basis
and employed for arrastre and stevedoring work depending on the actual requirements of the vessels serviced
by Minterbro, filed a complaint for payment of separation pay against Minterbro and De Castro in the Regional
Arbitration Branch No. XI at Davao City of the National Labor Relations Commission (NLRC). 18
Meanwhile, on December 8, 1997, Minterbro sent a letter19 to the PPA the pertinent portion of which reads:
This is to advise you that we have completed the repair of our pier which we did inspite of the earlier certification
issued by the Davao Engineering Works & Services, that after the latter carried out the underwater/above water
ocular inspection and survey of the pier facilities, said pier can still be used for loading and unloading of cargoes
provided that the docking procedures should be properly carried out.
In view of the foregoing, may we request your office to render your own ocular inspection and survey for the
issuance of the corresponding certification on its readiness to accept vessels for loading and unloading
operations.
At the initial hearing before the Labor Arbiter on December 10, 1997, Minterbro and De Castro informed the
union and its members that the rehabilitation of the pier had been completed and that they were just awaiting
clearance to operate from the PPA. In a manifestation dated December 12, 1997, the union and its members
stated, among others, that "they x x x are not anymore amenable to going back to work with [the] company, for
the reason that the latter has not been operating for more than six (6) months, even if it resumes operation at a
later date and would just demand that they be given Retirement or Separation Pay, as the case may be." 20
On December 17, 1997, the PPA issued the following Certification21 declaring Minterbro’s pier as safe and ready
for operation:
CERTIFICATION
This is to certify that the repair and rehabilitation of Minterbro Wharf owned by Mindanao Terminal & Brokerage
Services, Inc. located at Tibungco, Ilang, Davao City was inspected by our Engineering Services Division office
on Dec. 10, 1997 and was found to be totally completed. The structural design and the supervision of work was
undertaken by Bow C. Moreno, Civil Structural Design Engineering Office of San Andres St., Manila.
Further, as certified by the Structural Consultants of the Contractor, copy attached, the Port [M]anagement Office
of Davao, Philippine Ports Authority has now declared Minterbro Wharf as safe and ready for operationalization.
This certification is issued for whatever purpose the Mindanao Terminal & Brokerage Services, Inc. will deem
necessary.
Done in the City of Davao, Philippines, this 17th day of December 1997.
(Sgd.)
MANUEL C. ALBARRACIN
Port Manager
Thereafter, MV Uranus was serviced at the Minterbro pier on December 22 to 28, 1997.22
On June 15, 1998, the Labor Arbiter rendered a Decision23 with the following decretal portion:
WHEREFORE, judgment is hereby rendered dismissing the complaint for separation pay for lack of merit and
declaring the ninety-five (95) complainants named in the final list filed on February 3, 1998 to have lost their
employment status for abandonment of work; and
Declaring complainants Roberto D. Estrera, Sr., Gorgonio Huraño, Jeremias Molato and Constancio Albiso, who
have formally withdrawn their complaint, not to have lost their employment status and ordering respondents to
accept them back to their former positions without loss of seniority rights and other privileges. 24
Aggrieved, the union members appealed the Labor Arbiter’s Decision to the NLRC. In a Decision25 dated
September 30, 1998, the NLRC modified the Decision of the Labor Arbiter in this wise:
In denying complainants their separation benefits, the Executive Labor Arbiter considered the period embraced
within August 1, 1997, when respondent formally informed [the] DOLE of the temporary cessation of operation
up to December 16, 1997, when respondent was issued a certificate declaring the wharf safe and ready for
operations and December 22-28, 1997, when the respondent company serviced a vessel MV Uranus which
obviously did not exceed six (6) months, thus denying complainants their monetary benefits. Incidentally, the
period reckoned is incorrect.
It is admitted by respondent that the last vessel that was serviced was on April 11-13, 1997 (MV Bosco Polar),
and after the rehabilitation of the wharf, on December 22-28, 1997 (MV Uranus) was served, thereby covering a
period of more or less eight months.
Respondent cannot conceal or make the August 1, 1997 formal notice to DOLE or the alleged continued
operations of its office personnel until July 31, 1997, an excuse to evade the mandated six (6) months period
(Article 286 of the Labor Code, as amended), since the issue at bar concerns the complainants who became
jobless and penniless because of the December 28, 1996 accident.
With the unrefuted peculiar circumstances, complainants are therefore entitled to their claims for separation
benefits.
Moreover, complainants cannot be considered to have abandoned their jobs for the reason that it took
respondent a long period [of] time to rehabilitate the wharf causing uncertainties in their minds which culminated
in the filing of the case.
WHEREFORE, the assailed Decision is Modified. Respondents are ordered to pay complainants their separation
benefits to be assessed and computed during the post arbitral stage of the proceedings below upon finality of
the herein Decision.26
In a Resolution27 dated January 25, 1999, the NLRC maintained its Decision and denied the motion for
reconsideration of Minterbro and De Castro.
Thereafter, Minterbro and De Castro took the NLRC and the members of the union to task by filing a Petition
for Certiorari28 in the Court of Appeals asserting that the NLRC acted with grave abuse of discretion in ordering
Minterbro and De Castro to pay the union members separation pay under Article 286 of the Labor Code. This
was docketed as CA-G.R. SP No. 51656.
In a Decision dated April 21, 2006, the Court of Appeals dismissed the petition. It ruled that the seasonal nature
of the services rendered by the members of the union did not negate their status as regular employees and that
the temporary suspension of Minterbro’s operations should be reckoned from April 14, 1997, the day no more
vessel was serviced at Minterbro’s pier after MV Bosco Polar was serviced at the said pier on April 11 to 13,
1997. Thus, pursuant to Article 286 of the Labor Code and its application in Sebuguero v. National Labor
Relations Commission,29 the NLRC correctly ordered Minterbro and De Castro to pay the union members their
separation benefits as their temporary lay-off exceeded six months.
In a Resolution dated August 7, 2006, reconsideration was denied as the Court of Appeals found no reason to
reverse its decision. Hence, this petition.
Petitioners Minterbro and De Castro insist that the Court of Appeals erred when it ruled that the union members
are entitled to separation pay under Article 286 of the Labor Code. Petitioners concede that, as enunciated
in Sebuguero, where a temporary lay-off lasts longer than six months, the employees should either be recalled
to work or permanently retrenched following the requirements of the law.30 However, according to petitioners,
the lack of arrastre and stevedoring services in the pier after the servicing of MV Bosco Polar on April 11 to 13,
1997 was a result of Del Monte’s decision, for reasons unknown to Minterbro, to suddenly stop docking its
vessels at Minterbro’s pier. And while there were no arrastre and stevedoring services for lack of any vessel to
service, Minterbro’s office, motorpool and field personnel continued their work until July 31, 1997, or a day before
Minterbro filed the required notices with the DOLE on August 1, 1997. The decision to rehabilitate the pier is a
business decision and had nothing to do with the unfounded complaint of DPAI in January 1997 about the
condition of the pier.31
For their part, the union members contend that the petition is flawed as it presents a question of fact, not of law.
In particular, the determination of the correct reckoning date of the temporary suspension of Minterbro’s
business, whether April 14, 1997 or August 1, 1997, involves a review of facts and the respective evidence of
the parties, which is prohibited under the Rules of Court. Moreover, the NLRC and the Court of Appeals have
already fully discussed the matter and both came to the same conclusion, that Minterbro and De Castro are
liable to the union members for separation pay. The factual findings of the NLRC and the Court of Appeals should
therefore be accorded respect and conclusiveness.32
The issue thus presented in this petition is whether the union members/employees were deprived of gainful
employment on April 14, 1997 after the last vessel was serviced prior to the repair of the pier or on August 1,
1997 when repair works on the pier were commenced. Resolution of this issue will determine whether petitioners
are liable for separation pay for effectively dismissing the union members through their prolonged lay-off of more
than six months.
Petitioners insist on August 1, 1997 as the reckoning date and rely on Article 286 of the Labor Code. On the
other hand, the union members assert that the reckoning date is April 14, 1997 and invoke Sebuguero.
At the outset, the Court notes that the petition is fatally defective. The issue it presents is factual, not legal.
There is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts.
There is a question of fact if the issue invites a review of the evidence presented.33
In this case, this Court is effectively being called upon to determine who among the parties is asserting the truth
regarding the date the union members were laid-off. Such venture requires the evaluation of the respective
pieces of evidence presented by the parties as well as the consideration of "the existence and relevancy of
specific surrounding circumstances as well as their relation to each other and to the whole, and the probability
of the situation."34 However, the nature of petitioners’ action, a petition for review under Rule 45 of the Rules of
Court, renders that very action inappropriate for this Court to take. Only questions of law should be raised in a
petition for review under Rule 45.35 While there are recognized exceptions to that rule, this case is not among
them.
Moreover, this Court finds neither compelling reason nor substantial argument that will warrant the reversal of
the NLRC Decision which has been affirmed by the Court of Appeals.
The NLRC and the Court of Appeals found that the union members/employees were not given work starting April
14, 1997 and that more than six months have elapsed after the union members were laid off when the next
vessel was serviced at the Minterbro pier on December 22 to 28, 1997.
Minterbro claims that it had no hand whatsoever in the lack of work for the union members at the pier from April
14, 1997. It stated that it did not even have any idea as to why Del Monte suddenly stopped docking its vessels
at Minterbro’s pier. Nonetheless, as between petitioners and the union members, it is petitioners who had the
right to demand from Del Monte to perform its obligations under the Contract for Use of Pier. Petitioners’ right to
compel Del Monte to comply with its contractual obligations becomes stronger in view of the following
undertaking of Del Monte:
October 7, 1988
Atty. Eliodoro C. Cruz

Vice-President
Mindanao Terminal and Brokerage Service, Inc.
Davao City
Dear Atty. Cruz:

With reference to our "Contract for Use of Pier", dated 3 October, 1988, (Doc. No. 348, No. 71, Book XXVI of
Notary Public D. A. Soriano of Makati, Metro Manila), we confirm our commitment to maximize the use of
the [Minterbro] Pier at Ilang, Davao City and not to dock any of the vessels of our principal elsewhere for
as long as they can be accommodated therein as per your commitment in the contract and in the customary and
usual manner and for the purpose which they are intended to serve.
If this reflects our understanding, please sign below and return to us our copy of this letter. This will serve as our
supplemental agreement on the matter.
Very truly yours,
(Sgd.)
JUAN F. SIERRA
President
CONFORME:
Mindanao Terminal and

Brokerage Service, Inc.
By:
(Sgd.)
ELIODORO C. CRUZ
Vice-President36 (Emphasis supplied.)
Unfortunately, petitioners failed to show any effort on their part to hold Del Monte to its end of the bargain even
though the union members were being forced to be laid off. Effectively, when petitioners allowed Del Monte to
abandon its agreement with Minterbro for eight months covering the middle of April 1997 until the latter part of
December 1997 without holding Del Monte accountable for such breach, petitioners consented to Del Monte’s
unexplained action and the prejudice it caused to the union members.
Moreover, the communications between Minterbro and the PPA during the relevant period are telling. Among
these is a letter dated February 3, 1997 from the PPA:
03 February 1997
MR. FORTUNATO V. DE CASTRO, SR.

General Manager
Mindanao Terminal & Brokerage Services, Inc.
Port Area, Sasa, Davao City
Dear Mr. de Castro,
We had been furnished copy of the communications of the Davao Pilot’s, Association dated January 6 and 23,
1997 with the same subject on weakened pier structure of your port facility.
On 22 January 1997, a PMO team was dispatched to conduct an ocular inspection. The related report is herewith
furnished for your perusal.
Any report or observation of this nature from port users is considered critical and this should be
investigated and verified for the safety of all parties concerned. We therefore advise your company to
conduct a thorough investigation of the underdeck and underwater structures of the pier and initiate corrective
measures if necessary.
Please advise this end of your action/s undertaken.
Very truly yours,
(Sgd.)
MANUEL C. ALBARRACIN37 (Emphasis supplied.)
Another material document is the letter dated December 8, 1997 from Minterbro to the PPA wherein petitioners
requested the PPA to confirm the repair and rehabilitation of the Minterbro pier and issue a certification on the
pier’s "readiness to accept vessels for loading and unloading operations." 38
Petitioners exert much effort to dissociate themselves from Del Monte’s act of stopping its vessels from docking
at Minterbro’s pier beginning April 14, 1997. They also went to great lengths not only to refute the complaint of
DPAI that Minterbro’s pier is damaged and defective but also to establish that such allegedly baseless claims
have no connection with the decision of the vessels not to dock at the Minterbro pier. The above communications,
however, negate petitioners’ contention. As early as February 1997, the PPA had already advised petitioners
that the observation of DPAI that the pier had abnormal vibrations "is considered critical."39 And in the Petition
for Certiorari40and Memorandum41 which they filed in the Court of Appeals, petitioners alleged as follows:
12. MINTERBRO sent copies of the Survey Report No. 390/97 to the PPA, the [Davao Pilots] Association and
Del Monte Philippines, Inc. to inform them that the observation/complaint of the [Davao Pilots] Association was
clearly unfounded and without any factual basis. Despite receipt of the Survey Report, Del Monte did not
dock any of its vessels at MINTERBRO’s pier.42 (Emphasis supplied.)
The above statement shows that petitioners were fully aware that Del Monte’s decision to stop docking any of
its vessels at the Minterbro pier was basically related to the issue of the condition of the pier. Moreover,
petitioners may not rightfully shift the blame to Del Monte in view of the following provision of their Contract for
Use of Pier:
3. MINTERBRO shall maintain the pier in good condition suitable for the loading and unloading of [Del Monte]
or [Del Monte]-related cargoes[.]43 (Emphasis supplied.)
If petitioners really believed their claim that the pier’s condition was still suitable for normal operations even
without having undertaken the repairs which it took starting August 1997, petitioners could have simply submitted
Survey Report No. 390/97 to the PPA and requested for a certification similar to the PPA certification dated
December 17, 1997. Yet, they did not. They had to rehabilitate the pier first before they requested for the
certification. Furthermore, the very Survey Report No. 390/97 that petitioners use to support their claim that the
claim of DPAI as to the condition of the pier is totally baseless is not completely true. As quoted by petitioners,
the Survey Report states that the Minterbro pier "can still be used for loading and unloading of cargoes provided,
however, that docking procedures were properly carried out."44 This can be reasonably taken to mean as saying
that the operations at the pier should now be carried out in a mistake free manner because one wrong move
may prove to be disastrous. That means that every time arrastre and stevedoring services are conducted at the
pier, a sword would be hanging over the heads of those working at the pier. Moreover, the said Survey Report
expressly directs that "immediate attention should be given to the Pier damages in order to prevent further
deterioration of its structural members."45 This directive contradicts petitioners’ stance that the Minterbro pier
was in good condition even prior to its repair and rehabilitation in August 1997. Thus, the Court of Appeals did
not err when it made the following observations:
In view of the inspections and surveys conducted on the pier, it could not have failed to dawn upon petitioners
that no vessel would take the risk of docking in their pier because of its damaged condition. 46
To Our mind, both petitioners and the Labor Arbiter failed to realize that what had been indisputably established
thereby was that petitioners’ pier was in critical condition, i.e., no longer viable for docking as early as May 1996
in spite of which petitioners decided to make the necessary repairs only in August [1996] or four months
thereafter.
x x x Petitioners had already been amply notified of the unstable condition of their pier which required prompt
corrective action for the safety of both the facilities and the lives of the laborers therein, so that petitioners should
not have insisted that their pier was still in good shape.
x x x.47
In sum, petitioners’ inaction on what they allege to be the unexplained abandonment by Del Monte of its
obligations under the Contract for the Use of Pier coupled with petitioners’ belated action on the damaged
condition of the pier caused the absence of available work for the union members. As petitioners were
responsible for the lack of work at the pier and, consequently, the layoff of the union members, they are liable
for the separation from employment of the union members on a ground similar to retrenchment. In this
connection, this Court has ruled:
A lay-off, used interchangeably with "retrenchment," is a recognized prerogative of management. It is the

termination of employment resorted to by the employer, through no fault of nor with prejudice to the employees,
during periods of business recession, industrial depression, seasonal fluctuations, or during lulls occasioned by
lack of orders, shortage of materials, conversion of the plant for a new production program, or the introduction
of new methods or more efficient machinery, or of automation. Simply put, it is an act of the employer of
dismissing employees because of losses in operation of a business, lack of work, and considerable reduction on
the volume of his business, a right consistently recognized and affirmed by this Court. The requisites of a valid
retrenchment are covered by Article 283 of the Labor Code.
When a lay-off is temporary, the employment status of the employee is not deemed terminated, but merely
suspended. Article 286 of the Labor Code provides, in part, that the bona fide suspension of the operation of the
business or undertaking for a period not exceeding six months does not terminate employment. 48 (Citation
omitted.)
When petitioners failed to make work available to the union members for a period of more than six months
starting April 14, 1997 by failing to call the attention of Del Monte on the latter’s obligations under the Contract
of Use of Pier and to undertake a timely rehabilitation of the pier, they are deemed to have constructively
dismissed the union members. As this Court held in Valdez v. National Labor Relations Commission49 :
Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or undertaking for
a period not exceeding six months shall not terminate employment. Consequently, when the bona
fide suspension of the operation of a business or undertaking exceeds six months, then the employment of the
employee shall be deemed terminated. By the same token and applying said rule by analogy, if the employee
was forced to remain without work or assignment for a period exceeding six months, then he is in effect
constructively dismissed. (Citation omitted.)
In Sebuguero,50 the Court ruled on a case regarding layoff or temporary retrenchment, which subsequently
resulted to the separation from employment of the concerned employee as it lasted for more than six months,
as follows:
Article 283 of the Labor Code which covers retrenchment, reads as follows:
Art. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by servicing a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (I) month pay or at least one-half ( 1/2) month pay for every year of
service, whichever is higher.1âwphi1 A fraction of at least six (6) months shall he considered one (I) whole year.
This provision, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case
here. There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for
the requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-
off. To remedy this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific
period that employees may remain temporarily laid-off or in floating status. u Six months is the period set by law
that the operation of a business or undertaking may he suspended thereby suspending the employment of the
employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last
longer than six months. After six months, the employees should either be recalled to work or permanently
retrenched following the requirements of the law, and that failing to comply with this would be tantamount to
dismissing the employees and the employer would thus he liable for such dismissal. 51 (Citation omitted.)
As the Court of Appeals did not err in ruling that Sebuguero applies to this case, the consequences arrived at
in Sebuguero also apply. Lay-off is essentially retrenchment and under Article 283 of the Labor Code a
retrenched employee is entitled to separation pay equivalent to one (1) month salary or one-half (12) month
salary per year of service, whichever is higher.
WHEREFORE, the petition 1s hereby DENIED. The Executive Labor Arbiter of the Regional Arbitration Branch
No. XI at Davao City of the National Labor Relations Commission is DIRECTED to ensure the prompt
implementation of this Decision.
SO ORDERED.
SECOND DIVISION
[G.R. No. 109002. April 12, 2000]
DELA SALLE UNIVERSITY, petitioner, vs. DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION
(DLSUEA) and BUENAVENTURA MAGSALIN, respondents.
[G.R. No. 110072. April 12, 2000]
DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION-NATIONAL FEDERATION OF TEACHERS AND

EMPLOYEES UNION (DLSUEA-NAFTEU), petitioner, vs. DELA SALLE UNIVERSITY and
BUENAVENTURA MAGSALIN, respondents.
DECISION
BUENA, J.:
Filed with this Court are two petitions for certiorari,[1] the first petition with preliminary injunction and/or temporary
restraining order,[2] assailing the decision of voluntary arbitrator Buenaventura Magsalin, dated January 19, 1993,
as having been rendered with grave abuse of discretion amounting to lack or excess of jurisdiction. These two
petitions have been consolidated inasmuch as the factual antecedents, parties involved and issues raised therein
are interrelated.[3] Missc
The facts are not disputed and, as summarized by the voluntary arbitrator, are as follows. On December 1986,
Dela Salle University (hereinafter referred to as UNIVERSITY) and Dela Salle University Employees Association
- National Federation of Teachers and Employees Union (DLSUEA-NAFTEU), which is composed of regular
non-academic rank and file employees,[4] (hereinafter referred to as UNION) entered into a collective bargaining
agreement with a life span of three (3) years, that is, from December 23, 1986 to December 22, 1989. [5] During
the freedom period, or 60 days before the expiration of the said collective bargaining agreement, the Union
initiated negotiations with the University for a new collective bargaining agreement[6] which, however, turned out
to be unsuccessful, hence, the Union filed a Notice of Strike with the National Conciliation and Mediation Board,
National Capital Region.[7] After several conciliation-mediation meetings, five (5) out of the eleven (11) issues
raised in the Notice of Strike were resolved by the parties. A partial collective bargaining agreement was
thereafter executed by the parties.[8] On March 18, 1991, the parties entered into a Submission Agreement,
identifying the remaining six (6) unresolved issues for arbitration, namely: "(1) scope of the bargaining unit, (2)
union security clause, (3) security of tenure, (4) salary increases for the third and fourth years [this should
properly read second and third years][9] of the collective bargaining agreement, (5) indefinite union leave,
reduction of the union presidents workload, special leave, and finally, (6) duration of the agreement." [10] The
parties appointed Buenaventura Magsalin as voluntary arbitrator.[11] On January 19, 1993, the voluntary arbitrator
rendered the assailed decision.[12] Spped
In the said decision, the voluntary arbitrator, on the first issue involving the scope of the bargaining unit, ruled
that "the Computer Operators assigned at the CSC [Computer Services Center], just like any other Computer
Operators in other units, [should be] included as members of the bargaining unit,"[13] after finding that "[e]vidently,
the Computer Operators are presently doing clerical and routinary work and had nothing to do with [the] setting
of management policies for the University, as [may be] gleaned from the duties and responsibilities attached to
the position and embodied in the CSC [Computer Services Center] brochure. They may have, as argued by the
University, access to vital information regarding the Universitys operations but they are not necessarily
confidential."[14] Regarding the discipline officers, the voluntary arbitrator "believes that this type of employees
belong (sic) to the rank-and-file on the basis of the nature of their job."[15] With respect to the employees of the
College of St. Benilde, the voluntary arbitrator found that the College of St. Benilde has a personality separate
and distinct from the University and thus, held "that the employees therein are outside the bargaining unit of the
Universitys rank-and-file employees."[16]
On the second issue regarding the propriety of the inclusion of a union shop clause in the collective bargaining
agreement, in addition to the existing maintenance of membership clause, the voluntary arbitrator opined that a
union shop clause "is not a restriction on the employees right of (sic) freedom of association but rather a valid
form of union security while the CBA is in force and in accordance with the Constitutional policy to promote
unionism and collective bargaining and negotiations. The parties therefore should incorporate such union shop
clause in their CBA."[17]
On the third issue with respect to the use of the "last-in-first-out" method in case of retrenchment and transfer to
other schools or units, the voluntary arbitrator upheld the "elementary right and prerogative of the management
of the University to select and/or choose its employees, a right equally recognized by the Constitution and the
law. The employer, in the exercise of this right, can adopt valid and equitable grounds as basis for lay-off or
separation, like performance, qualifications, competence, etc. Similarly, the right to transfer or reassign an
employee is an employers exclusive right and prerogative."[18]
Regarding the fourth issue concerning salary increases for the second and third years of the collective bargaining
agreement, the voluntary arbitrator opined that the "proposed budget of the University for SY 1992-93 could not
sufficiently cope up with the demand for increases by the Union. xxx xxx. With the present financial condition of
the University, it cannot now be required to grant another round of increases through collective bargaining without
exhausting its coffers for other legitimate needs of the University as an institution," [19] thus, he ruled that "the
University can no longer be required to grant a second round of increase for the school years under consideration
and charge the same to the incremental proceeds."[20] Misspped
On the fifth issue as to the Unions demand for a reduction of the workload of the union president, special leave
benefits and indefinite union leave with pay, the voluntary arbitrator rejected the same, ruling that unionism "is
no valid reason for the reduction of the workload of its President," [21] and that there is "no sufficient justification
to grant an indefinite leave."[22] Finding that the Union and the Faculty Association are not similarly situated,
technically and professionally,[23] and that "[w]hile professional growth is highly encouraged on the part of the
rank-and-file employees, this educational advancement would not serve in the same degree as demanded of
the faculty members,"[24]the voluntary arbitrator denied the Unions demand for special leave benefits.
On the last issue regarding the duration of the collective bargaining agreement, the voluntary arbitrator ruled that
"when the parties forged their CBA and signed it on 19 November 1990, where a provision on duration was
explicitly included, the same became a binding agreement between them. Notwithstanding the Submission
Agreement, thereby reopening this issue for resolution, this Voluntary Arbitrator is constrained to respect the
original intention of the parties, the same being not contrary to law, morals or public policy." [25] As to the economic
aspect of the collective bargaining agreement, the voluntary arbitrator opined that the "economic provisions of
the CBA shall be re-opened after the third year in compliance with the mandate of the Labor Code, as
amended."[26]
Subsequently, both parties filed their respective motions for reconsideration which, however, were not
entertained by the voluntary arbitrator "pursuant to existing rules and jurisprudence governing voluntary
arbitration cases."[27] Josp-ped
On March 5, 1993, the University filed with the Second Division of this Court, a petition for certiorari with
temporary restraining order and/or preliminary injunction assailing the decision of the voluntary arbitrator, as
having been rendered "in excess of jurisdiction and/or with grave abuse of discretion."[28] Subsequently, on May
24, 1993, the Union also filed a petition for certiorari with the First Division.[29] Without giving due course to the
petition pending before each division, the First and Second Divisions separately resolved to require the
respondents in each petition, including the Solicitor General on behalf of the voluntary arbitrator, to file their
respective Comments.[30] Upon motion by the Solicitor General dated July 29, 1993, both petitions were
consolidated and transferred to the Second Division.[31]
In his consolidated Comment[32] filed on September 9, 1993 on behalf of voluntary arbitrator Buenaventura C.
Magsalin, the Solicitor General agreed with the voluntary arbitrators assailed decision on all points except that
involving the employees of the College of St. Benilde. According to the Solicitor General, the employees of the
College of St. Benilde should have been included in the bargaining unit of the rank-and-file employees of the
University.[33] The Solicitor General came to this conclusion after finding "sufficient evidence to justify the Unions
proposal to consider the University and the CSB [College of St. Benilde] as only one entity because the latter is
but a mere integral part of the University," to wit:[34]
"1. One of the duties and responsibilities of the CSBs Director of Academic Services is to
coordinate with the Universitys Director of Admissions regarding the admission of freshmen,
shiftees and transferees (Annex "3" of the Universitys Reply);
"2. Some of the duties and responsibilities of the CSBs Administrative Officer are as follows:
A. xxx xxx xxx.
4. Recommends and implements personnel policies and guidelines (in accordance

with the Staff Manual) as well as pertinent existing general policies of the university
as a whole. xxx.
12. Conducts and establishes liaison with all the offices concerned at the Main
Campus as well (sic) with other government agencies on all administrative-related
matters. xxx Spp-edjo
B. xxx xxx xxx
7. Handles processing, canvassing and direct purchasing of all requisitions worth

more than P10,000 or less. Coordinates and canvasses with the Main Campus all
requisitions worth more than P10,000. xxx
C. xxx xxx xxx
7. Plans and coordinates with the Security and Safety Committee at the Main
Campus the development of a security and safety program during times of
emergency or occurrence of fire or other natural calamities. xxx (Annex "4" of the
Universitys Reply).
"3. The significant role which the University assumes in the admission of students at the CSB is
revealed in the following provisions of the CSBs Bulletin for Arts and Business Studies
Department for the schoolyear 1992-1993, thus:
Considered in the process of admission for a (sic) high school graduate applicants
are the following criteria: results of DLSU College Entrance Examination xxx.
Admission requirements for transferees are: xxx and an acceptable score in the
DLSU admission test. xxx
Shiftees from DLSU who are still eligible to enroll may be admitted in accordance
with the DLSU policy on shifting. Considering that there sometimes exist
exceptional cases where a very difficult but temporary situation renders a DLSU
student falling under this category a last chance to be re-admitted provided he
meets the cut-off scores required in the qualifying examination administered by the
university. xxx
He may not be remiss in his study obligations nor incur any violation whatsoever,
as such will be taken by the University to be an indication of his loss of initiative to
pursue further studies at DLSU. In sch (sic) a case, he renders himself ineligible
to continue studying at DLSU. DLSU thus reserves the right to the discontinuance
of the studies of any enrolee whose presence is inimical to the objectives of the
CSB/DLSU. xxx Mi-so
As a college within the university, the College of St. Benilde subscribes to the De
La Salle Mission." (Annexes "C-1," "C-2," and "C-3" of the Unions Consolidated
Reply and Rejoinder)
"4. The academic programs offered at the CSB are likewise presented in the Universitys
Undergraduate Prospectus for schoolyear 1992-1993 (Annex "D" of the Unions Consolidated
Reply and Rejoinder).
"5. The Leave Form Request (Annex "F" of the Unions Position Paper) at the CSB requires prior
permission from the University anent leaves of CSB employees, to wit:
AN EMPLOYEE WHO GOES ON LEAVE WITHOUT PRIOR PERMISSION FROM

THE UNIVERSITY OR WHO OVEREXTENDS THE PERIOD OF HIS APPROVED
LEAVE WITHOUT SECURING AUTHORITY FROM THE UNIVERSITY, OR WHO
REFUSE TO BE RECALLED FROM AN APPROVED LEAVE SHALL BE
CONSIDERED ABSENT WITHOUT LEAVE AND SHALL BE SUBJECT TO
DISCIPLINARY ACTION.
"6. The University officials themselves claimed during the 1990 University Athletic Association of
the Philippines (UAAP) meet that the CSB athletes represented the University since the latter and
the CSB comprise only one entity."
On February 9, 1994, this Court resolved to give due course to these consolidated petitions and to require the
parties to submit their respective memoranda.[35]
In its memorandum filed on April 28, 1994,[36] pursuant to the above-stated Resolution,[37] the University raised
the following issues for the consideration of the Court:[38] Ne-xold
I.
"WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE

VOLUNTARY ARBITRATOR WHEN HE INCLUDED, WITHIN THE BARGAINING UNIT
COMPRISING THE UNIVERSITYS RANK-AND-FILE EMPLOYEES, THE COMPUTER
OPERATORS ASSIGNED AT THE UNIVERSITYS COMPUTER SERVICES CENTER AND THE
UNIVERSITYS DISCIPLINE OFFICERS, AND WHEN HE EXCLUDED THE COLLEGE OF
SAINT BENILDE EMPLOYEES FROM THE SAID BARGAINING UNIT.
II.

VOLUNTARY ARBITRATOR WHEN HE UPHELD THE UNIONS DEMAND FOR THE
INCLUSION OF A UNION SHOP CLAUSE IN THE PARTIES COLLECTIVE BARGAINING
AGREEMENT.
III.

VOLUNTARY ARBITRATOR WHEN HE DENIED THE UNIONS PROPOSAL FOR THE "LAST-
IN-FIRST-OUT" METHOD OF LAY-OFF IN CASES OF RETRENCHMENT. Sc
IV.

VOLUNTARY ARBITRATOR WHEN HE RULED THAT THE UNIVERSITY CAN NO LONGER
BE REQUIRED TO GRANT A SECOND ROUND OF WAGE INCREASES FOR THE SCHOOL
YEARS 1991-92 AND 1992-93 AND CHARGE THE SAME TO THE INCREMENTAL
PROCEEDS.
V.

VOLUNTARY ARBITRATOR WHEN HE DENIED THE UNIONS PROPOSALS ON THE
DELOADING OF THE UNION PRESIDENT, IMPROVED LEAVE BENEFITS AND INDEFINITE
UNION LEAVE WITH PAY."
The Union, on the other hand, raised the following issues, in its memorandum,[39] filed pursuant to Supreme
Court Resolution dated February 9, 1994,[40] to wit; that the voluntary arbitrator committed grave abuse of
discretion in:
"(1)......FAILING AND/OR REFUSING TO PIERCE THE VEIL OF CORPORATE FICTION OF

THE COLLEGE OF ST. BENILDE-DLSU DESPITE THE PRESENCE OF SUFFICIENT BASIS
TO DO SO AND IN FINDING THAT THE EMPLOYEES THEREAT ARE OUTSIDE OF THE
BARGAINING UNIT OF THE DLSUS RANK-AND-FILE EMPLOYEES. HE ALSO ERRED IN HIS
INTERPRETATION OF THE APPLICATION OF THE DOCTRINE; x-sc
"(2)......DENYING THE PETITIONERS PROPOSAL FOR THE LAST-IN FIRST-OUT METHOD

OF LAY-OFF IN CASE OF RETRENCHMENT AND IN UPHOLDING THE ALLEGED
MANAGEMENT PREROGATIVE TO SELECT AND CHOOSE ITS EMPLOYEES
DISREGARDING THE BASIC TENETS OF SOCIAL JUSTICE AND EQUITY UPON WHICH
THIS PROPOSAL WAS FOUNDED;
"(3)......FINDING THAT THE MULTISECTORAL COMMITTEE IN THE RESPONDENT

UNIVERSITY IS THE LEGITIMATE GROUP WHICH DETERMINES AND SCRUTINIZES
ANNUAL SALARY INCREASES AND FRINGE BENEFITS OF THE EMPLOYEES;
"(4)......HOLDING THAT THE 70% SHARE IN THE INCREMENTAL TUITION PROCEEDS IS

THE ONLY SOURCE OF SALARY INCREASES AND FRINGE BENEFITS OF THE
EMPLOYEES;
"(5)......FAILING/REFUSING/DISREGARDING TO CONSIDER THE RESPONDENT

UNIVERSITYS FINANCIAL STATEMENTS FACTUALLY TO DETERMINE THE FORMERS
CAPABILITY TO GRANT THE PROPOSED SALARY INCREASES OVER AND ABOVE THE
70% SHARE IN THE INCREMENTAL TUITION PROCEEDS AND IN GIVING WEIGHT AND
CONSIDERATION TO THE RESPONDENT UNIVERSITYS PROPOSED BUDGET WHICH IS
MERELY AN ESTIMATE.
"(6)......FAILING TO EQUATE THE POSITION AND RESPONSIBILITIES OF THE UNION

PRESIDENT WITH THOSE OF THE PRESIDENT OF THE FACULTY ASSOCIATION WHICH
IS NOT EVEN A LEGITIMATE LABOR ORGANIZATION AND IN SPECULATING THAT THE
PRESIDENT OF THE FACULTY ASSOCIATION SUFFERS A CORRESPONDING REDUCTION
IN SALARY ON THE ACCOUNT OF THE REDUCTION OF HIS WORKLOAD; IN FAILING TO
APPRECIATE THE EQUAL RIGHTS OF THE MEMBERS OF THE UNION AND OF THE
FACULTY FOR PROFESSIONAL ADVANCEMENT AS WELL AS THE DESIRABLE EFFECTS
OF THE INSTITUTIONALIZATION OF THE SPECIAL LEAVE AND WORKLOAD REDUCTION
BENEFITS."[41] xl-aw
The question which now confronts us is whether or not the voluntary arbitrator committed grave abuse of
discretion in rendering the assailed decision, particularly, in resolving the following issues: (1) whether the
computer operators assigned at the Universitys Computer Services Center and the Universitys discipline officers
may be considered as confidential employees and should therefore be excluded from the bargaining unit which
is composed of rank and file employees of the University, and whether the employees of the College of St.
Benilde should also be included in the same bargaining unit; (2) whether a union shop clause should be included
in the parties collective bargaining agreement, in addition to the existing maintenance of membership clause; (3)
whether the denial of the Unions proposed "last-in-first-out" method of laying-off employees, is proper; (4)
whether the ruling that on the basis of the Universitys proposed budget, the University can no longer be required
to grant a second round of wage increases for the school years 1991-92 and 1992-93 and charge the same to
the incremental proceeds, is correct; (5) whether the denial of the Unions proposals on the deloading of the union
president, improved leave benefits and indefinite union leave with pay, is proper; (6) whether the finding that the
multi-sectoral committee in the University is the legitimate group which determines and scrutinizes the annual
salary increases and fringe benefits of the employees of the University, is correct; and (7) whether the ruling that
the 70% share in the incremental tuition proceeds is the only source of salary increases and fringe benefits of
the employees, is proper.
Now, before proceeding to the discussion and resolution of the issues raised in the pending petitions, certain
preliminary matters call for disposition. As we reiterated in the case of Caltex Refinery Employees Association
(CREA) vs. Jose S. Brillantes,[42] the following are the well-settled rules in a petition for certiorari involving labor
cases. "First, the factual findings of quasi-judicial agencies (such as the Department of Labor and Employment),
when supported by substantial evidence, are binding on this Court and entitled to great respect, considering the
expertise of these agencies in their respective fields. It is well-established that findings of these administrative
agencies are generally accorded not only respect but even finality.[43] Man-ikx
"Second, substantial evidence in labor cases is such amount of relevant evidence which a reasonable mind will
accept as adequate to justify a conclusion.[44]
"Third, in Flores vs. National Labor Relations Commission,[45] we explained the role and function of Rule 65 as
an extraordinary remedy:
"It should be noted, in the first place, that the instant petition is a special civil action for certiorari
under Rule 65 of the Revised Rules of Court. An extraordinary remedy, its use is available only
and restrictively in truly exceptional cases those wherein the action of an inferior court, board or
officer performing judicial or quasi-judicial acts is challenged for being wholly void on grounds of
jurisdiction. The sole office of the writ of certiorari is the correction of errors of jurisdiction including
the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. It does
not include correction of public respondent NLRC's evaluation of the evidence and factual findings
based thereon, which are generally accorded not only great respect but even finality.
"No question of jurisdiction whatsoever is being raised and/or pleaded in the case at bench.
Instead, what is being sought is a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record, which is certainly beyond the province of the extraordinary writ of certiorari.
Such demand is impermissible for it would involve this Court in determining what evidence is
entitled to belief and the weight to be assigned it. As we have reiterated countless times,
judicial review by this Court in labor cases does not go so far as to evaluate the sufficiency
of the evidence upon which the proper labor officer or office based his or its determination
but is limited only to issues of jurisdiction or grave abuse of discretion amounting to lack
of jurisdiction." (emphasis supplied).
With the foregoing rules in mind, we shall now proceed to discuss the merit of these consolidated petitions.
We affirm in part and modify in part. Scl-aw
On the first issue involving the classification of the computer operators assigned at the Universitys Computer
Services Center and discipline officers, the University argues that they are confidential employees and that the
Union has already recognized the confidential nature of their functions when the latter agreed in the parties 1986
collective bargaining agreement to exclude the said employees from the bargaining unit of rank-and-file
employees. As far as the said computer operators are concerned, the University contends that " the parties have
already previously agreed to exclude all positions in the Universitys Computer Services Center (CSC), which
include the positions of computer operators, from the collective bargaining unit. xxx xxx."[46] The University further
contends that "the nature of the work done by these Computer Operators is enough justification for their exclusion
from the coverage of the bargaining unit of the Universitys rank-and-file employees. xxx xxx."[47] According to the
University, the Computer Services Center, where these computer operators work, "processes data that are
needed by management for strategic planning and evaluation of systems. It also houses the Universitys
confidential records and information [e.g. student records, faculty records, faculty and staff payroll data, and
budget allocation and expenditure related data] which are contained in computer files and computer-generated
reports. xxx xxx. Moreover, the Computer Operators are in fact the repository of the Universitys confidential
information and data, including those involving and/or pertinent to labor relations. xxx xxx."[48]
As to the discipline officers, the University maintains that "they are likewise excluded from the bargaining unit of
the rank-and-file employees under the parties 1986 CBA. The Discipline Officers are clearly alter egos of
management as they perform tasks which are inherent in management [e.g. enforce discipline, act as peace
officers, secure peace and safety of the students inside the campus, conduct investigations on violations of
University regulations, or of existing criminal laws, committed within the University or by University employees]
xxx xxx."[49] The University also alleges that "the Discipline Officers are privy to highly confidential information
ordinarily accessible only to management."[50] Manik-s
With regard to the employees of the College of St. Benilde, the Union, supported by the Solicitor General at this
point, asserts that the veil of corporate fiction should be pierced, thus, according to the Union, the University and
the College of St. Benilde should be considered as only one entity because the latter is but a mere integral part
of the University.[51]
The Universitys arguments on the first issue fail to impress us. The Court agrees with the Solicitor General that
the express exclusion of the computer operators and discipline officers from the bargaining unit of rank-and-file
employees in the 1986 collective bargaining agreement does not bar any re-negotiation for the future inclusion
of the said employees in the bargaining unit. During the freedom period, the parties may not only renew the
existing collective bargaining agreement but may also propose and discuss modifications or amendments
thereto. With regard to the alleged confidential nature of the said employees functions, after a careful
consideration of the pleadings filed before this Court, we rule that the said computer operators and discipline
officers are not confidential employees. As carefully examined by the Solicitor General, the service record of a
computer operator reveals that his duties are basically clerical and non-confidential in nature.[52] As to the
discipline officers, we agree with the voluntary arbitrator that based on the nature of their duties, they are not
confidential employees and should therefore be included in the bargaining unit of rank-and-file employees.
The Court also affirms the findings of the voluntary arbitrator that the employees of the College of St. Benilde
should be excluded from the bargaining unit of the rank-and-file employees of Dela Salle University, because
the two educational institutions have their own separate juridical personality and no sufficient evidence was
shown to justify the piercing of the veil of corporate fiction.[53] Man-ikan
On the second issue involving the inclusion of a union shop clause in addition to the existing maintenance of
membership clause in the collective bargaining agreement, the University avers that "it is in the spirit of the
exercise of the constitutional right to self-organization that every individual should be able to freely choose
whether to become a member of the Union or not. The right to join a labor organization should carry with it the
corollary right not to join the same. This position of the University is but in due recognition of the individuals free
will and capability for judgment."[54] The University assails the Unions demand for a union shop clause as
"definitely unjust and amounts to oppression. Moreover, such a demand is repugnant to democratic principles
and the constitutionally guaranteed freedom of individuals to join or not to join an association as well as their
right to security of tenure, particularly, on the part of present employees."[55]
The Union, on the other hand, counters that the Labor Code, as amended, recognizes the validity of a union
shop agreement in Article 248 thereof which reads:
"ART. 248. Unfair labor practices of employers.
xxx......xxx......xxx
(e) To discriminate in regard to hire or tenure of employment or any term or condition of

employment in order to encourage or discourage membership in any labor organization. Nothing
in this Code or in any other law shall prevent the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment, except of those
employees who are already members of another union at the time of the signing of the
collective bargaining agreement. xxx xxx." (emphasis supplied) Ol-dmiso
We affirm the ruling of the voluntary arbitrator for the inclusion of a union shop provision in addition to the existing
maintenance of membership clause in the collective bargaining agreement. As the Solicitor General asserted in
his consolidated Comment, the Universitys reliance on the case of Victoriano vs. Elizalde Rope Workers
Union[56] is clearly misplaced. In that case, we ruled that "the right to join a union includes the right to abstain
from joining any union. xxx xxx. The right to refrain from joining labor organizations recognized by Section 3 of
the Industrial Peace Act is, however, limited. The legal protection granted to such right to refrain from joining is
withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of
which the employer may employ only members of the collective bargaining union, and the employees must
continue to be members of the union for the duration of the contract in order to keep their jobs. xxx xxx."[57]
On the third issue regarding the Unions proposal for the use of the "last-in-first-out" method in case of lay-off,
termination due to retrenchment and transfer of employees, the Union relies on social justice and equity to
support its proposition, and submits that the Universitys prerogative to select and/or choose the employees it will
hire is limited, either by law or agreement, especially where the exercise of this prerogative might result in the
loss of employment.[58] The Union further insists that its proposal is "in keeping with the avowed State policy (q)
To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and
welfare (Art. 211, Labor Code, as amended)."[59]
On the other hand, the University asserts its management prerogative and counters that "[w]hile it is recognized
that this right of employees and workers to participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law has been enshrined in the Constitution (Article III, [should be
Article XIII], Section 3, par. 2), said participation, however, does not automatically entitle the Union to dictate as
to how an employer should choose the employees to be affected by a retrenchment program. The employer still
retains the prerogative to determine the reasonable basis for selecting such employees."[60] Nc-m
We agree with the voluntary arbitrator that as an exercise of management prerogative, the University has the
right to adopt valid and equitable grounds as basis for terminating or transferring employees. As we ruled in the
case of Autobus Workers' Union (AWU) and Ricardo Escanlar vs. National Labor Relations Commission,[61] "[a]
valid exercise of management prerogative is one which, among others, covers: work assignment, working
methods, time, supervision of workers, transfer of employees, work supervision, and the
discipline, dismissal and recall of workers. Except as provided for, or limited by special laws, an employer
is free to regulate, according to his own discretion and judgment, all aspects of employment." (emphasis
supplied)
On the fourth issue involving the voluntary arbitrators ruling that on the basis of the Universitys proposed budget,
the University can no longer be required to grant a second round of wage increases for the school years 1991-
92 and 1992-93 and charge the same to the incremental proceeds, we find that the voluntary arbitrator committed
grave abuse of discretion amounting to lack or excess of jurisdiction. As we ruled in the case of Caltex Refinery
Employees Association (CREA) vs. Jose S. Brillantes,[62] "xxx xxx. [w]e believe that the standard proof of a
company's financial standing is its financial statements duly audited by independent and credible external
auditors."[63] Financial statements audited by independent external auditors constitute the normal method of proof
of profit and loss performance of a company.[64] The financial capability of a company cannot be based on its
proposed budget because a proposed budget does not reflect the true financial condition of a company, unlike
audited financial statements, and more importantly, the use of a proposed budget as proof of a companys
financial condition would be susceptible to abuse by scheming employers who might be merely feigning dire
financial condition in their business ventures in order to avoid granting salary increases and fringe benefits to
their employees.
On the fifth issue involving the Unions proposals on the deloading of the union president, improved leave benefits
and indefinite union leave with pay, we agree with the voluntary arbitrators rejection of the said demands, there
being no justifiable reason for the granting of the same. Nc-mmis
On the sixth issue regarding the finding that the multi-sectoral committee in the University is the legitimate group
which determines and scrutinizes the annual salary increases and fringe benefits of the employees of the
University, the Court finds that the voluntary arbitrator did not gravely abuse his discretion on this matter. From
our reading of the assailed decision, it appears that during the parties negotiations for a new collective bargaining
agreement, the Union demanded for a 25% and 40% salary increase for the second and third years, respectively,
of the collective bargaining agreement.[65] The Universitys counter-proposal was for a 10% increase for the third
year.[66] After the meeting of the multi-sectoral committee on budget, which is composed of students, parents,
faculty, administration and union, the University granted across-the-board salary increases of 11.3% and 19%
for the second and third years, respectively.[67] While the voluntary arbitrator found that the said committee
"decided to grant the said increases based on the Universitys viability which were exclusively sourced from the
tuition fees. xxx xxx.," no finding was made as to the basis of the committees decision. Be that as it may,
assuming for the sake of argument that the said committee is the group responsible for determining wage
increases and fringe benefits, as ruled by the voluntary arbitrator, the committees determination must still be
based on duly audited financial statements following our ruling on the fourth issue.
On the seventh and last issue involving the ruling that the 70% share in the incremental tuition proceeds is the
only source of salary increases and fringe benefits of the employees, the Court deems that any determination of
this alleged error is unnecessary and irrelevant, in view of our rulings on the fourth and preceding issues and
there being no evidence presented before the voluntary arbitrator that the University held incremental tuition fee
proceeds from which any wage increase or fringe benefit may be satisfied.
WHEREFORE, premises considered, the petitions in these consolidated cases, G.R. No. 109002 and G.R. No.
110072 are partially GRANTED. The assailed decision dated January 19, 1993 of voluntary arbitrator
Buenaventura Magsalin is hereby AFFIRMED with the modification that the issue on salary increases for the
second and third years of the collective bargaining agreement be REMANDED to the voluntary arbitrator for
definite resolution within one month from the finality of this Decision, on the basis of the externally audited
financial statements of the University already submitted by the Union before the voluntary arbitrator and forming
part of the records. Scnc-m
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 199780 September 24, 2014
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner,

vs.
JOSE M. CAPACITE, Respondent.
DECISION
BRION, J.:
This is an appeal under Rule 43 of the Rules of Court of the decision1 dated August 4, 2011 and the
resolution2dated November 24, 2011 of the Court of Appeals (CA) in CA-GR SP No. 116030. The appealed
decision reversed and set aside the Decision dated June 29, 2010 of the Employees' Compensation Commission
(ECC), which denied the claim for compensation benefits under Presidential Decree No. 626 (PD 626)3 filed by
Jose M. Capacite (Jose).
Elma Capacite (Elma) was an employee in the Department of Agrarian Reform (DAR) – Eastern Samar Provincial
Office, Borongan, Eastern Samar, who successively held the following positions between the periods of
November 8, 1982 to July 15, 2009: Junior Statistician,
Bookkeeper, Bookkeeper II, and finally as Accountant I.4
On May 11, 2009, due to persistent cough coupled with abdominal pain, Elma was admitted at the Bethany
Hospital. The pathology examination showed thatshe was suffering from "Adenocarcinoma, moderately
differentiated, probably cecal origin with metastases to mesenteric lymph node and seeding of the peritoneal
surface."5
On July 16, 2009, Elma died due to "Respiratory Failure secondary to Metastatic Cancer to the lungs; Bowel
cancer with Hepatic and Intraperitoneal Seeding and Ovarian cancer."6
On May 13, 2009, Elma’s surviving spouse, Jose, filed a claim for ECC death benefits before the Government
Service Insurance System (GSIS) Catbalogan Branch Office, alleging thatElma’s stressful working condition
caused the cancer that eventually led to her death.7
On August 18, 2009, the GSIS deniedJose’s claim. The GSIS opined that Jose had failed to present direct
evidence to prove a causal connection between Elma’s illness and her work in order for the claimant to be entitled
to the ECC death benefits.8
Jose appealed the GSIS decision tothe ECC. On June 29, 2010, the ECC denied Jose’s claim for death
benefits.9The ECC held that colorectal cancer is not listed as an occupational and compensable disease under
Annex "A" of the Amended Rules on Employee’s Compensation.10 Although its item 17 provides that "[c]ancer
of the lungs, liver and brain shall be compensable," the rules required"that it had been incurred by employees
working as vinyl chloride workers, or plastic workers."11
Jose appealed the ECC ruling to the CA under Rule 43 of the Rules of Court. On August 4, 2011, the CA granted
the petition and reversed the ECC findings. Without discussing the nature of Elma’s employment, the CA ruled
that she had "adenocarcinoma of the lungs" or "lung cancer," which is a respiratory disease listed under Annex
"A" of the Amended Rules on Employee’s Compensation, entitling her heirs to death benefits even if she had
not been a "vinyl chloride worker, or plastic worker."
The CA further ruled that Jose was no longer required to provide evidence that would directly connect the
deceased’s illness with her working conditions; that it was enough that the nature of her employment contributed
to the development of the disease. As a bookkeeper, the CA assumed that Elma had been exposed to
voluminous dusty records and other harmful substances that aggravated her respiratory disease.
GSIS filed a motion for reconsideration which the CA denied in its resolution dated November24, 2011. The
GSIS now comes before us for a final review.
The Issues
GSIS raises the following assignment of errors:
I.
THE CA ERRED IN RULING THAT METASTASIZED TO THE LUNGS IS AN AILMENT AKIN TO

RESPIRATORY DISEASE UNDER ANNEX "A" OF P.D. NO. 626, AS AMENDED, OR THAT SUCH DISEASE
IS WORK-RELATED.
II.
THE CA ERRED IN APPLYING THE LIBERAL INTERPRETATION OF THE RULES SINCE THE LIMITED
RESOURCES DERIVED FROM ECC CONTRIBUTIONS SHOULD ONLY BE APPLIED TO LEGITIMATE
CLAIMS FOR COMPENSATION BENEFITS.
GSIS primarily argues that Elma’s illness is not work-related. It is neither listed under Annex "A" of the Amended
Rules on Employee’s Compensation, nor was it caused by her working conditions. GSIS asserts that the liberal
attitude to grant benefits should not be used to defeat the mandate of the GSIS to provide meaningful protection
to all government employees who are actually working under hazardous circumstances.
The Court’s Ruling
We find the petition meritorious.
PD 626, as amended, defines compensable sicknessas "any illness definitely accepted as an occupational
disease listed by the Commission, or any illness caused by employment subject to proof by the employee that
the risk of contracting the same is increased by the working conditions." Of particular significance in this definition
is the use of the conjunction "or," which indicates alternative situations.
Based on this definition, we ruled in GSIS v. Vicencio12 that for sickness and the resulting death of anemployee
to be compensable, the claimant must show either: (1) that it is a result of an occupational disease listed under
Annex "A" of the Amended Rules on Employees' Compensation with the conditions set therein satisfied; or (2) if
not so listed, that the risk of contracting the disease was increased by the working conditions.
While item 17, Annex "A" of the Amended Rules of Employee’s Compensation considers lung cancer to be a
compensable occupational disease, it likewise provides that the employee should be employed as a vinyl chloride
worker or a plastic worker. In this case, however, Elma did not work in an environment involving the manufacture
of chlorine or plastic, for her lung cancer to be considered an occupational disease. 13 There was, therefore, no
basis for the CA to simply categorize her illness as an occupational disease without first establishing the nature
of Elma’s work. Both the law and the implementing rules clearly state that the given alternative conditions must
be satisfied for a disease to be compensable.
No proof exists showing that Elma’s lung cancer
was induced or aggravated by her working conditions
We also do not find that Elma’s cause of death was work-connected. As we earlier pointed out, entitlement to
death benefits depends on whether the employee’s disease is listed as an occupational disease or, if not so
listed, whether the risk of contracting the disease has been increased by the employee’s working conditions.
In reversing the ECC and granting the claim for death benefits, the CA relied on the case of GSIS v.
Vicencio,14which particularly states:
Granting, however, that the only cause of Judge Vicencio’s death is lung cancer, we are still one with the CA in
its finding that the working conditions of the late Judge Vicencio contributed to the development of his lung
cancer.
It is true that under Annex "A" of the Amended Rules on Employees’ Compensation, lung cancer is occupational
only with respect to vinyl chloride workers and plastic workers. However, this will not bar a claim for benefits
under the law if the complainant can adduce substantial evidence that the risk of contracting the illness is
increased or aggravated by the working conditions to which the employee is exposed to.
It is well-settled that the degree of proof required under P.D. No. 626 is merely substantial evidence, which
means, "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." What
the law requires is a reasonable work-connection and not a direct causal relation. It is enough that the hypothesis
on which the workman's claim is based is probable. Medical opinion to the contrary can be disregarded especially
where there is some basis in the facts for inferring a work-connection. Probability, not certainty, is the touchstone.
It is not required that the employment be the sole factor in the growth, development or acceleration of a claimant’s
illness to entitle him to the benefits provided for. It is enough that his employment contributed, even if to a small
degree, to the development of the disease.
[Emphasis ours]
xxxx
We hold that the CA’s application of the Vicencio ruling is misplaced. The correct implementing ruleunder PD
626 or Section 1(b), Rule III of the Amended Rules on Employee’s Compensation in fact provides that:
Section 1. Grounds.
xxxx
(b) For the sickness and the resulting disability or death to be compensable, the sickness must bethe result of
an occupational disease listed under Annex "A" of these Rules with the conditions set therein satisfied, otherwise,
proof must be shown that the risk of contracting the disease is increased by the working conditions. [Emphasis
ours]
The CA failed to consider that what moved the Court to grant death benefits to the heirs of Judge Vicencio was
the proof that the judge had been in contact with voluminous and dusty records. The Court also took judicial
notice of the dilapidated conditions of Judge Vicencio’s workplace:
The late Judge Vicencio was a frontline officer in the administration of justice, being the most visible living
representation of this country's legal and judicial system. It is undisputed that throughout his noble career from
Fiscal to Metropolitan Trial Court Judge, and, finally, to RTC Judge, his work dealt with stressful daily work hours,
and constant and long-term contact with voluminous and dusty records. We also take judicial notice that Judge
Vicencio’s workplace at the Manila City Hall had long been a place with sub-standard offices of judges and
prosecutors overflowing with records of cases covered up in dust and are poorly ventilated. All these, taken
together, necessarily contributed to the development of his lung illness."[Emphasis ours]
In contrast with the present case, Jose merely alleged that throughout Elma’s 27-year service atthe DAR, she
had a very demanding job; that she rose from the ranks as a Junior Statistician, until she reached the position of
Accountant I. Jose also explained that Elma had to examine various financial statements for accuracy; perform
complex accounting reports; and prepare financial statements. She also had to constantly render overtime work,
even during weekends, in order to study, analyze, balance, formulate and finalize reports. All these involved
prolonged sitting, exposure to cold room temperature at the office, physical effort and mental exertion, making
her highly susceptible to physical and mental fatigue, stress and strain.15
The rule is that the party who alleges an affirmative fact has the burden of proving it because mere allegation of
the fact is not evidence of it.16 Proof of direct causal connection is not, however, indispensably required. The law
merely requires substantial evidence – such relevant evidence as a reasonable mind might accept as adequate
to support a conclusion that the claimant’s employment contributed, even if to a small degree, to the development
of the disease.17 Thus, there is no requirement that the employment be the sole factor in the growth, development
or acceleration of a claimant’sillness for the latter to beentitled to the benefits provided for. 18 However, it is
important to note that adequate proofmust be presented to substantiate the claim for death benefits.
In Dator v. Employees’ Compensation Commission,19 we emphasized that the deceased employee had been
proven to have been exposed to dusty substances and unsanitary conditions:
Until now the cause of cancer is not known. Despite this fact, however, the Employees' Compensation
Commission has listed some kinds of cancer as compensable. There is no reason why cancer of the lungs should
not be considered as a compensable disease. The deceased worked as a librarian for about 15 years. During
all that period she was exposed to dusty books and other deleterious substances in the library under unsanitary
conditions. [Emphasis ours]
In Raro v. Employees' Compensation Commission,20 we stated that medical science cannot, as yet, positively
identify the causes of various types of cancer. It is a disease that strikes people in general. The nature of a
person's employment appears to have no relevance. Cancer can strike a lowly paid laborer, or a highly paid
executive, or one who works on land, in water, or in the bowels of the earth. It makes no difference whether the
victim is employed or unemployed, a white collar employee or a blue collar worker, a housekeeper, an urban
dweller or the resident of a rural area.
By way of exception, certain cancers have reasonably been traced to or considered as strongly induced by
specific causes.1âwphi1 For example, heavy doses of radiation (as in Chernobyl, USSR), cigarette smoke over
a long period for lung cancer, certain chemicals for specific cancers, and asbestos dust, among others, are
generally accepted as increasing the risks of contracting specific cancers. In the absence of such clear and
established empirical evidence, the law requires proof of causation or aggravation.
Aside from Jose’s general allegationsproving the stressful duties of his late wife, no reasonable proof exists to
support the claim that her respiratory disease, which is similar to lung cancer, was aggravated by her working
conditions. The records do not support the contention that she had been exposed to voluminous and dusty
records, nor do they provide any definite picture of her working environment.
We cannot, under this evidentiary situation, grant death compensation benefits solely on the assumption thatshe
might have been exposed to deleterious substances while working as bookkeeper and accountant. We cannot
likewise award compensation benefits on the basis of stress and fatigue, which are general consequences of
working in practically all kinds of human activity; otherwise, we would unreasonably open the flood gates of
compensability and render the purposes ofa system like GSIS meaningless.
Insurance trust fund should only be applied to legitimate claims for compensation benefits
While PD 626, as amended, is a social legislation whose primary purpose is to provide meaningful protection to
the working class against the hazards of disability, illness, and other contingencies resulting in loss of income, it
was not enacted to cover all ailments of working men. The law discarded, among others, the conceptsof
"presumption of compensability" and "aggravation" and substituted a system based on social security principles.
The intent was to restore a sensible equilibrium between the employer's obligation to pay workmen's
compensation and the employee's right to receive reparation for work-connected death or disability.21
The new employee compensation program now directs that all covered employers throughout the country be
required by law to contribute fixed and regular premiums or contributions to a trust fund for their employees.
Benefits are paid from this trust fund. If diseases not intended by the law to be compensated are inadvertently
or recklessly included, the integrity of the trust fundwould be endangered.In this sense, compassion for the
victims of diseases not covered by the law ignores the need to show a greater concern for the trust fund to which
the tens of millions of workers and their families look up to for compensation whenever covered accidents, salary
and deaths occur.22
As an agency charged by law to manage and administer the limited trust fund of the government officials and
employees, the GSIS has the difficult task of insuring all legitimate claims. Suffice it to say that a misplaced
compassion for victims of diseases or injuries would prejudice the very same workers and their beneficiaries in
times of need.
In sum, for insufficiency of evidence of causation or aggravation, we cannot grant Jose's claim for compensation
benefits.
WHEREFORE, premises considered, we hereby GRANT the petition. The decision and the resolution of the
Court of Appeals in CA-GR SP No. 116030 are hereby REVERSED and SET ASIDE. The ECC decision dated
June 29, 2010 is hereby REINSTATED. No costs.
SO ORDERED.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 163212 March 13, 2007
CANDANO SHIPPING LINES, INC., Petitioner,

vs.
FLORENTINA J. SUGATA-ON, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to reverse and
set aside the Court of Appeals Decision1 dated 23 May 2003 and its Resolution dated 1 April 2004, affirming with
modification the Decision of the Regional Trial Court (RTC) of Manila, Branch 20, finding Candano Shipping
Lines, Inc. (Candano Shipping) liable for the death of Melquiades Sugata-on. The dispositive portion of the
assailed decision of the appellate court reads:
IN VIEW OF ALL THE FOREGOING, the appealed decision is AFFIRMED, with the MODIFICATION that: (1)
the awarded compensation for the death of Melquiades Sugata-on is reduced to ₱608,400.00; and, (2) the award
of moral and exemplary damages as well as attorney’s fees is deleted. No pronouncement as to costs.2
The factual and procedural antecedents of this instant petition are as follows:
Candano Shipping is a domestic corporation engaged in the business of coastwise trading within the
Philippines.3On 7 March 1994, Melquiades Sugata-on was employed by Candano Shipping as Third Marine
Engineer on board its cargo vessel, M/V David, Jr., with the monthly salary of ₱7,800.00. 4
On 25 March 1996, M/V David, Jr. left the port of Davao City with its cargo and 20 crew members. The voyage
was initially uneventful until around seven o’clock in the evening of 27 March 1996 when the vessel encountered
rough seas and strong winds while traversing the waters of Lianga Bay, Surigao del Sur, causing her to tilt at
three degrees on its starboard side. Due to the violent waves which continuously hammered the tilting vessel,
the seawaters slowly swallowed up the main deck causing the tilting to worsen up to 30 degrees. In an effort to
salvage the vessel, the ship captain changed its course from the north to the south but the tilting continued to
grow to a dangerously high level, rendering the vessel beyond control. It was at this point when the ship captain
ordered the crew members to abandon the vessel. Despite the efforts exerted by the crew members to save the
vessel, M/V David, Jr. sank together with her cargo at around eleven o’clock in the evening at Bakulin Point,
Lianga Bay, Surigao del Sur. Among the 20 crew members, twelve survived, one died and seven were missing.
One of those who were missing was Melquiades Sugata-on (Melquiades), the husband of herein respondent,
Florentina Sugata-on, (Florentina) as shown in the List of Surviving Crew of the Ill-Fated David, Jr., prepared by
Candano Shipping.5
Upon learning of Melquiades’ fate, Florentina immediately went to the office of Candano Shipping in Manila to
claim the death benefits of her husband but it refused to pay.6
Such refusal prompted Florentina to institute on 31 January 1997, an action seeking indemnity for the death of
her husband against Candano Shipping before the RTC of Manila, Branch 20. She grounded her case on the
provision of Article 17117 of the New Civil Code, which imposes upon the employer liability for the death of his
employee in the course of employment, even if the death is caused by a fortuitous event. Accordingly, Florentina
prayed that actual, moral and exemplary damages including attorney’s fees, be awarded in her favor. 8
In its Answer,9 Candano Shipping countered that Florentina had no cause of action against it because the death
of Melquiades was not yet an established fact since he was merely reported missing upon the sinking of M/V
David, Jr. The filing of the case before the RTC therefore was premature for she should have waited until the
body of Melquiades could be recovered or until the lapse of time which would render the provision of Article 391
of the New Civil Code10 on presumptive death operative.
The RTC resolved the controversy in favor of Florentina and ratiocinated that the provision of Article 391 of the
New Civil Code on presumptive death had become operative since the period of four years had already elapsed
since Melquiades was reported missing upon the sinking incident which occurred on 27 March 1996. In a
Decision11promulgated on 15 February 2001, the RTC ordered Candano Shipping to indemnify Florentina for the
death of her husband, in the following amounts:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Candano Shipping Lines,
Inc. to indemnify plaintiff Forentina J. Sugata-on the amount of ₱988,400.00 as actual damages, ₱100,000.00
as moral damages ₱50,000.00 as exemplary damages and 10% of the amount due as and for attorney’s fees
plus the cost of suit.
The award for actual damages amounting to ₱988,400.00 was computed by the lower court by adopting the
formula in the computation of loss of earning capacity enunciated in the case of Villa Rey Transit, Inc. v. Court
of Appeals,12wherein the annual expenses of the deceased are deducted from his gross annual income and
multiplied by life expectancy (gross annual income – annual expense x life expectancy).13
The Motion for Reconsideration interposed by Candano Shipping was denied by the RTC for lack of cogent
reason to disturb or reconsider its decision.14
Aggrieved, Candano Shipping elevated the adverse RTC decision to the Court of Appeals, which in turn, affirmed
with modification the judgment of the lower court. The award for actual damages was reduced from ₱998,400.00
to ₱608,400.00, while the awards for moral and exemplary damages including attorney’s fees were deleted for
lack of sufficient basis for their allowance.15
In arriving at the sum of ₱608,400.00, the appellate court applied the standard prescribed by Article 194 of the
Labor Code of the Philippines, as amended, to wit:
ART. 194. DEATH. – (a) Under such regulations as the Commission may approve, the System shall pay to the
primary beneficiaries upon the death of the covered employee under this Title an amount equivalent to his
monthly income benefit, plus ten percent thereof for each dependent child, but not exceeding five, beginning with
the youngest and without substitution, except as provided for in paragraph (j) of Article 167 hereof; Provided,
however, That the monthly income benefit shall be guaranteed for five years: Provided, further, That if he has
no primary beneficiary, the System shall pay to his secondary beneficiaries the monthly income benefit not to
exceed sixty months; Provided, finally, That the minimum monthly death benefit shall not be less that fifteen
thousand pesos.
In a Resolution16 issued on 1 April 2004, the Court of Appeals denied the Motion for Reconsideration filed by
Candano Shipping for failure to offer any justifiable ground to modify, reverse or reconsider the questioned
decision.
Hence, this instant Petition for Review on Certiorari filed by Candano Shipping raising the following issues:
WHETHER OR NOT THE FORMULA FOR FIXING THE AMOUNT OF DEATH COMPENSATION IN
ARTICLE 194 OF THE LABOR CODE APPLIES IN DETERMINING THE COMPENSATION CLAIMED
BY THE HEIR OF THE DECEASED EMPLOYEE AGAINST THE EMPLOYER UNDER ARTICLE 1711?
WHETHER OR NOT IT IS PERMITTED FOR THE COURT OF APPEALS, ON ORDINARY APPEAL, TO

APPLY ART. 194 OF THE LABOR CODE ON A CLAIM FOR DEATH COMPENSATION OF AN
EMPLOYEE AGAINST THE EMPLOYER FILED AND TRIED BEFORE THE REGULAR COURTS ON
THE BASIS OF ARTICLE 1711 OF THE CIVIL CODE AND THE DOCTRINE ENUNCIATED IN THE
VILLA REY TRANSIT CASE?
WHETHER OR NOT APPLICATION OF ARTICLE 194 OF THE LABOR CODE ON THE CLAIM FOR
DEATH COMPENSATION OF RESPONDENT OUSTS THE REGULAR COURTS, INCLUDING THE
COURT OF APPEALS OF JURISDICTION OVER THE CASE?
IN THE EVENT THAT THE SUPREME COURT RULES THAT THE COURT OF APPEALS
APPLICATION OF ARTICLE 194 OF THE LABOR CODE IN THIS CASE SHOULD BE SET ASIDE, IS
RESPONDENT ENTITLED TO RECOVER DEATH COMPENSATION FROM PETITIONER IN
ACCORDANCE WITH HER THEORY OF THE CASE AS ALLEGED, ARGUED AND TRIED BEFORE
THE TRIAL COURT.17
Since the factual findings of the RTC and the Court of Appeals that the non-recovery of Melquiades’ body for the
period of four (4) years from 27 March 1996 creates a presumption that he is already dead and that his death
was caused by a fortuitous event, were already settled, and considering that these findings were not controverted
by the parties in this instant petition, we find no compelling reason to disturb the same. Henceforth, we will limit
our discussion to the computation of the amount of indemnification.
In its Petition, Candano Shipping argues that the application of the measure stipulated under Article 194 of the
Labor Code is erroneous since it applies only to death compensation to be paid by the Social Security System
to the beneficiaries of a deceased member, to which proposition Florentina concedes. We agree. The remedy
availed by Sugata-on in filing the claim under the New Civil Code has been validly recognized by the prevailing
jurisprudence on the matter.
In the case of Floresca v. Philex Mining Company,18 we declared that the employees may invoke either the
Workmen’s Compensation Act or the provisions of the Civil Code, subject to the consequence that the choice of
one remedy will exclude the other and that the acceptance of the compensation under the remedy chosen will
exclude the other remedy. The exception is where the claimant who had already been paid under the Workmen’s
Compensation Act may still sue for damages under the Civil Code on the basis of supervening facts or
developments occurring after he opted for the first remedy.19
Stated differently, save for the recognized exception, an employee cannot pursue both remedies simultaneously
but has the option to proceed by interposing one remedy and waiving his right over the other. As we have
explained in Floresca, this doctrinal rule is rooted on the theory that the basis of the compensation under the
Workmen’s Compensation Act is separate and distinct from the award of damages under the Civil Code, thus:
The rationale in awarding compensation under the Workmen’s Compensation Act differs from that in giving
damages under the Civil Code. The compensation acts are based on a theory of compensation distinct from the
existing theories of damages, payments under the acts being made as compensation and not as damages (99
C.J.S. 53). Compensation is given to mitigate harshness and insecurity of industrial life for the workman and his
family. Hence, an employer is liable whether negligence exists or not since liability is created by law. Recovery
under the Act is not based on any theory of actionable wrong on the part of the employer (99 D.J.S. 36).
In other words, under compensation acts, the employer is liable to pay compensation benefits for loss of income,
as long as the death, sickness or injury is work-connected or work-aggravated, even if the death or injury is not
due to the fault of the employer (Murillo v. Mendoza, 66 Phil. 689). On the other hand, damages are awarded to
one as a vindication of the wrongful invasion of his rights. It is the indemnity recoverable by a person who has
sustained injury either in his person, property or relative rights, through the act or default of another (25 C.J.S.
452).
The principle underscored in the case of Floresca was further affirmed in the later case of Ysmael Maritime
Corporation v. Avelino,20 wherein we emphasized that once the claimant had already exercised his choice to
pursue his right under one remedy, he is barred from proceeding with an alternative remedy. As eloquently laid
down by Chief Justice Marcelo Fernan:
It is therefore clear that respondents had not only opted to recover under the Act but they had also been duly
paid. At the very least, a sense of fair play would demand that if a person entitled to a choice of remedies made
a first election and accepted the benefits thereof, he should no longer be allowed to exercise the second
option. "Having staked his fortunes on a particular remedy, (he) is precluded from pursuing the alternate
course, at least until the prior claim is rejected by the Compensation Commission."
In the case at bar, Florentina was forced to institute a civil suit for indemnity under the New Civil Code, after
Candano Shipping refused to compensate her husband’s death.
The pertinent provision of the New Civil Code reads:
Article 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or
injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely
accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of
employment. The employer is also liable for compensation if the employee contracts any illness or diseases
caused by such employment or as the result of the nature of employment. If the mishap was due to the
employee’s own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for
compensation. When the employee’s lack of due care contributed to his death or injury, the compensation shall
be equitably reduced.
In the case of Philippine Air Lines, Inc. v. Court of Appeals,21 this Court validated the strength of the
aforementioned provision and made the employer liable for the injury suffered by its employee in the course of
employment. We thus ruled:
Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to fly the plane to Daet on
January 8, 1951 whose slow reaction and poor judgment was the cause of the crash-landing of the plane which
resulted in private respondent Samson hitting his head against the windshield and causing him injuries for which
reason PAL terminated his services and employment as pilot after refusing to provide him with the necessary
medical treatment of respondent’s periodic spells, headache and general debility produced from said injuries, We
must necessarily affirm likewise the award of damages or compensation under the provisions of Art.
1711 and Art. 1712 of the New Civil Code. x x x.
As early as the case of Valencia v. Manila Yacht Club, Inc.,22 this Court, speaking through the renowned
civilist, Mr. Justice J.B.L. Reyes, made a pronouncement that Article 1711 of the Civil Code imposes
upon the employer the obligation to compensate the employee for injury or sickness occasioned by his
employment, and thus articulated:
>Appellant’s demand for compensation is predicated on employer’s liability for the sickness of, or injury to, his
employee imposed by Article 1711 of the Civil Code, which reads:
Article 1711. Owners of enterprises and other employers are obliged to pay compensation for the death x x x.
We find the abovequoted provision to be applicable and controlling in this case. The matter of the amount of
compensation and allowable medical expenses should be properly determined by the Municipal Court after the
parties are heard accordingly.
Given that the right of the claimant arose from the contract of employment and the corresponding obligation
imposed by the New Civil Code upon the employer to indemnify the former for death and injury of the employee
circumstanced by his employment, necessarily, the provisions of the same code on damages shall govern the
extent of the employer’s liability.
The pertinent provision on damages under the New Civil Code provides:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or
compensatory damages.
Article 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that
of the profits which the obligee failed to obtain.
In order to give breath to the aforestated provisions on damages of the New Civil Code, they must be transformed
into a more tangible and practical mathematical form, so that the purpose of the law to indemnify the employee
or his heirs for his death or injury occasioned by his employment, as envisioned by the Article 1711 of the same
code may be realized. We deem it best to adopt the formula for loss of earning capacity enunciated in the case
of Villa Rey v. Court of Appeals,23 in computing the amount of actual damages to be awarded to the claimant
under Article 1711 of the New Civil Code.
In Villa Rey, the common carrier was made liable for the death of its passenger on board a passenger bus owned
and operated by Villa Rey Transit, Inc. going to Manila from Lingayen, Pangasinan. While the bus was nearing
Sadsaran Bridge in Barrio Sto. Domingo, Minalin, Pampanga, it frontally hit the rear side of bull cart filled with
hay and bamboo poles. The protruding end of one bamboo pole, about eight feet long, penetrated through the
glass windshield of the bus and hit the face of Policarpio Quintos, Jr., who was then sitting at the front row,
causing his death.24
The obligation of the common carrier to indemnify its passenger or his heirs for injury or death arose from the
contract of carriage entered into by the common carrier and the passenger.25 By the very nature of the obligation
which is imbued with public interest,26 in contract of carriage the carrier assumes the express obligation to
transport its passenger to his destination safely and to observe extraordinary diligence with due regard to all the
circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier and thus gives rise to the right of the passenger or his heirs for indemnity. 27
In the same breadth, the employer shall be liable for the death or personal injury of its employees in the course
of employment as sanctioned by Article 1711 of the New Civil Code. The liability of the employer for death or
personal injury of his employees arose from the contract of employment entered into between the employer and
his employee which is likewise imbued with public interest.28 Accordingly, when the employee died or was injured
in the occasion of employment, the obligation of the employer for indemnity, automatically attaches. The
indemnity may partake of the form of actual, moral, nominal, temperate, liquidated or exemplary damages, as
the case may be depending on the factual milieu of the case and considering the criterion for the award of these
damages as outlined by our jurisprudence.29 In the case at bar, only the award of actual damages, specifically
the award for unearned income is warranted by the circumstances since it has been duly proven that the cause
of death of Melquiades is a fortuitous event for which Candano Shipping cannot be faulted.
The formula for the computation of unearned income is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:

2 / 3 x [80 – age of deceased at the time of death]
Jurisprudence provides that the first factor, i.e., life expectancy, shall be computed by applying the formula (2/3
x [80 - age at death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.30
In the computation of the second factor, it is computed by multiplying the life expectancy by the net earnings of
the deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or income and
less living and other incidental expenses.31 The loss is not equivalent to the entire earnings of the deceased, but
only such portion that he would have used to support his dependents or heirs. Hence, we deduct from his gross
earnings the necessary expenses supposed to be used by the deceased for his own needs.32 The Court
explained in Villa Rey:1avvphi1
[(The award of damages for loss of earning capacity is)] concerned with the determination of losses or damages
sustained by the private respondents, as dependents and intestate heirs of the deceased, and that said damages
consist, not of the full amount of his earnings, but of the support they received or would have received from him
had he not died in consequence of negligence of petitioner’s agent. In fixing the amount of that support, we must
reckon with the ‘necessary expenses of his own living’, which should be deducted from his earnings. Thus, it has
been consistently held that earning capacity, as an element of damages to one’s estate for his death by wrongful
act is necessarily his net earning capacity or his capacity to acquire money, ‘less necessary expense for his own
living.’ Stated otherwise, the amount recoverable is not the loss of entire earning, but rather the loss of that
portion of the earnings which the beneficiary would have received. In other words, only net earnings, and not
gross earnings are to be considered that is, the total of the earnings less expenses necessary in the creation of
such earnings or income and less living and other incidental expenses.33
In computing the third factor, the necessary living expense, a survey of more recent jurisprudence shows that
this Court consistently pegged the amount at 50% of the gross annual income. 34 We held in Smith Bell Dodwell
Shipping Agency Corp. v. Borja,35 that when there is no showing that the living expenses constituted the smaller
percentage of the gross income, we fix the living expenses at half of the gross income.
Applying the aforestated jurisprudential guidelines in the computation of the amount of award for damages set
out in Villa Rey, we now proceed to determining Melquiades’ life expectancy, thus:
Life expectancy = 2 / 3 x [80 – age of deceased at the time of death]
2 /3 x [80 – 56]
2 / 3 x [24]
Life expectancy = 16
With 16 more years of life expectancy and a monthly income of ₱7,800.00, as evidenced by the pay slips duly
presented before the RTC, Melquiades’ earning capacity is computed as follows:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
= 16 x ( ₱93,600.00 – ₱ 46,800.00)
= 16 x ( ₱ 46,800.00 )
Net Earning Capacity = ₱ 748,800.00
The argument raised by Candano Shipping that the formula for determining the life expectancy under Villa
Reycannot be automatically applied without proof of the basis for the expected length of life of a Filipino does
not merit our consideration. The formula for life expectancy has been repeatedly adopted in our jurisprudence in
fixing the amount of indemnity for the death of a party. This was adopted from the American Expectancy Table
of Mortality or the Actuarial of Combined Experience Table of Mortality which was used by insurers in determining
the capital sum to be charged for annuity.36
Admittedly, in several cases, this Court reduced the life expectancy multiplier considering the medical history
such as when the deceased previously underwent a major surgery37 or when it was shown that he was treated
for chest pains, backache or occasional feeling of tiredness38 and the fact that the deceased has been
consistently engaged in a dangerous and risky activity tending to shorten his life. 39 Failing to prove, however,
that any of these circumstances is attendant in the case at bar, Candano Shipping cannot validly assert that the
standard life expectancy factor laid down in Villa Rey cannot be applied in this case.
Accordingly, Florentina is entitled to recover the amount of ₱748,800.00 as actual damages for the death of her
husband. The awards of moral and exemplary damages are deleted. However, the award of costs of litigation
and attorney’s fees are proper.40
WHEREFORE, in view of the foregoing, the instant petition is DENIED and the Decision dated 23 May 2003 as
well as the Resolution dated 1 April 2004, rendered by the Court of Appeals in CA-G.R. CV No. 70410, are
hereby PARTIALLY AFFIRMED in so far as it finds petitioner liable to respondent for damages.
Pursuant to the appropriate provisions of the New Civil Code and the prevailing jurisprudence on the matter,
petitioner Candano Shipping Lines, Inc., is ORDERED to pay the amount of ₱748,800.00, as actual damages,
plus 10% of the amount awarded as attorney’s fee plus cost of the suit.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-21930 August 31, 1966
AGAPITA PAJARILLO, ET AL., petitioners-appellants,

vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.
Paulino Manongdo for petitioners-appellants.

Orlando L. Espinas for respondent-appellee.
BARRERA, J.:
This is an appeal by Agapita Pajarillo, et al., from the resolution of the Social Security Commission, denying their
petition to be exempted from coverage of the Social Security System.
There is no controversy as to the facts of this case. Appellants are owners of fishing boats being used for fishing
at sea, namely:
Owner Name of Vessel

Agapita Pajarillo Bagong Kalayaan
Basilio Medina Stella Maris
Rosario Relloso Villa Florida
Teofila Campana Salenian
Melicia Totanes Nazareno
Melicia Totanes San Pedro
Ireneo Racelis Ricardo
Salvador Boral Villa Rosario
Cesar King Felipa
Ramon King Tacia
Jaime King Aday
Amelia Reyes Queen Mary
Amelia Reyes Nanay
Teofilo Nasis Teresita
Rosario Reyes Charing Uno
Rosario Reyes Charing Dos
Aurora Sales Aurora
As such property-owners, they enter into agreement1 with the so-called patrons or pilots, whereby the latter take
charge of appellants fishing vessels, equipment, and gear used for fishing. Once entrusted with the equipment,
the pilot "hires" the crew to man the boat and secures their provisions. This is usually financed from loans
obtained in the form of advances from fish dealers, and payable in kind when the boat returns with catch from
the fishing trip. (pp. 23-24, t.s.n.).
These fishing trips are not regular. The fishermen go out to the sea only when there is no moon or it is not yet
very bright. For this reason, even in months of fine weather, the most that a boat can make are 18 fishing days
every month. These men have no regular income. If the trip yields a catch, the proceeds thereof are divided into
three parts: one part goes to the owner of the boat and equipment; one part is set aside to cover expenses like
crude oil and for maintenance of the boat, and the other one-third is divided among the men, with the pilot getting
3 times the share of a crew-member; and the "machinist", who tends or operates the engine of the motorized
boat, receiving twice the share of a crew-member. (pp. 9, 23, t.s.n.).
The men (usually 12 for every vessel, including the pilot) are under no obligation to stay in one outfit. Sometimes,
they join as members of the crew for one night only; sometimes two, or three days. Then, they leave and join
other outfits. (pp. 18-19, t.s.n.). Even the pilot himself is not bound to retain his charge for any definite duration.
He can return the boat to its owner anytime, if he does not want to manage it anymore. (p. 11, t.s.n.). The vessel-
owners, appellants in the present case, required to register as employers with the Social Security System, filed
a joint petition with the Social Security Commission, claiming that there exists no employer-employee relationship
between them and the crew of their fishing vessels, and praying that they be exempted from the compulsory
coverage of the law. After hearing, their petition was denied, the Commission holding that while the services of
the crew-members are engaged by the pilots, the latter are mere employees or agents of the boat-owners. Thus,
it is contended, a boat-owner can abolish the employment of the crew-members by withdrawing from the pilot
the authority to take charge of the vessel. Appellants, consequently, were directed to report their coverage and
that of their respective pilots and crew-members to the Commission and to pay the prescribed premiums
pursuant to Sections 18, 19 and 20 of the Republic Act 1161, as amended. The boat-owners filed the present
appeal.
The only issue raised before the Commission and presented in this appeal is, as stated by the Commission itself,
"whether under the facts set forth above, there exists an employer-employee relationship between the petitioners
and the crew-members of their respective fishing boats within the meaning of Republic Act 1161, as amended.
Under the law, an employer is a "person, natural or juridical, domestic or foreign, who carries on in the Philippines
any trade, business, industry, undertaking, or activity of any kind and uses the services of another person who
is under his orders as regards the employment. "2 In the case at bar, the pilots are not under the orders of the
boat-owners as regards their employment. They go out to sea not upon direction of the boat-owners, but upon
their own volition as to when, how long and where to go fishing. Much less do the boat-owners in any way control
the crew-members with whom the former have no relationship whatsoever. These crew-members simply join
every trip for which the pilots allow them, without any reference to the owners of the vessel.
On the other hand, an employee is defined as a "person who performs services for an 'employer' in which either
or both mental and physical efforts are used and who receives compensation for such services, where there is
an employer-employee relationship."3 In the present case, neither the pilots nor the crew-members receive
compensation from the boat-owners. They only share in their own catch produced by their own efforts. There is
no showing that outside of their one-third share, the boat-owners have anything to do with the distribution of the
rest of the catch among the pilots and the crew-members. The latter perform no service for the boat-owners, but
mainly for their own benefit.1äwphï1.ñët
In the undertaking in question, the boat-owners obviously are not responsible for the wage, salary, or fee of the
pilot and crew-members. Their sole participation in the venture is the furnishing or delivery of the equipment
used for fishing, after which, they merely wait for the boat's return and receive their share in the catch, if there is
any. For this part, a person who joins the outfit is entitled to a share or participation in the fruit of the fishing trip.
If it gives no return, the men get nothing. It appears to us, therefore, that the undertaking is in the nature of a
joint venture, with the boat-owner supplying the boat and its equipments, and the pilot and crew-members
contributing the necessary labor, and the parties getting specific shares for their respective contributions.
But, even assuming arguendo that the pilot and crew-members may be treated as employees of the boat-
owners, they cannot also be made subject to compulsory coverage under the Social Security Act. As previously
stated, the men are under no obligation to remain in the outfit for any definite period. Thus, one can be the crew-
member of an outfit for one day and be the member of the crew of another vessel the next day. Also, a fishing
boat has no regular schedule of fishing trips. It all depends on the weather and other natural conditions, and the
volition of the pilots and crew-men themselves. And, even when a fishing trip is completed, it is no assurance of
income for the fishermen and the boat-owner as well. Clearly, the services rendered by the fishermen are no
different from the agricultural labor performed by a share or leasehold tenant or worker, which is specifically
excluded from the definition of "employment",4 and exempted from the coverage of the Social Security Act.
Add to this the extreme difficulty, if not impossibility, of determining the monthly wage of earning of these
fishermen for the purpose of fixing the amount of their and the supposed employer's contributions,5 and there is
even reason to exempt the parties to this kind of undertaking from compulsory registration with the Social security
System.
In view of the foregoing considerations, the resolution of the Social Security Commission appealed from is hereby
set aside, and petitioners-appellants are declared exempted from compulsory coverage of the Social Security
law. No costs. So ordered.
THIRD DIVISION
REPUBLIC OF THE PHILIPPINES, represented by G.R. No. 172101

the SOCIAL SECURITY COMMISSION and SOCIAL
SECURITY SYSTEM, Present:
Petitioners,
YNARES-
SANTIAGO, J.,Chairperson,
AUSTRIA-MARTINEZ,
AZCUNA,
- versus -
CHICO-NAZARIO, and
REYES, JJ.
ASIAPRO COOPERATIVE,
Promulgated:
Respondent.
November 23, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure
seeking to annul and set aside the Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. SP No. 87236, dated 5
January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social Security Commission
(SSC) in SSC Case No. 6-15507-03, dated 17 February 2004[3] and 16 September 2004,[4] respectively, thereby dismissing
the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS) against herein
respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve
disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282.[5] Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 6938[6] and duly registered with
the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.[7]
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are
of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2)
associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges
provided in its by-laws.[8] Its primary objectives are to provide savings and credit facilities and to develop other livelihood
services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered
into several Service Contracts[9] with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The
owners-members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share
in the service surplus[10] which the respondent cooperative earns from different areas of trade it engages in, such as the
income derived from the said Service Contracts with Stanfilco. The owners-members get their income from the service
surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors of
the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent
cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as
self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as
amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both
the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A.
Jara, sent a letter[11] to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager
Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative
is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-
members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer
and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law
of 1997. On 9 October 2002,[12] respondent cooperative, through its counsel, sent a reply to petitioner SSSs letter asserting
that it is not an employer because its owners-members are the cooperative itself; hence, it cannot be its own
employer. Again, on 21 October 2002,[13] petitioner SSS sent a letter to respondent cooperative ordering the latter to
register as an employer and report its owners-members as employees for compulsory coverage with the petitioner
SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition[14] before petitioner SSC against the respondent
cooperative and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register
as an employer and to report respondent cooperatives owners-members as covered employees under the compulsory
coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997. The same
was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that
no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction
over the respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent
cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent
cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in
another Order issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a
Petition for Review before the Court of Appeals.Subsequently, respondent cooperative filed a Manifestation stating that
it was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before the
Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC
were issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in
that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over
the petition a quo, considering that it failed to first resolve the issue of the
existence of an employer-employee relationship between [respondent]
cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising
under the SSS Law with respect to coverage, benefits, contributions, and related
matters, it is respectfully submitted that [petitioner] SSC may only assume
jurisdiction in cases where there is no dispute as to the existence of an employer-
employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-
employee relationship raised in [respondents] Motion to Dismiss can be
preliminarily resolved through summary hearings prior to the hearing on the
merits. However, any inquiry beyond a preliminary determination, as what
[petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of
the National Labor Relations Commission [NLRC], which is the more competent
body clothed with power to resolve issues relating to the existence of an
employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the
petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law

but is a multi-purpose cooperative created pursuant to Republic Act No. 6938 and
composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent]

cooperative are derived from their Membership Agreements, the Cooperatives
By-Laws, and Republic Act No. 6938, and not from any contract of employment
or from the Labor Laws. Moreover, said owners-members enjoy rights that are
not consistent with being mere employees of a company, such as the right to
participate and vote in decision-making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of

[respondent] cooperative are not paid any compensation income.[15](Emphasis
supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent
cooperative. The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September
2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated
[12 June 2003] of [herein petitioner] Social Security System.[16]
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate
court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that
the SSC has jurisdiction over the subject matter and it has a valid basis in denying respondents Motion to Dismiss. The
said issue is supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the
[petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner

SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent
[cooperatives] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where

presentation of evidence is necessary.
V. There is an employer-employee relationship between [respondent cooperative] and its

[owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved
an issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section
5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to
settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other matter related
thereto.Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees. Thus,
when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner SSC
for the compulsory coverage of respondent cooperatives owners-members as well as for collection of unpaid SSS
contributions, it was very obvious that the subject matter of the aforesaid petition-complaint was within the expertise
and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an
employer-employee relationship between the respondent cooperative and its owners-members, said issue does not
preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal relief
sought in the said petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code
or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent cooperatives Motion to Dismiss grounded on the
alleged lack of employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC
because the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee
relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the
respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has already
filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner
SSC.
Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative
and its owners-members. The respondent cooperative is the employer of its owners-members considering that it
undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the respondent
cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no
employer-employee relationship can arise between them. The persons of the employer and the employee are merged in
the owners-members themselves. Likewise, respondent cooperatives owners-members even requested the respondent
cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction
over the petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with
grave abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there was
an employer-employee relationship between the respondent cooperative and its owners-members. Respondent
cooperative claims that the question of whether an employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the applicable
law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of
petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised
at the very first instance and where the only relief being sought is the dismissal of the petition-complaint for lack of
jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it
by petitioner SSS against the respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of
petitioner SSC since it had already filed an Answer with Motion to Dismiss before the said body.
Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of
the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to coverage,
benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by
the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. Any dispute arising under the Social Security Act with respect to coverage,
entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other
matter related thereto, shall be cognizable by the Commission after the SSS through its President,
Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken
action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well
within the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the
SSS Law is premised on the existence of an employer-employee relationship[17] except in cases of compulsory coverage of
the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to
Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend
almost entirely upon the defendant.[18] Moreover, it is well-settled that once jurisdiction is acquired by the court, it
remains with it until the full termination of the case.[19] The said principle may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent
cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the compulsory
coverage of the SSS because they are employees of the respondent cooperative.Consequently, the respondent
cooperative being the employer of its owners-members must register as employer and report its owners-members as
covered members of the SSS and remit the necessary premium contributions in accordance with the Social Security Law
of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case
clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative
challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship between itself and
its owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint
filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of
the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and
its owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee
relationship that exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the
National Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor
Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits,
all other claims, arising from employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.[20]
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the
coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on the
existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security
System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily
charged with the duty of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of
compulsory coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC
when it declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may
inquire into the presence or absence of an employer-employee relationship without need of waiting for a prior
pronouncement or submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC
are independent bodies and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has
the authority to inquire into the relationship existing between the worker and the person or entity to whom he renders
service to determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997 from compulsory
coverage.[21]
Even before the petitioner SSC could make a determination of the existence of an employer-employee
relationship, however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion
to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became
a party to the said Petition for Certiorari pursuant to Section 5(b)[22] of Republic Act No. 8282. The appellate court ruled in
favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-complaint
filed before it because there was no employer-employee relationship between the respondent cooperative and its
owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition
for Review before this Court.
Although as a rule, in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and the
findings of fact of the Court of Appeals are conclusive and binding on the Court, [23] said rule is not without
exceptions. There are several recognized exceptions[24] in which factual issues may be resolved by this Court. One of these
exceptions finds application in this present case which is, when the findings of fact are conflicting. There are, indeed,
conflicting findings espoused by the petitioner SSC and the appellate court relative to the existence of employer-employee
relationship between the respondent cooperative and its owners-members, which necessitates a departure from the oft-
repeated rule that factual issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following elements are considered: (1)
the selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal;
and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. [25] The
most important element is the employers control of the employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish.[26] The power of control refers to the existence of the power
and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance
of duties of the employee; it is enough that the employer has the right to wield that power.[27]All the aforesaid elements
are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive
discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned at
Stanfilco.[28] Second. Wages are defined as remuneration or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or unwritten contract of employment for
work done or to be done, or for service rendered or to be rendered.[29] In this case, the weekly stipends or the so-called
shares in the service surplus given by the respondent cooperative to its owners-members were in reality wages, as the
same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including
the wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates of wages.[30] It
cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these are given to
the owners-members as compensation in rendering services to respondent cooperatives client, Stanfilco. Third. It is also
stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate,
discipline and remove the owners-members and its team leaders who were rendering services at Stanfilco.[31] Fourth. As
earlier opined, of the four elements of the employer-employee relationship, the control test is the most important. In the
case at bar, it is the respondent cooperative which has the sole control over the manner and means of performing the
services under the Service Contracts with Stanfilco as well as the means and methods of work.[32]Also, the respondent
cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives at
Stanfilco.[33] All these clearly prove that, indeed, there is an employer-employee relationship between the respondent
cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide
that there shall be no employer-employee relationship between the respondent cooperative and its owners-
members.[34] This Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually exists between the
respondent cooperative and its owners-members. The four elements in the four-fold test for the existence of an
employment relationship have been complied with. The respondent cooperative must not be allowed to deny its
employment relationship with its owners-members by invoking the questionable Service Contracts provision, when in
actuality, it does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating
it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it should be.[35]
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However, the agreed terms and conditions must
not be contrary to law, morals, customs, public policy or public order.[36] The Service Contract provision in question must
be struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative
merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social Security
Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-
Calleja[37] wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being run
either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and
operate the business while the others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot
invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-
owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees who are not members or co-owners
thereof, certainly such employees are entitled to exercise the rights of all workers to organization,
collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the
country.
The situation in the aforesaid case is very much different from the present case. The declaration made by the
Court in the aforesaid case was made in the context of whether an employee who is also an owner-member of a
cooperative can exercise the right to bargain collectively with the employer who is the cooperative wherein he is an owner-
member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also the owner
because an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-members right
to bargain collectively with the cooperative. The question involved here is whether an employer-employee relationship
can exist between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City,
Inc. will show that it actually recognized that an owner-member of a cooperative can be its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative
Development Authority.[38] It has its Board of Directors, which directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management of its affairs.[39] With that, a cooperative can be likened to
a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-employee relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.[40] In its by-laws,[41] its Board of
Directors directs, controls, and supervises the business and manages the property of the respondent cooperative. Clearly
then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not in its owners-
members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person represented
by its Board of Directors, can enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the respondent cooperative
and its owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by
the petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent
cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to
Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of
the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are
hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004and 16 September 2004 are
hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by
the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members. No costs.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176150 June 25, 2008
IBARRA P. ORTEGA, petitioner,

vs.
SOCIAL SECURITY COMMISSION, and SOCIAL SECURITY SYSTEM, respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Ibarra P. Ortega assails the Court of Appeals’ August 7, 2006 Decision 1 dismissing his petition for
review and upholding the denial by respondent Social Security Commission (SSC) of his application for total
permanent disability benefits, and the Resolution2 of January 16, 2007 denying his motions for reconsideration
and inhibition.
Petitioner, a member of respondent Social Security System (SSS), filed claims for partial permanent disability
benefits on account of his condition of Generalized Arthritis and Partial Ankylosis,3 which claims the SSS granted
for a total monthly pension of 23 months.4
After the expiration of his disability pension, petitioner filed with the SSS Malabon Branch Office on April 26,
2000 a claim for total permanent disability benefits.5 His application, docketed as BO-0000-1755, was denied,
however, on the ground that he was already granted disability benefits for the same illness and physical
examination showed no progression of illness.6 Dr. Juanillo Descalzo III, SSS Malabon Branch senior physician,
observed that petitioner merely had a "slight limitation of grasping movement for both hands."7
Aggrieved, petitioner filed before the SSC an unverified Petition of June 19, 2000,8 alleging that the SSS denied
his application despite the fact that his attending physician, Dr. Rafael Recto, Jr., diagnosed him to be suffering
from Trigger finger 4th (L) and thumb (L)9 while another private medical practitioner, Dr. Flo dela Cruz,
diagnosed him to be also suffering from Bronchial Asthma, Hypertension and Gastro-Esophageal Reflux
Disease.10
Further claiming to be afflicted with rheumatoid arthritis of both hands affecting all fingers and both
palms,11petitioner contended that the medical opinion of the SSS physician who interviewed him for less than
three minutes cannot prevail over the findings of his physicians who have been treating him over a long period
of time.
Before taking cognizance of his appeal, the SSC directed the exhaustion of administrative remedies, by letter of
June 30, 2000. The matter was thus referred to the SSS Office of the Medical Program Director for review of
petitioner’s disability claim.12
Meanwhile, by letter of July 17, 2000, the SSS Legal Department denied a reconsideration of the denial of his
claim,13 prompting petitioner to submit a letter-opposition of August 15, 2000.14
Upon referral of the SSC, the SSS Medical Program Department, through Dr. Carlota A. Cruz-Tutaan and Dr.
Jesus S. Tan, confirmed that, upon examination of petitioner, there was no progression of his illness,15 prompting
petitioner to submit a letter-opposition of November 11, 2000 charging the SSS medical officers of issuing
fraudulent medical findings.16 Unperturbed, the SSS Medical Program Department stood its ground and denied
with finality petitioner’s claim, by letter of November 22, 2000.17
On January 29, 2001, SSC finally docketed petitioner’s June 19, 2000 petition as SSC Case No. 1-15115-
2001,18after petitioner complied with SSC’s directives19 to verify the petition and submit certain document-
annexes. SSS then filed its Answer of May 31, 2001,20 to which petitioner submitted a Reply of June 25,
2001.21 After the August 10, 2001 pre-hearing conference,22 the SSS filed its Position Paper of September 7,
2001 while petitioner submitted his Reply of October 19, 2001.
By Resolution of April 3, 2002,23 the SSC denied petitioner’s claim for entitlement to total permanent disability
for lack of merit. And it opined that, considering that he had reached the retirement age of 60, on March 19,
1998, with 41 contributions to his name, petitioner may opt:
(a) [t]o continue paying to the SSS monthly contributions (including employer’s share) on his own to
complete the required 120 monthly contributions in order to avail of the retirement pension benefit;
(b) [to] leave his monthly contributions with the SSS for his and his family’s future benefits; or
(c) [to a]vail of the lump sum retirement benefit.24
Petitioner moved for reconsideration of the Resolution. The SSC thus directed the SSS to file its comment25 and,
by a subsequent order, to conduct a domiciliary visit and physical examination on petitioner to ascertain whether
he could already qualify for such benefit.26 In compliance therewith, Dr. Rebecca Sison, SSS senior physician,
examined petitioner on August 29, 2002 and found no sufficient basis to warrant the granting of total permanent
disability benefits to him.27
Petitioner’s motion for reconsideration having been denied by Order28 of January 29, 2003, petitioner appealed
via Rule 43 to the Court of Appeals29 which promulgated in CA-G.R. SP No. 75653 the assailed issuances
affirming in toto the SSC Resolution and Order.
There is at the outset a need to thresh out procedural issues attending the petition drafted by petitioner himself,
apparently without the aid of counsel. While the petition was admittedly filed as a petition for certiorari under
Rule 65, it contains a rider averring that it was filed also as a petition for review on certiorari under Rule 45. 30
In not granting imprimatur to this type of unorthodox strategy, the Court ruled, in a similar case,31 that a party
should not join both petitions in one pleading. A petition cannot be subsumed simultaneously under Rule 45 and
Rule 65 of the Rules of Court, nor may it delegate upon the court the task of determining under which rule the
petition should fall.32 It is a firm judicial policy that the remedies of appeal and certiorari are mutually exclusive
and not alternative or successive.33
Palpably, petitioner crafted this unconventional two-headed petition under no other pretext but to second-guess
at the appropriate remedy. His apparent bewilderment led him to later rectify a supposed typographical error in
the caption such that instead of "petition for review," the title be read as a "petition for certiorari."34 The
subsequent filing of the Correction of Clerical Errors served no redeeming purpose as it only evinced petitioner’s
decision to consider the petition as a special civil action for certiorari, which is an improper remedy.
It bears stressing that Rule 45 and Rule 65 pertain to different remedies and have distinct applications. 35 It is
axiomatic that the remedy of certiorari is not available where the petitioner has the remedy of appeal or some
other plain, speedy and adequate remedy in the course of law.36 The petition for review under Rule 45 covers
the mode of appeal from a judgment, final order, resolution or one which completely disposes of the case, like
the herein assailed Decision and Resolution of the appellate court. There being already a final judgment at the
time of the filing of the petition, a petition for review under Rule 45 is the appropriate remedy.
Petitioner failed to carve out an exception to this rule, as he did not– and could not– illustrate the inadequacy of
an appeal as a remedy that could promptly relieve him from the injurious effects of the assailed judgment. 37 In
fact, by seeking the same kind of reliefs via two remedies rolled into one pleading, he implicitly admits that an
appeal suffices. Moreover, the probability of divergent rulings, a scenario transpiring in G & S Transport Corp. v.
CA,38 is far from obtaining in this case since the assailed issuances emanated from only one court and cannot
be elevated separately in different fora.
While the Court may dismiss a petition outright for being an improper remedy,39 it may, in certain instances where
a petition was filed on time both under Rules 45 and 65 and in the interest of justice, proceed to review the
substance of the petition and treat it as having been filed under Rule 45.40 Either way, however, the present
petition just the same merits dismissal since it puts to issue questions of fact rather than questions of law which
are appropriate for review under a Rule 45 petition.
It is settled that the Court is not a trier of facts and accords great weight to the factual findings of lower courts or
agencies whose function is to resolve factual matters.41 It is not for the Court to weigh evidence all over
again.42Moreover, findings of fact of administrative agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect but
finality when affirmed by the Court of Appeals.43
The requisite quantum of proof in cases filed before administrative or quasi-judicial bodies is neither proof beyond
reasonable doubt nor preponderance of evidence. In this type of cases, a fact may be deemed established if it
is supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion.44 In this case, substantial evidence abounds.
The conclusion that petitioner is not entitled to total permanent disability benefits under the Social Security Law
was reached after petitioner was examined not just by one but four SSS physicians, namely, Dr. Juanillo
Descalzo III, Dr. Carlota A. Cruz-Tutaan, Dr. Jesus S. Tan and Dr. Rebecca Sison.
The initial physical examination and interview revealed that petitioner had slight limitation of grasping movement
for both hands. According to Dr. Descalzo, this finding was not enough to grant an extension of benefit since
petitioner had already received benefits equivalent to 30% of the body. Responding to the allegation that the
April 2000 physical examination was performed in a short period of time, the doctor credibly explained that
petitioner’s movements were already being monitored and evaluated from a distance as part of the examination
of his extremities in order to minimize malingering and overacting.45
Meanwhile, the medical findings of Dr. Carlota A. Cruz-Tutaan and Dr. Jesus S. Tan in August and September
2000 were summarized as follows:
Heart:
- manifest regular rhythm
- no murmurs
Lungs:
- on ausculation showed no evidence of wheezing
- breath sounds are normal and;
- he is not in a state of respiratory distress
Hypertension:
- Blood Pressure is 140/80, hence, under control
Extremities: (Hands)
- No deformities noted except for the right small finger, the distal interphalangeal joint is bent at
about 30°. No abnormal limitation of movement noted on all the fingers, grasping has improved.46
Contrary to petitioner’s asseverations, the SSC did not ignore the certifications of petitioner’s attending
physicians as, in fact, it ordered the SSS in June 2001 to conduct an investigation as to the medical findings and
final diagnosis by his attending physicians.47 It was surfaced that petitioner’s medical records in the custody of
Dr. Flo dela Cruz could not be found as they were allegedly destroyed by inundation.48 And it was found that the
July 10, 2001 letter-certification by Dr. Rafael Recto, Jr. only narrated the recurring condition of petitioner’s trigger
finger, the administration to him of local steroid injections, and the performance of surgical release on his left 4th
trigger finger on June 16, 1998; and that he was diagnosed on August 28, 2000 with mallet finger (R, 5th), for
which he was advised to undergo reconstructive surgery.49
Adopting a liberal attitude and exercising sound discretion, the SSC even directed the conduct of another
physical examination on petitioner to judiciously resolve his motion for reconsideration. Pursuant thereto, Dr.
Sison physically examined petitioner in August 2002, the results of which were reflected in a medical report, viz:
Physical Examination:
General Survey: well nourished, well developed, conscious, coherent but talks with sarcasm and
arrogance.
EENT: normocephalic, pinkish conjunctiva, anicteric sclerae; negative tonsillo-pharyngeal congestion
C/L: clear breath sounds, no wheezes; (-) dyspnea
Heart: normal rate, regular rhythm.
Abdomen: negative tenderness
Extremeties: no neurological and sensory deficit

no gross deformity, (+) scar, 4th finger (L)
no loss of grasping power for large and small objects
no loss of opposition between thumb and forefingers
can bend fully to reach toes
can bend both knees fully without pain or difficulty
can raise both arms above shoulder level without pain and difficulty
can bend both elbows without limitation
The member was requested to submit recent ECG, x-rays and other laboratory work-up results but he
could not locate them during visit and would still look for the said medical documents and mail them to
SSS.
He was then advised to come to SSS, Diliman Branch for ECG and x-ray, however he refused.
He also refused to affix his signature on the medical field service form to confirm the visit of our Medical
Officer.
Based on these recent physical examination findings and functional assessment and the medical
certificate (Form MMD 102) with final diagnosis of Trigger Finger, there is no sufficient basis that warrants
the granting of Total Permanent disability.50 (Underscoring supplied)
Dr. Sison subsequently noted that petitioner’s Electrocardiograph, Chest X-ray, Kidney and Urinary Bladder
Ultrasound indicated his condition as normal,51 which conclusion was arrived at by going through the same
medical documents presented by petitioner following a series of tests conducted on him by hospitals of his
choice.
From the foregoing recital of petitioner’s medical history, the SSC concluded that petitioner is not entitled to total
permanent disability benefits under the Social Security Law, the pertinent provisions of which read:
xxxx
(d) The following disabilities shall be deemed permanent total:
1. Complete loss of sight of both eyes;
2. Loss of two limbs at or above the ankle or wrists;
3. Permanent complete paralysis of two limbs;
4. Brain injury resulting to incurable imbecility or insanity; and
5. Such cases as determined and approved by the SSS.
xxxx
(f) If the disability is permanent partial and such disability occurs after thirty-six (36) monthly contributions
have been paid prior to the semester of disability, the benefit shall be the monthly pension for permanent
total disability payable not longer than the period designated in the following schedule:
COMPLETE AND NUMBER

PERMANENT LOSS OF
OF USE OF MONTHS
One thumb 10
One index finger 8
One middle finger 6
One ring finger 5
One little finger 3
One big toe 6
One hand 39
One arm 50
One foot 31
One leg 46
One ear 10
Both ears 20
Hearing of one ear 10
Hearing of both ears 50
Sight of one eye 25
(g) The percentage degree of disability which is equivalent to the ratio that the designated number of
months of compensability bears to seventy-five (75), rounded to the next higher integer, shall not be
additive for distinct, separate and unrelated permanent partial disabilities, but shall be additive for
deteriorating and related permanent partial disabilities to a maximum of one hundred percent (100%), in
which case, the member shall be deemed as permanently totally disabled.52
Indeed, the evidence indicates that petitioner’s condition at the time material to the case does not fall under the
enumeration in the above-quoted provisions of the Social Security Law. Moreover, as correctly held by the
appellate court, the proviso of such provisions on the percentage degree of disability applies when there is a
related deterioration of the illness previously considered as partial permanent disability. In this case, there is
dearth of evidence on the proposition that petitioner’s array of illnesses is related to Generalized Arthritis and
Partial Ankylosis of the specific body parts.
Petitioner’s reliance on jurisprudence53 on work-connected disability claims insofar as it relates to a

demonstration of disability to perform his trade and profession54 is misplaced.
Claims under the Labor Code for compensation and under the Social Security Law for benefits are not the same
as to their nature and purpose. On the one hand, the pertinent provisions of the Labor Code govern
compensability of work-related disabilities or when there is loss of income due to work-connected or work-
aggravated injury or illness.55 On the other hand, the benefits under the Social Security Law are intended to
provide insurance or protection against the hazards or risks of disability, sickness, old age or death, inter alia,
irrespective of whether they arose from or in the course of the employment. 56 And unlike under the Social
Security Law, a disability is total and permanent under the Labor Code if as a result of the injury or sickness the
employee is unable to perform any gainful occupation for a continuous period exceeding 120 days regardless of
whether he loses the use of any of his body parts.57
The Court notes that the main issue petitioner proffers is whether he is entitled to total permanent disability
benefits from the SSS given his "angioplasty operation of the heart, coronary artery disease, ischemic heart
disease, severe hypertension and a host of other serious illnesses filed with the SSS[.]"58
A perusal of the records shows that when the case was already submitted for decision before the appellate court,
petitioner manifested that he suffered a heart attack on February 25, 2004, 59 for which he claimed to have
undergone a coronary angiogram on March 9, 2005 and a coronary angioplasty on September 27, 2005 at the
Philippine Heart Center.60
Unfortunate as these events were, the appellate court correctly ruled that it could not consider such allegation of
subsequent events since "a factual question may not be raised for the first time on appeal[,] and documents
forming no part of the proofs before the appellate court will not be considered in disposing of the issues of an
action."61
The issues in every case are limited to those presented in the pleadings. The object of the pleadings is to draw
the lines of battle between the litigants and to indicate fairly the nature of the claims or defenses of
both parties.62 A change of theory on appeal is not allowed.63 In this case, the matter of petitioner’s serious heart
condition was not raised in his application before the SSS or in his June 19, 2000 petition before the SSC.
Fair play dictates that the SSS be afforded the opportunity to properly meet the issue 64 with respect to the new
ailments besetting petitioner, in line with the actual practice that only qualified government physicians, by virtue
of their oath as civil service officials, are competent to examine persons and issue medical certificates which will
be used by the government for a specific official purpose.65 This holds greater significance where there exist
differences or doubts as to the medical condition of the person.
In this case, the SSS medical examiners are tasked by law to analyze the extent of personal incapacity resulting
from disease or injury. Oftentimes, a physician who is adequately versed in the knowledge of anatomy and
physiology will find himself deficient when called upon to express an opinion on the permanent changes resulting
from a disability. Unlike the general practitioner who merely concerns himself with the examination of his patient
for purposes of diagnosis and treatment, the medical examiner has to consider varied factors and ascertain the
claimant’s related history and subjective complaints.66 The members of this Court cannot strip their judicial robe
and don the physician’s gown, so to speak, in a pretense to correlate variances in medical findings.
Finding no cogent reason to discuss the ancillary issues, the Court dismisses the petition, without prejudice to
the filing of a new application by petitioner who is not left without any recourse in his legal bout respecting his
supervening claims anchored mainly on Coronary Artery Disease 1VD and Diabetes Mellitus Type 2, these
illnesses having been found to be dissimilar from the subject matter of the present action. 67
WHEREFORE, the petition is, in light of the foregoing disquisitions, DENIED.
SO ORDERED.

Labor Cases2

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Labor Cases2

Uploaded by

Copyright:

Available Formats

G.R. No. 208908, March 11, 2015 - THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC.

G.R. No. 208908, March 11, 2015

The Antecedent Facts

We DENY the petition.

We disagree with CBTL.

Carpio, (Chairperson), Del Castillo, Mendoza, and Leonen, JJ., concur.

-versus- CORONA, C. J., Chairperson,

NAME DATE EMPLOYED DAILY SALARY

Ruling of the Labor Arbiter

WHEREFORE, premises considered, respondents Exodus International Construction Corporation and/or

Respondents are likewise hereby ordered to pay complainants the following:

P 1,968.75 - Service Incentive Leave Pay

10,237.50 - 13th Month Pay

3,600.00 - Holiday Pay

+ 1,580.87 - 10% Attorneys Fees

P 2,056.25 - Service Incentive Leave Pay

10,692.50 - 13th Month Pay

3,525.00 - Holiday Pay

+ 1,627.37 - 10% Attorneys Fees

P 3,813.34 - 13th Month Pay

1,320.00 - Holiday Pay

+ 513.33 - 10% Attorneys Fees

P 1,860.42 - Service Incentive Leave Pay

9,674.19 - 13th Month Pay

3,055.00 - Holiday Pay

+ 1,458.96 - 10% Attorneys Fees

P 1,500.00 - Service Incentive Leave Pay

7,800.00 - 13th Month Pay

2,700.00 - Holiday Pay

+ 1,200.00 - 10% Attorneys Fees

Ruling of the Court of Appeals

The dispositive portion of the CA Decision reads:

The petition is partly meritorious.

There was also no abandonment of work on the part of the respondents.

Respondents are also entitled to the payment of attorneys fees.

The CA erred when it ordered reinstatement of respondents with payment of full

We do not agree with this ruling of the CA.

In cases where there is no evidence of dismissal, the remedy is

In Leonardo v. National Labor Relations Commission,[32] this Court held that:

- versus - DEL CASTILLO, and

INOCENCIO B. BERBANO, JR., Promulgated:

The Antecedent Facts

2. Conference Call Three (Three-way calling)

4. Hot Line Delayed

5. Call Diversion Immediate

6. Call Diversion Dont Answer

2. Test Call Only

3. Malicious Call Identification

5. Three-way Calling (Allows a third party to be linked to an existing call)

7. Abbreviated dialing 90 numbers

10. Call Diversion Immediate

11. Call Diversion to Fixed Announcement

14. Traffic Restriction Class 1

16. Call Diversion Immediate (Modification Authorization)

17. Hotline Delay Mod. Auth.(Modification Authorization)

WHEREFORE, premises considered, judgment is hereby rendered ordering the reinstatement of

The Court of Appeals Ruling

Hence, this appeal

Petitioner PLDT raises the following issues for our consideration:

The Courts Ruling

We find the appeal without merit.

Art. 277. Miscellaneous Provisions.

Section 2. Standards of due process: requirements of notice. In all cases of termination of