G.R. No. 184517 October 8, 2013 In June 2001, SME Bank experienced financial difficulties.
In June 2001, SME Bank experienced financial difficulties. To remedy the situation, the bank
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR,
JR., Petitioners,
vs.
PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR., ELICERIO GASPAR, ,
RICARDO GASPAR JR., EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR.,
and LIBERATO MANGOBA, Respondents.
x-----------------------x
G.R. No. 186641
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR,
JR., Petitioners,
vs.
ELICERIO GASPAR, RICARDO GASPAR, JR., EUFEMIA ROSETE, FIDEL ESPIRITU,
SIMEONESPIRITU, JR., and LIBERATO MANGOBA, Respondents.
DECISION
SERENO, CJ.:
Security of tenure is a constitutionally guaranteed right. Employees may not be
1 the employees of the head office and of the Talaveraand Muoz branches of SME Bank and
terminated from their regular employment except for just or authorized causes under the
Labor Code2 and other pertinent laws. A mere change in the equity composition of a
corporation is neither a just nor an authorized cause that would legally permit the
dismissal of the corporations employees en masse.
Before this Court are consolidated Rule 45 Petitions for Review on Certiorari assailing the
3 Liberato tendered their resignations dated 27 August 2001. As for Eufemia, the records
Decision4 and Resolution5 of the Court of Appeals(CA) in CA-G.R. SP No. 97510 and its
Decision6 and Resolution7 in CA-G.R. SP No. 97942.
The facts of the case are as follows:
Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr.(Ricardo), Eufemia
Rosete (Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato
Mangoba (Liberato) were employees of Small and Medium Enterprise Bank, Incorporated
(SME Bank).Originally, the principal shareholders and corporate directors of the bank were
Eduardo M. Agustin, Jr. (Agustin) and Peregrin de Guzman, Jr. (De Guzman).
officials proposed its sale to Abelardo Samson(Samson). 8
Accordingly, negotiations ensued, and a formal offer was made to Samson. Through his
attorney-in-fact, Tomas S. Gomez IV, Samson then sent formal letters (Letter Agreements)
to Agustin and De Guzman, demanding the following as preconditions for the sale of SME
Banks shares of stock:
4. You shall guarantee the peaceful turn over of all assets as well as the peaceful transition
of management of the bank and shall terminate/retire the employees we mutually agree
upon, upon transfer of shares in favor of our groups nominees;
xxxx
7. All retirement benefits, if any of the above officers/stockholders/board of directors are
hereby waived upon consummation [sic] of the above sale. The retirement benefits of the
rank and file employees including the managers shall be honored by the new management
in accordance with B.R. No. 10, S. 1997.9
Agustin and De Guzman accepted the terms and conditions proposed by Samson and
signed the conforme portion of the Letter Agreements.10
Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting with all
persuaded them to tender their resignations, 11 with the promise that they would be rehired
upon reapplication. His directive was allegedly done at the behest of petitioner Olga
Samson.12
Relying on this representation, Elicerio,13 Ricardo,14 Fidel,15 Simeon, Jr.,16 and
17
show that she first tendered a resignation letter dated27 August 2001, 18 and then a
retirement letter dated September 2001.19
Elicerio,20 Ricardo,21 Fidel,22 Simeon, Jr.,23 and Liberato24 submitted application letters on 11
September 2001. Both the resignation letters and copies of respondent employees
application letters were transmitted by Espiritu to Samsons representative on 11
September 2001.25
On 11 September 2001, Agustin and De Guzman signified their conformity to the Letter
Agreements and sold 86.365% of the shares of stock of SME Bank to spouses Abelardo and
Olga Samson. Spouses Samson then became the principal shareholders of SME Bank, while
Aurelio Villaflor, Jr. was appointed bank president. As it turned out, respondent employees,
except for Simeon, Jr.,26 were not rehired. After a month in service, Simeon, Jr. again
resigned on October 2001.27
Respondent-employees demanded the payment of their respective separation pays, but
their requests were denied.1wphi1
Aggrieved by the loss of their jobs, respondent employees filed a Complaint before the
National Labor Relations Commission (NLRC) Regional Arbitration Branch No. III and sued
SME Bank, spouses Abelardo and Olga Samson and Aurelio Villaflor (the Samson Group) for
unfair labor practice; illegal dismissal; illegal deductions; underpayment; and nonpayment
of allowances, separation pay and 13th month pay. 28 Subsequently, they amended their
Complaint to include Agustin and De Guzman as respondents to the case. 29
On 27 October 2004, the labor arbiter ruled that the buyer of an enterprise is not bound to
absorb its employees, unless there is an express stipulation to the contrary. However, he
also found that respondent employees were illegally dismissed, because they had
involuntarily executed their resignation letters after relying on representations that they
would be given their separation benefits and rehired by the new management.
Accordingly, the labor arbiter decided the case against Agustin and De Guzman, but
dismissed the Complaint against the Samson Group, as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents
Eduardo Agustin, Jr. and Peregrin De Guzman to pay complainants separation pay in the
total amount of P339,403.00 detailed as follows:
Elicerio B. Gaspar = P 5,837.00
Ricardo B. Gaspar, Jr. = P11,674.00
Liberato B. Mangoba = P64,207.00
Fidel E. Espiritu = P29,185.00
Simeon B. Espiritu, Jr. = P26,000.00
Eufemia E. Rosete = P202,510.00
All other claims including the complaint against Abelardo Samson, Olga Samson and
Aurelio Villaflor are hereby DISMISSED for want of merit.
SO ORDERED.30
Dissatisfied with the Decision of the labor arbiter, respondent employees, Agustin and De
Guzman brought separate appeals to the NLRC. Respondent employees questioned the
labor arbiters failure to award backwages, while Agustin and De Guzman contended that
they should not be held liable for the payment of the employees claims.
The NLRC found that there was only a mere transfer of shares and therefore, a mere
change of management from Agustin and De Guzman to the Samson Group. As the
change of management was not a valid ground to terminate respondent bank employees,
the NLRC ruled that they had indeed been illegally dismissed. It further ruled that Agustin,
De Guzman and the Samson Group should be held jointly and severally liable for the
employees separation pay and backwages, as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED.
Respondents are hereby Ordered to jointly and severally pay the complainants backwages
from 11 September 2001 until the finality of this Decision, separation pay at one month
pay for every year of service, P10,000.00 and P5,000.00 moral and exemplary damages,
and five (5%) percent attorneys fees.
Other dispositions are AFFIRMED
SO ORDERED.31
On 28 November 2006, the NLRC denied the Motions for Reconsideration filed by Agustin,
De Guzman and the Samson Group.32
Agustin and De Guzman filed a Rule 65 Petition for Certiorari with the CA, docketed as CA-
G.R. SP No. 97510. The Samson Group likewise filed a separate Rule 65 Petition for
Certiorari with the CA, docketed as CA-G.R. SP No. 97942. Motions to consolidate both
cases were not acted upon by the appellate court.
On 13 March 2008, the CA rendered a Decision in CA-G.R. SP No.97510 affirming that of
the NLRC. The fallo of the CA Decision reads:
WHEREFORE, in view of the foregoing, the petition is DENIED. Accordingly, the Decision
dated May 8, 2006, and Resolution dated November 28, 2006 of the National Labor
Relations Commission in NLRC NCR CA No. 043236-05 (NLRC RAB III-07-4542-02) are
hereby AFFIRMED.
SO ORDERED.33
Subsequently, CA-G.R. SP No. 97942 was disposed of by the appellate court in a Decision
dated 15 January 2008, which likewise affirmed that of the NLRC. The dispositive portion of
the CA Decision states:
WHEREFORE, premises considered, the instant Petition for Certiorari is denied, and the
herein assailed May 8, 2006 Decision and November 28, 2006 Resolution of the NLRC are
hereby AFFIRMED.
SO ORDERED.34
The appellate court denied the Motions for Reconsideration filed by the parties in
Resolutions dated 1 September 200835 and 19 February 2009.36
The Samson Group then filed two separate Rule 45 Petitions questioning the CA Decisions
and Resolutions in CA-G.R. SP No. 97510 and CA-G.R. SP No. 97942. On 17 June 2009, this
Court resolved to consolidate both Petitions.37
THE ISSUES
Succinctly, the parties are asking this Court to determine whether respondent employees
were illegally dismissed and, if so, which of the parties are liable for the claims of the
employees and the extent of the reliefs that may be awarded to these employees.
THE COURTS RULING
The instant Petitions are partly meritorious.
I it is to be treated as a discharge.44
Respondent employees were illegally dismissed.
As to Elicerio Gaspar, Ricardo Gaspar, Jr., Fidel Espiritu, Eufemia Rosete and Liberato
Mangoba
The Samson Group contends that Elicerio, Ricardo, Fidel, and Liberato voluntarily resigned
from their posts, while Eufemia retired from her position. As their resignations and
retirements were voluntary, they were not dismissed from their employment. 38 In support
of this argument, it presented copies of their resignation and retirement letters, 39 which
were couched in terms of gratitude.
We disagree. While resignation letters containing words of gratitude may indicate that the
employees were not coerced into resignation,40 this fact alone is not conclusive proof that
they intelligently, freely and voluntarily resigned. To rule that resignation letters couched in
terms of gratitude are, by themselves, conclusive proof that the employees intended to
relinquish their posts would open the floodgates to possible abuse. In order to withstand
the test of validity, resignations must be made voluntarily and with the intention of
relinquishing the office, coupled with an act of relinquishment. 41 Therefore, in order to
determine whether the employees truly intended to resign from their respective posts, we
cannot merely rely on the tenor of the resignation letters, but must take into consideration
the totality of circumstances in each particular case.
Here, the records show that Elicerio, Ricardo, Fidel, and Liberato only tendered resignation
letters because they were led to believe that, upon reapplication, they would be
reemployed by the new management. 42 As it turned out, except for Simeon, Jr., they were
not rehired by the new management. Their reliance on the representation that they would
be reemployed gives credence to their argument that they merely submitted courtesy
resignation letters because it was demanded of them, and that they had no real intention
of leaving their posts. We therefore conclude that Elicerio, Ricardo, Fidel, and Liberato did
not voluntarily resign from their work; rather, they were terminated from their
employment.
As to Eufemia, both the CA and the NLRC discussed her case together with the cases of the
rest of respondent-employees. However, a review of the records shows that, unlike her co-
employees, she did not resign; rather, she submitted a letter indicating that she was
retiring from her former position.43
The fact that Eufemia retired and did not resign, however, does not change our conclusion
that illegal dismissal took place.
Retirement, like resignation, should be an act completely voluntary on the part of the
employee. If the intent to retire is not clearly established or if the retirement is involuntary,
In this case, the facts show that Eufemias retirement was not of her own volition. The
circumstances could not be more telling. The facts show that Eufemia was likewise given
the option to resign or retire in order to fulfill the precondition in the Letter Agreements
that the seller should "terminate/retire the employees [mutually agreed upon] upon
transfer of shares" to the buyers.45 Thus, like her other co-employees, she first submitted a
letter of resignation dated 27 August 2001. 46 For one reason or another, instead of
resigning, she chose to retire and submitted a retirement letter to that effect. 47 It was this
letter that was subsequently transmitted to the representative of the Samson Group on 11
September 2001.48
In San Miguel Corporation v. NLRC, 49 we have explained that involuntary retirement is
tantamount to dismissal, as employees can only choose the means and methods of
terminating their employment, but are powerless as to the status of their employment and
have no choice but to leave the company. This rule squarely applies to Eufemias case.
Indeed, she could only choose between resignation and retirement, but was made to
understand that she had no choice but to leave SME Bank. Thus, we conclude that, similar
to her other co-employees, she was illegally dismissed from employment.
The Samson Group further argues 50 that, assuming the employees were dismissed, the
dismissal is legal because cessation of operations due to serious business losses is one of
the authorized causes of termination under Article 283 of the Labor Code. 51
Again, we disagree.
The law permits an employer to dismiss its employees in the event of closure of the
business establishment.52However, the employer is required to serve written notices on the
worker and the Department of Labor at least one month before the intended date of
closure.53 Moreover, the dismissed employees are entitled to separation pay, except if the
closure was due to serious business losses or financial reverses. 54 However, to be exempt
from making such payment, the employer must justify the closure by presenting
convincing evidence that it actually suffered serious financial reverses. 55
In this case, the records do not support the contention of SME Bank that it intended to
close the business establishment. On the contrary, the intention of the parties to keep it in
operation is confirmed by the provisions of the Letter Agreements requiring Agustin and De
Guzman to guarantee the "peaceful transition of management of the bank" and to appoint
"a manager of [the Samson Groups] choice x x x to oversee bank operations."
Even assuming that the parties intended to close the bank, the records do not show that
the employees and the Department of Labor were given written notices at least one month
before the dismissal took place. Moreover, aside from their bare assertions, the parties
failed to substantiate their claim that SME Bank was suffering from serious financial
reverses.
In fine, the argument that the dismissal was due to an authorized cause holds no water.
Petitioner bank also argues that, there being a transfer of the business establishment, the
innocent transferees no longer have any obligation to continue employing respondent
employees,56 and that the most that they can do is to give preference to the qualified
separated employees; hence, the employees were validly dismissed. 57
The argument is misleading and unmeritorious. Contrary to petitioner banks argument,
there was no transfer of the business establishment to speak of, but merely a change in
the new majority shareholders of the corporation.
There are two types of corporate acquisitions: asset sales and stock sales. 58 In asset sales,
the corporate entity59 sells all or substantially all of its assets60 to another entity. In stock
sales, the individual or corporate shareholders 61 sell a controlling block of stock 62 to new or
existing shareholders.
In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected
employees, but is liable for the payment of separation pay under the law. 63 The buyer in
good faith, on the other hand, is not obliged to absorb the employees affected by the sale,
nor is it liable for the payment of their claims. 64 The most that it may do, for reasons of
public policy and social justice, is to give preference to the qualified separated personnel of
the selling firm.65
In contrast with asset sales, in which the assets of the selling corporation are transferred to
another entity, the transaction in stock sales takes place at the shareholder level. Because
the corporation possesses a personality separate and distinct from that of its shareholders,
a shift in the composition of its shareholders will not affect its existence and continuity.
Thus, notwithstanding the stock sale, the corporation continues to be the employer of its
people and continues to be liable for the payment of their just claims. Furthermore, the
corporation or its new majority share holders are not entitled to lawfully dismiss corporate
employees absent a just or authorized cause.
In the case at bar, the Letter Agreements show that their main object is the acquisition by
the Samson Group of 86.365% of the shares of stock of SME Bank. 66 Hence, this case
involves a stock sale, whereby the transferee acquires the controlling shares of stock of the
corporation. Thus, following the rule in stock sales, respondent employees may not be
dismissed except for just or authorized causes under the Labor Code.
Petitioner bank argues that, following our ruling in Manlimos v. NLRC, 67 even in cases of
stock sales, the new owners are under no legal duty to absorb the sellers employees, and
that the most that the new owners may do is to give preference to the qualified separated
employees.68 Thus, petitioner bank argues that the dismissal was lawful.
We are not persuaded.
Manlimos dealt with a stock sale in which a new owner or management group acquired
complete ownership of the corporation at the shareholder level. 69 The employees of the
corporation were later "considered terminated, with their conformity" 70 by the new majority
shareholders. The employees then re-applied for their jobs and were rehired on a
probationary basis. After about six months, the new management dismissed two of the
employees for having abandoned their work, and it dismissed the rest for committing "acts
prejudicial to the interest of the new management."71 Thereafter, the employees sought
reinstatement, arguing that their dismissal was illegal, since they "remained regular
employees of the corporation regardless of the change of management."72
In disposing of the merits of the case, we upheld the validity of the second termination,
ruling that "the parties are free to renew the contract or not [upon the expiration of the
period provided for in their probationary contract of employment]." 73 Citing our
pronouncements in Central Azucarera del Danao v. Court of Appeals, 74 San Felipe Neri
School of Mandaluyong, Inc. v. NLRC, 75 and MDII Supervisors & Confidential Employees
Association v. Presidential Assistant on Legal Affairs, 76 we likewise upheld the validity of the
employees first separation from employment, pronouncing as follows:
A change of ownership in a business concern is not proscribed bylaw. In Central Azucarera
del Danao vs. Court of Appeals, this Court stated:
There can be no controversy for it is a principle well-recognized, that it is within the
employers legitimate sphere of management control of the business to adopt economic
policies or make some changes or adjustments in their organization or operations that
would insure profit to itself or protect the investment of its stockholders. As in the exercise
of such management prerogative, the employer may merge or consolidate its business
with another, or sellor dispose all or substantially all of its assets and properties which may
bring about the dismissal or termination of its employees in the process. Such dismissal or
termination should not however be interpreted in such a manner as to permit the employer
to escape payment of termination pay. For such a situation is not envisioned in the law. It
strikes at the very concept of social justice.
In a number of cases on this point, the rule has been laid down that the sale or disposition
must be motivated by good faith as an element of exemption from liability. Indeed, an
innocent transferee of a business establishment has no liability to the employees of the
transfer or to continue employer them. Nor is the transferee liable for past unfair labor
practices of the previous owner, except, when the liability therefor is assumed by the new
employer under the contract of sale, or when liability arises because of the new owners
participation in thwarting or defeating the rights of the employees.
Where such transfer of ownership is in good faith, the transferee is under no legal duty to
absorb the transferors employees as there is no law compelling such absorption. The most
that the transferee may do, for reasons of public policy and social justice, is to give
preference to the qualified separated employees in the filling of vacancies in the facilities
of the purchaser.
Since the petitioners were effectively separated from work due to a bona fide change of
ownership and they were accordingly paid their separation pay, which they freely and
voluntarily accepted, the private respondent corporation was under no obligation to
employ them; it may, however, give them preference in the hiring. x x x. (Citations
omitted)
We take this opportunity to revisit our ruling in Manlimos insofar as it applied a doctrine on
asset sales to a stock sale case. Central Azucarera del Danao, San Felipe Neri School of
Mandaluyong and MDII Supervisors &Confidential Employees Association all dealt with
asset sales, as they involved a sale of all or substantially all of the assets of the
corporation. The transactions in those cases were not made at the shareholder level, but at
the corporate level. Thus, applicable to those cases were the rules in asset sales: the
employees may be separated from their employment, but the seller is liable for the
payment of separation pay; on the other hand, the buyer in good faith is not required to
retain the affected employees in its service, nor is it liable for the payment of their claims.
The rule should be different in Manlimos, as this case involves a stock sale. It is error to
even discuss transfer of ownership of the business, as the business did not actually change
hands. The transfer only involved a change in the equity composition of the corporation. To
reiterate, the employees are not transferred to a new employer, but remain with the
original corporate employer, notwithstanding an equity shift in its majority shareholders.
This being so, the employment status of the employees should not have been affected by
the stock sale. A change in the equity composition of the corporate shareholders should
not result in the automatic termination of the employment of the corporations employees.
Neither should it give the new majority shareholders the right to legally dismiss the
corporations employees, absent a just or authorized cause.
The right to security of tenure guarantees the right of employees to continue in their
employment absent a just or authorized cause for termination. This guarantee proscribes a
situation in which the corporation procures the severance of the employment of its
employees who patently still desire to work for the corporation only because new
majority stockholders and a new management have come into the picture. This situation is
a clear circumvention of the employees constitutionally guaranteed right to security of
tenure, an act that cannot be countenanced by this Court.
It is thus erroneous on the part of the corporation to consider the employees as terminated
from their employment when the sole reason for so doing is a change of management by
reason of the stock sale. The conformity of the employees to the corporations act of
considering them as terminated and their subsequent acceptance of separation pay does
not remove the taint of illegal dismissal. Acceptance of separation pay does not bar the
employees from subsequently contesting the legality of their dismissal, nor does it estop
them from challenging the legality of their separation from the service. 77
We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it upheld that,
in a stock sale, the buyer in good faith has no obligation to retain the employees of the
selling corporation; and that the dismissal of the affected employees is lawful, even absent
a just or authorized cause.
As to Simeon Espiritu, Jr.
The CA and the NLRC discussed the case of Simeon, Jr. together with that of the rest of
respondent-employees. However, a review of the records shows that the conditions leading
to his dismissal from employment are different. We thus discuss his circumstance
separately.
The Samson Group contends that Simeon, Jr., likewise voluntarily resigned from his
post.78 According to them, he had resigned from SME Bank before the share transfer took
place.79
Upon the change of ownership of the shares and the management of the company,
Simeon, Jr. submitted a letter of application to and was rehired by the new
management.80 However, the Samson Group alleged that for purely personal reasons, he
again resigned from his employment on 15 October 2001. 81
Simeon, Jr., on the other hand, contends that while he was reappointed by the new
management after his letter of application was transmitted, he was not given a clear
position, his benefits were reduced, and he suffered a demotion in rank. 82 These allegations
were not refuted by the Samson Group.
We hold that Simeon, Jr. was likewise illegally dismissed from his employment.
Similar to our earlier discussion, we find that his first courtesy resignation letter was also
executed involuntarily. Thus, it cannot be the basis of a valid resignation; and thus, at that
point, he was illegally terminated from his employment. He was, however, rehired by SME
Bank under new management, although based on his allegations, he was not reinstated to
his former position or to a substantially equivalent one. 83 Rather, he even suffered a
reduction in benefits and a demotion in rank. 84 These led to his submission of another
resignation letter effective 15 October 2001.85
We rule that these circumstances show that Simeon, Jr. was constructively dismissed. In
Peaflor v. Outdoor Clothing Manufacturing Corporation, 86 we have defined constructive
dismissal as follows:
Constructive dismissal is an involuntary resignation by the employee due to the harsh,
hostile, and unfavorable conditions set by the employer and which arises when a clear
discrimination, insensibility, or disdain by an employer exists and has become unbearable
to the employee.87
Constructive dismissal exists where there is cessation of work, because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay" and other benefits. 88
These circumstances are clearly availing in Simeon, Jr.s case. He was made to resign, then
rehired under conditions that were substantially less than what he was enjoying before the
illegal termination occurred. Thus, for the second time, he involuntarily resigned from his
employment. Clearly, this case is illustrative of constructive dismissal, an act prohibited
under our labor laws.
II
SME Bank, Eduardo M. Agustin, Jr. and Peregrin de Guzman, Jr. are liable for illegal
dismissal.
Having ruled on the illegality of the dismissal, we now discuss the issue of liability and
determine who among the parties are liable for the claims of the illegally dismissed
employees.
The settled rule is that an employer who terminates the employment of its employees
without lawful cause or due process of law is liable for illegal dismissal. 89
None of the parties dispute that SME Bank was the employer of respondent employees.
The fact that there was a change in the composition of its shareholders did not affect the
employer-employee relationship between the employees and the corporation, because an
equity transfer affects neither the existence nor the liabilities of a corporation. Thus, SME
Bank continued to be the employer of respondent employees notwithstanding the equity
change in the corporation. This outcome is in line with the rule that a corporation has a
personality separate and distinct from that of its individual shareholders or members, such
that a change in the composition of its shareholders or members would not affect its
corporate liabilities.
Therefore, we conclude that, as the employer of the illegally dismissed employees before
and after the equity transfer, petitioner SME Bank is liable for the satisfaction of their
claims.
Turning now to the liability of Agustin, De Guzman and the Samson Group for illegal
dismissal, at the outset we point out that there is no privity of employment contracts
between Agustin, De Guzman and the Samson Group, on the one hand, and respondent
employees on the other. Rather, the employment contracts were between SME Bank and
the employees. However, this fact does not mean that Agustin, De Guzman and the
Samson Group may not be held liable for illegal dismissal as corporate directors or officers.
In Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC, 90 we laid down the rule as
regards the liability of corporate directors and officers in illegal dismissal cases, as follows:
Unless they have exceeded their authority, corporate officers are, as a general rule, not
personally liable for their official acts, because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders and members. 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. 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.91 (Citations omitted)
Thus, in order to determine the respective liabilities of Agustin, De Guzman and the
Samson Group under the afore-quoted rule, we must determine, first, whether they may be
considered as corporate directors or officers; and, second, whether the terminations were
done maliciously or in bad faith.
There is no question that both Agustin and De Guzman were corporate directors of SME
Bank. An analysis of the facts likewise reveals that the dismissal of the employees was
done in bad faith. Motivated by their desire to dispose of their shares of stock to Samson,
they agreed to and later implemented the precondition in the Letter Agreements as to the
termination or retirement of SME Banks employees. However, instead of going through the
proper procedure, the bank manager induced respondent employees to resign or retire
from their respective employments, while promising that they would be rehired by the new
management. Fully relying on that promise, they tendered courtesy resignations or
retirements and eventually found themselves jobless. Clearly, this sequence of events
constituted a gross circumvention of our labor laws and a violation of the employees
constitutionally guaranteed right to security of tenure. We therefore rule that, as Agustin
and De Guzman are corporate directors who have acted in bad faith, they may be held
solidarily liable with SME Bank for the satisfaction of the employees lawful claims.
find them liable in their individual steads. There is no showing that his constructive
dismissal amounted to more than a corporate act by SME Bank, or that spouses Samson
acted maliciously or in bad faith in bringing about his constructive dismissal.
Finally, as regards Aurelio Villaflor, while he may be considered as a corporate officer,
being the president of SME Bank, the records are bereft of any evidence that indicates his
actual participation in the termination of respondent employees. Not having participated at
all in the illegal act, he may not be held individually liable for the satisfaction of their
claims.
III
Respondent employees are entitled to separation pay, full backwages, moral damages,
exemplary damages and attorneys fees.
The rule is that illegally dismissed employees are entitled to (1) either reinstatement, if
viable, or separation pay if reinstatement is no longer viable; and (2) backwages. 96

Courts may grant separation pay in lieu of reinstatement when the relations between the
As to spouses Samson, we find that nowhere in the records does it appear that they were
employer and the employee have been so severely strained; when reinstatement is not in
either corporate directors or officers of SME Bank at the time the illegal termination
the best interest of the parties; when it is no longer advisable or practical to order
occurred, except that the Samson Group had already taken over as new management
reinstatement; or when the employee decides not to be reinstated. 97 In this case,
when Simeon, Jr. was constructively dismissed. Not being corporate directors or officers,
respondent employees expressly pray for a grant of separation pay in lieu of
spouses Samson were not in legal control of the bank and consequently had no power to
reinstatement. Thus, following a finding of illegal dismissal, we rule that they are entitled
dismiss its employees.
to the payment of separation pay equivalent to their one-month salary for every year of
service as an alternative to reinstatement.
Respondent employees argue that the Samson Group had already taken over and
conducted an inventory before the execution of the share purchase agreement. 92 Agustin
Respondent employees are likewise entitled to full backwages notwithstanding the grant of
and De Guzman likewise argued that it was at Olga Samsons behest that the employees
separation pay. In Santos v. NLRC,98 we explained that an award of backwages restores the
were required to resign from their posts.93 Even if this statement were true, it cannot
income that was lost by reason of the unlawful dismissal, while separation pay "provides
amount to a finding that spouses Samson should be treated as corporate directors or
the employee with 'the wherewithal during the period that he is looking for another
officers of SME Bank. The records show that it was Espiritu who asked the employees to
employment."99 Thus, separation pay is a proper substitute only for reinstatement; it is not
tender their resignation and or retirement letters, and that these letters were actually
an adequate substitute for both reinstatement and backwages. 100 Hence, respondent
tendered to him.94 He then transmitted these letters to the representative of the Samson
employees are entitled to the grant of full backwages in addition to separation pay.
Group.95 That the spouses Samson had to ask Espiritu to require the employees to resign
shows that they were not in control of the corporation, and that the former shareholders
through Espiritu were still in charge thereof. As the spouses Samson were neither As to moral damages, exemplary damages and attorney's fees, we uphold the appellate
corporate officers nor directors at the time the illegal dismissal took place, we find that court's grant thereof based on our finding that the forced resignations and retirement were
there is no legal basis in the present case to hold them in their personal capacities fraudulently done and attended by bad faith.
solidarily liable with SME Bank for illegally dismissing respondent employees, without
prejudice to any liabilities that may have attached under other provisions of law. WHEREFORE, premises considered, the instant Petitions for Review are PARTIALLY
GRANTED.
Furthermore, even if spouses Samson were already in control of the corporation at the time
that Simeon, Jr. was constructively dismissed, we refuse to pierce the corporate veil and
The assailed Decision and Resolution of the Court of Appeals in CA G.R. SP No. 97510
dated 13 March 2008 and 1 September 2008,respectively, are hereby REVERSED and SET
ASIDE insofar as it held Abelardo P. Samson, Olga Samson and Aurelio Villaflor, Jr. solidarily
liable for illegal dismissal.

The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 97942
dated 15 January 2008 and 19 February 2009,respectively, are likewise REVERSED and
SETASIDE insofar as it held Abelardo P. Samson, Olga Samson and Aurelio Villaflor, Jr.
solidarily liable for illegal dismissal.

We REVERSE our ruling in Manlimos v. NLRC insofar as it upheld that, in a stock sale, the
buyer in good faith has no obligation to retain the employees of the selling corporation,
and that the dismissal of the affected employees is lawful even absent a just or authorized
cause.

SO ORDERED.
THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC. AND WALDEN CHU,
Petitioners, v. ROLLY P. ARENAS, Respondent.
We resolve in this petition for review on certiorari1 the challenge to the Court of Appeals
(CA) decision2 dated 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 Commissions
(NLRC) decision4 dated August 13, 2010, which also affirmed the Labor Arbiters (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,6 Arenas was informed of CBTLs existing employment
policies.
To ensure the quality of its crews 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 CBTLs 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
stores 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 managers report which listed Arenas recent
infractions, as follows:
Leaving the counter unattended and eating chips in an unauthorized area while on duty
(March 30, 2009);
Reporting late for work on several occasions (April 1, 3 and 22); and
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 managers 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
LAs 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 CBTLs 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 CBTLs policies, procedures, rules and regulations, as
provided for under CBTLs 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 NLRCs
rulings. No grave abuse of discretion tainted these rulings, thus, the CAs decision also
warrants this Courts 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 stores 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 CBTLs
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 employees 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 CBTLs company policies. As
Arenas mentioned in his written explanation, he was on a scheduled break when he was
caught eating at CBTLs al fresco dining area. During that time, the other service crews
were the one in charge of manning the counter. Notably, CBTLs employee handbook
imposes only the penalty of written warning for the offense of eating non-CBTL products
inside the stores 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 ones 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
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 Courts 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 corporations 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 Chus part
as CBTLs president. His participation in Arenas termination was not even sufficiently
alleged and argued. Hence, he cannot be held solidarily liable for CBTLs 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.

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 CBTLs
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 employees 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
G.R. No. 208321 July 30, 2014
WESLEYAN UNIVERSITY PHILIPPINES, Petitioner, vs. NOWELLA REYES,
Respondent.
Nature of the Case
The issue in this petition boils down to the legality of respondent Nowella Reyes'
termination as University Treasurer of petitioner Wesleyan University - Philippines (WUP) on
the ground of loss of trust and confidence. Petitioner prays in this recourse that We reverse
the February 28, 2013 Decision of the Court of Appeals (CA) in CA-G.R. SP No. 122536
which declared respondent's termination illegal.
The Facts
On March 16, 2004, respondent Nowella Reyes was appointed as WUP's University
Treasurer on probationary basis. A little over a year after, she was appointed as full time
University Treasurer.
On April 27, 2009, a new WUP Board of Trustees was constituted. Among its first acts was
to engage the services of Nepomuceno Suner & Associates Accounting Firm (External
Auditor) to investigate circulating rumors on alleged anomalies in the contracts entered
into by petitioner and in its finances.
Discovered following an audit were irregularities in the handling of petitioners finances,
mainly, the encashment by its Treasury Department of checks issued to WUP personnel, a
practice purportedly in violation of the imprest system of cash management, and the
encashment of various crossed checks payable to the University Treasurer by Chinabank
despite managements intention to merelyhave the funds covered thereby transferred from
one of petitioners bankaccounts to another. The External Auditors report embodied the
following findings and recommendations:1
Treasury Department (Cash Management):
Findings:
1. It was noted that checks consisting of various checks payable to teachers, staffs and
other third parties had been the subject of encashment directly with the Treasury
Department under the stewardship of Mrs. Nowella A. Reyes,the University Treasurer. This
practice is a clear violation of imprest system of cash management, hence, resulting to
unsound accounting practice. This laxity in cash management of those checks were paid as
intended for them. Recommendations:
For internal control reasons, the treasury should not accept any check encashment from its
daily collections. Checks are being issued for encashment with our depository bank for
security reasons. The mere acceptance of checks from the collections is tantamount to
cash disbursement out of collections.
Findings:
2. It was also noted that various checks payable to the Treasurer of WUP x x x had been
negotiated for encashment directly to China Bank Cabanatuan Branch, while the
intention of the management for these checks were merely for fund transfer with the other
account maintained at China Bank. This practice is a violation not only in the practice of
accounting/cash custodianship but had been mingled with spurious elements.
Unfortunately, check vouchers relating to this exception are nowhere to be found or not on
file.
Findings:
3. A crossed check payable to the Treasurer [WUP] x x x had been negotiated for
encashment to China Bank Cabanatuan Branch despite of the restriction indicated in the
face of the check. Unfortunately, the used check was no longer found on file.
As a result of said audit, petitioner served respondent a Show Cause Order and placed her
under preventive suspension.2 The said Show Cause Order required her to explain the
following matters found by the External Auditors:
(a) your encashment of Php300,000.00 ofa crossed check you issued payable to yourself
(Chinabank Check No. 000873613 dated 26 November 2008) x x x;
(b) the encashment of various checks without any supporting vouchers x x x;
(c) unliquidated cash advances in the aggregate amount of Php9.7 million x x x.3
On June 18, 2009, respondent submitted her Explanation. Following which, WUPs Human
Resources Development Office (HRDO) conducted an investigation. Finding respondents
Explanation unsatisfactory, the HRDO, on July 2, 2009, submitted an Investigation Report4
to the University President containing its findings and recommending respondents
dismissal as University Treasurer.
Upon receipt of her notice of termination on July 9, 2009, respondent post-haste filed a
complaint for illegal dismissal with the Arbitration Branch of the National Labor Relations
Commission. She contended that her dismissal was illegal, void and unjust, for the
following reasons:
First,her 60-day preventive suspension violated the Labor Code provisions prohibiting such
suspensions tolast for more than thirty (30) days. Thus, the fact that she was not
reinstated to her former position before the lapse of thirty (30) days, amounted to
constructive dismissal;5 Second,there was a violation of her right to substantive and
procedural due process, as evidencedby petitioners failure to apply the pertinent due
process provisions under its Administrative and Personnel Policy Manual;6 and
Finally,the charges against her werebased on mere suspicion and speculations and
unsupported by evidence.7
Petitioner, for its part, predicated its defense on the contention that respondent was a
highly confidential employee who handled significant amounts of money as University
Treasurer and that the irregularities attributed to her in the performance ofher duties
justify her dismissal on the basis of loss of trust and confidence.8
Petitioner also averred that the 60-day preventive suspension thus imposed does not
necessarily make suchsuspension void, inasmuch as the law merely requires that after a
30-day preventive suspension, the affected employee shall automatically be reinstated.
But in the case of respondent, there was no need for her automatic reinstatement
inasmuch as she was duly terminated within the 30-day period of her preventive
suspension.9 Moreover, respondent was duly afforded her right to due process since WUP
substantially complied with the twin-notice rule.
Ruling of the Labor Arbiter
On December 15, 2010, Labor Arbiter Reynaldo V. Abdon rendered a Decision finding for
respondent. The dispositive portion of the Labor Arbiter Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, DECLARING that
complainant Nowella Reyes x x x [was] illegally dismissed by respondent Wesleyan
University Philippines.
Accordingly, respondent Wesleyan University Philippines through its President is hereby
DIRECTED to:
(1) Reinstate complainant Nowella Reyes to her former or equivalent position without loss
of seniority right;
(1.1) Since reinstatement is immediately executory, to render a Report of Compliance to
this Office within ten (10) days from receipt of this Decision.
(2) Pay complainant Reyes her backwages, from the time of her dismissal until
reinstatement, the present sum of which is P429,000.00;
(3) Pay complainant Reyes, her 13th month pay in the sum of P52,000; her shared (sic) in
related learning experience fee, P12,000.00; clothing allowance, P6,000.00; Honorarium as
member of standing committees, P4,000.00; and her vacation leave credits in the sum of
P17,862.59;
(4) Pay complainant Reyes, moral damages in the sum of P150,000.00, exemplary
damages in the amount of P100,000.00, and 10% attorneys fees in the sum of
P77,086.25;
xxxx
SO ORDERED.10
The Labor Artbiter noted, as respondent has insisted, that the charges against the latter
were based on mere rumors and speculations. As observed too by the Labor Arbiter,
petitioner itself was in the wrong because it had no proper policies on its accounting and
financial procedures and that the encashment and accommodation of checks to personnel,
especially after banking hours, had been the practice of its previous and present
administrations. Thus, it was unfair to put all the blame on respondent without any
evidence that her actionswere highly irregular, unfair or unjustified.11
As regards petitionersfindings on the alterations in the Check Disbursement Voucher
(CDV), unliquidated cash advances and duplicate checks, the Labor Arbiter found and
wrote:
Anent the alleged finding of the university that there was material alteration on the
documents as regards the Check Disbursement Voucher (CDV), for allegedly there was an
absence of Board Resolution entry in the CDV filed in the Accounting while the copy
submitted by the Treasurer has a Board Resolution entry as well as the word ATM on the
payee portion on the photocopy as crossed out while in the original it was not crossed out,
respondent cannot summarily state that complainant was at fault. The Human Resource
should have conducted an in-depth investigation on this matter. Unfortunately, respondent
just followed the twin-notice rule, and did not conduct a thorough administrative
investigation in accordance with their own internal rules and policies in the Manual.
Consequently, this Office has serious doubt that such matter was the fault of the
complainant for the blame may fall on the accounting personnel who is handling the CDV.
With respect to the unliquidated cash advances, it is not likewise the fault of the
complainant. She pointed out that follow ups of the liquidation is [sic] being handled by the
auditor, while respondent claims that she was previously handling the same before it was
transferred to Accounting Office in August 2008. We see no evidence to prove that the
liquidation is being handled by the complainant prior to August 2008. Moreover, it is
common practice thatthe Treasurer disburses the funds such as cash advances but the
liquidation must be done by the beneficiary of the fund, and the responsible people who
should follow up the liquidation is the accounting office.
With respect to the duplicate checks, the same were done by a syndicate or individuals not
connectedwith the University. The bank has already admitted responsibility in the
encashment of these checks and had returned the amounts to the respondent University,
thus complainant has no fault about this incident.12
Ruling of the NLRC
Petitioner filed an appeal withthe National Labor Relations Commission (NLRC) which was
granted in the tribunals Decision dated July 11, 2011, declaring that respondentwas
legally dismissed. However, petitioner was ordered to pay respondent her proportionate
13th month pay, the monetary value of her vacation leave, and attorneys fees.
Adopting a stance entirely opposite to that of the Labor Arbiter, the NLRC held that
respondent failed to controvert and disprove the established charges of petitioner (as
appellant-respondent) and insteadconveniently put the blame on other departments for
her inculpatory acts. The NLRC opined that her termination was not motivated by the
change of petitioners officers but by the Universitys goal to promote the economy and
efficiency of its Treasury Department.13
In net effect, the NLRC found petitioners contention of loss of trust and confidence in
respondent with sufficient basis. While respondent, so the NLRC notes, may not have been
guilty ofwillful breach of trust, the fact that she held a highly confidential position, and
considering that anomalous transactions transpired under her command responsibility,
provided petitioner with ample ground todistrust and dismiss her.14 The NLRC explained:
In this case, complainant-appellee [herein respondent] may not have been guilty of willful
breach of trust. But as Treasurer of [WUP] who handles and supervises all monetary
transactions in the University and being a highly confidential employee at that, holding
trust and confidence and after considering the series of irregular and anomalous
transactions that transpired under complainant-appellees command responsibility,
respondent has basis or ample reason to distrust complainant-appellee. Thus, we cannot
justly deny [WUP] the authority to dismiss complainant-appellee.
The principle of respondent (sic) superior or command responsibility may be cited as basis
for the termination of employment of managerial employees based on loss of trust and
confidence. In the Etcuban case (Ibid) the Supreme Court in upholding the validity of
petitioner-employees dismissal on the ground of loss of trust and confidence, ruled that
even if the employee x x x had no actual and direct participation in the alleged anomalies,
his failure to detect any anomaly that would normally fall withinthe scope of his work
reflects his ineffectiveness and amounts to gross negligence and incompetence which are
likewise justifiable grounds for his irregularity, for what is material is that his actuations
were more than sufficient to sow in his employer the seed of mistrust and loss of
confidence.
As found by the External Auditor, complainant-appellee should have implemented an
imprest system of cash management in order to secure the indicated payees in those
checks and they were paid of the checks as intended for them. It appears that checks
payable to teachers, staffs and other third parties had beenthe subject of encashment
directly with the Treasury Department x x x and this is an unsound accounting practice.
Moreover, the External Auditors found that various checks payable to the Treasurer of
Wesleyan University has been negotiated for encashment directly to China Bank-
Cabanatuan Branch while the intention of the management for those checks weremerely
for fund transfer with the other account maintained at China Bank. That this practice
violated accounting or cash custodianship and check vouchers are nowhere to be found.
Further, the crossed check payable to the Treasurer (complainantappellee) in the amount
of P300,000.00 dated 26 November 2008 had been negotiated for encashment to China
Bank Cabanatuan Branch despite of restriction indicated in the face of the check and that
the used check was no longer found on file. There is a need for a clear policy when to issue
crossed-checks or otherwise and the use of debit/credit memo to transfer one account to
another with the same bank. That these acts of violation of cash and check custodianship
by complainant-appellee resulted in the loss of respondent-appellant thus affecting the
economy of the respondent-appellant institution.
In view of our finding that respondents-appellants (sic) has validly terminated complainant-
appellee the latters claim for damages and attorneys fees lacks sufficient factual and
legal basis. Accordingly, the Labor Arbiters decision directing the reinstatement of
complainantappellee with full backwages ishereby vacated and set aside.15
The NLRC denied respondents motion for reconsideration in a Resolution dated September
29, 2011.Therefrom, respondent went on Certiorari to the CA, inCA-G.R. SP No. 122536.
Ruling of the Court of Appeals
On February 28, 2013, the CA, through its assailed Decision,16 found the NLRCs ruling
tainted with grave abuse of discretion and reinstated the Decision of the Labor Arbiter. The
fallo of the CA Decision reads:
WHEREFORE, premises considered, the assailed Decision and Resolution of the National
Labor Relations Commission dated July 11, 2011 and September 29, 2011 are REVERSED
and SET ASIDE. The Decision of the Labor Arbiter dated December 15, 2010 is hereby
REINSTATED, subject to the modification that if reinstatement is no longer feasible,
petitioner shall be awarded separation pay equivalent to one month salary for every year
ofservice reckoned from the time of employment to the finality of this decision.17
Holding that respondents termination was unjust, the CA, in virtual restoration of the
findings and conclusions of the Labor Arbiter, pointed out, among others, that: (1)
respondent sufficiently countered all charges against her; (2) it had been the practice of
the previous and present administrations of petitioner to encash and accommodate checks
of WUP personnel; thus, it would be unjust to penalize respondent for observing a practice
already in place when she assumed office; (3) the duty to liquidate cash advances is
assigned to the internal auditor; (4) it has been established that the encashments of
spurious duplicate checks were perpetrated by individuals not connected with WUP, and
that the bank admitted responsibility therefor and had returned the amount involved to
petitioner; (5) there was no imputation of any violation of the Universitys Administration
and Personnel Policy Manual; (6) while the acts complained of violated the imprest system
of cash management, there was no showing that the said system had been adopted and
observed in the schools accounting and financial procedures; and (7) there was no
showing that respondent had the responsibility to implement changes in petitioners
accounting system even if it were not in accordance with the generally accepted principles
of accounting.18
Hence, the instant petition.
The Issues
For consideration herein are the following issues raised by petitioner:
1. Whether or not the CA over-reached its power of review under Rule 65 of the Rules of
Court when it reversed the judgment of the NLRC; and
2. Whether or not the CA erred in finding respondent illegally dismissed by petitioner on
the ground of loss of trust and confidence.
The Courts Ruling
The petition is impressed with merit. The CA erred in reinstating the Labor Arbiters
Decision and in finding that respondent was illegally dismissed.
The CAs power of review
We first resolve the procedural issue raised in this recourse. Petitioner contends that the
CA over-reached its power of review under Rule 65 when it substituted its own judgment
over errors of judgment that it found in the NLRC Decision, stressing that the province of a
writ of certiorari is to correct only errors of jurisdiction and not errors of judgment.

This contention is misplaced. It is settled that under Section 9 of Batas Pambansa
Blg.129,19 as amended by Republic Act No. 7902,20 the CA, 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. Sec. 9 clearly states:
The Court of Appeals shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases
falling within its original and appellate jurisdiction, including the power to grant and
conduct new trials or further proceedings. x x x
Hence, the appellate court acted within its sound discretion when it re-evaluated the
NLRCs factual findings and substituted the latters own judgment.
Loss of trust and confidence as a ground for termination
We now proceed to the substantive issue on the propriety of respondents dismissal due to
loss of trust and confidence.As provided in Art. 282(c) of Presidential Decree No. 442,
otherwise known as the Labor Code of the Philippines:
Article 282. Termination by employer.An employer may terminate an employment for any
of the following causes:
xxxx
c. Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
We explained in M+W Zander Philippines, Inc. v. Enriquez21 the requisites of a valid
dismissal based on loss of trust and confidence. As the case elucidates:
Article 282 (c) of the Labor Code allows an employer to terminate the services of an
employee for loss of trust and confidence. Certain guidelines must be observed for the
employer to terminate an employee for loss of trust and confidence. We held in General
Bank and Trust Company v. Court of Appeals, viz.:
[L]oss of confidence should not be simulated. It should not be used as a subterfuge for
causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily
asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a
mere afterthought tojustify earlier action taken in bad faith.
The first requisite for dismissal on the ground of loss of trust and confidence is that the
employee concerned must be one holding a position of trust and confidence.
There are two classes of positions of trust: managerial employees and fiduciary rank-and-
file employees.
Managerial employees are defined as those vested with the powers or prerogatives to lay
down management policies and to hire, transfer, suspend, lay-off, recall, discharge,assign
or discipline employees or effectively recommend such managerialactions. They refer to
those whose primary duty consists of the management of the establishment in which they
are employed or of a department or a subdivision thereof, and to other officers or
members of the managerialstaff. Officers and members of the managerial staff perform
work directlyrelated to management policies of their employer and customarily and
regularly exercise discretion and independent judgment.
The second class or fiduciary rank-and-file employees consist of cashiers, auditors,
property custodians, etc., or those who, in the normal exercise of their functions,
regularlyhandle significant amounts of money or property. These employees, though rank-
and-file, are routinely charged with the care and custody of the employers money or
property, and are thus classified as occupying positions of trust and confidence.22
xxxx
The second requisite of terminating an employee for loss of trust and confidence is that
there must be an act that would justify the loss of trust and confidence. To be a valid cause
for dismissal, the loss of confidence must be based on a willful breach of trust and founded
on clearly established facts.23
To summarize, the first requisite is that the employee concerned must be one holding a
position of trust and confidence, thus, one who is either: (1) a managerial employee; or (2)
a fiduciary rank-and-file employee, who, in the normal exercise of his or her functions,
regularly handles significant amounts of money or property of the employer. The
secondrequisite is that the loss of confidence must be based on a willful breach of trust
and founded on clearly established facts.
In Lima Land, Inc. v. Cuevas,24 We discussed the difference between the criteria for
determining the validity of invoking loss of trust and confidence as a ground for
terminating a managerial employee on the one hand and a rank-and-file employee on the
other. In the said case, We held that with respect to rank-and-file personnel, loss of trust
and confidence, as ground for valid dismissal,requires proof of involvement in the alleged
events in question, and that mere uncorroborated assertions and accusations by the
employer would not suffice. Withrespect to a managerial employee, the mere existence of
a basis for believing that such employee has breached the trust of his employer would
suffice for his dismissal. The following excerpts from Lima Land are instructive:
As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for
termination of employment, is premised on the fact that an employee concerned holds a
position where greater trust is placed by management and from whom greater fidelity to
duty is correspondingly expected. This includes managerial personnel entrusted with
confidence on delicate matters, such as the custody, handling, or care and protection of
the employers property.The betrayal of this trust is the essence of the offense for which an
employee is penalized.
It must be noted, however, that ina plethora of cases, this Court has distinguished the
treatment of managerial employees from that of rank-and-file personnel, insofar as the
application of the doctrine of loss of trust and confidence is concerned. Thus, with respect
to rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal,
requires proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer will not be sufficient. But as
regards a managerial employee, the mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for his dismissal. Hence, in
the case of managerial employees, proof beyond reasonable doubt is not required, it being
sufficient that there is some basis for such loss of confidence, such as when the employer
has reasonableground to believe that the employee concerned is responsible for the
purported misconduct, and the nature of his participation therein renders him unworthy of
the trust and confidence demanded of his position.
On the other hand, loss of trust and confidence as a ground of dismissal has never been
intended to afford an occasion for abuse because of its subjective nature. It should not be
used as a subterfuge for causes which are illegal, improper, and unjustified. It must be
genuine, not a mere afterthought intended to justify an earlier action taken in bad faith.
Let it not be forgotten that what is at stake is the means of livelihood, the name, and the
reputation of the employee. To countenance an arbitrary exercise of that prerogative is to
negate the employees constitutional right to security of tenure.25
Respondents employment classification is irrelevant in light of her proven willful breach
There is no doubt that respondent held a position of trust; thus, greater fidelity is expected
of her. She was not an ordinary rank-and-file employee but an employee occupying a very
sensitive position. As University Treasurer, she handled and supervised all monetary
transactions and was the highest custodian of funds belonging to WUP.26 To be sure, in the
normal exercise of her functions, she regularly handled significant amounts of money of
her employer and managed a critical department.
The presence of the first requisite iscertain. So is as regards the second requisite. Indeed,
the Court finds that petitioner adequately proved respondents dismissal was for a just
cause, based on a willful breach of trust and founded on clearly established facts as
required by jurisprudence. At the end of the day, the question of whether she was a
managerial or rank-andfile employee does not matter in this case because not only is there
basis for believing that she breached the trust of her employer, her involvement in the
irregularities attending to petitionersfinances has also been proved.
To recall, petitioner, per its account, allegedly lost trust and confidence in respondent
owing to any or an interplay of the following events: (1) she encashed a check payable to
the University Treasurer in the amount of three hundred thousand pesos (PhP 300,000); (2)
she encashed crossed checks payable to the University Treasurer, when the intention of
management in this regard was to merely transfer funds from one of petitioners accounts
to another in the same bank; (3) she allowed the Treasury Department to encash the
checks issued to WUP personnel rather than requiring the latter to have said checks
encashed by the bank, in violation of the imprest system of accounting; (4) she caused the
disbursement of checks without supporting check vouchers; (5) there were unliquidated
cash advances; and (6) spurious duplicate checks bearing her signature were encashed
causing damage to petitioner.
We disagree with the CAs finding that respondent has sufficiently countered all inculpatory
allegations and accusations against her. On the contrary, We find that here, there was
anadmitted, actual and real breach of duty committed by respondent, which translates into
a breach of trust and confidence in her. For perspective, respondents explanation as to the
charges against her is as follows:
1. That the alleged crossed check issued by her payable to THE TREASURER WUP was
done in the exercise of her duty and function as such, and not with her name and not to
herself and personal favor, and that said check had been prepared passing through the
usual system; 2. That the University heads were the beneficiaries of said amount who
strongly requested that their love giftbe given, hence, the encashment;
3. That the amount of the check was properly disposed of as evidenced by the document
bearing the signatures of recipients;
4. That the Office to pointto if vouchers and supporting documents will have to be checked
concerning payments made is the Accounting Office;
5. That cash advances to various University personnel pass through her office in the
exercise of her duties assuch but the office who follow up the liquidation of payments
received is the Office of the University Auditor;
6. That respondent Reyes adopted her reply on the show-cause order in the investigation
previously conducted by Dr. Jeremias Garcia about the duplicated checks alleging among
others:
a) She and her staff confirmed that only the checks issued to General Capulong and
Leodigario David were encashed by the University Teller;
b) The check issued to Norma de Jesus was encashed by the Pick-up Chinabank Teller on
December 5, 2008 while collecting deposits from the University with the assistance of the
University teller;
c) That the check issued to Mercedes was not encashed with the University teller but with
WEMCOOP;
d) As to the encashment and accommodation of checks to personnel, it has been the
practice of previousand present administration moreso when employees cannot anymore
go to Chinabank to transact business as it is mostly beyond banking hours when checks
are ready for disbursement;
e) That Respondents department has no control over fraudulent transactions done outside
the University, that it is the Banks duty to protect its clients as tothe proper procedures to
secure our account;
f) That the computer system program of the Universitys depository bank has very limited
capabilities to detect fraudulent entries;
g) That the signature verifier also had been remiss in carefully checking the authenticity
ofprevious signatories.27
a. Respondents encashment of checks
As it were, respondent did not deny, in fact admitted, the encashment of the three hundred
thousand peso (PhP 300,000) crossed check payable to the University Treasurer which
covered the total amount of the "love gift" for administrative and academic officials of
WUP. Neither did she deny the fact that the Treasury Department encashed checks issued
to WUP personnel rather than requiring them to have the checks encashed by the bank.
Instead, she explained that the beneficiaries of the amounts strongly requested that their
love gifts be given in cash, hence the encashment of the PhP 300,000 crossed check and,
thereafter, the accommodation and encashment of their checks directly by the Treasury
Department. Moreover, she submitted a document bearing the signatures of the recipients
of the "love gift" as proof that the amount was disposed properly.28 She further insisted
that this was the usual practice of the University and that she merely accommodated the
requests of WUP personnel especially when Chinabank was already closed.
Jurisprudence has pronounced that the crossing of a check means that the check may not
be encashed but only deposited in the bank.29 As Treasurer, respondent knew or is at least
expected to be aware of and abide by this basic banking practice and commercial custom.
Clearly, the issuance of a crossed check reflects managements intention to safeguard the
funds covered thereby, its special instruction to have the same deposited to another
account and its restriction on its encashment.
Here, respondent, as aptly detailed inthe auditors report, disregarded managements
intentions and ignored the measures in place to secure the handling of WUPs funds. By
encashing the crossed checks, respondent put the funds covered thereby under the riskof
being lost, stolen, co-mingled with other funds or spent for other purposes. Furthermore,
the accommodation and encashment by the Treasury Department of checks issued to WUP
personnel were highly irregular. First, WUP, not being a bank, had no business encashing
the checks of its personnel.30 More importantly, in encashing the said checks, the Treasury
Department made disbursements contrary to the wishes ofmanagement because, in
issuing said checks, management has madeclear its intention that monies therefor would
be sourced from petitioners deposit with Chinabank, under a specific account, and not
from the cash available in the Treasury Department.
That the encashment of crossed checks and payment of checks directly to WUP personnel
had been the practice of the previous and present administration of petitioner is of no
moment. To Our mind, this was simply respondents convenient excuse, a poorlydisguised
afterthought, when her unbecoming carelessness in managing WUPs finances was
exposed. Moreover, the prevalence of this practice could have been contained if only
respondent consistently observed the regular procedure for encashing crossed checks and
properly handled requests for accommodation of checks issued to the WUP personnel.
b. Unliquidated cash advances
On the matter of unliquidated cash advances in the aggregate amount of nine million
seven hundred thousand pesos (PhP 9,700,000), respondent explained that while it was
true that cash advances to WUP personnel passed through her office in the exercise of her
duties as University Treasurer, the office that follows up the liquidation of advances
received is the office of the University Auditor.31 However, granting that the responsibility
of handling the liquidation of cash advances is no longer lodged in her office, there is proof
showing that before the Treasury Department was relieved of said responsibility, the total
unliquidated cash advances was even bigger, amounting to eleven million five hundred
thirty-three thousand two hundred thirty pesos and thirty-seven centavos (PhP
11,533,230.37). There is nothing in the records before us showing that respondent denied
the following findings in the Investigation Report of the WUPs Human Resource
Development Office (HRDO)on this matter, to wit:
In the matter of unliquidated cash advances in the aggregate amount of Php9.7million as
found by the External Auditors, respondents contention was that cash advances tovarious
University personnel pass through her office in the exercise of her duties as such but the
office who follows up the liquidation of payments received is the Office of the University
Auditor.
On the inquiry done x x x of the Internal Auditor, Treasury and Accounting officer on July 1,
2009, it was found out that the responsibility of handling cash advances and liquidation
report was transferred from Treasury Office to Accounting Office on August 2008, when Ms.
Luzviminda Torres, the personnel handling the same detailed at the Treasury Office went on
leave. It was transferred to Ms. Julieta Mateo. What was surprising was that as per
certification and summary submitted by Ms. Mateo, the amount of unliquidated cash
advances previous to August 2008, when the same was under the responsibility of the
Treasury Office, was even bigger with the total amount of ELEVEN MILLION FIVE HUNDRED
THIRTY THREE THOUSAND, TWO HUNDRED THIRTY PESOS AND THIRTY SEVEN CENTAVOS
(Attached as Annex "G")
Even if there is truth in the contention of herein Respondent that she was no longer the
one in charge of the liquidation proceedings, the same would not absolve her from gross
negligence of duties. The fact that the said function was with her office until August 2008,
with unliquidated cash advances even bigger, still showed that she reneged in her duties
which she had overlooked for so long. She now mistakenly points the responsibility to the
Office of the University Auditor. These informations are enough to be considered as
Respondents acts constitutive of breach of trust and confidence.32
xxx
c. Other irregularities inrespondents performance
In all, We find the Investigation Report of the HRDO a credible, extensive and thorough
account of respondents involvementin incidents which are sufficient grounds for
petitioners loss of trust and confidence in her, to wit:
Respondent Nowella C. Reyes has committed breach of trust and confidence in the conduct
of her office.
In her answer, Respondent admitted the encashment of the crossed check with the
defense that the same was done in the performance of her duty, not for her personal use
but because of the request of University heads who wanted their love gifts begiven. She
alsoadmitted habitual encashment of checks issued by the University to its personnel on
the basis of practice of previous administration.
The charge against Respondent of the act of improper encashment of a check, which aside
from being irregular is clearly violative of imprest system of cash management. Moreover,
the same being a crossed check, should not be negotiated for encashment to Chinabank
Cabanatuan Branch because of the restriction indicated on its face, which Mrs. Reyes, by
reason of her office knew very well.
During the investigation conducted, it was revealed that the check disbursement voucher
attached by Respondent on her answer to justify the regularity of its issuance and eventual
encashment was not exactly the same as the one filed at the Accounting Office. It showed
that the photocopy of the original CDV which was attached by Respondent (attached as
Annex "E"of this report) bear some material alterations, namely:

1. The absence of entry of the Board Resolution which was reflected as a sort of inquiry by
the Internal Auditor, and which at present was left blank on the original, as compared to
the photocopy submitted by respondent bearing an entry of the Board Resolution number;
2. The word ATM on the payee portion of the CDV in the original as compared to the
photocopy wherein the entry ATM was crossed out.
During a discussion with the external auditors, it was categorically stated by them that
during the courseof external audit, said document was inexistent in the records presented
by the Accounting and Treasurers Offices. The production of the photocopy by Respondent
already altered only after the suspension was effected cast doubt on the regularity of its
issuance, negating her otherwise claim. Another significant observation was that the
original copy of CDV (attached as Annex "F" of this report) and corresponding signatures of
administrative heads who received payments showed folded marks halfways, with the
fastener holes unmatched, showing that those two documents were not really filed
together, as regularly done, and the same were not filed in the regular course and must
have been kept previously on a different manner in possession of person other than the
office which must file the same.
xxxx
On the last charge in the show cause order specifically the existence of duplicate checks in
the account of the University amounting to Php 1.050 Million, included in Respondents
defenses were that among the checks duplicated, only two of them were encashed with
the University Teller, and the check originally named to Norma de Jesus as payee was paid
by the pick-up teller only through the assistance of the University teller.
Again, Respondents defense were void of truth and merit. The act of encashing checks
issued by the Treasury Office, clearly violative of imprest system of cash management
which Mrs. Reyes by reason of her office knew very well, showed that Respondent directly
reneged in her duty to observe economic security measures.
As found on the documents attachedto the Investigation report of Dr. Garcia which had
been expressly adopted by herein respondent in her answer is an Affidavit of Norma de
Jesus stating that she actually encashed the check with the personnel of the Treasury
Office particularly Shirley Punay, who gave her the amountequivalent days after the check
was handed to the Treasury office.
However noble the intention of herein Respondent in helping her fellow workers in the
University by her acts of accommodation by encashing their checks directly withthe
Treasury Office when Chinabank was already closed, the same still reneged in her duty to
protect the economic security of the University. An act of misconduct which caused [sic]33
An employer cannot be compelled toretain an employee who is guilty of acts inimical to
the interests of the employer. A company has the right to dismiss its employees if only as a
measure of self-protection. This is all the more true in the case of supervisors or personnel
occupying positions of responsibility.34 In this case, let it be remembered that respondent
was not an ordinary rank-and-file employee as she was no less the Treasurer who was in
charge of the coffers of the University. It would be oppressive to require petitioner to retain
in their management an officer who has admitted to knowingly and intentionally
committing acts which jeopardized its finances and who was untrustworthy in the handling
and custody of University funds.
WHEREFORE, premises considered, we GRANTthe petition. The assailed Decision of the
Court of Appeals in CA-G.R. SP No. 122536 is, thus, SET ASIDE. The Decision of the National
Labor Relations Commission in NLRC RAB III Case No. 07-15131-09 is REINSTATED.
SO ORDERED.
G.R. No. 213934, November 09, 2016
MARY ANN G. VENZON, EDDIE D. GUTIERREZ, JOSE M. GUTIERREZ, JR. AND MONA
LIZA L. CABAL, Petitioners, v. ZAMECO II ELECTRIC COOPERATIVE, INC. AND
ENGR. FIDEL S. CORREA, GENERAL MANAGER, Respondents.
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court which
seeks the reversal of the Resolution2 dated July 31, 2014 of the Court of Appeals (CA) in
CA-G.R. SP No. 125798. The CA affirmed the Decision3 of the National Labor Relations
Commission (NLRC), Special Third Division, in NLRC Case No. RAB-III-10-15467-09
reversing, on reconsideration, the Decision4 of the NLRC Third Division which held that,
while there was illegal dismissal of petitioners contrary to the Decision5 of the Labor
Arbiter (LA), the case has been mooted due to the reinstatement of petitioners.
Petitioners were regular employees of ZAMECO II Electric Cooperative, Inc. (ZAMECO II)
occupying managerial and rank-and-file positions. They filed a case for illegal dismissal
from employment claiming that they were mere victims of a power struggle between the
two (2) factions fighting to control the management of ZAMECO II.
The Factual Antecedents relating to ZAMECO II:
On November 21, 2002, Castillejos Consumers Associations, Inc. (CASCONA), an
organization of electric consumers from the Municipality of Castillejos, Zambales under the
coverage area of ZAMECO II and represented by Engr. Dominador Gallardo, filed a letter-
complaint with the National Electrification Administration (NEA). The complaint sought to
remove the Board of Directors of ZAMECO II headed by the Board President, Jose S.
Dominguez, for mismanagement of funds and expiration of their term of office.
On November 24, 2004, the NEA issued a Resolution removing from office all the members
of the Board of Directors of ZAMECO II with perpetual disqualification to run for the same
position in any future district elections of the cooperative, and ordered the immediate
conduct of district elections. On December 21, 2004, the NEA issued an Office Order
designating Engr. Paulino T. Lopez as Project Supervisor of ZAMECO II who was tasked to
perform his duty until such time that a new set of Board of Directors shall have been
constituted.
The Board of Directors headed by Dominguez appealed to the CA on the ground that
Republic Act (R.A.) No. 9136, or the Electric Power Industry Reform Act (EPIRA), abrogated
the regulatory and disciplinary power of the NEA over electric cooperatives.
On February 7, 2005, the CA issued a Temporary Restraining Order (TRO) valid for sixty
(60) days enjoining the NEA and CASCONA from enforcing or implementing the
aforementioned NEA Resolution and Office Order. On April 5, 2005, a Writ of Preliminary
Injunction was issued by the CA. On October 4, 2006, the CA upheld the authority of the
NEA in the supervision of electric cooperatives such as ZAMECO II, and the power to
undertake preventive and/or disciplinary directors, measures against the board of
directors, officers and employees of electric cooperatives.
On March 22, 2007, the Board of Directors of ZAMECO II headed by Dominguez appealed
the CA Decision with this Court. They manifested that they had registered ZAMECO II as a
cooperative under the Cooperative Development Authority (CDA), and, thus, it was the
CDA which had regulatory powers over ZAMECO II.
Meanwhile, by virtue of the aforesaid NEA Resolution dated November 24, 2004, NEA
installed an Interim Board of Directors led by Gallardo as Interim President to function
within an un-extendible period of 100 days beginning November 10, 2008 until February
18, 2009.
On March 13, 2009, this Court promulgated its Decision (G.R. No. 176935-36)12 which held
that the passage of the EPIRA did not affect the power of the NEA particularly over
administrative cases involving the board of directors, officers and employees of electric
cooperatives.13 This Court further ruled that there was substantial evidence to justify the
penalty of removal from office imposed by NEA against the incumbent Board of Directors of
ZAMECO II.
With respect to the issue of ZAMECO II being under the regulatory powers of the CDA in
view of its registration, this Court declared that the matter could not then be adjudicated
yet. This Court stated that the EPIRA provides that an electric cooperative must first
convert into either a stock cooperative or stock corporation before it could register under
the CDA. This Court further stated that whether ZAMECO II complied with the provisions
particularly on the conduct of a referendum and obtainment of a simple majority vote prior
to its conversion into a stock cooperative, was a question of fact which this Court could not
then review. The evidence on record did not afford this Court sufficient basis to make a
ruling on the matter. Thus, this Court remanded the case to the CA. The dispositive portion
of the Decision reads:
WHEREFORE, the instant case is hereby REMANDED to the Court of Appeals for further
proceedings in order to determine whether the procedure outlined in Republic Act No.
9136, otherwise known as the Electric Power Industry Reform Act of 2001, and its
Implementing Rules for the conversion of an electric cooperative into a stock cooperative
under the Cooperative Development Authority had been complied with. The Court of
Appeals is directed to raffle this case immediately upon receipt of this Decision and to
proceed accordingly with all deliberate dispatch. Thereafter, it is directed to forthwith
transmit its findings to this Court for final adjudication. No pronouncement as to costs.
SO ORDERED.
On March 22, 2009, Republic Act No. 9520 otherwise known as the Philippine Cooperative
Code of 2008 took effect.
On April 28, 2009, NEA issued a Resolution reappointing the members of the Interim Board
Directors for 180 days or until the regular Board of Directors of ZAMECO II have been
elected and qualified.17chanrobleslaw
On June 22, 2009, the CDA through a Board Resolution, issued a confirmation as to the
registration of ZAMECO II. A Task Force for ZAMECO II was created headed by Atty.
Fulgencio A. Vigare, Jr., who was the CDA Administrator for Luzon and the Oversight
Administrator for Electric Cooperatives.18 The Task Force was created primarily to reinstate
the duly-recognized incumbent members of the board of directors who should perform
their functions until such time as elections were conducted, and their successors should
have been elected and qualified.
On August 27, 2009, the NEA Administrator recalled the designation of Engr. Lopez as
Project Supervisor of ZAMECO II effective September 1, 2009.
On September 1, 2009, Vigare issued a Memorandum stating that the CDA should assume
jurisdiction over ZAMECO II. It also stated that in the August 26, 2009 hearing of the House
of Representatives Committee on Cooperative Development (August 26, 2009 House
Committee Hearing), the NEA readily acceded that the CDA should assume jurisdiction
over ZAMECO II.21 It recognized the incumbent Board of Directors of ZAMECO II headed by
Dominguez and the Management Staff headed by General Manager Fidel S. Correa.
On September 19, 2009, a Special Annual General Membership Assembly was called and
conducted by the Interim Board of Directors headed by Gallardo.
In a letter dated October 12, 2009, NEA informed the Interim Board of Directors that their
previous reappointment for 180 days had expired on the said date.
On October 19, 2009, pursuant to the said Memorandum issued by Vigare, the CDA issued
a Resolution which created a team composed of the officers of the CDA. The team was
mandated to meet with the ZAMECO II management who was then headed by Gallardo to
talk about some issues and concerns; to pave the way for the conduct of the election of
officers; and to seek the opinion of the Department of Justice (DOJ) about the jurisdiction of
the CDA over electric cooperatives. The said Resolution was implemented through a
Special Order issued on October 20, 2009.
According to CASCONA, on October 22, 2009, Correa, who was installed by the CDA as
General Manager, and his companions entered the ZAMECO II premises and refused to
leave. Come night fall, members of the Philippine National Police (PNP) and security guards
assembled outside the gates of ZAMECO II but were not allowed inside the premises.
The next day, on October 23, 2009, the PNP members asked Gallardo, the Interim
President of the Board of Directors of ZAMECO II, for a discussion. When the latter opened
the gates, the PNP members and security guards forcefully entered the grounds of
ZAMECO II. The Interim Board of Directors did not surrender the management of ZAMECO II
to the group of Correa.
On October 24, 2009, Dominguez, who was installed as President of the Board by the CDA,
and two other former board members arrived at the ZAMECO II premises. Tensions only de-
escalated when the PNP members left the scene through the intervention of Governor
Amor Deloso.
On October 30, 2009, petitioners Mary Ann Venzon, Eddie Gutierrez, Jose Gutierrez, Jr.,
Correa and another employee filed a complaint for damages with the Regional Trial Court
(RTC) of Olongapo City with an application for a TRO and a writ of preliminary injunction
against the Interim Board of Directors and General Manager Engr. Alvin Farrales. On
November 24, 2009, a Preliminary Injunction was granted by the RTC28 and ordered the
Interim Board of Directors and General Manager Engr. Alvin Farrales to vacate their
positions, and prevented them from interfering in the performance of the functions of
General Manager Fidel S. Correa who was designated by the CDA.
On November 27, 2009, the CA annulled the aforesaid NEA Resolution dated April 28,
2009.
On February 15, 2010, the RTC of Olongapo City, set aside the Writ of Injunction it had
previously issued. The RTC took into consideration the Resolutions that were passed on
October 30, 2008 which were affirmed in the Annual General Assembly held on September
19, 2009, to wit: (1) Resolution removing Engr. Fidel S. Correa as OIC General Manager of
ZAMECO II and appointed Engr. Alvin Farrales as the Interim OIC General Manager; (2)
Resolution withdrawing and cancelling ZAMECO II's registration with the CDA and
recognizing the NEA as the regulatory agency; (3) Resolution recognizing the present
members of the Interim Board of Directors as legitimate and ratifying their continuance in
office until the next regular election.29 The dispositive portion of the RTC Order states:
WHEREFORE, in order to avoid the provocative effect in the catalytic change of the General
Manager and Members of the Board of Directors of Zameco II by the resolution of the
Cooperative Development Authority, the powers of which as alleged by the defendants'
counsel are not clearly defined by law insofar as appointment and removal of the General
Manager and Members of the Board of Directors are concerned, the Court finds merit in the
motion for reconsideration of the order dated November 19, 2009 and the writ of injunction
issued on November 24, 2009 pursuant to the said order is hereby set aside.
Consequently, and there being no legal and factual basis for the issuance of the writ of
injunction dated November 24, 2009, defendant Engr. Alvin Farrales and the other
defendants are hereby reinstated to their positions as General Manager and Members of
the Interim Board of Directors of Zameco II, respectively, x x x.
x x x. Ineluctably, plaintiff Fidel S. Correa is hereby ordered to vacate his position as
Manager of Zameco II and the other plaintiffs to desist from performing their duties and
functions as designated by the Cooperative Development Authority.
On June 16, 2010, this Court issued a Resolution in G.R. No. 176935-36,
thus:ChanRoblesVirtualawlibrary
The Court NOTES the Report dated 25 March 2010 submitted by Associate Justice Romeo E.
Barza of the Court of Appeals, Manila, in compliance with the Decision dated 13 March
2009 (which remanded these cases to the Court of Appeals for further proceedings to
determine whether the proceedings outlined in Republic Act No. 9136 (Electric Power
Industry Reform Act of 2001 or EPIRA) and its Implementing Rules for the conversion of an
electric cooperative under the Cooperative Development Authority had been complied
with), stating that in the hearing conducted by the appellate court on October 20, 2009, it
was aptly observed by respondents CASCONA and NEA that counsel for petitioners
categorically admitted that none of the requirements such as conduct of a referendum and
obtainment of a simple majority vote of its members to determine whether they agree to
convert into a stock cooperative or stock corporation were complied with, and that given
the said admissions, the appellate court cannot but conclude that petitioners failed to
prove compliance with the procedure outline[d] in the EPIRA and its Implementing Rules for
the conversion of an electric cooperative into a stock certificate under the CDA.
On September 24, 2010, the RTC of Olongapo City denied the motion of ZAMECO II to
declare the Order of February 15, 2010 immediately executory in view of the motion for
reconsideration filed by petitioners and Correa.
On October 20, 2014, this Court issued a Decision in G.R. Nos. 176935-3633 stating that
the NEA's power of supervision applies whether an electric cooperative remains as a non-
stock cooperative or opts to register with the CDA as a stock cooperative. This Court ruled:
x x x. This only means that even assuming arguendo that the petitioners validly registered
ZAMECO II with the CDA in 2007, the NEA is not completely ousted of its supervisory
jurisdiction over electric cooperatives under the R.A. No. 10531. This law may be
considered as curative statute that is intended to address the impact of a restructured
electric power industry under the EPIRA on electric cooperatives, which has not been fully
addressed by the Philippine Cooperative Code of 2008.
The Facts of the Case:
Petitioner Jose M. Gutierrez, Jr. was the Manager of Administrative and Personnel
Department of ZAMECO II and was hired on June 1, 2003. Petitioner Mary Ann Venzon was
the Manager of Member Service Department and had been with ZAMECO II since January
21, 1996. Petitioner Eddie Gutierrez was a member of the Operation and Disconnection
Team and was hired on April 29, 2002. Petitioner Monaliza L. Cabal was an accounting staff
and started working at ZAMECO II on August 1, 2001.
In a Memorandum dated September 2, 2009, OIC-General Manager Engr. Alvin Farrales
designated petitioner Gutierrez, Jr. as Officer-in-Charge of the cooperative during his official
travel to Manila on September 3, 2009.
On September, 3, 2009, the CDA authorities arrived in ZAMECO II to assume management
of the cooperative. This was opposed by the existing management of ZAMECO II.36 The
following day, September 4, 2009, Petitioner Gutierrez, Jr. issued a Memorandum for and in
behalf of Farrales directing the employees to proceed to the main office in compliance with
the directive of the CDA appointed officers. Thus, a meeting was held on the same date at
ZAMECO II's office in San Antonio led by CDA representatives. Petitioners Gutierrez, Jr.,
Venzon and Gutierrez participated in the said meeting.37 Also, several meetings were held
which were attended by employees and officers of ZAMECO II who allegedly defected to
the side of CDA appointed officers.
Likewise, on September 4, 2009, petitioners Venzon, Gutierrez and Gutierrez, Jr. were given
separate memoranda by Engr. Farrales directing them to explain why no disciplinary action
should be taken against them for failure to report for work on the said date and for
violating the Company Code of Ethics and Discipline and the Employees Code of
Conduct.39 The charges against them were: (a) attending unauthorized meetings,
gatherings or assembly of employees; (b) abandonment of work or of assigned duties; (c)
misrepresentation or usurpation of functions; (d) giving unlawful orders that create
confusion and disorder; (e) rumor mongering or gossiping with intent to destroy the
reputation of the company or its officers and employees; and/or (f) any act conduct or
behavior not included in the above but which is prejudicial or detrimental to the company
or its employees and/or contrary to good order or discipline.
Incidentally, petitioner Gutierrez, Jr. had undergone medical treatment from September 8
to September 28, 2009. He submitted medical certificates but did not file any application
for sick leave.41 He, together with petitioner Gutierrez, did not submit any explanation
with regard to the above charges.
On September 11, 2009, petitioner Venzon answered the above charges. She explained
that effective September 3, 2009 when CDA had assumed jurisdiction over ZAMECO II,
after a serious discernment, she recognized only the officers appointed by the CDA, who
were the ones dismissed by the NEA, and Fidel Correa as the General Manager. She further
averred:
2. Nevertheless, allow us to state our position on the issues you raised:
a. Unauthorized meeting/gathering or assembly of employees at sub-offices. The meeting
was called by the CDA representatives who have the mandate to conduct information
dissemination under the CDA Memorandum dated September 1, 2009 and we had no other
choice but to follow a lawful order.
b. Abandonment of work or assigned duties - Since the interim board (which has no legal
authority or power whatsoever) has virtually driven out of ZAMECO II's office premises the
legally-recognized management of the cooperative, we decided to report for work and
undertake our respective duties at their designated [workplace]. x x x
c. Misrepresentation or usurpation of functions xxx. It is the illegally-constituted interim
board that is usurping the functions of the CDA-recognized Board of Directors. In addition,
you are the one usurping the functions of General Manager Fidel S. Correa, while the other
cooperative staff you designated in our stead are the ones usurping our own functions as
Department Managers.
d. Giving unlawful orders that create confusion and disorder - xxx; It is you and the interim
board that are giving unlawful orders on account of your lack of legal basis to continue
performing such functions, regrettably.
e. Rumor mongering or gossiping with intent to destroy the reputation of the company or
its officers and employees - xxx. Openly discussing the more than P17M net losses of the
cooperative incurred for only the six-month period January to June 2009 that were
registered under the watch of the interim board and yourself, and talking about the true
state of validity of the registration of Zameco II with CDA are legitimate issues.
f. Any act, conduct or behavior not included in the above but which is prejudicial or
detrimental to the company or its employees and/or contrary to good order or discipline,
etc. Your inclusion of this "offense" among those that we need to explain merely exposes
your lack of knowledge and competence on general management. x x
x42chanroblesvirtuallawlibrary
Petitioner Cabal stopped reporting for work starting September 13, 2009.
On September 18, 2009, Farrales issued a Memorandum to the security personnel to deny
entry to petitioners Gutierrez, Jr, Gutierrez and Venzon and four other persons including
Engr. Correa, and to not allow them to report for work.43chanrobleslaw
On September 22, 2009, Farrales issued several memoranda: a) for petitioner Venzon to
return the laptop computer and other equipment entrusted to her; b) for petitioner
Gutierrez to answer the charges against him; c) for petitioners Venzon, Jose Gutierrez, Jr.,
and Gutierrez placing them under preventive suspension pending investigation by the
Investigation and Appeals Committee (IAC).44chanrobleslaw
Also, on September 22, 2009, a Memorandum was sent to petitioner Cabal to explain in
writing why no disciplinary action should be taken against her for violating the Company
Code of Ethics and Discipline particularly on the unauthorized and unexcused absence
from work which exceeded six (6) consecutive days.45 On September 24, 2009, she was
directed to appear before the IAC but she stated that she was banned from entering the
premises. She submitted a Memorandum claiming that she had not abandoned her work,
and that she believed that she had not incurred any unauthorized and unexcused absences
from work exceeding six consecutive days on the basis of what she believed was "right and
legal".46 She was again required to appear, for the last time, on September 29, 2009 but
she replied through a letter that she couldn't do so because of the existing ban for her
from entering the main office of ZAMECO II.47 On October 1, 2009, she made a written
manifestation to Engr. John Regadio that she did not recognize the authority of the IAC, and
that the Interim Board of Directors was not cloth with any authority, such that, their actions
were illegal.48chanrobleslaw
On October 27, 2009, upon the recommendation of the IAC in a meeting on October 22,
2009, petitioners were dismissed from employment. The order of dismissal was served to
them on November 20, 2009 but they refused to receive the same.49chanrobleslaw
On November 23, 2009, petitioners Venzon and Gutierrez jointly filed a complaint for illegal
dismissal, illegal suspension, non-payment of 13th month pay, damages payment of
allowances. On January 5, 2010, petitioners Gutierrez, Jr. and Cabal jointly filed the same
complaint.
During the mandatory conference, a Manifestation and Motion was filed by Correa stating
that petitioners were already reinstated to their respective positions by him as the CDA-
recognized and recently reinstated General Manager of ZAMECO II commencing on October
20, 2009 with Board Resolution dated November 14, 2009, and that the Interim Board
Members and the OIC General Manager were prohibited from meddling with the operations
of ZAMECO II by virtue of the writ of preliminary injunction issued by the RTC of Olongapo
City. Various checks issued in the names of petitioners dated January 2010 and February
2010, signed by Dominguez as President and by Correa as General Manager of ZAMECO II,
were presented.
On the other hand, Farrales submitted his Comment stating that the action of the CDA in
assuming jurisdiction over ZAMECO II was a unilateral act on the part of Vigare; and that,
Farrales' appointment as General Manager was still subsisting and recognized by the Board
of Directors of ZAMECO II.50chanrobleslaw
On August 11, 2009, an Order was issued by LA Leandro M. Jose suspending the resolution
of the incident.51chanrobleslaw
On January 21, 2011, the LA issued a Decision declaring petitioners to have been illegally
dismissed from employment. The LA held that though the evidence may, at first glance,
shows compliance with the notice requirement of procedural due process, the same failed
to show that petitioners were indeed guilty of violations of the cooperative's Code of Ethics
and Discipline. According to the LA, the Investigation Reports and Recommendations were
noticeably undated which gave rise to a suspicion that it was conveniently intercalated to
give basis to the memorandum of dismissal, and that, the supporting documents were not
attached to the said reports.
Thereafter, respondents elevated the case before the NLRC Third Division. On September
30, 2011, the NLRC ruled that the termination of petitioners from employment was valid,
but in view of their reinstatement, it dismissed the case for being moot and academic,
thus:
We rule that the said Manifestation and Motion has rendered this case moot and academic.
Notably, when complainants were suspended on September 23, 2009 and dismissed on
October 27, 2009 by OIC-General Manager Farrales, he appears to have the authority to do
so. This is because at that point in time, the CDA has already assumed jurisdiction over
ZAMECO II and has recognized the incumbent Board of Directors headed by Jose S.
Dominguez and the management staff under General Manager Correa. The NEA has (sic)
apparently gave way to CDA as shown by its recall order of Engr. Lopez as Project
Supervisor of ZAMECO II effective 1 September 2009 and its letter stating that the
reappointment/appointment of the interim board headed by Gallardo has expired on
October 12, 2009. Besides, on April 28, 2009, the NEA Board of Administrators' Resolution
(reappointing as members of Interim Board of Directors for 180 days or sooner when the
regular Board of Directors of ZAMECO II has been duly elected and qualified) was annulled
and set aside by the Court of Appeals' Special Sixteenth Division in its Decision dated
November 27, 2009 in CA-G.R. SP No. 108553. The records of this case is bereft of any
showing that said Decision was assailed before the Supreme Court.
x x x. Unless the issue as to which of the Board of Directors and/or management have
authority to control the affairs of ZAMECO II is legally settled with clarity and finality, we
uphold the right of the complainants to remain in their employment with ZAMECO II and
accordingly, receive their salaries and benefits. The grounds (serious misconduct, breach
of trust, willful disobedience, etc.) relied upon by Engr. Farrales for suspending and
dismissing the complainants are essentially anchored on his and the Interim Board's
authority, which authority the complainants believe they do not possess. And, we have no
jurisdiction to rule on the same.
Respondent ZAMECO II filed a Motion for Reconsideration. On March 26, 2012, the NLRC
Special Third Division held that there was no valid reinstatement of petitioners hence the
case has not been mooted:
It is thus clear that as of February 15, 2010, Engr. Alvin Farrales and no longer Fidel S.
Correa was the General Manager of herein respondent-appellant Zameco II and therefore
Fidel S. Correa's Manifestion and Motion filed on February 18, 2010 which sought the
dismissal of these consolidated cases since herein complainants-appellees were allegedly
reinstated earlier should not have made these cases moot and academic since as of
February 15, 2010, he already lost his standing and authority to do anything in connection
with these cases.
We therefore reconsider and set aside Our having, thus, dismissed these cases and
proceed to resolve the issue in this case.53chanroblesvirtuallawlibrary
The NLRC Special Third Division54 ruled, however, that there was valid dismissal of
petitioners because, instead of playing neutral, they embroiled themselves in the ongoing
corporate dispute. Hence, it set aside its Decision dated September 30, 2011 and
dismissed case the case for lack of merit. The decretal portion of the Decision states:
WHEREFORE, the Motion for Reconsideration of respondents-appellants is hereby
GRANTED. Our Decision dated September 30, 2011 is hereby reconsidered and SET ASIDE
and a new one entered dismissing the case a quo for lack of merit.
SO ORDERED.
Aggrieved, petitioners filed a petition for certiorari before the CA. In a Decision dated July
31, 2014, the CA affirmed the Decision of the NLRC. It held that the petitioners failed to
substantiate their claim, or point to a specific act on the part of the NLRC that can be
construed as amounting to grave abuse of discretion.
Hence, the instant Petition, wherein petitioners make the following assignment of errors:
THE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS' PETITION FOR REVIEW ON
CERTIORARI ON THE GROUND THAT THEY FAILED TO SUBSTANTIATE THEIR CLAIM THAT THE
NLRC ACTED ARBITRARILY IN CONCLUDING THAT THEIR TERMINATION FROM EMPLOYMENT
WAS IN ACCORDANCE WITH LAW CONTRARY TO LAW AND JURISPRUDENCE; [and]
THE COURT OF APPEALS FAILED TO CONSIDER AS AN ACT OF ABUSE OF DISCRETION THE
GRANTING OF PRIVATE RESPONDENTS' MOTION FOR RECONSIDERATION BY THE NLRC
WHEN SUCH MOTION WAS BASED ON THE MISLEADING AND INCOMPLETE INFORMATION
GIVEN BY THE PRIVATE RESPONDENTS.56
Petitioners argued in their petition that the NLRC acted with grave abuse of discretion
when it treated the Order dated February 15, 2010 of RTC Olongapo City as final and
executory. Petitioners cited the fact that there is a pending appeal before this Court as to
the execution of the said Order in GR No. 199828. They alleged that without any finality on
who has the control of ZAMECO II because of the pending cases with this Court, they could
not be faulted for following orders of the other faction.
In their Comment,57 respondents alleged that the petition should not be given due course
because it raises questions of fact which is not allowed under Rule 45 of the Rules of Court.
They also showed the dismissal of the case before the RTC Olongapo City upon the
initiative of both parties.58 And that, the dismissal of the case settled the issue of
injunction.
Our Ruling
There are two issues that have to be resolved in this case, to wit: a) whether or not Engr.
Farrales of the Interim Board of Directors of ZAMECO II had the authority to suspend and
dismiss petitioners from employment; and, b) whether petitioners where validly terminated
from employment.
To resolve the first issue, We need to determine who between the two factions - the NEA
appointed General Manager Engr. Farrales or the CDA installed General Manager Engr.
Correa - had the authority to manage the affairs of ZAMECO II for the period from
September 4, 2009, when the first memorandum was issued to petitioners, until October
27, 2009, when petitioners were dismissed from employment.
We have clarified this in our Decision in CASCONA v. Dominguez,59 thus:
In the case at bench, the respondents committed several acts which constituted indirect
contempt. The CDA issued the September 1, 2009 Memorandum stating that it had
jurisdiction over ZAMECO II and could reinstate the former members of the Board of
Directors. The CDA officials also issued Resolution No. 262, S-2009 and Special Order 2009-
304 to interfere with the management and control of ZAMECO II. Armed with these
issuances, the other respondents even tried to physically takeover ZAMECO II on October
22,2009. These acts were evidently against the March 13, 2009 decision of this Court and,
thus, constituted indirect contempt against the Court. These contemptuous acts are
criminal in nature because these obstruct the administration of justice and tend to bring
the court into disrepute or disrespect. x x x.
xxxx
x x x. [T]he March 13, 2009 decision should not be taken in isolation. A perusal of the said
decision shows that there were several pronouncements which must be respected and
obeyed, to wit: first, the CA shall make a factual determination as to the propriety of
ZAMECO II's registration with the CDA; second, the continuing jurisdiction of the Court, as
the case is not yet final and executory; and lastly, that there is substantial evidence to
justify the removal from office of respondents Dominguez, et al.
Precisely, the Court remanded the case to the CA to determine whether ZAMECO II was
properly registered as a stock cooperative under the CDA. Until the CA properly had
ascertained such fact, the Court could not determine conclusively that the CDA had
supervisory powers over ZAMECO II. The parties were then expected to maintain status
quo and refrain from doing any act that would pre-empt the final decision of the Court.
Hence, the Court continued to exercise its jurisdiction in G.R. Nos. 176935-36 until a final
decision was promulgated. The respondents, however, unreasonably interfered with the
proper procedure mandated by the Court when they decided for themselves that the CDA
had jurisdiction over ZAMECO II. This constituted a contemptuous act because it unlawfully
interfered with the processes or proceedings of a court.
Worse, the respondent-officials of the CDA, fully aware of the Court's pronouncement,
attempted to reinstate respondents Dominguez, et al. despite the existence of substantial
evidence that warrant the latter's removal from office. Glaringly, this grave allegation was
never refuted by the respondents, Dominguez, et al. were found unfit to hold office yet the
respondents relentlessly endeavored to return them to the seat of power in ZAMECO II.
This blatant disregard of the March 13, 2009 decision of the Court is an improper conduct
that impedes, obstructs, or degrades the administration of justice.
The respondents justify their acts by stating that in the August 26, 2009 House Committee
Hearing, the NBA acceded to the jurisdiction of the CDA over ZAMECO II. This contention,
however, is completely unsubstantiated. Notably, respondents Esguerra and Apalisok
admitted that the creation of a task force to take over ZAMECO II would place dire
consequences against the CDA. Even CDA Regional Director Manuel A. Mar doubted that
the NEA consented to the authority of the CDA over ZAMECO II.
Indeed, the October 20, 2014 decision of the Court in G.R. Nos. 176935-36 conclusively
settled that it is NEA, and not the CDA, that has jurisdiction and disciplinary authority over
ZAMECO II. The substantial issues of the case have now been laid to rest. The Court,
however, cannot turn a blind eye to the contemptuous acts of the respondents during the
pendency of the case. If the Court condones these acts of interference and improper
conduct, it would set a dangerous precedent to future litigants in disregarding the
interlocutory orders and processes of the Court.
Clearly, from the above pronouncement, during the period material to this case, the
Interim Board of Directors of ZAMECO appointed by the NEA had the jurisdiction and
disciplinary authority over ZAMECO II. Thus, Engr. Farrales, as General Manager, had the
authority to suspend and dismiss petitioners.
We go now to the second issue as to whether the petitioners were validly dismissed from
employment. The right to security of tenure states that no employee shall be dismissed
unless there are just or authorized causes and only after compliance with procedural and
substantive due process. Article 279 of the Labor Code provides for this right, thus:
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 of 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.
Hence, a lawful dismissal must meet both substantive and procedural requirements; in
fine, the dismissal must be for a just or authorized cause and must comply with the
rudimentary due process of notice and hearing. Article 282 of the Labor Code provides the
just causes for dismissing an employee, 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;
(e) Other causes analogous to the foregoing.
Serious misconduct by the employee justifies the employer in terminating his or her
employment.
Misconduct is defined as an improper or wrong conduct. It is a transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. To constitute a valid
cause for the dismissal within the text and meaning of Article 282 of the Labor Code, the
employee s misconduct must be serious i.e., of such grave and aggravated character and
not merely trivial or unimportant.
Additionally, the misconduct must be related to the performance of the employees duties
showing him to be unfit to continue working for the employer. Further, and equally
important and required, the act or conduct must have been performed with wrongful
intent.
In the case at bar, General Manager Farrales, himself, designated petitioner Gutierrez, Jr. as
Officer-in-Charge of the cooperative during his official travel to Manila on September 3,
2009. But when the CDA authorities arrived in ZAMECO II to assume management of the
cooperative which was opposed by the existing management of ZAMECO II, petitioner
Gutierrez, Jr. issued a Memorandum, allegedly signed on behalf of Farrales, directing the
employees to proceed to the main office in compliance with the directive of the CDA
appointed officers. Hence, a meeting was held on the same date at the cooperative's office
in San Antonio led by CDA representatives. Petitioners Gutierrez, Jr., Venzon and Gutierrez
participated in the said meeting.
Petitioners obviously aligned themselves with the former Board of Directors led by
Dominguez in trying to wrest control of the management of ZAMECO II. In deciding to get
involved in the power play, petitioners relinquished their duties as employees. They defied
the instructions and directives of the Interim Board of Directors as well as that of the
General Manager. Instead, they followed the instructions of the Board of Directors and
officers designated by the CDA. They even filed a civil action against Farrales and the
Interim Board of Directors.
Petitioners did not participate in the proceedings before the IAC because they did not
recognize its authority. It was the officers designated by the CDA whom they recognize.
Their acts definitely undermined the existence of the cooperative.
Under these factual premises, We cannot help but consider the petitioners' misconduct to
be of grave and aggravated character so that the cooperative was justified in imposing the
highest penalty available dismissal. In ruling as We do now, We considered the
balancing between petitioners' tenurial rights and ZAMECO II's interests. Unfortunately for
the petitioners, in this balancing under the circumstances of the case, we have to rule
against their tenurial rights in favor of the employer's management rights.
As correctly held by the NLRC Special Third Division, thus:
What is important, as shown by the records, is that complainants-appellees Venzon, Jose
Gutierrez, Jr. and Eddie Gutierrez burned their bridges when they not only sided with the
group of Fidel S. Correa but also fought with them as actual complainants-appellees in their
effort at wrestling control over ZAMECO II and its interim board headed by Engr. Alvin
Farrales.
This is shown by the fact that instead of playing neutral, they, along with Correa, instituted
Civil Case No. 163-0-2009 with the Regional Trial Court of Olongapo City against Farrales to
remove him as the rightful General Manager of Zameco II. Complainants-appellees
embroiled themselves in the ongoing corporate dispute instead of being neutral.
Furthermore, Article 296(c) states that loss of trust and confidence in the employee is a
just cause for dismissal. But it will validate an employee's dismissal only upon compliance
with certain requirements, namely: (1) the employee concerned must be holding a position
of trust and confidence; and (2) there must be an act that would justify the loss of trust
and confidence.
Loss of trust and confidence to be a valid cause for dismissal must be work related such as
would show the employee concerned to be unfit to continue working for the employer and
it must be based on a willful breach of trust and founded on clearly established facts. Such
breach is willful if it is done intentionally, knowingly, and purposely, without justifiable
excuse as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently. The loss of trust and confidence must spring from the voluntary or willful act
of the employee, or by reason of some blameworthy act or omission on the part of the
employee.65chanrobleslaw
While loss of trust and confidence should be genuine, it does not require proof beyond
reasonable doubt, it being sufficient that there is some basis to believe that the employee
concerned is responsible for the misconduct and that the nature of the employees
participation therein rendered him unworthy of trust and confidence demanded by his
position.66chanrobleslaw
There are two classes o f positions of trust. First, are the managerial employees whose
primary duty consists of the management of the establishment in which they are employed
or of a department or a subdivision thereof, and to other officers or members of the
managerial staff. The second class consists of the fiduciary rank-and-file employees, such
as cashiers, auditors, property custodians, or those who, in the normal exercise of their
functions, regularly handle significant amounts of money or property. These employees,
though rank-and-file, are routinely charged with the care and custody of the employer's
money or property, and are thus classified as occupying positions of trust and confidence.
It is undisputed that at the time of their dismissal, the petitioners Gutierrez, Jr. and Venson
were holding managerial positions and greater fidelity and trust were expected of them.68
Farrales even designated petitioner Gutierrez, Jr. as Officer-in-Charge of ZAMECO II during
his official travel to Manila. Their positions were unmistakably imbued with trust and
confidence as they were charged with the delicate task of overseeing the operations of
their divisions. As managers, a high degree of honesty and responsibility, as compared
with ordinary rank-and-file employees, were required and expected of them.
It need not be stressed that the nature or extent of the penalty imposed on an erring
employee must be commensurate to the gravity of the offense as weighed against the
degree of responsibility and trust expected of the employee's position. Petitioners
Gutierrez, Jr. and Venson are not just charged with a misdeed, but with loss of trust and
confidence, a cause premised on the fact that petitioners Gutierrez, Jr. and Venzon hold
positions whose functions may only be performed by someone who enjoys the trust and
confidence of the management. Needless to say, such an employee bears a greater burden
of trustworthiness than ordinary workers, and the betrayal of the trust reposed is the
essence of the loss of trust and confidence which is a ground for the employee's dismissal.

As to the standards of procedural due process, the same were likewise observed in
effecting the petitioner's dismissal. Petitioners were given written memorandum to inform
them of the charges against them as well as notices of termination in accordance with
Section 2, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code.

In protecting the rights of the workers, the law, however, does not authorize the oppression
or self-destruction of the employer. The constitutional commitment to the policy of social
justice cannot be understood to mean that every labor dispute shall automatically be
decided in favor of labor. The constitutional and legal protection equally recognizes the
employer's right and prerogative to manage its operation according to reasonable
standards and norms of fair play.

Finally, in labor cases, a Rule 45 petition is limited to reviewing whether the CA correctly
determined the presence or absence of grave abuse of discretion and deciding other
jurisdictional errors of the NLRC. In this case, the CA is correct in ruling that the NLRC
cannot be faulted for grave abuse of discretion amounting to excess or lack of jurisdiction
in concluding that, indeed, petitioners were validly dismissed from their employment. After
all, grave abuse of discretion implies a capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or, when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility; and it must be so patent and gross as to
amount to an evasion of positive duty enjoined or to act at all in contemplation of law.71
Such is not present in this case.

WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP No. 125798, dated July 31, 2014, is hereby AFFIRMED.

SO ORDERED.chanR
FIRST DIVISION
G.R. No. 219430, November 07, 2016
JINKY S. STA. ISABEL, Petitioner, v. PERLA COMPAIA* DE SEGUROS, INC.,
Respondent.
Assailed in this petition for review on certiorari1 are the Decision2 dated March 25, 2015
and the Resolution3 dated June 15, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.
134676, which nullified and set aside the Decision4 dated December 26, 2013 and the
Resolution5 dated February 27, 2014 of the National Labor Relations Commission (NLRC) in
NLRC LAC No. 06-001823-13 and, accordingly, reinstated the Decision6 dated April 10,
2013 of the Labor Arbiter (LA) in NLRC NCR Case No. 12-17463-12 finding petitioner Jinky
S. Sta. Isabel (Sta. Isabel) to have been validly dismissed from employment by respondent
Perla Compaia de Seguros, Inc. (Perla).
The Facts
On February 27, 2006, Perla, a corporation engaged in the insurance business hired Sta.
Isabel as a Claims Adjuster with the task of handling and settling claims of Perla's Quezon
City Branch (QC Branch). Later on, Perla discovered that Sta. Isabel owned a separate
insurance agency known as JRS Insurance Agency (JRS). To avoid conflict of interests, Perla
instructed its QC Branch manager to: (a) allow the licensing of JRS as a licensed agent of
the QC Branch at the soonest time possible; and (b) forward all claims coded under JRS to
Perla's Claims Department at the Head Office for processing, evaluation, and approval.7
Pending the resolution of the JRS issue, Sta. Isabel received a Notice to Explain8 dated
October 19, 2012 why no disciplinary action should be taken against her for her poor
services towards the clients of PAIS Insurance Agency (PAIS), to which she submitted her
written explanation.9 On October 29, 2012, Sta. Isabel attended a meeting with Perla's
officers concerning the JRS and PAIS incidents. On even date, Perla issued a Report on
Status of the Hearing for Jinky Sta. Isabel10 wherein it resolved the foregoing incidents by
agreeing that: (a) claims under JRS shall be approved by the Head Office; and (b) claims
under PAIS will be transferred to the Head Office for processing.11
On November 9, 2012, Sta. Isabel received another Notice to Explain12 why no disciplinary
action should be taken against her for her poor services towards the clients of Ricsons
Consultants and Insurance Brokers, Inc. (Ricsons). In view of Sta. Isabel's failure to submit
a written explanation and to appear before the Head Office to explain herself, Perla issued
a Final Written Warning13 dated November 22, 2012 to be more circumspect with her
claims servicing, with a stem admonition that "any repetition of the same offense or any
acts analogous to the foregoing shall be dealt with more severely and shall warrant drastic
disciplinary action including the penalty of Termination in order to protect the interest of
the company."14 On even date, Perla likewise issued a Final Directive to Report to Head
Office15 instructing Sta. Isabel to report to the Head Office and explain her alleged refusal
to receive the afore-cited Final Written Warning.
On November 26, 2012, Perla issued the following to Sta. Isabel: (a) a Notice to Explain16
why no disciplinary action should be taken against her for failing to report to the Head
Office despite due notice; and (b) a Notice of Termination17 dismissing Sta. Isabel from
employment on the ground of insubordination. Consequently, Sta. Isabel filed the instant
complaint18 for: (a) illegal dismissal; (b) underpayment of wages; (c) non-payment of
overtime pay, service incentive leave pay, accrued leave pay, and 13th to 16th month pay;
(d) retirement pay benefits under the corporation's Provident Fund; (e) actual, moral, and
exemplary damages; and (f) attorney's fees against Perla before the NLRC.19 In relation to
her claim for illegal dismissal, Sta. Isabel prayed for the grant of separation pay and
backwages, maintaining that there is already strained relations between her and Perla
which would render reinstatement impossible.20
In support of her complaint, Sta. Isabel claimed that Perla could no longer use the PAIS and
Ricsons incidents against her, considering that she was already penalized with multiple
warnings to be more circumspect with her claims servicing. She likewise alleged that after
receipt of the Final Directive to Report to Head Office dated November 22, 2012, she met
with Renato Carino (Carino), Perla's Vice-President for Operations,21 albeit not at the Head
Office, but at a nearby restaurant where Carino himself instructed her to proceed. At the
restaurant, Carino asked Sta. Isabel if she would voluntarily resign over the Ricsons
incident, to which the latter replied that the incident had already been dealt with. Finally,
Sta. Isabel concluded that Perla was bent on easing her out of work, pointing out that the
Notice to Explain and Notice of Termination regarding her alleged insubordination was
dated on the same day.22
In its defense, Perla maintained that it validly terminated Sta. Isabel's employment on the
ground of insubordination. It averred that since Sta. Isabel did not submit any written
explanation regarding the Notice to Explain dated November 9, 2012 (pertaining to the
Ricsons incident), it was constrained to issue the Final Written Warning dated November
22, 2012, which Sta. Isabel refused to accept. Carino then called her via telephone to get
an explanation and, thereafter, sent a Final Directive to Report to Head Office. Instead of
reporting at the Head Office, Sta. Isabel requested for an informal meeting with Carino at a
restaurant as she did not want to see the faces of the other officers. Thereat, Carino asked
Sta. Isabel if she was willing to voluntarily retire, and at the same time, reminded her to
report to the Head Office. In view of Sta. Isabel's recalcitrance in complying with the
aforesaid directives, Perla issued a Notice to Explain dated November 26, 2012 charging
Sta. Isabel of insubordination. On November 27, 2012, Perla received a letter23 from Sta.
Isabel saying that she will only report to the Head Office if Perla's President, Operations
Head, Assistant Vice President, Human Resources Manager, and QC Branch Manager will all
be present for a meeting/conference to clear all issues surrounding her. Thus, on November
28, 2012, Perla terminated Sta. Isabel's employment on the ground of insubordination. In
this regard, Perla explained that due to a typographical error, it "wrongly" indicated
November 26, 2012 as the date of issuance of Sta. Isabel's Notice of Termination instead of
November 28, 2012.24
The LA Ruling
In a Decision25 dated April 10, 2013, the Labor Arbiter (LA) dismissed the complaint for
lack of merit, but nevertheless, ordered Perla to pay Sta. Isabel the amounts of P8,778.00
and P7,442.30 representing her unpaid salary and service incentive leave pay,
respectively.26
The LA found that since Perla's directives for Sta. Isabel to appear before the Head Office
were in connection with the administrative proceedings against the latter, her refusal to
comply therewith was not tantamount to willful disobedience or insubordination. At the
most, it only amounted to a waiver of her opportunity to be heard in said proceedings.
Nevertheless, the LA found just cause in terminating Sta Isabel's employment, opining that
her disrespectful language in her letter dated November 27, 2012 not only constitutes
serious misconduct, but also insubordination as it showed her manifest refusal to
cooperate with Perla.27
Aggrieved, Sta. Isabel appealed28 to the NLRC.
The NLRC Ruling
In a Decision29 dated December 26, 2013, the NLRC granted Sta. Isabel's appeal and,
accordingly, ordered Perla to pay her separation pay, backwages, benefits under the
Provident Fund, 14th month pay, and attorney's fees equivalent to 10% of all the monetary
awards.30
The NLRC held that Sta. Isabel's refusal to report to the Head Office was not willful
disobedience, considering that the directives were in connection with the administrative
proceedings against her and, as such, her failure to appear was only tantamount to a
waiver of her opportunity to be heard. Hence, she cannot be dismissed on such cause,
which incidentally, was the sole ground for her termination as stated in the Notice of
Termination. In this relation, the NLRC ruled that the LA could not use Sta. Isabel's
November 27, 2012 letter as a ground for her termination as Perla itself did not invoke the
same in the first place. Even assuming that the letter may be used as evidence against
Sta. Isabel, the NLRC held that a careful perusal thereof would show that it was not
discourteous, accusatory, or inflammatory. At the most, the language in the letter would
show that Sta. Isabel had written it out of confusion and frustration over the matter the
administrative proceedings against her were being handled, and not out of defiance and
arrogance.31 In sum, the NLRC concluded that Sta. Isabel's dismissal was without just
cause, hence, unlawful.32
Upon Perla's motion for reconsideration,33 the NLRC issued a Resolution34 dated February
27, 2014 affirming its Decision with modification deleting the award of benefits under the
Provident Fund. Dissatisfied, Perla filed a petition for certiorari35 before the CA.
The CA Ruling
In a Decision36 dated March 25, 2015, the CA nullified and set aside the NLRC ruling, and
reinstated that of the LA.37 Essentially, it held that the NLRC gravely abused its discretion
in failing to appreciate the evidence showing Sta. Isabel's sheer defiant attitude on the
orders of Perla and its officers.38 In this regard, the CA held that Sta. Isabel's conduct
towards Perla's officers by deliberately ignoring the latter's directives for her to appear
before the Head Office, coupled with her letter dated November 27, 2012, constitutes
insubordination or willful disobedience.39 Thus, the CA concluded that Sta. Isabel's
dismissal was valid, it being a valid exercise of management prerogative in dealing with its
affairs, including the right to dismiss its erring employees.40
Undaunted, Sta. Isabel moved for reconsideration,41 which was, however, denied in a
Resolution42 dated June 15, 2015; hence, this petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA correctly ascribed
grave abuse of discretion on the part of the NLRC in ruling that Sta. Isabel's dismissal was
illegal.
The Court's Ruling
The petition is meritorious.
To justify the grant of the extraordinary remedy of certiorari, the petitioner must
satisfactorily show that the court or quasi-judicial authority gravely abused the discretion
conferred upon it. Grave abuse of discretion connotes a capricious and whimsical exercise
of judgment, done in a despotic manner by reason of passion or personal hostility, the
character of which being so patent and gross as to amount to an evasion of positive duty
or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of
law.43
In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia,
its findings and conclusions are not supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.44
Guided by the foregoing considerations, the Court finds that the CA committed reversible
error in granting Perla's certiorari petition considering that the NLRC's finding that Sta.
Isabel was illegally dismissed from employment is supported by substantial evidence.
As may be gleaned from the records, Sta. Isabel received a total of three (3) Notices to
Explain dated October 19, 2012,45 November 9, 2012,46 and November 26, 2012.47
In the Notice to Explain dated October 19, 2012, Sta. Isabel was charged with serious
misconduct for her poor services towards the clients of PAIS.48 After Sta. Isabel submitted
her written explanation and attended the corresponding meeting, Perla resolved the
matter through a Report on Status of the Hearing for Jinky Sta. Isabel49 dated October 29,
2012 wherein she was penalized with a "VERBAL WARNING to improve on the claims
servicing of clients in QC Branch."50 Thus, the proceedings with regard to the PAIS incident
should be deemed terminated.
In the Notice to Explain dated November 9, 2012, Sta. Isabel was charged with serious
misconduct and gross neglect of duty for her poor services towards the clients of
Ricsons.51 Notwithstanding Sta. Isabel's failure to submit her written explanation despite
due notice, Perla went ahead and resolved the matter anyway in the Final Written
Warning52 dated November 22, 2012 wherein it penalized her with a "FINAL WARNING to
be more circumspect in [her] claims servicing with agents, brokers, and assureds" with an
admonition that "any repetition of the same offense or any acts analogous to the foregoing
shall be dealt with more severely and shall warrant drastic disciplinary action including the
penalty of Termination in order to protect the interest of the company."53 Hence, Perla's
issuance of the Final Written Warning should have likewise terminated the administrative
proceedings relative to the Ricsons incident.
Finally, in the Notice to Explain dated November 26, 2012, Perla charged her of willful
disobedience for her failure to appear before the Head Office despite due notice.54 In the
Notice of Termination55 of even date - although Perla insists that the date indicated therein
was a mere typographical error and that it was actually made on November 28, 201256 -
Sta. Isabel was terminated from work on the ground o insubordination.57
Since Sta. Isabel was actually dismissed on the ground of insubordination, there is a need
to determine whether or not there is sufficient basis to hold her guilty on such ground.
Insubordination or willful disobedience, is a just cause for termination of employment listed
under Article 297 (formerly Article 282) of the Labor Code,58 to wit:
Article 297282. 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;
xxxx
Willful disobedience or insubordination, as a just cause for the dismissal of an employee,
necessitates the concurrence of at least two (2) requisites, namely: (a) the employee's
assailed conduct must have been willful, that is, characterized by a wrongful and perverse
attitude; and (b) 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.59
In this case, a plain reading of the Notice to Explain and Notice of Termination both dated
November 26, 2012 reveals that the charge of insubordination against Sta. Isabel was
grounded on her refusal to report to the Head Office despite due notice. While Perla's
directives for Sta. Isabel to report to the Head Office indeed appear to be reasonable,
lawful, and made known to the latter, it cannot be said that such directives pertain to her
duties as a Claims Adjuster, i.e., handling and settling claims of Perla's Quezon City Branch,
regardless of whether her refusal to heed them was actually willful or not. The aforesaid
directives, whether contained in the Notice to Explain dated November 9, 2012 or the Final
Directive to Report to Head Office dated November 22, 2012, all pertain to Perla's
investigation regarding the Ricsons incident and, thus, were issued in compliance with the
requisites of procedural due process in administrative cases. Otherwise stated, such
directives to appear before the Head Office were for the purpose of affording Sta. Isabel an
opportunity to be heard regarding the Notice to Explain dated November 9, 2012.60 As
correctly pointed out by the labor tribunals, Sta. Isabel's failure or refusal to comply with
the foregoing directives should only be deemed as a waiver of her right to procedural due
process in connection with the Ricsons incident, and is not tantamount to willful
disobedience or insubordination.
Besides, contrary to Perla's claim that it could not wrap up its investigation on the Ricsons
incident due to Sta. Isabel's continuous disregard of said directives,61 the Final Written
Warning dated November
22, 2012 indubitably shows that Perla had already taken care of the Ricsons complaint
despite Perla's non-cooperation. To recapitulate, the Final Written Warning stated that
Perla: (a) took into consideration Sta. Isabel's refusal to appear before the Head Office or to
submit her written explanation; (b) deemed such refusal as a waiver of her opportunity to
be heard; and (c) resultantly resolved the matter by penalizing Sta. Isabel with, among
others, a "FINAL WARNING to be more circumspect in [her] claims servicing with agents,
brokers[,] and assureds."62 Clearly, Perla cannot base the charge of insubordination
against Sta. Isabel in her refusal to report to the Head Office in connection with the Ricsons
complaint.
As an additional basis for Sta. Isabel's alleged insubordination, Perla argues that Sta.
Isabel's letter63 dated November 27, 2012 signifies her outright defiance of management
authority, considering that as an employee, she had no right to impose conditions on
management on when and what circumstances she would explain her side.64
The Court finds the argument untenable and simply an afterthought to put some
semblance of legality to Sta. Isabel's dismissal.
A careful examination of the records reveals that Perla already issued Sta. Isabel's Notice
of Termination on November 26, 2012 the same day the Notice to Explain charging her of
insubordination was issued - even before Sta. Isabel wrote them the letter dated November
27, 2012. Evidently, Perla never took this letter into consideration in dismissing Sta. Isabel.
In an attempt to cover up this mishap, Perla claimed that the date indicated on the Notice
of Termination was only a typographical error, as it was actually issued on November 28,
2012, even presenting the private courier receipt65 showing that it was only sent to Sta.
Isabel on the latter date. While such private courier receipt indeed shows the date when
the Notice of Termination was sent, it does not prove that it was made on the same day.
More revealing is the fact that this November 27, 2012 letter allegedly showing
insubordination on the part of Sta. Isabel was not even mentioned in her Notice of
Termination. Verily, Perla's excuse of typographical error in the date indicated on the Notice
of Termination is simply unacceptable for being a mere self-serving assertion that deserves
no weight in law.66 Besides, as aptly put by the NLRC, a careful perusal of such letter
reveals that the wordings used therein were not discourteous, accusatory, or inflammatory,
nor was the letter written out of defiance and arrogance. Rather, it only exhibits Sta.
Isabel's confusion and frustration over the way the administrative proceedings against her
were being handled.
In sum, the totality of the foregoing circumstances shows that Sta. Isabel was not guilty of
acts constituting insubordination, which would have given Perla a just cause to terminate
her employment. As such, the CA erred in holding that the NLRC gravely abuse its
discretion in ruling that Sta. Isabel's dismissal was illegal; hence, the NLRC ruling must be
reinstated. However, since the NLRC erred in reckoning the computation of Sta. Isabel's
separation pay from February 27, 2007 instead of the actual date of the commencement of
her employment with Perla, a modification of the NLRC ruling to reflect this correction is in
order.
WHEREFORE, the petition is GRANTED. The Decision dated March 25, 2015 and the
Resolution dated June 15, 2015 of the Court of Appeals in CA-G.R. SP No. 134676 are
hereby REVERSED and SET ASIDE. Accordingly, the Decision dated December 26, 2013 and
the Resolution dated February 27, 2014 of the National Labor Relations Commission in
NLRC LAC No. 06-001823-13 are REINSTATED with MODIFICATION in that the computation
of separation pay due to petitioner Jinky S. Sta. Isabel should be counted from February 26,
2006, the actual date of the commencement of her employment with respondent Perla
Compaia de Seguros, Inc., instead of February 27, 2007.
SO ORDERED.
THIRD DIVISION
G.R. Nos. 205685-86 June 22, 2015
EMMANUEL H. BERALDE, HAYDEE B. OCHE, EDGAR E. FERNANDEZ, RONALD M.
DUMADAUG, WENCESLAO L. CAMPORENDONDO, OCTAVE BRENDAN N. MARTINEZ,
AVELINA C. NAVA, ALSADOM P. CIRILO, OSCAR H. GALARAGA, IGNACIO R.
ALMARIO, JR., MISAMBO D. LLEJES, ERNESTO M. MOVILLA, SR., RONALD R.
PANUGALING, NICHOLS M. SULTAN, SR., FRANCISCO M. VELASCO, SAMUEL G.
WENCESLAO, EDMONDO B. ELECCION, SANNY L. ABDUL, JOEL T. AUTIDA,
ANTONIO C. BAG-O, RODOLFO C. BARTIDO, NECTOR B. BASILISCO, GREGORIO Y.
CANAMO, TOMAS M. CANSECO, REYSALVIO M. CARREON, ALEJANDRO A. CELIS,
EMERISA S. BLANCADA, FELIX E. BUGWAT, RENIE N. BURGOS, DESIDERIO C.
CABONITA, RICARDO P. DAG-UMAN, RUBEN B. DAVIDE, FELIPE G. DEMETILA,
EDUARDO B. DIAL, EFREN L. ENCALLADO, GETULIO A. GOHIL, GUMERSINDO C.
HAPE, DOMINGO M. LABTON, ARNOLD B. LIM, LEONARDO G. LOPEZ, SR., ALBINO
M. LECERNAS, JOEL B. LUMERAN, MARTIN C. MAGLINTE, FOL A. MALAYA,
ALFREDO D. MARAVILLAS, MARTINO R. MENDEZ, MAURO B. NAVAREZ, JR.,
CARLITO R. NAVARRO, AGUSTIN C. NOTARTE, JR., GONZALO G. OCHE, CARLITO G.
OTOM, WALTER S. PANOY, ALEJANDRO T. PADOJAN, SR., GLESERIA L. PELDEROS,
WILSON C. RODRIGUEZ, ARMAN A. ROSALINDA, ISIDRO M. RUSGAL, ISMAEL M.
SANDANG, SR., WEA MAE B. SALATAN, EDWIN L. SARDIDO, PAULINO T. SEDIMO,
CESARIO A. TANGARO, PABLITO B. TAYURAN, EDUARDO D. TUBURAN, ARMANDO I.
VARGAS, JR., RENATO E. LUMANAS, WILFREDO C. PAUSAL, ALFREDO R. RAMIS,
JOSE V. TUGAP, MANUEL G. WENCESLAO, MARIO D. ALBARAN, EDGAR P. ALSADO,
SANTOS T. AMADO, JR., CHRISBEL A. ANG, BERNARDO C. AYUSTE, JR., RONALD B.
BARTIDO, REYNALDO R. BAURA, SR., ANGELITO A. BIMBO, REYNALDO N. CAPUL,
SONNY M. DAVIDE, REYNALDO A. LANTICSE, SR., MARIO M. LIMPIO, ARGIE A.
OTOM, DANILO V. PABLIO, CARLITO H. PELLERIN, DANILO L. QUIMPAN, MARK
ANTHONY M. SALATAN, DANTE S. SERAFICA, BUENVENTURA J. TAUB, JENRITO S.
VIA, ROMULO A. LANIOHAN, JORGE L. QUIMPAN, ANTONIO C. SALATAN, ARLON C.
AYUSTE, ERNESTO P. MARAVILLAS, DANIEL B. ADONA, and WILFREDO M.
ALGONES, Petitioners,
vs.
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION (GUIHING
PLANTATION OPERATIONS), RICA REGINA L. DA VILA (Chairman), EDWIN T.
FABREGAR, JR. (VP-Banana Production); GERARDO IGNACIO B. ONGKIKO, (Senior
VP-HR), CELSO S. SANCHEZ (Production Manager); and JESSEPEHINE 0. ALEGRE
(Area Administrative Manager), Respondents.
x-----------------------x
PRESCO A. FUENTES and BRIAN TAUB, Petitioners,
vs.
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION, (GUIHING
PLANTATION OPERATIONS) RICA REGINA L. DAVILA, Chairman; EDWIN T.
FABREGAR, JR., VP-Banana Production; GERARDO IGNACIO B. ONGKIKO, CELSO S.
SANCHEZ, Production Manager, Respondents.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the
reversal of the Consolidated Decision1 dated June 29, 2012 and Consolidated Resolution2
dated November 14, 2012 of the Court of Appeals-Cagayan de Oro City in CA-G.R. SP No.
035883 and CA-G.R. SP No. 04646.4
The facts, as culled from the records, are as follows:
Lapanday Agricultural and Development Corporation (Lapanday) is engaged in the
business of Banana plantation and exporting of the same to its clientele abroad. Petitioners
are employees in the said corporation.
Between the years 1992-1994, Lapanday retrenched and paid separation pay to some of
its employees in a downsizing effort. Thereafter, Lapanday allegedly re-hired some of their
former employees with a promise that the land they worked on will be eventually turned-
over to them, since the land was covered by the Comprehensive Agrarian Reform Program
(CARP). The employees including several of the petitioners agreed to be retrenched and re-
hired.
Sometime in 1999, Lapanday again retrenched all its employees and offered to pay
separation pay for their years of service. Meanwhile, the land was not turned-over to them
as promised since the Department of Agrarian Reform (DAR) issued an Order Dated
February8, 1999, exempting said land from the coverage of the CARP.
On March 29, 1999, Lapanday and the employees, including petitioners, signed a new
employment contract. However, upon learning of the DAR's order of exemption, the
employees filed a petition to revoke said order.
On January 4, 2008, Lapanday issued a Notice of Termination to all its employees, including
herein petitioners. In the said notice of termination, it was stated that the company is
instituting a retrenchment program pursuant to Section 5, Article 1 of the Collective
Bargaining Agreement (CBA) to prevent losses as a result of the dramatical increase in
production costs and lower productivity. The termination date for all employees was
effective February 4, 2008.
Several employees signed the notice, in the hopes of getting their separation pay and
other benefits. Petitioners, however, claimed that their separation pay was not given to
them. They further alleged that those who refused to sign the notice were not allowed to
enter the work premises unless they would sign the notice. Lapanday, on the other hand,
claimed that despite its financial predicament, separation pay was offered to its
employees.
Hence, without any recourse, petitioners filed a complaint for illegal dismissal. Emmanuel
Beralde, et al. filed their Complaint on February 5, 2008,5 while Fuentes and Taub filed
their Complaint on October 6, 2008.6
Lapanday claimed that in 2006, it was beset with financial reverses due to very low
productivity, an onslaught of banana diseases, the adverse effects of the imposition of the
aerial spraying ban, the reduction of leased areas due to CARP, the refusal of the
landowners to renew petitioner's lease contracts, increase in production costs, and the
extraordinary fluctuation in foreign exchange. They averred to have implemented
numerous saving measures; however, its financial condition continued to decline, thus,
they opted to implement a retrenchment program. Lapanday further claimed that it
consulted with the employees union (Samahan Manggagawa ng Lapanday Guihing-
SAMALAG), and filed the required notice with the Department of Labor and Employment
(DOLE) before the implementation of said program.
CA-G.R. SP No. 035887
On August 15, 2008, in NLRC RAB XI-02-00135-08,8 the Labor Arbiter rendered a Decision9
which reads, thus:
WHEREFORE, foregoing considered, judgment is hereby rendered as follows:
1. Dismissing the complaint for illegal dismissal and unfair labor practice;
2. Declaring that the retrenchment is valid; and
3. Ordering respondent LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION to
pay complainants the sum of EIGHT MILLION TWO HUNDRED EIGHTY-SIX THOUSAND ONE
HUNDRED SEVENTY-FOUR AND 53/100 PESOS (P8,286,174.53) representing their
separation pays.
SO ORDERED.10
Undaunted, before the NLRC, petitioners insisted that they were illegally dismissed. On
September 22, 2009, the NLRC reversed and set aside the appealed decision.11 The
dispositive portion reads, thus:
WHEREFORE, foregoing premises considered, the appealed decision is Reversed and Set
Aside. In lieu thereof, a new judgment is rendered declaring the complainants, less Presco
Fuente and Brian Taub, to have been illegally dismissed from employment, and thus
ordering respondent Lapanday Agricultural Development Corporation to reinstate the said
complainants to their former positions without loss of seniority rights and other privileges
and to pay them full backwages from the dates they were dismissed until they are actually
reinstated plus attorneys fees equivalent to ten (10%) percent of the aggregate monetary
award due them, subject to computation by the Regional Arbitration Branch of origin
during execution proceedings.
SO ORDERED.12
Lapanday filed a motion for reconsideration, but the NLRC denied the same in a
Resolution13 dated February 12, 2010.
CA-G.R. SP No. 0464614
Meanwhile, in NLRC RAB XI-10-00881-08,15 the Labor Arbiter rendered a Decision16 dated
July 30, 2009, which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered declaring the
dismissal of complainants Presco A. Fuentes and Brina Taub as illegal:
Accordingly, Lapanday Agricultural Development Corporation (Guihing Plantation
Operation), represented by its authorized officers, is hereby (ordered) to pay complainants'
backwages, to wit:
1. Presco A. Fuentes - P160,632.21
2. Brian M. Taub - P160,632.21
P321,264.42
Respondent is further ordered (to)reinstate complainants to their former positions, either
physically or in the payroll, without loss of seniority rights and other privileges, and to
submit a report of compliance thereon within ten (10) days from receipt of Decision. This
order of reinstatement is immediately executory.
All other claims are denied for insufficiency of evidence.
SO ORDERED.17
Lapanday appealed to the NLRC, however, the NLRC dismissed the same for non-perfection
due to failure of petitioner to post a cash bond or surety bond within the reglementary
period. Petitioner moved for reconsideration but was denied.
Fuentes and Taub filed a petition for certiorari under Rule 65 alleging that the NLRC gravely
abuse its discretion when it denied its appeal. On April 20, 2011, the Court of Appeals
granted the petition and reinstated NLRC RAB XI-10-00881-08,18 and the proceedings
continued before the NLRC.
On July 29, 2011, the NLRC dismissed19 the complaint for lack of merit, affirming the
assailed Decision of the Labor Arbiter which ruled in favor of petitioners' reinstatement
after finding their dismissal to be illegal. It likewise echoed its Decision dated September
22, 2009 but included Fuentes and Taub as they were not parties in the earlier case since
they filed the complaint several months thereafter.
The motion for reconsideration was filed, but was denied on October 26, 2011 for lack of
merit.20
Thus, Lapanday filed petitions on certiorari against the appellate court.
In CA-G.R. SP No. 03588,21 Lapanday assailed the NLRC's Resolutions claiming that it
gravely abused its discretion amounting to lack or excess of jurisdiction when it reversed
the decision of the Labor Arbiter.
In CA-G.R. SP No. 04646,Lapanday raised the same issue of whether the NLRC committed
grave abuse of discretion in concluding that the retrenchment program it had undertaken
was a mere ploy to ease out petitioners from their employment.
In a Resolution22 dated March 13, 2012, upon motion, the appellate court ordered that CA-
G.R. SP No. 04646 be consolidated with CA-G.R. No. SP 03588.
In the disputed Consolidated Decision23 dated June 29, 2012, the Court of Appeals-
Cagayan de Oro City, 23rd Division, granted the petitions for certiorari, the dispositive
portion of which reads:
WHEREFORE, the instant consolidated Petitions are GRANTED.
In CA-G.R. [SP] No. 03588: the National Labor Relations Commission, 8th Division's (NLRC)
Resolution promulgated on September 22, 2009 and February 12, 2010 are SET ASIDE. The
Decision of Labor Arbiter Henry F. Te promulgated on August 15, 2008 is hereby
REINSTATED. In CA-G.R. [SP] No. 04646: the National Labor Relations Commission, 8th
Division's (NLRC) Decision promulgated on July 29, 2011 and the Resolution promulgated
on October 26, 2011 are SET ASIDE and a new judgment is entered DISMISSING the instant
complaints for lack of merit. Let this case be remanded to the arbitration branch of origin
for the computation of private respondents' separation pay to be based on each private
respondent's number of years of service.
SO ORDERED.24
Petitioners moved for reconsideration, but was denied in a Resolution25 dated November
14, 2012.
Hence, petitioners filed the instant appeal questioning the appellate court's
pronouncement of the legality of their dismissal due to retrenchment.
The petition is without merit.
Considering the conflicting findings of the Labor Arbiter and the NLRC, it behooved upon
the Court of Appeals in the exercise of its certiorari jurisdiction to determine which findings
are more in conformity with the evidentiary facts.26
As a rule, a petition for certiorari under Rule 65 is valid only when the question involved is
an error of jurisdiction, or when there is grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the court or tribunals exercising quasi-judicial
functions. Hence, courts exercising certiorari jurisdiction should refrain from reviewing
factual assessments of the respondent court or agency. However, the Court of Appeals
cannot be faulted in reviewing the correctness of the factual findings, considering that the
NLRC and the Labor Arbiter came up with conflicting findings. Thus, we shall now proceed
to review whether the appellate court's decision was in accord with law and evidentiary
facts.27
Retrenchment is the termination of employment initiated by the employer through no fault
of the employees and without prejudice to the latter, resorted to by management during
periods of business recession; industrial depression; or seasonal fluctuations, 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
automation. Retrenchment is a valid management prerogative. It is, however, subject to
faithful compliance with the substantive and procedural requirements laid down bylaw and
jurisprudence. In the discharge of these requirements, it is the employer who bears the
onus, being in the nature of affirmative defense.28
The pertinent provision of the Labor Code on the subject of retrenchment is instructive:
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 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. Therefore, for a valid retrenchment, the
following requisites must be complied with: (a) the retrenchment is necessary to prevent
losses and such losses are proven; (b) written notice to the employees and to the DOLE at
least one month prior to the intended date of retrenchment; and (c) payment of separation
pay equivalent to one-month pay or at least one-half month pay for every year of service,
whichever is higher.
Likewise, jurisprudence laid down the following standards to justify retrenchment in order
to prevent the management from abusing this prerogative. In Ariola v. Philex Mining
Corporation,29 the Court summarized the requirements for retrenchment, as follows:
Thus, the requirements for retrenchment are: (1) it is undertaken to prevent losses, which
are not merely de minimis, but substantial, serious, actual, and real, or if only expected,
are reasonably imminent as perceived objectively and in good faith by the employer; (2)
the employer serves written notice both to the employees and the DOLE at least one
month prior to the intended date of retrenchment; and (3) the employer pays the
retrenched employees separation pay equivalent to one month pay or at least 1/2 month
pay for every year of service, whichever is higher. The Court later added the requirements
that the employer must use fair and reasonable criteria in ascertaining who would be
dismissed and x x x retained among the employees and that the retrenchment must be
undertaken in good faith. Except for the written notice to the affected employees and the
DOLE, non-compliance with any of these requirements renders the retrenchment illegal.30
In the instant case, Lapanday's financial condition before and at the time of petitioners'
retrenchment, justified petitioners retrenchment. The audited financial report presented in
evidence was found to conclusively show that Lapanday has indeed suffered serious
financial losses for the last three years prior to its retrenchment. We quote the findings of
the appellate court, to wit:
Petitioner-company's financial condition before and at the time of the retrenchment clearly
paints a picture of a losing business. An independent auditor confirmed its claim of
financial losses, finding that is suffered a net loss of Php26,297,297. in 2006 as compared
to its net income of Php14,128,589. in 2005. This net loss ballooned to Php72,363,879. in
2007. To be sure, these financial statements cannot be whimsically assailed as self-serving,
as these documents were prepared and signed by SGV & Co., a firm of reputable
independent external auditors.31 Lapanday instituted a retrenchment program as a result
of the management's decision to limit its operation and streamline positions and personnel
requirements and arrest its increasing financial losses by downsizing its workforce.
Lapanday then was justified in implementing a retrenchment program since it was
undergoing financial reverses, not only for a single fiscal year, but for several years prior to
and even after the program. We likewise quote the Labor Arbiter's findings: Per audit report
of Sycip, Gorres Velayo & Co (SGV), an independent accounting firm and credible external
auditor, dated April 17, 2007, for 2006 Financial Statement of Lapanday Agriculture and
Development Corporation, it shows that respondent's revenue for sales of bananas in 2005
was PhP724,200,596.00. In 2006, it dropped to Php607,186,264.00. A difference or loss of
Php117,013,332.00 was incurred by the respondent company. Also, per audit report dated
March 28, 2008 of same accounting firm x x x for the year 2007, it shows that respondent's
revenue for sales of bananas from Php607,186,264.00 further went down to
PhP539,979,711.00 or a loss of P67,207,753.00.
Recovering from other aspects of respondent's business, summary of respondent net loss
was at PhP26,297,297.00 for 2006 from PhP14,128,589.00 for 2005. The net loss ballooned
to Php72,363,879.00 in 2007.32
We cannot ignore the audited financial reports of independent and reputable external
auditors such as Sycip Gorres Velayo & Co., as no evidence can best attest to a company's
economic status other than its financial statement. We defined the evidentiary weight
accorded to audited financial statements in Asian Alcohol Corporation v. National Labor
Relations Commission,33 thus:
The condition of business losses is normally shown by audited financial documents like
yearly balance sheets and profit and loss statements as well as annual income tax returns.
It is our ruling that financial statements must be prepared and signed by independent
auditors. Unless duly audited, they can be assailed as self-serving documents. But it is not
enough that only the financial statements for the year during which retrenchment was
undertaken, are presented in evidence. For it may happen that while the company has
indeed been losing, its losses may be on a downward trend, indicating that business is
picking up and retrenchment, being a drastic move, should no longer be resorted to. Thus,
the failure of the employer to show its income or loss for the immediately preceding year
or to prove that it expected no abatement of such losses in the coming years, may
bespeak the weakness of its cause. It is necessary that the employer also show that its
losses increased through a period of time and that the condition of the company is not
likely to improve in the near future.34
Verily, the fact that the financial statements were audited by independent auditors settles
any doubt on the financial condition of Lapanday.1avvphi1 As reported by SGV & Co., the
financial statements presented fairly, in all material aspects, the financial position of the
respondent as of December 31, 2006 and 2005.35 However, even assuming arguendo that
Lapanday was not experiencing losses, it is still authorized by Article 28336 of the Labor
Code to terminate the employment of any employee due to retrenchment to prevent losses
or the closing provided that the projected losses are not merely de minimis, but
substantial, serious, actual, and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer.
We also find that Lapanday complied with the requisite notices to the affected employees
and the DOLE to effect a valid retrenchment. As found by the Labor Arbiter and Court of
Appeals:37
Records show that the one (1) written notice requirement was duly filed by the respondent
with the Office of the Department of Labor and Employment on December 27, 2007 and
the Notices of Termination were duly served to its workers on January 4, 2008 to take effect
thirty (30) days from their receipt or on February4, 2008. By reason of the hard "no
retrenchment" stand of herein complainants, the latter refused to receive the notices of
termination, thus, copies of the Letters of Retrenchment were sent through registered mail
on January 8, 2008 to the last known addresses of the complainants. It appears also that
respondent submitted to the Department of Labor and Employment its Reports on
Employee Termination. On the matter of separation pay, it is established that respondent
company is willing to comply with the same.
We likewise cannot sustain petitioners' argument that their dismissal was illegal on the
basis that Lapanday did not actually cease its operation, or that they have re-hired some of
the dismissed employees and even hired new set of employees to replace the retrenched
employees.
The law acknowledges the right of every business entity to reduce its work force if such
measure is made necessary or compelled by economic factors that would otherwise
endanger its stability or existence. In exercising its right to retrench employees, the firm
may choose to close all, or a part of, its business to avoid further losses or mitigate
expenses. In Caffco International Limited v. Office of the Minister-Ministry of Labor and Consequently, petitioners are not entitled to backwages as it is well settled that
Employment,38 the Court has aptly observed that backwages may be granted only when there is a finding of illegal dismissal.42
Nevertheless, petitioners are entitled to separation pay as provided under the law,
Business enterprises today are faced with the pressures of economic recession, stiff equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
competition, and labor unrest. Thus, businessmen are always pressured to adopt certain service, whichever is higher,43 and those other benefits that petitioners may been titled
changes and programs in order to enhance their profits and protect their investments. thereto under the retrenchment program. WHEREFORE, premises considered, the instant
Such changes may take various forms. Management may even choose to close a branch, a Petition is DENIED. The Court of Appeals Consolidated Decision dated June 29, 2012 and its
department, a plant, or a shop. Resolution dated November 14, 2012 in CA-G.R. SP No. 03588 are hereby AFFIRMED.
Let the records of the case be remanded to the Labor Arbiter for proper computation of the
In the same manner, when Lapanday continued its business operation and eventually hired award in accordance with this decision.
some of its retrenched employees and new employees, it was merely exercising its right to SO ORDERED.
continue its business. The fact that Lapanday chose to continue its business does not
automatically make the retrenchment illegal. We reiterate that inretrenchment, the goal is
to prevent impending losses or further business reversals- it therefore does not require
that there is an actual closure of the business. Thus, when the employer satisfactorily
proved economic or business losses with sufficient supporting evidence and have complied
with the requirements mandated under the law to justify retrenchment, as in this case, it
cannot be said that the subsequent acts of the employer to re-hire the retrenched
employees or to hire new employees constitute bad faith. It could have been different if
from the beginning the retrenchment was illegal and the employer subsequently hired new
employees or rehired some of the previously dismissed employees because that would
have constituted bad faith. Consequently, when Lapanday continued its operation, it was
merely exercising its prerogative to streamline its operations, and to re-hire or hire only
those who are qualified to replace the services rendered by the retrenched employees in
order to effect more economic and efficient methods of production and to forestall
business losses. The rehiring or reemployment of retrenched employees does not
necessarily negate the presence or imminence of losses which prompted Lapanday to
retrench.39

In spite of overwhelming support granted by the social justice provisions of our

Constitution in favor of labor, the fundamental law itself guarantees, even during the
process of tilting the scales of social justice towards workers and employees, "the right of
enterprises to reasonable returns of investment and to expansion and growth." To hold
otherwise would not only be oppressive and inhuman, but also counter-productive and
ultimately subversive of the nation's thrust towards a resurgence in our economy which
would ultimately benefit the majority of our people. Where appropriate and where
conditions are in accord with law and jurisprudence, the Court has authorized valid
reductions in the work force to forestall business losses, the hemorrhaging of capital, or
even to recognize an obvious reduction in the volume of business which has rendered
certain employees redundant.40

AWARD OF SEPARATION PAY

The payment of separation pay would be due when a dismissal is on account of an
authorized cause as in this case, and the amount of separation pay depends on the ground
for the termination of employment. When the termination of employment is due to
retrenchment to prevent losses, or to closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay is
only an equivalent of "one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher." In the above instances, a fraction of at least six (6)
months is considered as one (1) whole year.41
FIRST DIVISION
G.R. No. 213729, September 02, 2015
PHILIPPINE AIRLINES, INC., Petitioner, v. ALEXANDER P. BICHARA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated January 24, 2014
and the Resolution3 dated July 30, 2014 rendered by the Court of Appeals (CA) in CA-G.R.
SP. No. 118777, which reversed and set aside the Decision4 dated November 23, 2010 and
the Resolution5 dated January 21, 2011 of the National Labor Relations Commission (NLRC)
in NLRC NCR 00-04-03414-94 (CA No. 013528-97) (AE-03-09), and thereby, ordered
petitioner Philippine Airlines, Inc. (PAL) to pay respondent Alexander P. Bichara (Bichara)
salary differentials, backwages, and retirement benefits.
The Facts
On October 28, 1968, PAL hired Bichara as a flight attendant. Sometime in 1971, PAL
implemented a retrenchment program. By April of that year, Bichara voluntarily resigned.
On May 15, 1975, he was rehired.6
In August 1993, Bichara was included in PAL's Purser Upgrading Program in which he
graduated on December 13, 1993. As flight purser, he was required to take five (5) check
rides for his performance evaluation and earn at least an 85% rating for each ride.
However, Bichara failed in the two (2) check rides with ratings of 83.46% and 80.63%.
Consequently, on March 21, 1994, Bichara was demoted to the position of flight steward.7
On March 22, 1994, Bichara appealed his demotion to PAL, but no action was taken; hence,
he filed a complaint for illegal demotion against PAL8 before the NLRC-Regional Arbitration
Branch, docketed as NLRC NCR 04-03414-94 (illegal demotion case). Eventually, or on June
16, 1997, Labor Arbiter Ricardo C. Nora (LA Nora) issued a Decision9 (June 16, 1997
Decision) declaring Bichara's demotion as illegal, and accordingly, ordered PAL to reinstate
Bichara to his position as flight purser.10 PAL filed an appeal before the NLRC and later
before the CA, both of which, however, upheld LA Nora's finding. PAL no longer appealed to
the Court, thus, it rendered the June 16, 1997 Decision final and executory on February 5,
2004.11
During the pendency of the illegal demotion case12 before the CA, however, or on July 15,
1998, PAL implemented another retrenchment program that resulted in the termination of
Bichara's employment.13 This prompted him, along with more than 1,400 other retrenched
flight attendants, represented by the Flight Attendants and Stewards Association of the
Philippines (FASAP), to file on June 22, 1998, a separate complaint for unfair labor practice,
illegal retrenchment with claims for reinstatement and payment of salaries, allowances,
backwages, and damages14 against PAL, docketed as NLRC-NCR Case No. 06-05100-9815
(illegal retrenchment case)16 This case was appealed all the way to this Court, docketed as
G.R. No. 178083 entitled "Flight Attendants and Stewards Assn. of the Phils, v. PAL, Patria T.
Chiong, and CA" (FASAP case), which remains pending as of this time.17
On July 9, 2005, Bichara reached the 60 year-old compulsory retirement age under the PAL-
FASAP Collective Bargaining Agreement (CBA).18
On January 31, 2008, Bichara filed a motion for execution of LA Nora's June 16, 1997
Decision,19 which PAL opposed20 by arguing that the "complaint for illegal demotion x x x
was overtaken by supervening events, i.e., the retrenchment of [Bichara] in 1998 and his
having reached [the] compulsory retirement age in 2005."21
The LA Ruling
In an Order22 dated February 4, 2009 (February 4, 2009 Order), Labor Arbiter Antonio R.
Macam (LA Macam) granted Bichara's motion for execution, thus, directing the issuance of
a writ of execution against PAL and/or a certain Jose Garcia to jointly and severally pay
Bichara: (a) separation pay in lieu of reinstatement equivalent to one (1) month's pay for
every year of service counting from October 28, 1968 up to the present, excluding the
period from April 1, 1971 until May 15, 1975, or a period of 35 years; and (b) attorney's
fees in the amount of P20,000.00.23
LA Macam declared that, notwithstanding the pendency before this Court of the illegal
retrenchment case, i.e., FASAP case, Bichara's termination was invalid, given that: (a) PAL
did not use a fair and reasonable criteria in effecting the retrenchment; (b) PAL disregarded
the labor arbiters' rulings in the illegal demotion and illegal retrenchment cases which were
both immediately executory; and (c) retrenchment was made during the pendency of the
illegal demotion case without the permission of the court where the case was pending.24
For these reasons, Bichara was entitled to reinstatement to his position as flight purser.
However, since Bichara may no longer be reinstated in view of his compulsory retirement
in accordance with the CBA, LA Macam, instead, ordered PAL to pay Bichara separation pay
with the salary base of a flight purser.25cralawred
Aggrieved, PAL appealed to the NLRC.
The NLRC Ruling
In a Decision26 dated November 23, 2010, the NLRC reversed and set aside LA Macam's
February 4, 2009 Order and denied the motion for execution for being moot and academic,
considering Bichara's compulsory retirement in 2005,27 without prejudice to the latter's
entitlement to backwages and retirement benefits of a flight steward pursuant to this
Court's final decision in the FASAP case.28
At the outset, the NLRC ruled that Bichara's reinstatement could have taken effect, if at all,
only on January 31, 2008 when he sought the execution of the said relief.29 In this light, his
reinstatement and corresponding backwages prior to said date must therefore be based on
the salary rate and other benefits attached to the position of flight steward to which he
was demoted/reverted.30 (However, it declared that reinstatement is no longer possible as
the same was rendered moot and academic when he compulsorily retired in 2005.31 On
the other hand, the NLRC concluded that the matter of payment of monetary benefits is
not for it to order since it is a relief pertaining to the pending FASAP case; as such, Bichara
should pursue payment of backwages when the decision in the FASAP case is due for
execution. In this relation, the NLRC remarked that LA Macam exceeded his authority in
awarding separation pay in lieu of reinstatement, since such relief is not contemplated in
the decision sought to be executed, i.e., the June 16, 1997 Decision.32
Both parties moved for reconsideration, which were, however, denied in a Resolution33
dated January 21, 2011. Dissatisfied, Bichara elevated the case to the CA through a
petition for review on certiorari.
The CA Ruling
In a Decision34 dated January 24, 2014, the CA reversed and set aside the NLRC's ruling. It
did not find LA Macam to have exceeded his authority in ordering the payment of
separation pay in lieu of reinstatement since, in a long line of cases, this Court has
consistently held that when reinstatement is not possible due to over age, payment of
separation pay is in place.35 The CA, however, observed that since Bichara was one of the
retrenched employees involved in the FASAP case, this Court's Decision dated October 2,
2009, wherein it ruled that the retrenchment was illegal and thereby stated that "[f]light
attendants who have reached their compulsory retirement age of retirement shall receive
backwages up to the date of their retirement only,"36 should be made to apply. Thus,
instead of separation pay, Bichara is entitled to backwages from the time of his
retrenchment up to the time he reached the compulsory retirement age of 60. In addition,
since the June 16, 1997 Decision, rendered in the illegal demotion case, had already
become final and executory, he is entitled to salary differentials of a flight purser from a
flight attendant from March 21, 1994, i.e., the date of his demotion, up to the time of his
retrenchment in July 1998.37 He is also entitled to retirement benefits in accordance with
the existing CBA at the time of his retirement.38
PAL moved for reconsideration39 which was denied in a Resolution40 dated July 30, 2014;
hence, this petition.
The Issue Before the Court
The essential issue to be resolved is whether or not the CA erred in reversing the NLRC's
Decision and thereby awarding Bichara the aforementioned monetary awards.
The Court's Ruling
The petition is partly meritorious.
A judgment should be implemented according to the terms of its dispositive portion is a
long and well-established rule.41 As such, where the writ of execution is not in harmony
with and exceeds the judgment which gives it life, the writ has pro tanto no validity.42
A companion to this rule is the principle of immutability of final judgments, which states
that a final judgment may no longer be altered, amended or modified, even if the
alteration, amendment or modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law and regardless of what court renders it. Any attempt to
insert, change or add matters not clearly contemplated in the dispositive portion violates
the rule on immutability of judgments.43 But like any other rule, this principle has
exceptions, namely: (1) the correction of clerical errors; (2) the so-called nunc pro tunc
entries which cause no prejudice to any party; (3) void judgments; and (4) whenever
circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable.44
In this case, the final judgment sought to be executed is LA Nora's June 16, 1997 Decision,
which was confined to the directive that PAL reinstate Bichara as a flight purser in view of
his illegal demotion to the position of flight attendant:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered declaring the illegality of
complainant's [Bichara] demotion/reversion to Flight Steward and ordering the
respondents [PAL] to reinstate the complainant to his position as Flight Purser within ten
(10) days from receipt of this Decision.
The claim for damages is dismissed for lack of merit.
SO ORDERED.45
Evidently, LA Macam went beyond the terms of the June 16, 1997 Decision when he, in his
February 4, 2009 Order, directed the issuance of a writ of execution ordering the payment
of separation pay in lieu of reinstatement:
WHEREFORE, finding merit in the complainant's [Bichara] Motion for Execution, the same is
hereby GRANTED. Let a Writ of Execution be issued ordering the respondents Philippine
Airlines, Inc. and/or Jose Garcia, in lieu of reinstating the complainant to the position of
Flight Purser, to jointly and severally PAY to the complainant his separation pay equivalent
to one (1) month's pay for every year of service counting from October 28, 1968 up to the
present, excluding the period from April 1, 1971 until May 15, 1975, or a period of thirty-
five (35) years and to pay the complainant the sum of Twenty Thousand Pesos
(P20,000.00) for and as attorney's fees.
SO ORDERED.
Unlike the cases cited by the CA, which all involved illegal dismissal cases, it would not be
proper to accord such relief in this case since, in those cases, the awards of separation pay
in lieu of reinstatement were all hinged on the validity of the employee's dismissal. Here,
the validity of Bichara's termination is the subject matter of a separate case, i.e., the
FASAP case, which is still pending before this Court, and is also beyond the ambit of the
illegal demotion proceedings. Hence, LA Macam exceeded his authority when he ruled on
this issue and directed PAL to pay Bichara separation pay in lieu of reinstatement.
PAL's supervening retrenchment of its employees, which included Bichara, in July 1998,
and his compulsory retirement in July 2005, however, prevent the enforcement of the
reinstatement of Bichara to the position of flight purser under the June 16, 1997 Decision.
Nonetheless, since this Decision had already settled the illegality of Bichara's demotion
with finality, this Court finds that Bichara should, instead, be awarded the salary
differential of a flight purser from a flight steward from the time of his illegal demotion on
March 21, 1994 up until the time he was retrenched in July 1998. Notably, unlike LA
Macam's award of separation pay in lieu of reinstatement, the award of salary differential
is not dependent on the validity of his termination, as it is, in fact, intrinsically linked to the
illegality of Bichara's demotion. Hence, with this direct relation, there should be no
obstacle in rendering this award.
Further, it should be pointed out that the principle of immutability of judgments, from
which the above-stated rule on writ of executions proceed, allow courts, as an exception,
to recognize circumstances that transpire after the finality of the decision which would
render its execution unjust and inequitable and act accordingly. Thus, in view of the
supervening events above-mentioned, this Court deems the award of salary differential to
be the just and equitable award under the circumstances herein prevailing. Jurisprudence
holds that courts may modify or alter the judgment to harmonize the same with justice and
the facts when after judgment has been rendered and the latter has become final, facts
and circumstances transpire which render its execution impossible or unjust,48 as in this
case.
As a last point, it deserves mentioning that since Bichara's illegal demotion has been
finally decreed, he should be entitled to (a) backwages, at the salary rate of a flight purser,
from the time of retrenchment in July 1998 up until his compulsory retirement in July 2005;
(b) retirement benefits of a flight purser in accordance with the existing CBA at the time of
Bichara's retirement; and (c) attorney's fees, moral, and exemplary damages, if any, but
only if this Court, in the FASAP case, finally rules that the subject retrenchment is invalid.
Otherwise, he should only be entitled to the above-stated salary differential, as well as the
corresponding separation pay required under the relevant CBA, or Article 29749 (formerly
Article 283) of the Labor Code if no such CBA provision exists. The awards of backwages,
and retirement benefits, including attorney's fees, moral, and exemplary damages, if any,
cannot, however, be executed in these proceedings since they are incidents which pertain
to the illegal retrenchment case, hence, executable only when the FASAP case is finally
concluded.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated January 24, 2014 and
the Resolution dated July 30, 2014 of Court of Appeals in CA-G.R. SP. No. 118777 are
hereby REVERSED and SET ASIDE. A new one is entered ORDERING petitioner Philippine
Airlines, Inc. to pay respondent Alexander P. Bichara the salary differential of a flight purser
from a flight attendant from the time of his illegal demotion on March 21, 1994 up until the
time he was retrenched on July 15, 1998.
SO ORDERED.
SECOND DIVISION
G.R. No. 214961, September 16, 2015
BANCO DE ORO UNIBANK, INC., Petitioner, v. GUILLERMO C. SAGAYSAY, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the March 31,
2014 Decision1 and the October 8, 2014 Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 126586, which reversed and set aside the February 29, 2012 Decision3 and the
June 25, 2012 Resolution4 of the National Labor Relations Commission (NLRC) and
reinstated the July 19, 2011 Decision5 of the Labor Arbiter (LA) in NLRC Case No. RAB II 02-
0067-11.
The Facts
On May 16, 2006, respondent Guillermo Sagaysay (Sagaysay) was hired by petitioner
Banco De Oro Unibank, Inc., (BDO) as Senior Accounting Assistant 5 in its San Jose, Nueva
Ecija, branch as a result of a merger with United Overseas Bank (UOB), with BDO as the
surviving bank. Sagaysay was previously employed in UOB from 2004 to 2006 or for two
(2) years. Prior thereto, he worked for Metropolitan Bank and Trust Co. (Metrobank) from
1976 to 2004 for a period of twenty-eight (28) years.
In a letter,6 dated January 8, 2010, BDO informed Sagaysay that, pursuant to the
retirement policy of the bank which mandated its retirement age to be sixty (60), he would
be formally retired effective September 1, 2010, a few days after his 60th birthday. The
normal or compulsory retirement age of the bank was based on its retirement plan7 which
was implemented on July 1, 1994, Section 1, Article V of which reads:
Section 1. Normal Retirement
The Normal Retirement Date of each member shall be the first day of the month coincident
with or next following his sixtieth (60th) birthday. The Member's Normal Retirement Benefit
shall be a sum determined in accordance with the Retirement Benefit Schedule stated in
Section 4 of this Article as of his retirement date.
In an e-mail,9 dated July 27, 2010, Sagaysay wrote that, although the time had come that
the BDO Retirement Program would be implemented to those reaching the age of sixty
(60), he requested that his services be extended because he had an outstanding loan and
his children were still in college. He assured BDO that he was healthy and could still
perform his duties in the branch. BDO denied Sagaysay's request.
In another e-mail,10 dated August 19, 2010, Sagaysay appealed to BDO to extend his
service for 8.5 months or up to May 16, 2011 so that he could render at least five (5) years
of employment which would entitle him to 50% of his basic pay for every year of service
upon his retirement. BDO denied Sagaysay's appeal and retired him on September 1,
2010. As of his last day of work, he was earning a monthly salary of P28,048.00.
Sagaysay then signed Release, Waiver and Quitclaim11 (quitclaim), dated October 22,
2010, for and in consideration of P98,376.14. The quitclaim stated, among others, that in
consideration of the foregoing payment, Sagaysay released and discharged the bank, its
affiliates and its subsidiaries from any action, suit, claim or demand in connection with his
employment.
On January 10, 2011, Sagaysay filed a complaint12 for illegal dismissal with prayer for
reinstatement and payment of backwages, moral damages, exemplary damages, and
attorney's fee against BDO before the Labor Arbiter (LA). He claimed that despite his
appeal, BDO compulsory retired him on September 1, 2010. As a result, he and his family
suffered damages in the amount of P2,225,403.00 which he would have received if he was
made to retire at the age of sixty-five (65).
For its part, BDO countered that after the bank denied Sagaysay's request for extension of
services, he was paid the amount of P98,376.14 representing the full and final settlement
of his compensation, allowances, benefits and other emoluments. BDO stressed that he
was not dismissed but was retired from the service.
The LA Ruling
In a decision, dated July 19, 2011, the LA ruled that Sagaysay was illegally dismissed
because he was forced to avail of an optional retirement at the age of sixty (60) which was
contrary to the provisions of Article 287 of the Labor Code.13 The LA opined that he was
terminated on the basis of a provision in a retirement plan to which he did not freely
assent. BDO took advantage of his predicament and made him sign a quitclaim in
exchange for a small consideration. The decretal portion of the LA decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring that
complainant GUILLERMO C. SAGAYSAY was illegally dismissed from work. Hence,
respondent BDO UNIBANK, INC. is ordered to REINSTATE complainant to his former position
as Senior Accounting Assistant 5 without loss of seniority rights and privileges and to pay
him backwages in the sum of P280,480.00 as of July 7, 2011, plus ten percent (10%)
thereof as attorney's fees or a total of P308,528.00.
The reinstatement aspect is immediately executory, even pending appeal. Respondent is
hereby ordered to show proof that it complied with the reinstatement of complainant
within ten (10) calendar days from receipt hereof.
Respondents [are] also ordered to pay complainant P50,000.00 each as moral and
exemplary damages.
SO ORDERED.
Aggrieved, BDO appealed to the NLRC arguing chiefly that Sagaysay freely assented to its
retirement plan.
The NLRC Ruling
On February 29, 2012, the NLRC reversed and set aside the ruling of the LA. The NLRC
explained that BDO's retirement plan, which mandated a normal or compulsory retirement
date at the age of sixty (60), was effective as early as June 1, 1994. The plan was renamed
Banco de Oro Multiemployer Retirement Plan on July 1, 2004, but the compulsory
retirement age of sixty (60) was preserved. When Sagaysay was employed on May 16,
2006, the retirement plan was already in full force and effect. Thus, the NLRC concluded
that when he accepted his employment with BDO, he assented to the provisions of the
retirement plan.
The NLRC found it difficult to believe that Sagaysay started his employment with BDO
without familiarizing himself with the bank's retirement policy considering that he had
previously retired from two (2) other banks. Further, the NLRC stated that a more concrete
proof of his acceptance of BDO's retirement plan was his execution of a quitclaim where he
declared that he had no cause of action against the bank and its agents. The dispositive
portion of the NLRC decision states:
WHEREFORE, the appeal is GRANTED. The Decision of Labor Arbiter Ma. Lourdes R.
Baricaua dated July 19, 2011 is REVERSED and SET ASIDE and a new one entered
DISMISSING the complaint.
SO ORDERED.
Sagaysay filed a motion for reconsideration, but it was denied by the NLRC in its
Resolution, dated June 25, 2012.
Undaunted, Sagaysay filed a petition for certiorari16 before the CA contending that it was
neither stated in his employment contract nor stipulated in the collective bargaining
agreement (CBA) between BDO and its employees that the compulsory retirement age was
sixty (60) years old.
The CA Ruling
On March 31, 2014, the CA rendered the assailed decision which reversed the NLRC ruling.
The appellate court explained that while the cases of Pantranco North Express, Inc., v.
NLRC17 and Philippine Airlines v. Airline Pilots Association of the Philippines18 affirmed
that the employer may provide an earlier retirement age, the retirement plans therein
were the result of negotiations and agreement between employer and employee. The CA
continued that, in this case, the retirement plan was not a result of a mutual agreement of
employer and employee. This was affirmed by the BDO Memorandum,19 dated June 1,
2009, stating that the retirement plan was to be implemented in the merged bank. Citing
Cercado v. UNIPROM Inc.20 (Cercado), the CA ruled that a retirement plan with no
voluntary acquiescence on the part of the employee was ineffective.
The CA stated that Sagaysay was forced to participate in the retirement plan. Equally, the
quitclaim he executed was not given credence because his subsequent filing of a
complaint for illegal dismissal manifested that he had no intention to relinquish his
employment. Nonetheless, the CA deleted the awards of moral and exemplary damages for
lack of basis. The appellate court disposed the case in this wise:
WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2012 and the
Resolution dated June 25, 2012 of the National Labor Relations Commission are REVERSED
and SET ASIDE. The July 19, 2011 Decision of the Labor Arbiter is REINSTATED, with
MODIFICATION that the awards of moral and exemplary damages are DELETED for lack of
basis.
SO ORDERED.
BDO moved for reconsideration, but the motion was denied by the CA in the assailed
resolution, dated October 8, 2014.
Hence, this petition.
The issues presented can be summarized as follows:
I
WHETHER THE RETIREMENT PLAN IS VALID AND EFFECTIVE AND, CONSEQUENTLY, THE
MANDATORY RETIREMENT AGE OF 60 YEARS OLD IS ALSO BINDING.
II
WHETHER THE EXECUTION OF A RELEASE, WAIVER AND QUITCLAIM BY RESPONDENT IS
VALID.
BDO principally argues that the retirement plan has been valid and effective since June 1,
1994; that having been in place for such a long period, the retirement plan is deemed to
have been written into Sagaysay's employment contract, executed on May 16, 2006; that
he even asked for an extension to become eligible to avail of the benefits under the same
retirement plan; and that the 2005-2010 CBA stated, "[t]he Bank shall continue to grant
retirement pay," showing that the CBA likewise recognized the existing retirement plan.
BDO also contends that the CA erred in citing Cercado because in that case, the retirement
plan was executed only after the employment of petitioner therein. Moreover, Sagaysay, as
a veteran banker, fully knew the effects of the release, waiver and quitclaim when he
signed it.
In his Comment,22 Sagaysay countered that he was retired by BDO against his will; that
there was no provision in any CBA that employees who reached sixty (60) years of age
could be compulsorily retired; that there was no agreement either between Sagaysay and
BDO that he would be retired upon reaching sixty (60); and that the quitclaim was invalid
because BDO took undue advantage of his situation and dire financial problems to obtain
his signature therein.
In its Reply,23 BDO reiterated that the retirement plan was not forced upon Sagaysay; and
that at the time he was employed by BDO in 2006, he had every opportunity to refuse
employment if he disagreed with the retirement policy of the bank.
The Court's Ruling
The Court finds the petition meritorious.
The petition essentially centers on whether the June 1, 1994 retirement plan is valid and
effective against Sagaysay. To resolve this issue, a review of the relevant laws and
jurisprudence regarding the compulsory retirement age is warranted.
Laws and jurisprudence on early age of retirement
Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age, agrees to
sever his or her employment with the former.24 Article 287 of the Labor Code is the
primary provision which governs the age of retirement and states:
Art. 287. Retirement. xxx
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary
for every year of service, a fraction of at least six (6) months being considered as one
whole year.
[Emphasis Supplied]
Doubtless, under this provision, the retirement age is primarily determined by the existing
agreement or employment contract. Only in the absence of such an agreement shall the
retirement age be fixed by law, which provides for a compulsory retirement age at 65
years, while the minimum age for optional retirement is set at 60 years.
Retirement plans allowing employers to retire employees who have not yet reached the
compulsory retirement age of 65 years are not per se repugnant to the constitutional
guaranty of security of tenure. By its express language, the Labor Code permits employers
and employees to fix the applicable retirement age at 60 years or below, provided that the
employees' retirement benefits under any CBA and other agreements shall not be less
than those provided therein.26
Jurisprudence is replete with cases discussing the employer's prerogative to lower the
compulsory retirement age subject to the consent of its employees. In Pantranco North
Express, Inc. v. NLRC,27 the Court upheld the retirement of the private respondent therein
pursuant to a CBA allowing the employer to compulsorily retire employees upon
completing 25 years of service to the company. Interpreting Article 287, the Court held that
the Labor Code permits employers and employees to fix the applicable retirement age
lower than 60 years of age. The Court also stressed that "[p]roviding in a CBA for
compulsory retirement of employees after twenty-five (25) years of service is legal and
enforceable so long as the parties agree to be governed by such CBA."28
In Progressive Development Corporation v. NLRC,29 the retirement plan, which allowed the
employer to retire employees who had rendered more than 20 years of service, was
declared valid and enforceable even though it was not embodied in a CBA. In that case, the
Court concluded that the employees, who were hired before the execution of the
employer's retirement plan on April 1, 1980, were bound by it because the retirement plan
was expressly made known and accepted by them.
In contrast, the case of Jaculbe v. Silliman University30 did not allow the application of a
lower retirement age. The petitioner in the said case was employed sometime in 1958
while the retirement plan, which automatically retired its members upon reaching the age
of 65 or after 35 years of uninterrupted service to the university, came into being in 1970.
The said retirement plan was not applied to the petitioner because there was no
agreement to which the latter assented.
Similarly, the case of Cercado, which was heavily relied on by the CA, involved a non-
contributory retirement plan which provided that any employee with twenty (20) years of
service, regardless of age, may be retired at his option or at the option of the company.
The said plan was adopted on April 1, 1980 while the petitioner therein was employed
earlier on December 15, 1978. When respondent UNIPROM retired the petitioner pursuant
to its retirement plan, the latter objected stating that she did not consent to it. The Court
ruled in favor of the petitioner because there was no voluntary acquiescence to UNIPROM's
early retirement age option on her part. It elucidated that:
Acceptance by the employees of an early retirement age option must be explicit,
voluntary, free, and uncompelled. While an employer may unilaterally retire an employee
earlier than the legally permissible ages under the Labor Code, this prerogative must be
exercised pursuant to a mutually instituted early retirement plan. In other words, only the
implementation and execution of the option may be unilateral, but not the adoption and
institution of the retirement plan containing such option. For the option to be valid, the
retirement plan containing it must be voluntarily assented to by the employees or at least
by a majority of them through a bargaining representative.31
On the other hand, in Obusan v. Philippine National Bank32 (Obusan), the petitioner
therein, who was hired by PNB in 1979, was deemed covered by its retirement plan
adopted on December 22, 2000. It mandated that the employee should retire when he
attained the age of sixty (60), regardless of his length of service, or when he had rendered
thirty (30) years of service, regardless of age, whichever of the said conditions came first.
Considering that on February 21, 2001, PNB had informed all of its officers and employees
about the said retirement plan, the said plan was then registered with the B1R and was
later recognized by the Philnabank Employees Association in its CBA. Despite the proper
dissemination of information, no one questioned the retirement plan. Hence, the Court
deemed it valid and effective as due notice of the employer's decision to retire an
employee was adequately provided.
A scrutiny of the above-discussed cases reveals that the retirement plan was adopted after
the employees were hired by their employer. This is in stark contrast with the case at
bench wherein the adoption of the retirement plan came before the hiring of Sagaysay.
Thus, the present petition portrays a unique predicament on whether a retirement plan
adopted before the employment of an employee is deemed binding on the latter.
Sagaysay was sufficiently informed of the retirement plan
After a judicious study of records, the Court is convinced that Sagaysay was undeniably
informed and had consented to the retirement plan of BDO before his compulsory
retirement on September 1, 2010 based on the following:
First, the retirement plan was established as early as July 1, 1994. The purpose of the plan
was to create a BDO employee's retirement trust fund which would provide for retirement
and other benefits for all employees of the bank. It was also intended to support the
funding of the benefits indicated in the CBA.33 The retirement plan provided several
retirement options such as normal retirement, early retirement, late retirement, and
disability retirement. Normal or compulsory retirement was mandated at the first day of
the month following the employee's sixtieth (60th) birthday, while early or optional
retirement age was pegged at the age of fifty (50) with at least 10 years of credited
service. It also discussed the different benefits that an employee could be entitled to upon
retirement, resignation or separation.
It was renamed on June 1, 2004, but its provision on the normal retirement age was
retained. Twelve (12) years after the adoption of the retirement plan, Sagaysay was
employed by the bank. From its inception until his hiring, no employee had earnestly
questioned the retirement plan. By then, it was unquestionably an established policy within
the BDO, applied to each and every worker of the bank.
Second, by accepting the employment offer of BDO, Sagaysay was deemed to have
assented to all existing rules, regulations and policy of the bank, including the retirement
plan. Likewise, he consented to the CBA34 between BDO and the National Union of Bank
Employees Banco De Oro Chapter. Section 2 of Article XVII of the CBA provides that "[t]he
Bank shall continue to grant retirement/gratuity pay xxx." Notably, both the retirement
plan and the CBA recognize that the bank has a continued and existing practice of granting
the retirement pay to its employees.
Third, on June 1, 2009, BDO issued a memorandum35 regarding the implementation of its
retirement program, reiterating that the normal retirement date was the first day of the
month following the employee's sixtieth (60th) birthday. Similar to the case of Obusan, the
memorandum was addressed to all employees and officers. By that time, Sagaysay was
already an employee and he did not deny being informed of such memorandum.
For four years, from the time he was employed until his retirement, and having actual
knowledge of the BDO retirement plan, Sagaysay had every opportunity to question the
same, if indeed he knew it would not be beneficial to him. Yet, he did not express his
dissent. As observed in Obusan, "[t]his deafening silence eloquently speaks of [his] lack of
disagreement with its provisions."36
Lastly, perhaps the most telling detail indicative of Sagaysay's assent to the retirement
plan was his e-mails to the bank, dated July 27, 2010 and August 19, 2010. In these
communications, albeit having been informed of his upcoming retirement, Sagaysay never
opposed the company's compulsory age of retirement. In fact, he recognized that "the time
has come that BDO Retirement Program will be implemented to those reaching the age of
sixty (60)."37
Glaringly, he even requested that his services be extended, at least until May 16, 2011, so
that he could render five (5) years of service.38 Sagaysay's request reflects the late
retirement option where an employee may be allowed by the bank to continue to work on
a yearly extension basis beyond his normal retirement date.39 The late retirement option
is embodied in the same retirement plan, of which, ironically, he claimed to be unaware.
With such inconsistent stance, the Court can only conclude that Sagaysay was indeed
notified and had accepted the provisions of the retirement plan. It was only when his
request for late retirement was denied that he suddenly became oblivious to the said plan.
The case of Cercado is not applicable
The case of Cercado is not applicable in the present case as it has a different factual
milieu. First, in Cercado, the petitioner was employed on December 15, 1978, which was
almost two (2) years before the adoption of the employer's retirement plan on April 1,
1980. The Court explained that, logically, her employment contract did not include the
retirement plan, much less the early retirement age option contained therein.
In the case at bench, Sagaysay was employed on May 16, 2006, which was almost twelve
(12) years after the adoption of retirement plan on July 1, 1994. Accordingly, from the
moment that Sagaysay accepted his employment, he was deemed to have consented to all
existing company rules and regulations, including the policy on the early age retirement.
Second, in Cercado, the retirement plan was implemented when the petitioner therein was
already employed. The Court held that because of the automatic application of the
retirement plan to the current employees without their voluntary conformity, "[p]etitioner
was forced to participate in the plan, and the only way she could have rejected the same
was to resign or lose her job." Necessarily, it undermined the petitioner's security of
tenure.
The ruling in Cercado cannot be applied to this case as Sagaysay was not yet employed
when the retirement plan was adopted. When he was offered employment by the bank in
2006, the established retirement plan was not forced upon him. Sagaysay had the free will
whether to undertake the employment and accept the bank's corresponding policies or
look for a job elsewhere. Corollarily, no security of tenure had yet attached at that specific
moment.
In other words, the evil sought to be prevented in Cercardo does not exist in the present
case as Sagaysay was given the opportunity to accept or reject the lower retirement age
policy.
Third, the petitioner in Cercado refused the early retirement package in the amount of
P171,982.90 from her employer. From the very beginning, she was adamant that she did
not consent to the retirement plan of her employer.
The opposite cam be observed in the present case. It has been uncontroverted that
Sagaysay earlier acknowledged the retirement program of BDO and even requested for an
extension of service. Moreover, he signed a quitclaim for and in consideration of
P98,376.14 which discharged the bank, its affiliates and its subsidiaries from any action,
suit, claim or demand in connection with his employment.
Generally, a quitclaim is frowned upon. As an exception, 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 was credible and reasonable, the
transaction must be recognized as a valid and binding undertaking.40
Here, the Court is of the view that the quitclaim was validly executed. For the consideration
of the quitclaim, Sagaysay received the amount of P98,376.14. As admitted by him, the
amount was based on a liquidation data sheet which showed the computation of benefits
and emoluments of a rank and file employee.41 Understandably, the amount given would
not reflect the retirement benefits he demanded because he did not qualify under the
retirement plan of BDO for he had not completed five (5) years of service upon his
compulsory retirement. Thus, the consideration provided in the quitclaim was justified and
reasonable.
Further, it has been duly proven that Sagaysay was a seasoned banker, spending thirty-
four (34) years of his career in different banking establishments. He was learned in his
profession and even experienced separation from his previous employments.
Consequently, it cannot be said that he was naive in dealing with his employer and that he
failed to exercise his free and voluntary will when faced with the documents relating to his
retirement. Not an iota of evidence showed that BDO exerted undue influence against him
to acquire his consent. In fine, absent any doubt to the contrary, his quitclaim must stand.
Extension of service
Finally, on Sagaysay's request to extend his length of service despite the compulsory
retirement age of sixty (60) which was denied by BDO and eventually sparked the present
controversy, the Court holds that BDO had the management prerogative to deny the
extension of service. It is important to state that upon the compulsory retirement of an
employee or official in the public or private service his employment is deemed terminated.
The matter of extension of service of such employee or official is addressed to the sound
discretion of the employer. It is a privilege only the employer can grant.
Although the Court has, more often than not, been inclined towards the plight of the
workers and has upheld their cause in their conflicts with the employers, such inclination
has not blinded it to the rule that justice is in every case for the deserving, to be dispensed
in the light of the established facts and applicable law and doctrine.
WHEREFORE, the petition is GRANTED. The March 31, 2014 Decision and the October 8,
2014 Resolution of the Court of Appeals in CA-G.R. SP No. 126586 are REVERSED and SET
ASIDE, and the February 29, 2012 Decision and the June 25, 2012 Resolution of the
National Labor Relations Commission in NLRC LAC No. 08-002069-11 are REINSTATED.
SO ORDERED.