Case Digest: Begino v.

ABS-CBN
NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN AND MA. CRISTINA
SUMAYAO, Petitioners, vs. ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING
CORPORATION) AND AMALIA VILLAFUERTE, Respondents.

G.R. No. 199166, 20 April 2015.

PEREZ, J.:

Respondent ABS-CBN, through Respondent Villafuerte, engaged the services of Petitioners as cameramen, editors
or reporters for TV Broadcasting. Petitioners signed regularly renewed Talent Contracts (3 months - 1 year) and
Project Assignment Forms which detailed the duration, budget and daily technical requirements of a particular
project. Petitioners were tasked with coverage of news items for subsequent daily airings in Respondents’ TV Patrol
Bicol Program.

The Talent Contract has an exclusivity clause and provides that nothing therein shall be deemed or construed to
establish an employer-employee relationship between the parties.

Petitioners filed against Respondents a complaint for regularization before the NLRC's Arbitration branch.

In support of their complaint, Petitioners claimed that they worked under the direct control of Respondent
Villafuerte - they were mandated to wear company IDs, they were provided the necessary equipment, they were
informed about the news to be covered the following day, and they were bound by the company’s policy on
attendance and punctuality.

Respondents countered that, pursuant to their Talent Contracts and Project Assignment Forms, Petitioners were hired
as talents to act as reporters, editors and/or cameramen. Respondents further claimed they never imposed control as
to how Petitioners discharged their duties. At most, they were briefed regarding the general requirements of the
project to be executed.

While the case was pending, Petitioners contracts were terminated, prompting the latter to file a second complaint
for illegal dismissal.

The Arbitration Branch ruled that Petitioners were regular employees, and ordered Respondents to reinstate the
Petitioners.

The NLRC affirmed the ruling, but the CA overturned the decision.

ISSUE: W/N Petitioners are regular employees of Respondents.

RULING: Yes.

Of the criteria to determine whether there is an employer-employee relationship, the so-called "control test" is
generally regarded as the most crucial and determinative indicator of the said relationship.

Under this test, an employer-employee relationship is said to exist where the person for whom the services are
performed reserves the right to control not only the end result but also the manner and means utilized to achieve the
same.

Notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment Forms and the terms and
condition embodied therein, petitioners are regular employees of ABS-CBN.

As cameramen, editors and reporters, it appears that Petitioners were subject to the control and supervision of
Respondents which provided them with the equipment essential for the discharge of their functions. The exclusivity
clause and prohibitions in their Talent Contract were likewise indicative of Respondents' control over them, however
obliquely worded.

Also,the presumption is that when the work done is an integral part of the regular business of the employer and
when the worker does not furnish an independent business or professional service, such work is a regular
employment of such employee and not an independent contractor.

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

1
 DECISION
CARPIO, J.:

The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of the Court of
Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals
affirmed the findings of the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.

The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement (Agreement)
with the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide
SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year
and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and
25thdays of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of
ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In this
connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph
7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and
Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries,
separation pay, service incentive leave pay, 13 th month pay, signing bonus, travel allowance and amounts due under
the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship
existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank,
Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where
ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter [5] denied the motion to dismiss and directed the parties
to file their respective position papers. The Labor Arbiter ruled:

2
In this instant case, complainant for having invoked a claim that he was an employee of respondent company
until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the
instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the causes
of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack
of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to
prove that there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position
papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes
and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.
[6]
The pertinent parts of the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent, it
stands to reason that a talent as above-described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a
TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he
undertook to render in accordance with his own style. The benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally given to employees. For one, complainant Sonzas
monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such
number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee
is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and
not by reason of employer-employee relationship. As correctly put by the respondent, All these benefits are
merely talent fees and other contractual benefits and should not be deemed as salaries, wages and/or other
remuneration accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to
this is the rule that the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the
parties to the Agreement conferring such benefit.

The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract
from the absence of employer-employee relationship. As held by the Supreme Court, The line should be drawn
between rules that merely serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind
or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means to achieve
it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor
Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July
1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the
decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the
case.[8]
Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between
SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the
NLRC:

3
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
Tiangco. (Opposition to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between
ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred
to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the
same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the
said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s]
employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that
MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the
same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-
appellee. As squarely apparent from complainant-appellants Position Paper, his claims for compensation for
services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on the Labor
Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he
was receiving prior to effectivity of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting
to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with
ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from
ABS-CBN, complainant-appellant served upon the latter a notice of rescission of Agreement with the station, per his
letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and
renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to
such recovery of the other benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to
Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase
Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims
being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by
reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the
regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis
supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and
ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve. [10] A special civil action for
certiorari extends only to issues of want or excess of jurisdiction of the NLRC. [11] Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion. [12]The
Court of Appeals added that it could not re-examine the parties evidence and substitute the factual findings of the
NLRC with its own.[13]

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:

4
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH
A FINDING.[14]

The Courts Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC
ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define
clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature
of the relationship between a television and radio station and one of its talents. There is no case law stating that a
radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-
CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual
findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial
evidence.[15] Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.[16] A party cannot prove the absence of substantial evidence by simply pointing out that there is
contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible. [17]
SONZA maintains that all essential elements of an employer-employee relationship are present in this case.
Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employee on the means and methods by which the work is accomplished. [18] The last element, the so-
called control test, is the most important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs
peculiar skills, talent and celebrity status. SONZA contends that the discretion used by respondent in specifically
selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as
complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish
them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent
and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-
CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We
must consider all the circumstances of the relationship, with the control test being the most important element.

B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA
asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that
ABS-CBN granted him benefits and privileges which he would not have enjoyed if he were truly the subject of a
valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as SSS,
Medicare, x x x and 13th month pay[20] which the law automatically incorporates into every employer-employee

5
contract.[21] Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way
above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed
to show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment
to prevent losses as provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay
Sonza shall faithfully and completely perform each condition of this Agreement. [24] Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs
talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship
between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent
fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during
the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA. [25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is
not an employee of ABS-CBN. The Labor Arbiter stated that if it were true that complainant was really an
employee, he would merely resign, instead. SONZA did actually resign from ABS-CBN but he also, as president of
MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26] However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned
from work does not determine his status as employee or independent contractor.

D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of
Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR)
[27]
that a television program host is an independent contractor. We quote the following findings of the U.S.court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled
position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters
degree in public communications and journalism; is trained in dance, singing, and modeling; taught with the drama
department at the University of Puerto Rico; and acted in several theater and television productions prior to her
affiliation with Desde Mi Pueblo.Second, Alberty provided the tools and instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor
status because WIPR provided the equipment necessary to tape the show. Albertys argument is misplaced. The
equipment necessary for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on the
show. Others provided equipment for filming and producing the show, but these were not the primary tools that
Alberty used to perform her particular function. If we accepted this argument, independent contractors could never
work on collaborative projects because other individuals often provide the equipment required for different aspects
of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts with
WIPR specifically provided that WIPR hired her professional services as Hostess for the Program Desde Mi
Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x
x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.[29] This test is based on the extent of control the hirer exercises over a worker. The greater

6
the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well the less control the hirer exercises, the more likely the worker is considered an independent
contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff meetings. [31] ABS-CBN could not
dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his shows
ABS-CBN or its interests. [32] The clear implication is that SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of
SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right
to modify the program format and airtime schedule for more effective programming. [34] ABS-CBNs sole concern
was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the
means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means
and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs
show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZAs performance of his work, or even with the quality or product of
his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast
SONZAs show but ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue
paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance of
SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance
of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval.This proves
that ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or
not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville
performers were independent contractors although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control over the manner of performance of the skills of
the artists, it could only control the result of the work by deleting objectionable features. [37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and
crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the Mel & Jay
programs. However, the equipment, crew and airtime are not the tools and instrumentalities SONZA needed to
perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs
sole concern was for SONZA to display his talent during the airing of the programs. [39]
A radio broadcast specialist who works under minimal supervision is an independent contractor. [40] SONZAs
work as television and radio program host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized
his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its
rules and standards of performance. SONZA claims that this indicates ABS-CBNs control not only [over] his
manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering
talents[41] of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement
refers to the Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by the COMPANY (ABS-CBN) as its Code of Ethics. [42] The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents
and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee
of the former.[43] In this case, SONZA failed to show that these rules controlled his performance. We find that these
general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the industry. We have ruled that:

7
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to
the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts
of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it.[44]
The Vaughan case also held that one could still be an independent contractor although the hirer reserved
certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired
from performing his services according to his own initiative. [45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of control which
ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-
CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. [46] This
practice is not designed to control the means and methods of work of the talent, but simply to protect the investment
of the broadcast station. The broadcast station normally spends substantial amounts of money, time and effort in
building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with
the station for a commensurate period of time. [47] Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to
ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN.SONZA
insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who is
ostensibly under the employ of the labor-only contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the labor-only contractor is the agent of the principal. The law makes the principal
responsible to the employees of the labor-only contractor as if the principal itself directly hired or employed the
employees.[48] These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN.
MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the AGENT of
SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The
President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned,
controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and
SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of
SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job
contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to
promote their careers in the broadcast and television industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January
1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the
broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is
no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot
exclude independent contractors from the class of service providers to the broadcast industry. The classification of
workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.

8
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without
giving his counsel the opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent
to attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting
the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing
after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding
those that may have been amicably settled, and shall be accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the place of the latters direct testimony. x x x

Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary
evidence, if any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without
a formal trial.[51] The holding of a formal hearing or trial is something that the parties cannot demand as a matter of
right.[52] If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat
talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the
right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee
relationship. To hold that every person who renders services to another for a fee is an employee - to give meaning to
the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The right
of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and
talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to render
his services without any one controlling the means and methods by which he performs his art or craft. This Court
will not interpret the right of labor to security of tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services only as employees, the station owners and
managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom
of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716, [55] as amended by
Republic Act No. 8241,[56] treats talents, television and radio broadcasters differently. Under the NIRC, these
professionals are subject to the 10% value-added tax (VAT) on services they render. Exempted from the VAT are
those under an employer-employee relationship.[57] This different tax treatment accorded to talents and broadcasters
bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual
relationship are present as in this case.

Nature of SONZAs Claims

9
 SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay, separation pay, service incentive
leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the
findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In
effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the
regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March
1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 205300

FONTERRA BRANDS PHILS., INC., Petitioner,

vs.
LEONARDO1 LARGADO and TEOTIMO ESTRELLADO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and setting aside
of the Decision of the Court of Appeals (CA) dated September 6, 2012, as well as its January 11, 2013 Resolution
denying reconsideration thereof, in CA-G.R. SP No. 114227, entitled Leonardo Largado and Teotimo P. Estrellado
v. National Labor Relations Commission (NLRC), Fonterra Brands Phils., lnc./Carlo Mendoza, Zytron Marketing &
Promotions Corp./Francisco Valencia, A. C. Sicat Marketing & Promotional Services/Arturo Sicat.

The Facts

Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and Promotions Corp.
(Z)rtron) for the marketing and promotion of its milk and dairy products. Pursuant to the contract, Zytron provided
Fonterra with trade merchandising representatives (TMRs), including respondents Leonardo Largado (Largado) and
Teotimo Estrellado (Estrellado). The engagement of their services began on September 15, 2003 and May 27, 2002,
respectively, and ended on June 6, 2006.

On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006. Fonterra
then entered into an agreement for manpower supply with A.C. Sicat Marketing and Promotional Services (A.C.
Sicat). Desirous of continuing their work as TMRs, respondents submitted their job applications with A.C. Sicat,
which hired them for a term of five (5) months, beginning June 7, 2006 up to November 6, 2006.

When respondents’ 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal thereof,
but were allegedly refused. This prompted respondents to file complaints for illegal dismissal, regularization, non-
payment of service incentive leave and 13th month pay, and actual and moral damages, against petitioner, Zytron,
and A.C. Sicat.

The Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not illegally dismissed. As a matter
of fact, they were the ones who refused to renew their contract and that they voluntarily complied with the
requirements for them to claim their corresponding monetary benefits in relation thereto; and (2) they were
consecutively employed by Zytron and A.C. Sicat, not by Fonterra. The dispositive portion of the Decision 2 reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered DISMISSING the instant case for utter lack
of merit.

SO ORDERED.

The NLRC affirmed the Labor Arbiter, finding that respondents’ separation from Zytron was brought about by the
execution of the contract between Fonterra and A.C. Sicat where the parties agreed to absorb Zytron’s personnel,
including respondents. Too, respondents failed to present any evidence that they protested this set-up. Furthermore,
respondents failed to refute the allegation that they voluntarily refused to renew their contract with A.C. Sicat. Also,
respondents did not assert any claim against Zytron and A.C. Sicat. The NLRC disposed of the case in this wise:
10
WHEREFORE, premises considered, the appeals are hereby ordered DISMISSED and the Decision of the Labor
Arbiter is AFFIRMED [in] toto.

SO ORDERED.3

The NLRC decision was assailed in a petition under Rule 65 before the CA.

Ruling on the petition, the CA, in the questioned Decision,4 found that A.C. Sicat satisfies the requirements of
legitimate job contracting, but Zytron does not. According to the CA: (1) Zytron’s paid-in capital of 250,000 cannot
be considered as substantial capital; (2) its Certificate of Registration was issued by the DOLE months after
respondents’ supposed employment ended; and (3) its claim that it has the necessary tools and equipment for its
business is unsubstantiated. Therefore, according to the CA, respondents were Fonterra’s employees.

Additionally, the CA held that respondents were illegally dismissed since Fonterra itself failed to prove that their
dismissal is lawful. However, the illegal dismissal should be reckoned from the termination of their supposed
employment with Zytron on June 6, 2006. Furthermore, respondents’ transfer to A.C. Sicat is tantamount to a
completely new engagement by another employer. Lastly, the termination of their contract with A.C. Sicat arose
from the expiration of their respective contracts with the latter. The CA, thus, ruled that Fonterra is liable to
respondents and ordered the reinstatement of respondents without loss of seniority rights, with full backwages, and
other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. The fallo of the
Decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Decision dated 20
November 2009 and Resolution dated 5 March 2010 of the National Labor Relations Commission (NLRC), Seventh
Division, are hereby ANULLED and SET ASIDE. Private respondent Fonterra Brand, Inc. is hereby ordered to
REINSTATE [respondents] without loss of seniority rights. Private respondents Fonterra Brand, Inc. and Zytron
Marketing and Promotional Corp. are hereby further ORDERED to jointly and severally pay petitioners their full
backwages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement; and
attorney’s fees.

SO ORDERED.

Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.

The Issues

Petitioner presents the following issues for Our resolution:

I.The CA erred in ruling that Zytron was a mere labor-only contractor to petitioner Fonterra, in that:

a.As held by the Court, there is no absolute figure that constitutes "substantial" capital for an independent
contractor, and the same should instead be measured against the type of work it is obligated to do for the
principal. It is most respectfully submitted that, here, the merchandising work undertaken by Zytron’s paid-
in capital of 250,000 was as of 1990, the year it was incorporated;

b.As shown in its Articles of Incorporation, Zytron had been in business since 1990, or more than a decade
before it signed a merchandising agreement with petitioner Fonterra;

c.Very importantly, petitioner Fonterra never exercised the right to control respondents and other employees
of Zytron. Indeed, respondents neither alleged that petitioner exercised control over them nor presented
proof in support thereof in any of their previous pleadings.

II.Respondents never claimed nor adduced evidence that they were dismissed from employment by Zytron. In fact,
Zytron denies terminating them from work. The CA, thus, erred in finding that respondents were "illegally
dismissed."

Succinctly, the issues in the case at bar are: (1) whether or not Zytron and A.C. Sicat are labor-only contractors,
making Fonterra the employer of herein respondents; and (2) whether or not respondents were illegally dismissed.

Our Ruling

We find merit in the petition.

11
As regards the CA’s conclusion that Zytron is not a legitimate job contractor, We are of the view that such is
immaterial to the resolution of the illegal dismissal issue for one reason: We find that respondents voluntarily
terminated their employment with Zytron, contrary to their allegation that their employment with Zytron was
illegally terminated.

We do not agree with the CA that respondents’ employment with Zytron was illegally terminated.

As correctly held by the Labor Arbiter and the NLRC, the termination of respondents’ employment with Zytron was
brought about by the cessation of their contracts with the latter. We give credence to the Labor Arbiter’s conclusion
that respondents were the ones who refused to renew their contracts with Zytron, and the NLRC’s finding that they
themselves acquiesced to their transfer to A.C. Sicat.

By refusing to renew their contracts with Zytron, respondents effectively resigned from the latter. Resignation is the
voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment,
done with the intention of relinquishing an office, accompanied by the act of abandonment.5

Here, it is obvious that respondents were no longer interested in continuing their employment with Zytron. Their
voluntary refusal to renew their contracts was brought about by their desire to continue their assignment in Fonterra
which could not happen in view of the conclusion of Zytron’s contract with Fonterra. Hence, to be able to continue
with their assignment, they applied for work with A.C. Sicat with the hope that they will be able to continue
rendering services as TMRs at Fonterra since A.C. Sicat is Fonterra’s new manpower supplier. This fact is even
acknowledged by the CA in the assailed Decision where it recognized the reason why respondents applied for work
at A.C. Sicat. The CA stated that "[t]o continuously work as merchandisers of Fonterra products, [respondents]
submitted their job applications to A.C. Sicat x x x."6 This is further bolstered by the fact that respondents
voluntarily complied with the requirements for them to claim their corresponding monetary benefits in relation to
the cessation of their employment contract with Zytron.

In short, respondents voluntarily terminated their employment with Zytron by refusing to renew their employment
contracts with the latter, applying with A.C. Sicat, and working as the latter’s employees, thereby abandoning their
previous employment with Zytron. Too, it is well to mention that for obvious reasons, resignation is inconsistent
with illegal dismissal. This being the case, Zytron cannot be said to have illegally dismissed respondents, contrary to
the findings of the CA.

As regards respondents’ employment with A.C. Sicat and its termination via non-renewal of their contracts,
considering that in labor-only contracting, the law creates an employer-employee relationship between the principal
and the labor-only contractor’s employee as if such employees are directly employed by the principal employer, and
considers the contractor as merely the agent of the principal,7 it is proper to dispose of the issue on A.C. Sicat’s
status as a job contractor first before resolving the issue on the legality of the cessation of respondents’ employment.

In this regard, We defer to the findings of the CA anent A.C. Sicat’s status as a legitimate job contractor, seeing that
it is consistent with the rules on job contracting and is sufficiently supported by the evidence on record.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

1.The contractor or subcontractor carries on a distinct and independent business and undertakes to perform
the job, work or service on its own account and under its own responsibility according to its own manner
and method, and free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof;

2.The contractor or subcontractor has substantial capital or investment; and

3.The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.8

On the other hand, contracting is prohibited when the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and if any of the following elements are present, thus:

1.The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or

2.The contractor does not exercise the right to control over the performance of the work of the contractual
employee.9

12
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C. Sicat was
able to prove its status as a legitimate job contractor for having presented the following evidence, to wit:

1.Certificate of Business Registration;

2.Certificate of Registration with the Bureau of Internal Revenue;

3.Mayor’s Permit;

4.Certificate of Membership with the Social Security System;

5.Certificate of Registration with the Department of Labor and Employment;

6.Company Profile; and

7.Certifications issued by its clients.10

Furthermore, A.C. Sicat has substantial capital, having assets totaling 5,926,155.76 as of December 31, 2006. Too,
its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and salaries of its
employees or workers, including benefits, premiums, and protection due them, as well as remittance to the proper
government entities of all withholding taxes, Social Security Service, and Medicare premiums, in accordance with
relevant laws.

The appellate court further correctly held that Fonterra’s issuance of Merchandising Guidelines, stock monitoring
and inventory forms, and promo mechanics, for compliance and use of A.C. Sicat’s employees assigned to them,
does not establish that Fonterra exercises control over A.C. Sicat. We agree with the CA’s conclusion that these were
imposed only to ensure the effectiveness of the promotion services to be rendered by the merchandisers as it would
be risky, if not imprudent, for any company to completely entrust the performance of the operations it has contracted
out.

These sufficiently show that A.C. Sicat carries out its merchandising and promotions business, independent of
Fonterra’s business.1âwphi1 Thus, having settled that A.C. Sicat is a legitimate job contractor, We now determine
whether the termination of respondents’ employment with the former is valid.

We agree with the findings of the CA that the termination of respondents’ employment with the latter was simply
brought about by the expiration of their employment contracts.

Foremost, respondents were fixed-term employees. As previously held by this Court, fixed-term employment
contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific
projects with predetermined dates of completion; they also include those to which the parties by free choice have
assigned a specific date of termination.11 The determining factor of such contracts is not the duty of the employee
but the day certain agreed upon by the parties for the commencement and termination of the employment
relationship.12

In the case at bar, it is clear that respondents were employed by A.C. Sicat as project employees. In their
employment contract with the latter, it is clearly stated that "[A.C. Sicat is] temporarily employing [respondents] as
TMR[s] effective June 6[, 2006] under the following terms and conditions: The need for your service being only for
a specific project, your temporary employment will be for the duration only of said project of our client, namely to
promote FONTERRA BRANDS products x x x which is expected to be finished on or before Nov. 06, 2006."13

Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even acceded to
the condition that their employment thereat will end on said pre-determined date of termination. They cannot now
argue that they were illegally dismissed by the latter when it refused to renew their contracts after its expiration. This
is so since the non-renewal of their contracts by A.C. Sicat is a management prerogative, and failure of respondents
to prove that such was done in bad faith militates against their contention that they were illegally dismissed. The
expiration of their contract with A.C. Sicat simply caused the natural cessation of their fixed-term employment
thereat. We, thus, see no reason to disturb the ruling of the CA in this respect.

With these, We need not belabor the other assigned errors.

IN VIEW OF THE FOREGOING, the instant Petition for Review is GRANTED. The assailed Decision of the
Court of Appeals dated September 6, 2012 and its January 11, 2013 Resolution denying reconsideration thereof, in
CA-G.R. SP No. 114227, are hereby REVERSED and SET ASIDE. The Decision of the National Labor Relations

13
Commission dated November 20, 2009 and its Resolution dated March 5, 2010 in NLRC Case No. RAB IV 12-
23927-06-Q are hereby REINSTATED.

SO ORDERED.

JOSE MEL BERNARTE, G.R. No. 192084

Petitioner,

Present:

- versus - CARPIO, J., Chairperson,

BRION,

DEL CASTILLO,*

PEREZ, and

SERENO, JJ.

PHILIPPINE BASKETBALL

ASSOCIATION (PBA), JOSE

EMMANUEL M. EALA, and Promulgated:

PERRY MARTINEZ,

Respondents. September 14, 2011

x-----------------------------------------------------------------------------------------x

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of
Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the National Labor Relations
Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is
14
an independent contractor, and not an employee of respondents Philippine Basketball Association (PBA), Jose
Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as
referees. During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a
year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms of
their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-
Filipino Cup which was from February 23, 2003 to June 2003. It was only during the second conference
when he was made to sign a one and a half month contract for the period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his
contract would not be renewed citing his unsatisfactory performance on and off the court. It was a total
shock for Bernarte who was awarded Referee of the year in 2003. He felt that the dismissal was caused by
his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in
February 2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly
contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a memorandum
to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-
town games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA
in the year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and the second was
for September 1 to December 2003. After the lapse of the latter period, PBA decided not to renew their
contracts.

Complainants were not illegally dismissed because they were not employees of the PBA. Their respective
contracts of retainer were simply not renewed. PBA had the prerogative of whether or not to renew their
contracts, which they knew were fixed.4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents
was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages,
moral and exemplary damages and attorneys fees, to wit:
15
 WHEREFORE, premises considered all respondents who are here found to have illegally dismissed
complainants are hereby ordered to (a) reinstate complainants within thirty (30) days from the date of
receipt of this decision and to solidarily pay complainants:

JOSE MEL RENATO GUEVARRA

BERNARTE

1. backwages from January 1, 2004

up to the finality of this Decision,
which to date is P211,250.00
P536,250.00

100,000.00
2. moral damages 100,000.00
50,000.00

3. exemplary damages 50,000.00

4. 10% attorneys fees 68,625.00 36,125.00

TOTAL P754,875.00 P397,375.00

or a total of P1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive portion of the
NLRCs decision reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-
Lora dated March 31, 2005 is AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC
and Labor Arbiter. The dispositive portion of the Court of Appeals decision reads:

16
 WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008
and Resolution dated August 26, 2008 of the National Labor Relations Commission
are ANNULLED and SET ASIDE. Private respondents complaint before the Labor Arbiter
is DISMISSED.

SO ORDERED.10

The Court of Appeals Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of
control over the means and methods by which petitioner performed his work as a basketball referee. The Court of
Appeals held:

While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and
making calls during basketball games, it, nevertheless, theorized that the said acts refer to the means and
methods employed by the referees in officiating basketball games for the illogical reason that said acts refer
only to the referees skills. How could a skilled referee perform his job without blowing a whistle and
making calls? Worse, how can the PBA control the performance of work of a referee without controlling his
acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC) that the
Contracts of Retainer show that petitioners have control over private respondents.

xxxx

Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that private respondents
repeated hiring made them regular employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether
petitioner was illegally dismissed.

17
Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final and executory for
failure of respondents to appeal with the NLRC within the reglementary period.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final and executory for failure of
respondents to appeal with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiters decision
was constructively served on respondents as early as August 2005 while respondents appealed the Arbiters decision
only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that service of an
unclaimed registered mail is deemed complete five days from the date of first notice of the post master. In this case
three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was
consequently returned to sender. Petitioner presents the Postmasters Certification to prove constructive service of the
Labor Arbiters decision on respondents. The Postmaster certified:

xxx

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately
issued the first registry notice to claim on July 12, 2005 by the addressee. The second and third notices
were issued on July 21 and August 1, 2005, respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it
after our one month retention period elapsed. Said registered letter was dispatched from this office to
Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary
mail is complete upon the expiration of ten (10) days after mailing, unless the court otherwise provides.
Service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the
date he received the first notice of the postmaster, whichever date is earlier.

18
The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is
determined upon receipt by the addressee of the registered mail; and (2) constructive service the completeness of
which is determined upon expiration of five days from the date the addressee received the first notice of the
postmaster.13

Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the
postmaster to the addressee.14 Not only is it required that notice of the registered mail be issued but that it should
also be delivered to and received by the addressee. 15 Notably, the presumption that official duty has been regularly
performed is not applicable in this situation. It is incumbent upon a party who relies on constructive service to prove
that the notice was sent to, and received by, the addressee. 16

The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not
only that the notice was issued or sent but also as to how, when and to whom the delivery and receipt was made. The
mailman may also testify that the notice was actually delivered. 17

In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of
the three notices issued by the post office was made. There is no conclusive evidence showing that the post office
notices were actually received by respondents, negating petitioners claim of constructive service of the Labor
Arbiters decision on respondents. The Postmasters Certification does not sufficiently prove that the three notices
were delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply
put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the
registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiters decision on
respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as respondents appeal
was considered in the interest of substantial justice. We agree with the NLRC. The ends of justice will be better
served if we resolve the instant case on the merits rather than allowing the substantial issue of whether petitioner is
an independent contractor or an employee linger and remain unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues
are beyond the province of this Court. However, this rule admits of exceptions, one of which is where there are
conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the
other, such as in the present case.18

To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold
test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employers power to control the employee on the means and methods by which the work is accomplished.
The so-called control test is the most important indicator of the presence or absence of an employer-employee
relationship.19

In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays
petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can
terminate the retainer contract for petitioners violation of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making petitioner an
independent contractor and not an employee of respondents.

19
Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise
control over the performance of his work. Petitioner cites the following stipulations in the retainer contract which
evidence control: (1) respondents classify or rate a referee; (2) respondents require referees to attend all basketball
games organized or authorized by the PBA, at least one hour before the start of the first game of each day; (3)
respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to
observe and comply with all the requirements of the PBA governing the conduct of the referees whether on or off
the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the life of
the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in
any basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct
himself on and off the court according to the highest standards of honesty or morality; and (6) imposition of various
sanctions for violation of the terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his
work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less
dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they merely serve as rules of
conduct or guidelines in order to maintain the integrity of the professional basketball league. As correctly observed
by the Court of Appeals, how could a skilled referee perform his job without blowing a whistle and making calls?
x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the
whistle and making calls?20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio
station and one of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former. The Court held:

We find that these general rules are merely guidelines towards the achievement of the mutually desired
result, which are top-rating television and radio programs that comply with standards of the industry. We
have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in
relation to the services being rendered may be accorded the effect of establishing an employer-employee
relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC.
In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement
of the mutually desired result without dictating the means or methods to be employed in attaining it, and
those that control or fix the methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it.22

We agree with respondents that once in the playing court, the referees exercise their own independent judgment,
based on the rules of the game, as to when and how a call or decision is to be made. The referees decide whether an
infraction was committed, and the PBA cannot overrule them once the decision is made on the playing court. The
referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA officers
cannot and do not determine which calls to make or not to make and cannot control the referee when he blows the
whistle because such authority exclusively belongs to the referees. The very nature of petitioners job of officiating a
professional basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are
required to report for work only when PBA games are scheduled, which is three times a week spread over an
average of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the
only deductions from the fees received by the referees are withholding taxes.
20
In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours per
game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig,
which are the usual deductions from employees salaries. These undisputed circumstances buttress the fact that
petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special
skills and independent judgment are required specifically for such position and cannot possibly be controlled by the
hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a
soccer referee, is an independent contractor, and not an employee of defendant which is the statutory body that
governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in
Employment Act. The U.S. District Court ruled:

Generally, if an employer has the right to control and direct the work of an individual, not only as to the
result to be achieved, but also as to details by which the result is achieved, an employer/employee
relationship is likely to exist. The Court must be careful to distinguish between control[ling] the conduct of
another party contracting party by setting out in detail his obligations consistent with the freedom of
contract, on the one hand, and the discretionary control an employer daily exercises over its employees
conduct on the other.

Yonan asserts that the Federation closely supervised his performance at each soccer game he officiated by
giving him an assessor, discussing his performance, and controlling what clothes he wore while on the field
and traveling. Putting aside that the Federation did not, for the most part, control what clothes he wore, the
Federation did not supervise Yonan, but rather evaluated his performance after matches. That the
Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that
parties retaining independent contractors may judge the performance of those contractors to determine if
the contractual relationship should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion
and authority, under the Laws of the Game, to call the game as he saw fit. x x x In a similar vein,
subjecting Yonan to qualification standards and procedures like the Federations registration and training
requirements does not create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent contractor
status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x x Here, it is
undisputed that soccer refereeing, especially at the professional and international level, requires a great deal
of skill and natural ability. Yonan asserts that it was the Federations training that made him a top referee,
and that suggests he was an employee. Though substantial training supports an employment inference, that
inference is dulled significantly or negated when the putative employers activity is the result of a statutory
requirement, not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the
Tennessee Secondary School Athletic Association (TSSAA), so the players vicarious liability claim
against the association should be dismissed. In finding that the umpire is an independent
contractor, the Court of Appeals of Tennesse ruled:

21
 The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between
TSSAA member schools. The TSSAA does not supervise regular season games. It does not tell an official
how to conduct the game beyond the framework established by the rules. The TSSAA does not, in the
vernacular of the case law, control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the
former. For a hired party to be considered an employee, the hiring party must have control over the means and
methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by
PBA of petitioner simply signifies the renewal of the contract between PBA and petitioner, and highlights the
satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to
discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory services, or
violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the
non-renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not
constitute illegal dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.

G.R. No. 177592 June 9, 2014

AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN

SUNGAHID, MAXIMO LEE, JOSE G. MORA TO, REX GABILAN, AND EUGEMA L.
LAURENTE, Petitioners,
vs.
PETRON CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital, investment,
tools and the like. However, where the principal is the one claiming that the contractor is a legitimate contractor, the
burden of proving the supposed status of the contractor rests on the principal.1

This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the Court of Appeals (CA) in
CA-G.R. SP No. 01291 which granted the Petition for Certiorari filed therewith, reversed and set aside the February
18, 2005 Decision4 and August 24, 2005 Resolution5 of the National Labor Relations Commission (NLRC) in NLRC
Case No. V-000481-2003 and dismissed the Complaint for illegal dismissal filed by petitioners Avelino Alilin
(Alilin), Teodoro Calesa (Calesa), Charlie Hindang (Hindang), Eutiquio Gindang (Gindang), Allan Sungahid
(Sungahid), Maximo Lee (Lee), Jose G. Morato (Morato), Rex Gabilan (Gabilan) and Eugema L. Laurente
(Laurente) against respondent Petron Corporation (Petron). Also assailed in this Petition is the CA Resolution 6 dated
March 30, 2007 which denied petitioners’ Motion for Reconsideration7 and Supplemental Motion for
Reconsideration.8

Factual Antecedents

Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the country for receiving,
storing and distributing its petroleum products.

In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D. Gindang
(Romualdo), started recruiting laborers for fielding to Petron’s Mandaue Bulk Plant. When Romualdo
died in1989, his son Romeo D. Gindang (Romeo), through Romeo D. Gindang Services(RDG), took over
the business and continued to provide manpower services to Petron. Petitioners were among those
recruited by Romualdo D. Gindang Contractor and RDG to work in the premises of the said bulk plant,
with the corresponding dates of hiring and work duties, to wit:
Employees Date of Hiring Duties

22
Eutiquio Gindang
Eugema L. Laurente
Teodoro Calesa
Rex Gabilan
Charlie T. Hindang
Allan P. Sungahid
Maximo S. Lee
Avelino S. Alilin
Jose Gerry M. Morato
1968 utility/tanker receiver/barge loader/warehouseman/mixer
June 1979 telephone operator/order taker
August 1, 1981 utility/tanker receiver/barge loader/sounder/gauger
July 1, 1987 warehouseman/forklift driver/tanker receiver/barge loader
September 18, 1990 utility/tanker receiver/barge loader/sounder/gauger
September 18, 1990 filler/sealer/painter/tanker receiver/utility
September 18, 1990 gasul filler/painter/utility
July 16, 1992 carpenter/driver
March 16, 1993 cylinder checker/tanker receiver/grass cutter/janitor/utility

On June 1, 2000, Petron and RDG entered into a Contract for Services9 for the period from June 1, 2000 to May 31,
2002, whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging and
other utility services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended
until September 30, 2002. Upon expiration thereof, no further renewal of the service contract was done.

Proceedings before the Labor Arbiter

Alleging that they were barred fromcontinuing their services on October 16, 2002, petitioners Alilin, Calesa,
Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint10 for illegal dismissal, underpayment of
wages, damages and attorney’s fees against Petron and RDG on November 12, 2002. Petitioner Laurente filed
another Complaint11 for illegal dismissal, underpayment of wages, non-payment of overtime pay, holiday pay,
premium pay for holiday, rest day, 13th month pay, service incentive leave pay, allowances, separation pay,
retirement benefits, damages and attorney’s fees against Petron and RDG. The said complaints were later
consolidated.

Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is a
labor-only contractor, which merely acted as an agent of Petron, their true employer. They asseverated that their
jobs, which are directly related to Petron’s business, entailed them to work inside the premises of Petron using the
required equipment and tools furnished by it and that they were subject to Petron’s supervision. Claiming to be
regular employees, petitioners thus asserted that their dismissal allegedly in view of the expiration of the service
contract between Petron and RDG is illegal.

RDG corroborated petitioners’ claim that they are regular employees of Petron. It alleged that Petron directly
supervised their activities; they performed jobs necessary and desirable to Petron’s business; Petron provided
petitioners with supplies, tools and equipment used in their jobs; and that petitioners’ workplace since the start of
their employment was at Petron’s bulk plant in Mandaue City. RDG denied liability over petitioners’ claim of illegal
dismissal and further argued that Petron cannot capitalize on the service contract to escape liability.

Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of the
petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages, and directly supervised
their work. Attesting to these were two former employees of RDG and Petron’s Mandaue Terminal Superintendent
whose joint affidavit12 and affidavit,13 respectively, were submitted by Petron. Anent its allegation that RDG is an
independent contractor, Petron presented the following documents: (1) RDG’s Certificate of Registration issued by
the Department of Labor and Employment (DOLE) on December 27, 2000;14 (2) RDG’s Certificate of Registration
of Business Name issued by the Department of Trade and Industry (DTI) on August 18, 2000;15 (3) Contractor’s Pre-
Qualification Statement;16 (4) Conflict of Interest Statement signed by Romeo Gindang as manager of RDG;17 (5)
RDG’s Audited Financial Statements for the years 199818 199919 and 2000;20 (6) RDG’s Mayor’s Permit for the years
200021 and 2001;22 (7) RDG’s Certificate of Accreditation issued by DTI in October 1991;23 (8) performance
bond24and insurance policy25 posted to insure against liabilities; (9) Social Security System (SSS) Online Inquiry
System Employee Contributions and Employee Static Information;26 and, (10) Romeo’s affidavit27 stating that he
had paid the salaries of his employees assigned to Petron for the period of November 4, 2001 to December 31, 2001.
Petron argued that with the expiration of the service contract it entered with RDG, petitioners’ term of employment
has concomitantly ended. And not being the employer, Petron cannot be held liable for petitioners’ claim of illegal
dismissal.

In a Decision28 dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular employees of Petron. It found
that their jobs were directly related to Petron’s business operations; they worked under the supervision of Petron’s
foreman and supervisor; and they were using Petron’s tools and equipment in the performance of their works. The
Labor Arbiter also found that Petron merely utilized RDG in its attempt to hide the existence of employee-employer
relationship between it and petitioners and avoid liability under labor laws. And there being no showing that

23
petitioners’ dismissal was for just or authorized cause, the Labor Arbiter declared them to have been illegally
dismissed. Petron was thus held solidarily liable with Romeo for the payment of petitioners’ separation pay (in lieu
of reinstatement due to strained relations with Petron) fixed at one month pay for every year of service and
backwages computed on the basis of the last salary rate at the time of dismissal. The dispositive portion of the
Decision reads: WHEREFORE, premises considered, judgment is hereby rendered ordering the respondents Petron
Corporation and Romeo Gindang to pay the complainants as follows:
1. Teodoro Calesa P 136,890.00
2. Eutiquio Gindang P 202,800.00
3. Charlie T. Gindang P 91,260.00
4. Allan P. Sungahid P 91,260.00
5. Jose Gerry Morato P 76,050.00
6. Avelino A. Alilin P 95,680.00
7. Rex S. Gabilan P 106,470.00
8. Maximo S. Lee P 91,260.00
9. Eugema Minao Laurente P 150,800.00
Total award ₱1,042,470.00

The other claims are dismissed for lack of merit.

SO ORDERED.29

Proceedings before the National Labor Relations Commission

Petron continued to insist that there is no employer-employee relationship between it and petitioners. The NLRC,
however, was not convinced. In its Decision30 of February 18, 2005, the NLRC ruled that petitioners are Petron’s
regular employees because they are performing job assignments which are germane to its main business. Thus:

WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is understood that the
grant of backwages shall be until finality of the Decision.

The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.

SO ORDERED.31

The NLRC also denied Petron’s Motion for Reconsideration in its Resolution32 of August 24, 2005.

Proceedings before the Court of Appeals

Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or writ of
injunction before the CA. The said court resolved to grant the injunction.33 Hence, a Writ of Preliminary
Injunction34 to restrain the implementation of the February 18, 2005 Decision and August 24, 2005 Resolution of the
NLRC was issued on March 3, 2006.

In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship between the parties.
According to it, the records of the case do not show that petitioners were directly hired, selected or employed by
Petron; that their wages and other wage related benefits were paid by the said company; and that Petron controlled
the manner by which they carried out their tasks. On the other hand, RDG was shown to be responsible for paying
petitioners’ wages. In fact, SSS records show that RDG is their employer and actually the one remitting their
contributions thereto. Also, two former employees of RDG who were likewise assigned in the Mandaue Bulk Plant
confirmed by way of a joint affidavit that it was Romeo and his brother Alejandre Gindang who supervised their
work, not Petron’s foreman or supervisor. This was even corroborated by the Terminal Superintendent of the
Mandaue Bulk Plant.

The CA also found RDG to be an independent labor contractor with sufficient capitalization and investment as
shown by its financial statement for year-end 2000. In addition, the works for which RDG was contracted to provide
were menial which were neither directly related nor sensitive and critical to Petron’s principal business. The CA
disposed of the case as follows:

24
WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005 Resolution of
the Fourth Division of the National Labor Relations Commission in NLRC Case No. V-000481-2003, entitled
"Teodoro Calesa et al. vs. Petron Corporation and R.D. Gindang Services", having been rendered with grave abuse
of discretion amounting to excess of jurisdiction, are hereby REVERSED and SET ASIDE and a NEW ONE is
entered DISMISSING private respondents’ complaint against petitioner. It is so ordered. 36

Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed them; that RDG is a labor-
only contractor; and that they performed jobs which are sensitive to Petron’s business operations. To support these,
they attached to their Supplemental Motion for Reconsideration38 Affidavits39 of former employees of Petron
attesting to the fact that their jobs were critical to Petron’s business operations and that they were carried out under
the control of a Petron employee.

Petitioners’ motions were, however, denied by the CA in a Resolution40 dated March 30, 2007.

Hence, this Petition.

Issue

The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such finding
hinges the determination of whether an employer-employee relationship exists between the parties as to make Petron
liable for petitioners’ dismissal.

Our Ruling

The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the NLRC on one hand, and
of the CA on the other, constrains the Court to review the factual issues involved in this case.

As a general rule, the Court does not review errors that raise factual questions.41 Nonetheless, while it is true that the
determination of whether an employer-employee relationship existed between the parties basically involves a
question of fact, the conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the CA on the
other, constrains the Court to review and reevaluate such factual findings.42

Labor-only contracting, distinguished

from permissible job contracting.

The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract for Services in
June 2000 is DOLE Department Order No. 10, series of 1997,43 the pertinent provision of which reads:

Section 4. x x x

xxxx

(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a principal and the following
elements are present:

(i) The contractor or subcontractor does not have substantial capital or investment to actually perform the
job, work or service under its own account and responsibility; and

(ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.

xxxx

Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3 (d) and (e) and
Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the performance of any
of the following:

(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of
products or services, provided that the normal production capacity or regular workforce of the principal
cannot reasonably cope with such demands;

25
 (b) Works or services temporarily or occasionally needed by the principal for undertakings requiring expert
or highly technical personnel to improve the management or operations of an enterprise;

(c) Services temporarily needed for the introduction or promotion of new products, only for the duration of
the introductory or promotional period;

(d) Works or services not directly related or not integral to the main business or operation of the principal,
including casual work, janitorial, security, landscaping, and messengerial services, and work not related to
manufacturing processes in manufacturing establishments;

(e) Services involving the public display of manufacturers’ products which do not involve the act of selling
or issuance of receipts or invoices;

(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or production
capacity of the principal; and

(g) Unless a reliever system is in place among the regular workforce, substitute services for absent regular
employees, provided that the period of service shall be coextensive with the period of absence and the same
is made clear to the substitute employee at the time of engagement. The phrase "absent regular employees"
includes those who are serving suspensions or other disciplinary measures not amounting to termination of
employment meted out by the principal, but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on the records filed with the National
Conciliation and Mediation Board.

"Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out with
a contractor or subcontractor the performance of a specific job, work, or service within a definite or predetermined
period, regardless of whether such job, work or, service is to be performed or completed within or outside the
premises of the principal. Under this arrangement, the following conditions must be met: (a) the contractor carries
on a distinct and independent business and undertakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of his work except as to the results thereof; (b) the contractor has
substantial capital or investment; and (c) the agreement between the principal and contractor or subcontractor
assures the contractual employees’ entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social welfare benefits." 44 Labor-only contracting,
on the other hand, is a prohibited act, defined as "supplying workers to an employer who does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer."45 "[I]n distinguishing between prohibited labor-only contracting and permissible job contracting, the
totality of the facts and the surrounding circumstances of the case shall be considered." 46 Generally, the contractor is
presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like. However, where the principal is the one claiming that the
contractor is a legitimate contractor, as in the present case, said principal has the burden of proving that supposed
status.47 It is thus incumbent upon Petron, and not upon petitioners as Petron insists,48 to prove that RDG is an
independent contractor.

Petron failed to discharge the burden of

proving that RDG is a legitimate
contractor. Hence, the presumption that
RDG is a labor-only contractor stands.

Here, the audited financial statements and other financial documents of RDG for the years 1999 to 2001 establish
that it does have sufficient working capital to meet the requirements of its service contract. In fact, the financial
evaluation conducted by Petron of RDG’s financial statements for years 1998-2000 showed RDG to have a
maximum financial capability of Php4.807 Million as of December 1998,49 and Php1.611 Million as of December
2000.50 Petron was able to establish RDG’s sufficient capitalization when it entered into the service contract in 2000.
The Court stresses though that this determination of RDG’s status as an independent contractor is only with respect
to its financial capability for the period covered by the financial and other documents presented. In other words, the
evidence adduced merely proves that RDG was financially qualified as a legitimate contractor but only with respect
to its last service contract with Petron in the year 2000.

As may be recalled, petitioners have rendered work for Petron for a long period of time even before the service
contract was executed in 2000. The respective dates on which petitioners claim to have started working for Petron,
as well as the fact that they have rendered continuous service to it until October 16, 2002, when they were prevented
from entering the premises of Petron’s Mandaue Bulk Plant, were not at all disputed by Petron. In fact, Petron even
recognized that some of the petitioners were initially fielded by Romualdo Gindang, the father of Romeo, through
26
RDG’s precursor, Romualdo D.Gindang Contractor, while the others were provided by Romeo himself when he took
over the business of his father in 1989.1âwphi1 Hence, while Petron was able to establish that RDG was financially
capable as a legitimate contractor at the time of the execution of the service contract in 2000, it nevertheless failed to
establish the financial capability of RDG at the time when petitioners actually started to work for Petron in 1968,
1979, 1981, 1987, 1990,1992 and 1993.

Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since 1976 and prior to
DOLE Department Order No. 10, series of 1997,52 provide that for job contracting to be permissible, one of the
conditions that has to be met is that the contractor must have substantial capital or investment. Petron having failed
to show that this condition was met by RDG, it can be concluded, on this score alone, that RDG is a mere labor-only
contractor. Otherwise stated, the presumption that RDG is a labor-only contractor stands due to the failure of Petron
to discharge the burden of proving the contrary.

The Court also finds, as will be discussed below, that the works performed by petitioners were directly related to
Petron’s business, another factor which negates Petron’s claim that RDG is an independent contractor.

Petron’s power of control over

petitioners exists in this case.

"[A] finding that a contractor is a ‘labor-only’ contractor is equivalent to declaring that there is an employer-
employee relationship between the principal and the employees of the supposed contractor." 53 In this case, the
employer employee relationship between Petron and petitioners becomes all the more apparent due to the presence
of the power of control on the part of the former over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals54 that:

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between the parties. The four elements of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the
employee’s conduct.

Of these four elements, it is the power to control which is the most crucial and most determinative factor, so
important, in fact, that, the other elements may even be disregarded." (Emphasis supplied)

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not
detract from the conclusion that there exists an employer-employee relationship between the parties due to Petron’s
power of control over the petitioners. One manifestation of the power of control is the power to transfer employees
from one work assignment to another.55 Here, Petron could order petitioners to do work outside of their regular
"maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk plant, observe an
8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety
and security measures being implemented within the bulk plant. All these imply control. In an industry where safety
is of paramount concern, control and supervision over sensitive operations, such as those performed by the
petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and
flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to property and
the environment. Naturally, supervision by Petron is essential in every aspect of its product handling in order not to
compromise the integrity, quality and safety of the products that it distributes to the consuming public.

Petitioners already attained regular

status as employees of Petron.

Petitioners were given various work assignments such as tanker receiving, barge loading, sounding, gauging,
warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron refers to these work
assignments as menial works which could be performed by any able-bodied individual. The Court finds, however,
that while the jobs performed by petitioners may be menial and mechanical, they are nevertheless necessary and
related to Petron’s business operations. If not for these tasks, Petron’s products will not reach the consumers in their
proper state. Indeed, petitioners’ roles were vital inasmuch as they involve the preparation of the products that
Petron will distribute to its consumers.

Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to petitioners, the
Court notes the undisputed fact that for many years, it was the same able-bodied individuals (petitioners) who
performed the tasks for Petron. The engagement of petitioners for the same works for a long period of time is a
strong indication that such works were indeed necessary to Petron’s business. In view of these, and considering
further that petitioners’ length of service entitles them to become regular employees under the Labor Code,
petitioners are deemed by law to have already attained the status as Petron’s regular employees. As such, Petron
could not terminate their services on the pretext that the service contract it entered with RDG has already lapsed. For

27
one, and as previously discussed, such regular status had already attached to them even before the execution of the
service contract in 2000. For another, the same does not constitute a just or authorized cause for a valid dismissal of
regular employees.

In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent of Petron.
Consequently, the employer-employee relationship which the Court finds to exist in this case is between petitioners
as employees and Petron as their employer. Petron therefore, being the principal employer and RDG, being the
labor-only contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims. 56

WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30, 2007 Resolution of the Court
of Appeals in CA-G.R. SP No. 01291 are REVERSED and SET ASIDE. The February 18, 2005 Decision and
August 24, 2005 Resolution of the National Labor Relations Commission in NLRC Case No. V-000481-2003 are
hereby REINSTATED and AFFIRMED.

SO ORDERED.

G.R.No. 204261, October 05, 2016

EDWARD C. DE CASTRO AND MA. GIRLIE F. PLATON, Petitioners, v. COURT OF APPEALS,

NATIONAL LABOR RELATIONS COMMISSION, SILVERICON, INC., AND/OR NUVOLAND PHILS.,
INC., AND/OR RAUL MARTINEZ, RAMON BIENVENIDA, AND THE BOARD OF DIRECTORS OF
NUVOLAND, Respondents.

DECISION

MENDOZA, J.:

This is a Petition for Certiorari under Rule 65 of the Rules of Court assailing the June 1, 2012 Decision1and the
September 21, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 122415, for having been issued
with grave abuse of discretion, when it affirmed the July 29, 2011 Decision 3 and the September 22, 2011
Resolution4 of the National Labor Relations Commission (NLRC) in NLRC -NCR Case Nos. 11-16356-09 and 12-
17308-09, consolidated cases for illegal dismissal filed against respondent corporations, Nuvoland Phils.,
Inc. (Nuvoland) and Silvericon, Inc. (Silvericon).

The July 29, 2011 NLRC Decision, in turn, reversed the March 15 2011 Decision5 of the Labor Arbiter (LA), finding
that the petitioners were illegally dismissed.chanroblesvirtuallawlibrary
The Antecedents

Nuvoland, a corporation formed primarily "to own, use, improve, develop, subdivide, sell, exchange, lease and hold
for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures,"
was registered with the Securities and Exchange Commission (SEC) on August 9, 2006.6 Respondent Ramon
Bienvenida (Bienvenida) was the principal stockholder and member of the Board of Directors while Raul
Martinez (Martinez) was its President.

Silvericon, on the other hand, was registered with the SEC on December 19, 2006. Its Articles: of Incorporation
described it as a "corporation organized 'to own, use, improve, develop, subdivide, sell, exchange, lease and hold for
investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures.'" 7

Sometime in 2007, Martinez recruited petitioner Edward de Castro (De Castro), a sales and marketing professional
in the field of real estate, to handle its sales and marketing operations, including the hiring and supervision of the
sales and marketing personnel. To formalize this undertaking, De Castro was made to sign a Memorandum of
Agreement (MOA), denominated as Shareholders Agreement,8 wherein Martinez proposed to create a new
corporation, through which the latter's compensation, benefits and commissions, including those of other sales
personnel, would be coursed. It was stipulated in the said MOA that the new corporation 9 would have an authorized
capital stock of P4,000,000.00, of which P1,000,000.00 was subscribed and paid equally by the Martinez Group and
the De Castro Group.10

As it turned out, the supposedly new corporation contemplated was Silvericon. De Castro was appointed the
President and majority stockholder of Silvericon while Bienvenida and Martinez were named as stockholders and
incorporators thereof, each owning one (1) share of subscribed capital stock.

In the same MOA, Martinez was designated as Chairman of the new corporation to whom De Castro, as President
and Chief Operating Officer, would directly report. De Castro was tasked to manage the day to day operations of the
new corporation based on policies, procedures and strategies set by Martinez. For their respective roles, Martinez
was to receive a monthly allowance of P125,000.00, while De Castro's monthly salary was P400,000.00, with car

28
plan and project income bonus, among other perks. Both Martinez and De Castro were stipulated to receive override
commissions at 1% each, based on the net contract price of each condominium unit sold.

During De Castro's tenure as Chief Operating Officer of the newly created Silvericon, he recruited forty (40) sales
and marketing personnel. One of them was petitioner Ma. Girlie F. Platon (Platon) who occupied the position of
Executive Property Consultant. De Castro and his team of sales personnel were responsible for the sale of 100% of
the projects owned and developed by Nuvoland.11

Thereafter, the Sales and Marketing Agreement 12(SMA), dated February 26, 2008, was purportedly executed by
Nuvoland and Silvericon, stipulating that all payments made for the condominium projects of Nuvoland were to be
given directly to it. Clients secured by the sales and marketing personnel would issue checks payable to
Nuvoland while the cash payments, as the case may be, were deposited to Nuvoland's account. Meanwhile, the
corresponding sales commission of the sales personnel were issued to them by Nuvoland, with Martinez signing on
behalf of the said company.

In a Letter,13 dated December 12, 2008 and signed by Bienvenida, Nuvoland terminated the SMA on the ground that
Silvericon personnel committed an unauthorized walkout and abandonment of the Nuvo City Showroom for two (2)
days. In the same letter, Nuvoland demanded that Silvericon make a full accounting of all its uses of the marketing
advances from Nuvoland. It, however, assured that all sales commissions earned by Silvericon personnel would be
released as per existing policy.

After the issuance of the said termination letter, De Castro and all the sales and marketing personnel of Silvericon
were barred from entering the office premises. Nuvoland, eventually, was able to secure the settlement of all sales
and marketing personnel's commissions and wages with the exception of those of De Castro and Platon. The claims
of one of Silvericon's senior manager were settled during the pendency of a complaint with the LA. 14

Aggrieved, De Castro and Platon filed a complaint for illegal dismissal before the LA, demanding the payment of
their unpaid wages, commissions and other benefits with prayer for the payment of moral and exemplary damages
and attorney's fees against Silvericon, Nuvoland, Martinez, Bienvenida, and the Board of Directors of Nuvoland.

Nuvoland and its directors and officers denied a direct contractual relationship with De Castro and Platon, and
contended that if there was any dispute at all, it was merely between the complainants and Silvericon.

For its part, Silvericon admitted that it had employed De Castro as President and COO. It, however, asserted the
application of Presidential Decree (P.D.) No. 902-A to the case, arguing that the claims come within the purview of
corporate affairs and management, thus, falling within the jurisdiction of the regular courts. 15

The Ruling of the Labor Arbiter

On March 15, 2011, after the filing of the parties' respective position papers, the LA handed down his decision in
favor of De Castro and Platon. He concluded that Silvericon was a mere labor-only contractor and, therefore, a mere
agent of Nuvoland. Thus:chanRoblesvirtualLawlibrary
It should be noted that in the Sales and Marketing Agreement between Silvericon and Nuvoland, the latter
committed to advance all the necessary amount of money up to the extent of P30 million per building to fund the
marketing expenses for the project. This alone disqualifies respondent Silvericon as an independent contractor as it
could not undertake the contracted sales and marketing work under its own account and under its own responsibility.
Not only that, that respondent Nuvoland has to bankroll the marketing expenses of respondent Silvericon up to the
extent of P30 million per building means that the latter does not have substantial capital to undertake the contract
work on its own account and under its own responsibility. Thus, the argument by the respondents that the paid-up
capital of respondent Silvericon in the amount of P1 million as shown by its Articles of Incorporation to be
substantial capital is simply puerile. If it were true that said amount of Pi million would be substantial enough for
Silvericon to carry out its undertaking under Sales and Marketing Agreement, then there was no need for respondent
Nuvoland to advance the amount of P30,000,000.00 for the marketing expenses of Silvericon. Moreover, as argued
by complainants, how can P1,000,000.00 be deemed as substantial capitalization if complainant De Castro's salary
per month alone is already about almost half of Silver/icon's paid-up capitalization. This is not to mention the
salaries of the more than forty sales and marketing staff. This means that after only one (1) month in operation,
Silvericon's capitalization would not have been enough to pay even the salaries of its employees.

To be added to the foregoing findings is the admitted fact that it was respondent Nuvoland which paid the sales
commissions of the sales personnel of respondent Silvericon. Even the power to dismiss the complainants and the
other sales personnel of Silvericon was exercised by respondent Nuvoland. If indeed there was an unauthorized
walkout and abandonment by the sales personnel of the Nuvo City showroom for a period of two (2) days, then what
Nuvoland could have done was to notify Silvericon to institute appropriate disciplinary action against the erring
personnel, and not to take the cudgels for Silvericon in abruptly terminating the entire sales force including the
complainants herein.16
chanrobleslaw
Nuvoland was adjudged as the direct employer of De Castro and Platon and, thus, liable to pay their money claims
as a consequence of their illegal dismissal. According to the LA, the ground relied upon for the termination of the
29
employment of De Castro and Platon - abandonment of the Nuvo City Showroom - was not at all proven. Mere
suspicion that De Castro instigated the walkout did not discharge the burden of proof which heavily rested on the
employer. Without an unequivocal showing that an employee deliberately and unjustifiably refused his
employment sans any intention to return to work, abandonment as a cause for dismissal could not stand. Worse,
procedural due process could not be said to have been observed through the expediency of a letter in contravention
to Article 277, paragraph 2 of the Labor Code.17 Hence, the LA disposed:chanRoblesvirtualLawlibrary
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering respondent
Nuvoland Phils. Inc. and/or Raul Martinez and Ramon Bienvenida to pay jointly and solidarity the awarded claims
in favor of the complainants, as follows:cralawlawlibrary

EDWARD DE CASTRO

Backwages................................ P10,800,000.00
Separation pay.............................. 1,600,000.00
Unpaid Salaries................................ 146,667.00
13th Month Pay............................... 380,000.00
Unpaid Override Commissions ........26,454.839.88

TOTAL........................P39,381,506.88

MA. GIRLIE PLATON

Backwages................................ P405,000.00
Separation pay.............................. 60,000.00
Unpaid Salaries................................ 5,500.00
13th Month Pay.............................. 14,250.00
Unpaid Override Commissions ........530.231.93

TOTAL........................P1,014,981.93
chanrobleslaw
Not in conformity, Nuvoland, Bienvenida and Martinez interposed an appeal before the NLRC, arguing that the LA
gravely abused his discretion in ruling that: 1) Silvericon was a labor-only contractor; 2) the case did not involve an
intra-corporate dispute; and 3) Martinez and Bienvenida were solidarity liable for illegal dismissal.

The Ruling of the NLRC

In its July 29, 2011 Decision, the NLRC reversed the LA decision, finding that Silvericon was an independent
contractor, thus, the direct employer of De Castro and Platon. In its view, in the SMA, Silvericon had full discretion
on how to perform and conduct its marketing and sales tasks; and there was no showing that Nuvoland had exercised
control over the method of sales and marketing strategies used by Silvericon. The NLRC further concluded that
Silvericon had substantial capital. It pointed out that in several cases decided by the Court, even an amount less than
One Million Pesos was sufficient to constitute : substantial capital; and so to require Silvericon to prove that it had
investments in the form of tools, equipment, machinery, and work premises would be going beyond what the law
and jurisprudence required. Hence, it could not consider Silvericon as a dummy corporation of Nuvoland organized
to effectively evade the latter's obligation of providing employment benefits to its sales and marketing agents. This
being the case, the NLRC ruled that no employer-employee relationship existed between Nuvoland, on one hand,
and De Castro and Platon, on the other. There was no evidence showing that Nuvoland hired, paid wages, dismissed
or controlled De Castro and Platon, or anyone of Silvericon's employees. Resultantly, Martinez and Bienvenida
could not be held liable for they merely acted as officers of Nuvoland.

Unfazed, De Castro and Platon assailed the decision of the NLRC via a petition for certiorari under Rule 65 with the
CA.

The Ruling of the CA

In its June 1, 2012 Decision, the CA affirmed the findings of the NLRC, pointing out that what was terminated was
the SMA. As such, the employment of the forty (40) personnel hired by Silvericon, as well as the petitioners'
employment, was not affected. Considering that there was no employer-employee relationship between the
petitioners and Nuvoland, the CA deemed that the latter could not be held liable for the claim of illegal dismissal.
Even assuming that De Castro was illegally dismissed, the CA opined that the NLRC was correct in refraining from
taking cognizance of the complaint because De Castro's employment with Silvericon put him within the ambit of
Section 5.2 of Republic Act (R.A.) No. 8799, otherwise known as The Securities Regulation Code. As such, his
claim should have been brought before the Regional Trial Court (RTC) instead.

Upon the denial of their motion for reconsideration, the petitioners filed this petition on the following
GROUNDS

I
30
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT AGREED
WITH THE NLRC THAT SILVERICON IS NOT A LABOR-ONLY CONTRACTOR
II

THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT AGREED
WITH THE NLRC THAT THE INSTANT CASE INVOLVES AN INTRA-CORPORATE DISPUTE
III

THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT HELD
THAT NO BAD FAITH WAS ESTABLISHED ON THE PART OF RESPONDENTS RAUL MARTINEZ
AND RAMON BIENVENIDA.18
chanrobleslaw
Essentially, petitioners De Castro and Platon argue that Silvericon, far from being an independent contractor, was
engaged in labor-only contracting as shown by: 1) its lack of a substantial capital necessary in the conduct of its
business; 2) its lack of investment on tools, equipment, machineries, work premises, and other materials; and 3) its
failure to secure a certificate of authority to act as an independent contractor issued by the Department of Labor and
Employment (DOLE); and 4) its services to Nuvoland being exclusive in nature.

According to De Castro and Platon, the evaluation of the authorized capital stock of Silvericon against the marketing
and sales activities of its sales personnel would readily show that it needed a huge amount of funds for salaries and
operating expenses, not to mention the funds for promotions and advertisements for the Aspire Condominium
Project and Infinity Office and Residential Condominium Prpject. Suffice it to say, Silvericon's authorized or paid up
capital was deficient to cover its operations. This is the reason why Nuvoland made advancements amounting to P30
Million per building.

The petitioners contend that the CA gravely erred when it relied on the eventual deduction of the said advances from
the earned marketing fee of Silvericon pursuant to the SMA. The advancements, whether or not at cost on the part of
Silvericon, only proved that the latter had no substantial capital necessary for its business. Although jurisprudence
was replete with rulings considering an amount less than the paid-up capital of Silvericon as substantial, the industry
in which the respondent corporations were engaged, that is, the sale and marketing of enormous condominium
projects, should be taken into account. In other words, the test of a substantial paid-up capital for purposes of
identifying an entity; as an independent contractor should be evaluated in light of the business it is undertaking. In
the case of Silvericon, the paid-up capital of P1 Million Pesos could hardly be considered substantial.

Further, Silvericon had no investment in the form of tools and equipment necessary in the conduct of its business,
the sales and marketing activities of which were conducted in the premises of Nuvoland. The latter itself designed
and constructed the model units used for the sales and marketing of the condominium projects.

More significantly, the petitioners explained that Nuvoland created Silvericon to serve, not any other clientele, but
its creator. If Nuvoland really wanted to engage a truly independent contractor to undertake its sales and marketing
needs, it should have engaged a more experienced one, not a two-year old untested company. But then, they are one
and the same. The services of Silvericon were exclusively for Nuvoland. Hence, there was no need for Nuvoland to
require Silvericon to secure a certificate of authority from the DOLE. Undeniably, De Castro was merely engaged to
facilitate the recruitment of sales and marketing personnel, who then performed functions which were directly
related to the main business of the principal, Nuvoland.

Position of the Respondents

In their Comment,19 respondents Nuvoland, Martinez and Bienvenida argued that the subject petition should be
dismissed outright for having been filed under a wrong mode of appeal. In other words, instead of being captioned
as a petition under Rule 45, the petitioners availed of the special civil action under Rule 65, setting forth grave abuse
of discretion on the part of the CA as a main ground. The respondents pointed out that the petitioners may not utilize
a petition for certiorari as a pretext for a belated filing of a petition for review.

Respondent Silvericon for its part, submitted its Manifestation,20 dated December 12, 2013, praying that it be
excused from filing a comment as it did not see any need to be part of the appeal.

Reply of Petitioners

In their Reply,21 the petitioners asserted that their petition was strongly grounded on grave abuse of discretion due to
the CA's deliberate failure to consider material and undisputed facts showing that Silvericon was indeed a labor-only
contractor. They hinged their choice of remedy on their view that the NLRC, as affirmed by the CA, acted in total
disregard of the evidence decisive of the present controversy.chanroblesvirtuallawlibrary
The Court's Ruling
31
Initially, because of the divergence in the conclusions of the LA and the NLRC, it appears that the issues
surrounding the legal arrangements between and among the parties are complicated. After a perusal of the records,
however, the Court comes to view the case as a simple question of whether Silvericon was engaged in independent
contracting or a labor-only scheme. The answer to this issue would necessarily shape the conclusions as to
respondents' other contentions like jurisdiction. Before delving into these matters, though, there is a need to first
resolve the procedural issues.

Procedural Issues

After a careful review of the records, the Court decides to apply a tempered relaxation of the procedural rules in
accord with substantial justice.

It is elementary that parties seeking the review of NLRC decisions should file a Rule 65 petition for certiorari in the
CA on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction. Thereafter, the remedy of
the aggrieved party from the CA decision is an appeal via a Rule 45 petition for review on certiorari.22 It is equally
true, however, that the Court, on several occasions, has relaxed the procedural application in accordance with the
liberal spirit and in the interest of substantial justice. Where the exigencies of the case are such that the ordinary
methods of appeal may not prove adequate - either in point of promptness or completeness, so that a partial if not a
total failure of justice could result - a writ of certiorari may still be issued.23

In the broader interest of justice, the Court deems it proper to suspend the rules and allow due course to the petition
as one for certiorari under Rule 65. As will be discussed hereafter, the Court has determined points of contention
that were disregarded by the authorities a quo, the outright conclusion of which stripped off the petitioners of a
remedy to demand their claims which were founded on a legal obligation. The propriety of the mode of appeal used
by the petitioners pales in comparison with the alleged grave errors of judgment committed by the CA. For said
reason, matters deserving clear resolution by the Court of last resort cannot be ignored lest a miscarriage of justice
come to pass.

Substantive Issues

As to the substantive issues, the Court is faced with divergent views in the arguments raised. On one hand, the
petitioners strongly urge the Court to consider numerous factors that would justify the piercing of the corporate veil
showing that Silvericon was just a business conduit of Nuvoland. On the other, the respondents vehemently deny the
existence of an employer-employee relationship between Nuvoland and the petitioners. This absence of a juridical
tie, according to Nuvoland, necessarily directs the claims of the petitioners to Silvericon as their employer, being an
independent contractor.

Pertinently, Article 106 of the Labor Code provides:chanRoblesvirtualLawlibrary

Article 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and jobcontracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
emplover who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. [Emphasis and underscoring supplied]
chanrobleslaw
Corollary thereto, DOLE Department Order No. 18-02, Series of 2002 (D.O. 18-02), implements the above
provision of law:chanRoblesvirtualLawlibrary
Section 5. Prohibition against labor-only contracting. -Labor-only contracting is hereby declared prohibited x x x
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for a principal, and any of the following elements are
present:cralawlawlibrary
32
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual-
employee.chanroblesvirtuallawlibrary
xxxx

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools or equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual parties
are performed to determine, not only the end to be achieved, but also the manner and means to be used in reaching
that end. [Emphasis and underscoring supplied]
chanrobleslaw
At the outset it should be rioted that a real estate company like Nuvoland may opt to advertise and; sell its real estate
assets on its own, or allow an independent contractor to market these developments in a manner that does not violate
aforesaid regulations. Basically, a legitimate job contractor complies with the requirements on sufficient
capitalization and equipment to undertake the needs of its client. Although this is not the sole determining factor of
legitimate contracting, independent contractors are likewise required to register with the DOLE. This is required
by D.O. 18-02. Thus:chanRoblesvirtualLawlibrary
Section 11. Registration of Contractors or Subcontractors. - Consistent with the authority of the Secretary of Labor
and Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a registration
system to govern contracting arrangements and to be implemented by the Regional Offices is hereby established.

The registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor
market information and monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only
contracting. [Emphasis and underscorings supplied]
chanrobleslaw
In the present case, the Court is hounded by nagging doubts in its review of the assailed decision. Several factors
showing that Silvericon was not an independent contractor were, conveniently brushed aside resulting in an unjust
outcome. For clarity, the Court lists down these factors, most of which were left unexplained by the respondents.

First. As earlier pointed out, D.O. 18-02 expressly provides for a registration requirement. Remarkably, the
respondents do not deny the apparent non-compliance with the rules governing independent contractors.

This failure on the part of Silvericon reinforces the Court's view that it was engaged in labor-only contracting.
Nuvoland did not even bother to make Silvericon comply with this vital requirement had it really entered into a
legitimate contracting arrangement with a truly independent outfit. The efforts which the two corporations have put
into the drafting of the SMA belie mere inadvertence and heedlessness on this matter.

That the NLRC and the CA failed to consider this fact of non-compliance confounds the Court. The tribunals below
should have looked into the cited provision, as non-compliance thereto gives rise to a presumption completely
opposite to their claim. The presumption finds more significance especially when the respondents have nothing but
silence to rebut the same.

All they could say was that what Nuvoland terminated was the SMA, the termination of which produced no effect
whatsoever on the personnel of Silvericon. The sweeping conclusion might have been the simplest and easiest way
to dismiss the case but this certainly failed to rebut the fact that Silvericon was a labor-only contracting entity. To the
Court's mind, this is a clear attribute of grave abuse of discretion on the part of the CA.

Second. D.O. No. 18-A, series of 2011, defines substantial capital as the paid-up capital stocks/shares of at least
P3,000,000.00 in the case of corporations, partnerships and cooperatives. This amount was set with speciflty to
avoid the subterfuge resorted to by entities with the intention to circumvent the law. As things now stand, even the
subscribed capital of Silvericon was a far cry from the amount set by the rules. It is important to note that at the time
Nuvoland engaged the services of Silvericon, the latter's authorized stock capital was P4,000,000.00, out of which
only P1,000,000.00 was subscribed.

In Vinoya v. National Labor Relations Commission,24 the Court tackled the insufficiency of paid-in capitalization
taking into account the "current economic atmosphere in the country."25 In other words, the determination of
sufficient capital stock for independent contractors must be assessed in a broad and extensive manner with
consideration of the industry involved.

33
In this case, the sufficiency of a subscribed capital of P1,000,000.00 for independent contracting must be assessed
taking into consideration the extent of the undertaking relative to the nature of the industry in which Nuvoland was
engaged.

Nuvoland was one of the prominent corporations in the real estate industry. It is safe to assume then that the
marketing of its condominium projects would entail a substantially high amount in what was typically a capital
intensive industry. The undertaking covered not just one but two considerably huge condominium projects located in
prime spots in the metropolis.

For the sale and marketing of two condominium buildings, it would require massive funds for promotions,
advertisements, shows, salaries, and operating expenses of its more or less 40 personnel. In light of this vast
business undertaking, it is obvious that the P1 million subscribed capital of Silvericon would hardly suffice to satisfy
this huge engagement. Nuvoland was apparently aware of this that it had to fund the marketing expenses of the
project in an amount not exceeding P30 million per building. This was even provided in paragraph 6 of the SMA.

This being the case, the paid-in capitalization of Silvericon amounting to P1 million was woefully inadequate to be
considered as substantial capital. Thus, Silvericon could not qualify as an independent contractor.

The CA finding that Silvericon's capital was sufficient for independent contracting due to the agreement that
Nuvoland would advance the amount of P30,000,000.00 for marketing expenses, though deductible from
Silvericon's earned marketing fees at a later time, was a strained reasoning. The Court agrees with the observation of
the LA that this set-up would not have been resorted to if Silvericon's capital was substantial enough from the start
of the business venture. It is logical to presume that an established corporation like Nuvoland would select an
independent contractor, which had the financial resources to adequately undertake its marketing and advertising
requirements, and not an under capitalized company like Silvericon. It perplexes the Court that the CA disregarded
this set-up as it certainly shows that Silvericon, from the beginning, did not have substantial capital to service the
needs of Nuvoland.

Third. Silvericon had no substantial equipment in the form of tools, equipment, machinery, and work premises.
Records reveal that Nuvoland itself designed and constructed the model units used in the sales and marketing of its
condominium units. This indisputably proves that at the time of its engagement, Silvericon had no such investment
necessary for the conduct of its business.

Fourth. Although it is true that the respondents had explicitly assailed the authenticity of the MO A attached with
the petition, their faint denial fails to explain the exclusivity which had characterized the relationship between
Nuvoland and Silvericon. If Silvericon was an independent contractor, it is only but logical that it should have also
offered its services to the public.

The respondents claim that they had presented a contract tending to show that Silvericon had catered its services to
one LNC (SPV-AMC) Corporation in 2007. In their own words, the respondents assert that the relationship of
Nuvoland with Silvericon, particularly as to its contractual rights and obligations, was exactly the same as the
transaction of Silvericon with LNC (SPV-AMC) Corporation. Unfortunately for the respondents, this allegation
alone could not override the other tell-tale indicators of labor-only contracting present in this case.

Fifth. The respondents do not deny that Nuvoland and Silvericon shared the same officers and employees:
respondents Bienvenida and Martinez were stockholders and incorporators thereof while De Castro was the
President and majority stockholder of Silvericon. At the same time, Bienvenida was a principal stockholder and
member of the Board of Directors of Nuvoland while Martinez was Nuvoland's President. Admittedly, this fact alone
does not give rise to an inference that Nuvoland and Silvericon are one and the same. It effectively sows doubt,
however, when taken together with the other indicators of labor-only contracting, as previously discussed.

If Nuvoland and Silvericon were indeed separate entities, out of all other Nuvoland officers, why did Bienvenida, as
an incorporator of both corporations, choose to authorize the purported termination of the SMA without at least
calling for an investigation of the incident? As a stockholder of Silvericon, he possessed an interest in the said
corporation. Curiously though, Nuvoland's decision to part with Silvericon as expressed in Bienvenida's letter was
reached without consultation or, at the least, a preliminary notice. Had there really been a breach of contract,
Nuvoland would have demanded an explanation from Silvericon before barring the personnel's entry in their work
premises to think that the latter was engaged in an important aspect of its business.

Further, with Nuvoland having advanced a huge amount of money for Silvericon, it could have at least exercised
caution before terminating the SMA with a meager request for an accounting of funds. A closer scrutiny of the
events that transpired would show that the termination of the SMA was one and the same with the termination of all
Silvericon personnel. This conclusion proceeded from the irrefutable fact that Silvericon was actually a creation of
Nuvoland. As a labor-only contractor, for all intents and purposes, Silvericon was a mere mock-up.

In truth, the termination of the SMA was actually a ruse to make it appear that Silvericon was an independent entity.
It was simply a way to terminate the employment of several employees altogether and escape liability as an
employer. True enough, Nuvoland insisted that the petitioners direct their claims to Silvericon.
34
The conclusion that Silvericon was a mere labor-only contractor and a business conduit of Nuvoland warrants the
piercing of its corporate veil. At this point, it is apt to restate the Court's ruling in Sarona v. National Labor
Relations Commission:26chanroblesvirtuallawlibrary
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases,
where a corporation merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.
chanrobleslaw
As ruled in Prince Transport, Inc. v. Garcia,27 it is the act of hiding behind the separate and distinct personalities of
juridical entities to perpetuate fraud, commit illegal acts and evade one's obligations, that the equitable piercing
doctrine was formulated to address and prevent: Thus:chanRoblesvirtualLawlibrary
x x x A settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises are
owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights
of third parties, disregard the legal fiction that these two entities are distinct and treat them as identical or as one and
the same, xxx However, petitioners' attempt to isolate themselves from and hide behind the supposed separate and
distinct personality of Lubas so as to evade their liabilities is precisely what the classical doctrine of piercing the veil
of corporate entity seeks to prevent and remedy.28
chanrobleslaw
Consequently, the piercing of the corporate veil disregards the seemingly separate and distinct personalities of
Nuvoland and Silvericon with the aim of preventing the anomalous situation abhorred by prevailing labor laws. That
Silvericon was independent from Nuvoland's personality could not be given legal imprimatur as the same would
pave the way for Nuvoland's complete exoneration from liability after a circumvention of the law. Besides, a
contrary proposition would leave the petitioners without any recourse notwithstanding the unquestioned fact that
Nuvoland eventually assented to the settlement of all the sales and marketing personnel's commissions and wages
before the LA, except the petitioners. The respondents in their comment were strikingly silent on this point.

In the interest of justice and equity, that veil of corporate fiction must be pierced, and Nuvoland and Silvericon be
regarded as one and the same entity to prevent a denial of what the petitioners are entitled to. In a situation like this,
an employer-employee relationship between the principal and the dismissed employees arises by operation of law.
Silvericon being merely an agent, its employees were in fact those of Nuvoland. Stated differently, Nuvoland was
the principal employer of the petitioners.

Sixth. As additional basis of this outcome, the Court highlights the presence of the elements of an employer-
employee relationship between the parties. In determining the presence or absence of an employer-employee
relationship, the Court has consistently looked for the following incidents, to wit; (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee on the means and methods by which the work is accomplished. The last element, the so-called control test,
is the most important element.29Jurisprudentially speaking, there is no hard and fast rule designed to establish the
aforesaid elements. It depends on the peculiar facts of each case.30 Here, the Court acknowledges the findings of the
LA since the inception of this legal controversy -
To be added to the foregoing findings is the admitted fact that it was respondent Nuvoland which paid the sales
commissions of the sales personnel of respondent Silvericon. Even the power to dismiss the complainants and the
other sales personnel of Silvericon was exercised by respondent Nuvoland. If indeed there was an unauthorized
walkout and abandonment by the sales personnel of the Nuvo City showroom for a period of two (2) days, then what
Nuvoland could have done was to notify Silvericon to institute appropriate disciplinary action against the erring
personnel, and not to take the cudgels for Silvericon in abruptly terminating the entire sales force including the
complainants herein.31
chanrobleslaw
Not to be excluded from this pronouncement is the observation that the subject termination letter itself mentioned
the release of all the commissions earned by Silvericon personnel after the impetuous decision of Nuvoland to
physically bar the personnel from entry to their workplace. If these are not indicators of the power of engagement,
payment of wages and power of dismissal, the Court is at a loss as to what to call this authority. Astonishingly,
Nuvoland did not refute its conformity to the payment of commissions, as if it was oblivious to an admission that all
commissions were taken directly from Nuvoland, and not from Silvericon. Verily, this reflects Nuvoland's exercise
of the power to compensate Silvericon personnel. The power to terminate employees had also been exercised by
Nuvoland when it clearly dispensed with the cancellation clause in the SMA providing a 30-day period for grievance
resolution. Instead, Nuvoland utilized the alleged abandonment of the showroom as a ground for unilateral
termination of the simulated agreement.

As regards the power of control, the only argument raised by the respondents was the inclusion of a provision in the
SMA which stated that Silvericon, as its agent, "shall be responsible for all advertisements, promotions, public
relations, special events, marketing collaterals, road shows, open houses, etc. as part of its marketing efforts." 32 For
Nuvoland, this provision in the SMA showed that Silvericon exercised full and exclusive control over all levels of
work, especially as to the means thereof. 33 Regrettably, the existence of the subject provision would not cause an
automatic proposition that Silvericon exercised control over the work of its personnel. A clear showing of
35
Silvericon's control over its day-to-day operations and ultimate work performance would have dispelled any doubt,
but Nuvoland fell short on this score. Worse, it again opted for silence when the petitioners alleged that Nuvoland
provided the work premises of the sales and marketing; personnel of Silvericon; that Nuvoland dictated the end
result of the undertaking, that is, to sell at least eighty percent of the condominium project within a period of twenty-
four months; that Nuvoland decided on the models, designs and prices of the units; that Nuvoland was the ultimate
recipient of all amounts collected by the sales and marketing team; and lastly, Nuvoland determined the maximum
amount of marketing expenses for the accomplishment of the goal.

On Jurisdiction

Anent the issue on jurisdiction, Article 217 of the Labor Code, as amended by Section 9 of R.A. No. 6715 is
instructive:chanRoblesvirtualLawlibrary
ART. 217. Jurisdiction of the Labor Arbiters and the Commission-- (a) Except as otherwise provided under this
Code, the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or
nonagricultural:chanRoblesvirtualLawlibrary

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of
pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and cralawlawlibrary

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement. [Emphases and underscoring supplied]

chanrobleslaw
Taking the foregoing into consideration, the Court finds that the LA properly took cognizance of the existence of an
employer-employee relationship between the parties. The NLRC's position that the case belonged to the RTC as an
"intra-corporate dispute" could not be applied to Platon as she was merely a rank-and-file personnel raising illegal
dismissal as her main cause of action.

With respect to De Castro, the Court recalls the pronouncement in Viray v. Court of Appeals,34 which provided for
the policy in determining jurisdiction in similar cases. In order to determine whether a dispute constitutes an intra-
corporate controversy or not, the Court considers two elements instead, namely: (a) the status or relationship of the
parties; and (b) the nature of their controversy. Concurrence of these two renders a case as an intra-corporate
dispute.

Under the nature-of-the-controversy test, the dispute must not only be rooted in the existence of an intra-corporate
relationship, but must also refer to the enforcement of the parties' correlative rights and obligations under the
Corporation Code, as well as the internal and intra-corporate regulatory rules of the corporation. 35 The combined
application of the relationship test and the nature-of-the-controversy test has, consequently, become the norm in
determining whether a case is an intra-corporate controversy or purely civil in character. 36 In the absence of any one
of these factors, the case cannot be considered an intra-corporate dispute and the RTC acting as a special commercial
court cannot acquire any jurisdiction. The criteria for distinguishing between corporate officers who may be ousted
from office at will, on one hand, and ordinary corporate employees, who may only be terminated for just cause, on
the other hand, do not depend on the nature of the services performed, but on the manner of creation of the office.

As it had been determined that Silvericon was a mere subterfuge for Nuvoland's sales and marketing activities, the
circumstances surrounding the nature of De Castro's hiring and the very nature of his claims must be fully
considered to determine jurisdiction. It must be remembered that De Castro was hired by Martinez and Bienvenida
to be the President and COO of Silvericon. This appears in the SMA, which the Court has interpreted as a ruse to
conceal Nuvoland's labor-contracting activities. As previously discussed, the contrived cancellation of the SMA was,
in effect, a termination of its personnel assigned to Silvericon.

Equally important for contemplation is the nature of the petitioners' claims and arguments which not only
demonstrates a firm avowal of labor-only contracting on the part of Nuvoland and Silvericon but also shows that the
ultimate issue to be resolved is not rooted in a corporate issue governed by the Corporation Code and its
implementing rules, but a labor problem, the resolution of which is covered by labor laws and DOLE issuances.
36
The Court reiterates the odd silence that pervaded Nuvoland despite the allegation that it was able to settle the
payment of all the sales and marketing personnel's commissions and wages with the exception of the petitioners and
one Amy Rose Palileo, whose claims were settled during the pendency of her complaint with LA Fe Cellan. 37 This
information raised serious doubts as to Nuvoland's refutation of the jurisdiction of the LA over the case. The Court,
in fact, expected a denial or, at the least, an explanation of this matter on the part of Nuvoland but all it got was
silence. Certainly, this distinctive treatment of the petitioners influences the Court to take a position against any
attempt to sidestep legal obligations under a pretense of a jurisdictional challenge.

In view of the foregoing, the complete resolution of this case now boils down to the determination of the: 1)
corporate liability of Nuvoland as the principal employer of the petitioners; and 2) individual liabilities of the
respondents, as officers thereof, if any.

Solidary liability is imposed by law on the principal who is deemed as the direct employer of the employees as
provided in Section 19 of D.O. No. 18-02-
Section 19. Solidary liability. - The principal shall be deemed as the direct employer of the contractual employees
and therefore, solidarity liable with the contractor or subcontractor for whatever monetary claims the contractual
employees may have against the former in the case of violations as provided for in Sections 5 (Labor-Only
contracting), 6 (Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these Rules. In addition,
the principal shall also be solidarity liable in case the contract between the principal and contractor or subcontractor
is preterminated for reasons not attributable to the fault of the contractor or subcontractor.
chanrobleslaw
Based on the said provision, Nuvoland is solidarity liable with Silvericon for the monetary claims of the petitioners
who were clearly their employees. Further, the application of law and jurisprudence on illegal dismissal becomes
relevant. In Skippers United Pacific, Inc. v. Doza38 the Court held that for a worker's dismissal to be considered
valid, it must comply with both procedural and substantive due process, viz.:chanRoblesvirtualLawlibrary
For a worker's dismissal to be considered valid, it must comply with both procedural and substantive due
process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the
act of dismissal constitutes substantive due process. 39 [Emphasis and underscoring supplied]
chanrobleslaw
Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer
must furnish the employee with two written notices before the termination of employment can be effected: (1) the
first notice apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the
second notice informs the employee of the employer's decision to dismiss him. Before the issuance of the second
notice, the requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not
necessary though that an actual hearing be conducted.40 Substantive due process, on the other hand, requires that the
dismissal by the employer be made for a just or authorized cause under Articles 282 to 284 of the Labor
Code.41cralawred

As correctly observed by the LA, the respondents failed to show any valid or just cause under the Labor Code on
which it may justify the termination of services of the petitioners. There was no iota of evidence to substantiate their
story of staged walkout and abandonment which caused them to terminate the employment of the petitioners. After
the issuance of the termination letter, De Castro and all the sales and marketing personnel of Nuvoland were barred
from entering the premises of their office and payment of wages, commissions and all other benefits were withheld.
The respondents also failed to comply with the rudimentary requirement of notifying the petitioners why they were
being dismissed, as well as giving them ample opportunity to contest the legality of their dismissal. Failing to show
compliance with the requirements of termination of employment under the Labor Code, the respondents were found
liable for illegal dismissal. A contrary ruling would serve as a wallop on the very principles of labor - justice and
equity for a man to be made to work and thereafter be denied of his due as to the fruits of his labor.

Corporate Directors and Officers,

Not Liable

A corporation, being a juridical entity, may act only through its directors, officers and employees. Obligations
incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation
they represent.42 Pursuant to this principle, a director, officer or employee of a corporation is generally not held
personally liable for obligations incurred by the corporation; it is only in exceptional circumstances that solidary
liability will attach to them.43 Thus, in labor cases, the Court has held that corporate directors and officers are
solidarity liable with the corporation for the employee's termination only when the same is done with malice or in
bad faith.44

"Xxx. Bad faith is never presumed. Bad faith does not simply connote bad judgment or negligence - it imports a
dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty
through some motive or interest or ill will that partakes of the nature of fraud." 45

The records are bereft of any evidence at all that respondents Martinez and Bienvenida acted with malice, ill will or
bad faith when the SMA was terminated. Hence, the said individual officers cannot be held solidarity liable for the
money claims due the petitioners.
37
WHEREFORE, the petition is GRANTED. The June 1, 2012 Decision and the September 21, 2012 Resolution of
the Court of Appeals in CA-G.R. SP No. 122415 are REVERSED and SET ASIDE.

The March 15, 2011 Decision of the Labor Arbiter declaring Nuvoland as a labor-only contractor
is REINSTATED, but the pronouncement on the solidary liability of Ramon Bienvenida and Raul Martinez is
ordered DELETED.

The case is hereby REMANDED to the Labor Arbiter for the computation of the separation pay, back wages and
other monetary awards that the petitioners deserve to receive.

No pronouncement as to costs.

SO ORDERED.ChanRoblesVirtualawlibrary

G.R. No. 208451

MANILA MEMORIAL PARK CEMETERY, INC., Petitioner,

vs.
EZARD D. LLUZ, NORMAN CORRAL, ERWIN FUGABAN, VALDIMAR BALISI, EMILIO FABON,
JOHN MARK APLICADOR, MICHAEL CURIOSO, JUNLIN ESPARES, GA VINO FARINAS, and WARD
TRADING AND SERVICES, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari1 assailing the Decision2 dated 21 January 2013 and the Resolution3 dated
17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.

The Facts

On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a Contract of
Services with respondent Ward Trading and Services (Ward Trading). The Contract of Services provided that Ward
Trading, as an independent contractor, will render interment and exhumation services and other related work to
Manila Memorial in order to supplement operations at Manila Memorial Park, Parañaque City.

Among those assigned by Ward Trading to perform services at the Manila Memorial Park were respondents Ezard
Lluz, Norman Corral, Erwin Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael Curioso,
Junlin Espares, and Gavino Farinas (respondents). They worked six days a week for eight hours daily and were paid
P250 per day.

On 26 June 2007, respondents filed a Complaint4 for regularization and Collective Bargaining Agreement benefits
against Manila Memorial; Enrique B. Lagdameo, Manila Memorial’s Executive Vice-President and Director in
Charge for Overall Operations, and Ward Trading. On 6 August 2007, respondents filed an amended complaint to
include illegal dismissal, underpayment of 13th month pay, and payment of attorney’s fees.

Respondents alleged that they asked Manila Memorial to consider them as regular workers within the appropriate
bargaining unit established in the collective bargaining agreement by Manila Memorial and its union, the Manila
Memorial Park Free Workers Union (MMP Union). Manila Memorial refused the request since respondents were
employed by Ward Trading, an independent labor contractor. Thereafter, respondents joined the MMP Union. The
MMP Union, on behalf of respondents, sought their regularization which Manila Memorial again declined.
Respondents then filed the complaint. Subsequently, respondents were dismissed by Manila Memorial. Thus,
respondents amended the complaint to include the prayer for their reinstatement and payment of back wages.

Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was no
employer-employee relationship. Manila Memorial argued that respondents were the employees of Ward Trading.

In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the existence of
an employer-employee relationship. The dispositive portion of the Decision states:

38
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for
complainants’ lack of employer-employee relationship with respondent Manila Memorial Park Cemetery, Inc.

SO ORDERED.6

Respondents appealed7 to the NLRC. In a Decision8 dated 30 September 2010, the NLRC reversed the Labor
Arbiter’s findings. The NLRC ruled that Ward Trading was a labor-only contractor and an agent of Manila
Memorial. The dispositive portion of the Decision states:

WHEREFORE, premises considered, complainants’ appeal is GRANTED. The assailed Decision of Labor Arbiter
Geobel A. Bartolabac dated March 29, 2010 is MODIFIED. It is hereby declared that complainants were regular
employees of respondent Manila Memorial Park Cemetery, Inc. and entitled to the benefits provided for under the
CBA between the latter and the Manila Memorial Park Free Workers Union.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as follows:

1. Ezard D. Lluz – P43,982.79

2. Norman Corral – P29,765.67

3. Erwin Fugaban – P28,634.67

4. Valdimar Balisi – P20,310.33

5. Emilio Fabon – P43,982.79

6. John Mark Aplicador – P43,982.79

7. Michael Curioso – P43,982.79

8. Ju[n]lin Espares – P43,982.79

9. Gavino Farinas – P43,982.79

SO ORDERED.9

Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution10 dated 31 January 2011.

Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA affirmed the
ruling of the NLRC. The CA found the existence of an employer-employee relationship between Manila Memorial
and respondents. The dispositive portion of the Decision states:

WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision, dated
September 30, 2010 and the Resolution, dated January 31, 2011, rendered by the National Labor Relations
Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.

SO ORDERED.11

Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 17 July
2013.

Hence, the instant petition.

The Issue

The main issue for our resolution is whether or not an employer-employee relationship exists between Manila
Memorial and respondents for the latter to be entitled to their claim for wages and other benefits.

The Court’s Ruling

The petition lacks merit.

39
Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward Trading’s
financial statements for the year 2006, proving that it has sufficient capitalization to qualify as a legitimate
independent contractor. Manila Memorial insists that nowhere is it provided in the Contract of Services that Manila
Memorial controls the manner and means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the latter’s employees to abide by company rules
and regulations.

Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward Trading
cannot qualify as an independent contractor but should be treated as a mere labor-only contractor. Respondents state
that (1) there is enough proof that Ward Trading does not have substantial capital, investment, tools and the like; (2)
the workers recruited and placed by the alleged contractors performed activities that were related to Manila
Memorial’s business; and (3) Ward Trading does not exercise the right to control the performance of the work of the
contractual employees.

As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is when the
factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the case
may be. This Court is obliged to resolve an issue of fact due to the conflicting findings of the Labor Arbiter on one
hand, and the NLRC and the CA on the other.

In order to determine whether there exists an employer-employee relationship between Manila Memorial and
respondents, relevant provisions of the labor law and rules must first be reviewed. Article 106 of the Labor Code
states:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him. (Emphasis supplied)

Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only contracting and
assume the existence of an employer-employee relationship if found to be engaged in labor-only contracting. The
provisions state:

xxxx

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently
undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or
subcontractor to accomplish the job, work or service.

xxxx

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For
this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following
elements are present:

40
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.

xxxx

Section 7. Existence of an employer-employee relationship. – The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by
a competent authority:

(a) where there is labor-only contracting; or

(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.isi
(Emphasis supplied)

It is clear from these provisions that contracting arrangements for the performance of specific jobs or services under
the law and its implementing rules are allowed. However, contracting must be made to a legitimate and independent
job contractor since labor rules expressly prohibit labor-only contracting.

Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal and any of the following elements are present:

1) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

2) The contractor does not exercise the right to control the performance of the work of the contractual employee. 13

In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single proprietorship
owned by Emmanuel Mayor Ward with business address in Las Piñas City on 23 February 2006. In the Contract of
Services, it was provided that Ward Trading, as the contractor, had adequate workers and substantial capital or
investment in the form of tools, equipment, machinery, work premises and other materials which were necessary in
the conduct of its business.

However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial capital or
investment in the form of tools, equipment, machinery, work premises and other materials since it is Manila
Memorial which owns the equipment used in the performance of work needed for interment and exhumation
services. The pertinent provision in the Contract of Services which shows that Manila Memorial owns the equipment
states:

The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE MILLION
FOUR HUNDRED THOUSAND PESOS ONLY (Php 1,400,000.00) payable in two (2) years or a monthly payment
of FIFTY EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php 58,335.00) to be deducted
from the CONTRACTOR’s billing.14

41
Just by looking at the provision, it seems that the sale was a regular business transaction between two parties.
However, Manila Memorial did not present any evidence to show that the sale actually pushed through or that
payments were made by Ward Trading to prove an ordinary arms length transaction. We agree with the NLRC in its
findings:

While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell subject
equipment to Ward at some future time, the former failed to present any contract of sale as proof that, indeed, it
actually sold said equipment to Ward. Likewise, respondent MMPCI failed to present any "CONTRACTOR’s
billing" wherein the purported monthly installment of P58,335.00 had been deducted, to prove that Ward truly paid
the same as they fell due. In a contract to sell, title is retained by the vendor until full payment of the price.

Moreover, the Contract of Service provides that:

"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR’s equipment in the event the
COMPANY requires the use of said equipment. x x x."

This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment,
considering that its right to do so is subject to respondent MMPCI’s use thereof at any time the latter requires it.
Such provision is contrary to Article 428 of the Civil Code, which provides that "The owner has the right to enjoy
and dispose of a thing, without other limitation than those established by law." It is plain to see that Ward is not the
owner of the equipment worth P1,400,000.00 that is being actually and directly used in the performance of the
services contracted out.

Further, the Service Contract states that:

"For its part, the COMPANY agrees to provide the following:

a) Area to store CONTRACTOR’s equipment and materials

b) Office space for CONTRACTOR’s staff and personnel"

This provision is clear proof that even the work premises actually and directly used by Ward in the performance of
the services contracted out is owned by respondent MMPCI.15

Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly seen in
Ward Trading’s financial statements for the year 2006 when compared to its 2005 financial statements. It is
significant to note that these financial statements were submitted by Manila Memorial without any certification that
these financial statements were actually audited by an independent certified public accountant. Ward Trading’s
Balance Sheet16 as of 31 December 2005 showed that it had assets in the amount of P441,178.50 and property and
equipment with a net book value of P86,026.50 totaling P534,705. A year later, Ward Trading’s Balance
Sheet17ending in 31 December 2006 showed that it had assets in the amount of P57,084.70 and property and
equipment with a net book value of P1,426,468 totaling P1,491,052.70. Ward Trading, in its Income Statements18 for
the years 2005 and 2006, only earned a net income of P53,800 in the year ending 2005 and P68,141.50 in 2006.
Obviously, Ward Trading could not have raised a substantial capital of P1,400,000.00 from its income alone without
the inclusion of the equipment owned and allegedly sold by Manila Memorial to Ward Trading after they signed the
Contract of Services on 23 February 2006.

Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents performed
various interment services at its Sucat, Parañaque branch which were directly related to Manila Memorial’s business
of developing, selling and maintaining memorial parks and interment functions. Manila Memorial even retained the
right to control the performance of the work of the employees concerned. As correctly observed by the CA:

A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner’s control as it
specifically provides that although Ward shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of petitioner Memorial Park, particularly:

"It is also agreed that:

a) The CONTRACTOR’s supervisor will conduct a regular inspection of grave sites/areas being dug to ensure
compliance with the COMPANY’s interment schedules and other related ceremonies.

b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays and
Holidays.

42
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY’s schedule of
interment operation.

d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting from its
operation, which must be restored to its/their original condition without delay and at the expense of
CONTRACTOR."

The contract further provides that petitioner has the option to take over the functions of Ward’s personnel if it finds
any part or aspect of the work or service provided to be unsatisfactory, thus:

"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this CONTRACT and its
sole determination, the COMPANY may take over the performance of any of the functions mentioned in Paragraph I
above, in any of the following cases:

xxx

c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave digging works
or other services provided by it to be unsatisfactory."

It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner Memorial Park as
the contract states that the latter may take over if it finds any part of the services to be below its expectations,
including the manner of its performance. x x x.19

The NLRC also found that Ward Trading’s business documents fell short of sound business practices. The relevant
portion in the NLRC’s Decision states:

It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the Department of
Trade and Industry on October 24, 2003 and valid up to October 24, 2008, the same expressly states that it is not a
license to engage in any kind of business, and that it is valid only at the place indicated therein, which is Las Piñas
City. Hence, the same is not valid in Parañaque City, where Ward assigned complainants to perform interment
services it contracted with respondent MMPCI. It is also noted that the Permit, which was issued to Ward by the
Office of the Mayor of Las Piñas City on October 28, 2003, was valid only up to December 31, 2003. Likewise, the
Sanitary Permit to Operate, which was issued to Ward by the Office of the City Health Officer of the Las Piñas City
Health Office on October 28, 2003, expired on December 31, 2003. While respondents MMPCI and Lagdameo were
able to present copies of the above-mentioned documents, they failed to present any proof that Ward is duly
registered as [a] contractor with the Department of Labor and Employment. 20

Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors with the
DOLE, states:

Section 11. Registration of Contractors or Subcontractors. – Consistent with authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a registration system
to govern contracting arrangements and to be implemented by the Regional Office is hereby established.

The Registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor
market information and monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.1âwphi1

For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting unless the
contractor overcomes the burden of proving that it has substantial capital, investment, tools and the like. 21

In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any substantial
capital, investment or assets to perform the work contracted for. Thus, the presumption that Ward Trading is a labor-
only contractor stands. Consequently, Manila Memorial is deemed the employer of respondents. As regular
employees of Manila Memorial, respondents are entitled to their claims for wages and other benefits as awarded by
the NLRC and affirmed by the CA.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the Resolution
dated 1 7 July 2013 of the Court of Appeals in CA-G.R. SP No. 119237.

SO ORDERED.

43
 EMMANUEL D. QUINTANAR, BENJAMIN O. DURANO, CECILIO C. DELAVIN, RICARDO G
GABORNI, ROMEL G GERARMAN, JOEL JOHN P. AGUILAR, RAMIRO T. GAVIOLA, RESTITUTO D.
AGSALUD, MARTIN E. CELIS, PATRICIO L. ARIOS, MICHAEL S. BELLO, LORENZO C. QUINLOG,
JUNNE G. BLAYA, SANTIAGO B. TOLENTINO, JR., NESTOR A. MAGNAYE, ARNOLD S.
POLVORIDO, ALLAN A. AGAPITO, ARIEL E. BAUMBAD, JOSE T. LUTIVA, EDGARDO G. TAPALLA,
ROLDAN C. CADAYONA, REYNALDO V. ALBURO, RUDY C. ULTRA, MARCELO R. CABILI,
ARNOLD B. ASIATEN, REYMUNDO R. MACABALLUG, JOEL R. DELEÑA, DANILO T. OQUIÑO,
GREG B. CAPARAS AND ROMEO T. ESCARTIN, Petitioners, v. COCA-COLA BOTTLERS,
PHILIPPINES, INC., Respondent.

DECISION

MENDOZA, J.:

At bench is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the July 11, 2013
Decision1 and the December 5, 2013 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 115469, which
reversed and set aside the March 25, 2010 Decision3 and the May 28, 2010 Resolution4 of the National Labor
Relations Commission (NLRC), affirming the August 29, 2008 Decision of the Labor Arbiter (LA), in a case for
illegal dismissal, damages and attorney's fees filed by the petitioners against respondent Coca-Cola Bottlers
Philippines, Inc. (Coca-Cola).

The gist of the subject controversy, as narrated by the LA and adopted by the NLRC and the CA, is as
follows:ChanRoblesVirtualawlibrary
Complainants allege that they are former employees directly hired by respondent Coca-Cola on different dates from
1984 up to 2000, assigned as regular Route Helpers under the direct supervision of the Route Sales Supervisors.
Their duties consist of distributing bottled Coca-Cola products to the stores and customers in their assigned
areas/routes, and they were paid salaries and commissions at the average of P3,000.00 per month. After working for
quite sometime as directly-hired employees of Coca-Cola, complainants were allegedly transferred successively as
agency workers to the following manpower agencies, namely, Lipercon Services, Inc., People's Services, Inc.,
ROMAC, and the latest being respondent Interserve Management and Manpower Resources, Inc.

Further, complainants allege that the Department of Labor and Employment (DOLE) conducted an inspection of
Coca-Cola to determine whether it is complying with the various mandated labor standards, and relative thereto,
they were declared to be regular employees of Coca-Cola, which was held liable to pay complainants the
underpayment of their 13th month pay, emergency cost of living allowance (ECOLA), and other claims. As soon as
respondents learned of the filing of the claims with DOLE, they were dismissed on various dates in January 2004.
Their claims were later settled by the respondent company, but the settlement allegedly did not include the issues on
reinstatement and payment of CBA benefits. Thus, on November 10, 2006, they filed their complaint for illegal
dismissal.

In support of their argument that they were regular employees of Coca-Cola, the complainants relied on the
pronouncement of the Supreme Court in the case of CCBPI vs. NOWM, G.R. No. 176024, June 18, 2007, as
follows:ChanRoblesVirtualawlibrary
"In the case at bar, individual complainants were directly hired by respondent Coca-Cola as Route Helpers. They
assist in the loading and unloading of softdrinks. As such they were paid by respondent Coca-Cola their respective
salaries plus commission. It is of common knowledge in the sales of softdrinks that salesmen are not alone in
making a truckload of softdrinks for delivery to customers. Salesmen are usually provided with route helpers or
utility men who does the loading and unloading. The engagement of the individual complainants to such activity is
usually necessary in the usual business of respondent Coca-Cola.

Contrary to the Labor Arbiter's conclusion that respondent Coca-Cola is engaged solely in the manufacturing is
erroneous as it is also engaged in the sales of the softdrinks it manufactured.

Moreover, having been engaged to perform, such activity for more than a year all the more bolsters individual
complainants' status as regular employees notwithstanding the contract, oral or written, or even if their employment
was subsequently relegated to a labor contractor."
Respondent Coca-Cola denies employer-employee relationship with the complainants pointing to respondent
Interserve with whom it has a service agreement as the complainants' employer. As alleged independent service
contractor of respondent Coca-Cola, respondent Interserve "is engaged in the business of rendering substitute or
reliever delivery services to its own clients and for CCBPI in particular, the delivery of CCBPI's softdrinks and
beverage products." It is allegedly free from the control and direction of CCBPI in all matters connected with the
performance of the work, except as to the results thereof, pursuant to the service agreement. Moreover, respondent
Interserve is allegedly highly capitalized with a total of P21,658,220.26 and with total assets of P27,509,716.32.

Further, respondent Coca-Cola argued that all elements of employer-employee relationship exist between respondent
Interserve and the complainants. It was allegedly Interserve which solely selected and engaged the services of the
complainants, which paid the latter their salaries, which was responsible with respect to the imposition of

44
appropriate disciplinary sanctions against its erring employees, including the complainants, without any
participation from Coca-Cola, which personally monitors the route helpers' performance of their delivery services
pointing to Noel Sambilay as the Interserve Coordinator. Expounding on the power of control, respondent Coca-
Cola vigorously argued that:ChanRoblesVirtualawlibrary
"12. According to Mr. Sambilay, he designates who among the route helpers, such as complainants herein, will be
assigned for each of the delivery trucks. Based on the route helpers' performance and rapport with the truck driver
and the other route helpers, he groups together a team of three (3) to five (5) route helpers to undertake the loading
and unloading of the softdrink products to the delivery trucks and to their designated delivery point. It is his
exclusive discretion to determine who among the route helpers will be grouped together to comprise an effective
team to render the most efficient delivery service of CCBPI's products.

"13. Similarly, it is Interserve, through Mr. Sambilay, who takes charge of monitoring the attendance of the route
helpers employed by Interserve. At the start of the working day, Mr. Sambilay would position himself at the gate of
the CCBPI premises to check the attendance of the route helpers. He also maintains a logbook to record the time
route helpers appear for work. In case a route helper is unable to report for duty, Mr. Sambilay reassigns another
route helper to take his place."
On its part, respondent Interserve merely filed its position paper, pertaining only to complainants Quintanar and
Cabili totally ignoring all the other twenty-eight (28) complainants. It maintains that it is a legitimate job contractor
duly registered as such and it undertakes to perform utility, janitorial, packaging, and assist in transporting services
by hiring drivers. Complainants Quintanar and Cabili were allegedly hired as clerks who were assigned to CCBPI
Mendiola Office, under the supervision of Interserve supervisors. Respondent Coca-Cola does not allegedly interfere
with the manner and the methods of the complainants' performance at work as long as the desired results are
achieved. While admitting employer-employee relationship with the complainants, nonetheless, respondent
Interserve avers that complainants are not its regular employees as they were allegedly mere contractual workers
whose employment depends on the service contracts with the clients and the moment the latter sever said contracts,
respondent has allegedly no choice but to either deploy the complainants to other principals, and if the latter are
unavailable, respondent cannot allegedly be compelled to retain them.5chanroblesvirtuallawlibrary
The Decision of the LA

On August 29, 2008, the LA rendered its decision granting the prayer in the complaint. In its assessment, the LA
explained that the documentary evidence submitted by both parties confirmed the petitioners' allegation that they
had been working for Coca-Cola for quite some time. It also noted that Coca-Cola never disputed the petitioners'
contention that after working for Coca-Cola through the years, they were transferred to the various service
contractors engaged by it, namely, Interim Services, Inc. (ISI), Lipercon Services, Inc. (Lipercon), People Services,
Inc. (PSI), ROMAC, and lastly, Interserve Management and Manpower Resources, Inc. (Interserve). In view of said
facts, the LA concluded that the petitioners were simply employees of Coca-Cola who were "seconded" to
Interserve.6chanrobleslaw

The LA opined that it was highly inconceivable for the petitioners, who were already enjoying a stable job at a
multi-national company, to leave and become mere agency workers. He dismissed the contention of Coca-Cola that
the petitioners were employees of Interserve, stressing that they enjoyed the constitutional right to security of tenure
which Coca-Cola could not compromise by entering into a service agreement manpower supply contractors, make
petitioners sign employment contracts with them, and convert their employment status from regular to
contractual.7chanrobleslaw

Ultimately, the LA ordered Coca-Cola to reinstate the petitioners to their former positions and to pay their full
backwages.8 The dispositive portion of the decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering respondent
Coca-Cola Bottlers Phils., Inc. to reinstate complainants to their former or substantially equivalent positions, and to
pay their full backwages which as of August 29, 2008 already amounts to P15,319,005.00, without prejudice to
recomputation upon subsequent determination of the applicable salary rates and benefits due a regular route helper
or substantially equivalent position on the plantilla of respondent CCBPI.

SO ORDERED.9chanroblesvirtuallawlibrary
The Decision of the NLRC

Similar to the conclusion reached by the LA, the NLRC found that the petitioners were regular employees of Coca-
Cola. In its decision, dated March 25, 2010, it found that the relationship between the parties in the controversy bore
a striking similarity with the facts in the cases of Coca-Cola Bottlers Philippines, Inc. v. National Organization of
Workingmen10(N.O.W.) and Magsalin v. National Organization of Workingmen (Magsalin).11 The NLRC, thus,
echoed the rulings of the Court in the said cases which found the employees involved, like the petitioners in this
case, as regular employees of Coca-Cola. It stated that the entities ISI, Lipercon, PSI, ROMAC, and Interserve
simply "played to feign that status of an employer so that its alleged principal would be free from any liabilities and
responsibilities to its employees."12 As far as it is concerned, Coca-Cola failed to provide evidence that would place
the subject controversy on a different plane from N.O.W and Magsalin as to warrant a deviation from the rulings
made therein.

As for the quitclaims executed by the petitioners, the NLRC held that the same could not be used by Coca-Cola to
45
shield it from liability. The NLRC noted the Minutes of the National Conciliation and Mediation Board (NCMB)
which stated that the petitioners agreed to settle their claims with Coca-Cola only with respect to their claims for
violation of labor standards law, and that their claims for illegal dismissal would be submitted to the NLRC for
arbitration.13chanrobleslaw

Coca-Cola sought reconsideration of the NLRC decision but its motion was denied.14chanrobleslaw

The Decision of the CA

Reversing the findings of the LA and the NLRC, the CA opined that the petitioners were not employees of Coca-
Cola but of Interserve. In its decision, the appellate court agreed with the contention of Coca-Cola that it was
Interserve who exercised the power of selection and engagement over the petitioners considering that the latter
applied for their jobs and went through the pre-employment processes of Interserve. It noted that the petitioners'
contracts of employment and personal data sheets, which were filed with Interserve, categorically stipulated that
Interserve had the sole power to assign them temporarily as relievers for absent employees of their clients. The CA
also noted that the petitioners had been working for other agencies before they were hired by
Interserve.15chanrobleslaw

The CA also gave credence to the position of Coca-Cola that it was Interserve who paid the petitioners' salaries.
This, coupled with the CA's finding that Coca-Cola paid Interserve for the services rendered by the petitioners
whenever they substituted for the regular employees of Coca-Cola, led the CA to conclude that it was Interserve who
exercised the power of paying the petitioners' wages.

The CA then took into consideration Interserve's admission that they had to sever the petitioners' from their
contractual employment because its contract with Coca-Cola expired and there was no demand for relievers from its
other clients. The CA equated this with Interserve's exercise of its power to fire the petitioners. 16chanrobleslaw

Finally, the CA was of the considered view that it was Interserve which exercised the power of control. Citing the
Affidavit17 of Noel F. Sambilay (Sambilay), Coordinator of Interserve, the CA noted that Interserve exercised the
power of control, monitoring the petitioners' attendance, providing them with their assignments to the delivery
trucks of Coca-Cola, and making sure that they were able to make their deliveries. 18chanrobleslaw

The CA then went on to conclude that Interserve was a legitimate independent contractor. It noted that the said
agency was registered with the Department of Labor and Employment (DOLE) as an independent contractor which
had provided delivery services for other beverage products of its clients, and had shown that it had substantial
capitalization and owned properties and equipment that were used in the conduct of its business operations. The CA
was, thus, convinced that Interserve ran its own business, separate and distinct from Coca-Cola. 19chanrobleslaw

The petitioners sought reconsideration, but they were rebuffed.20chanrobleslaw

Hence, this petition, raising the following

GROUNDS FOR THE PETITION/ASSIGNMENT OF ERRORS

THE COURT OF APPEALS IS GUILTY OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK

OR IN EXCESS OF JURISDICTION IN:

chanRoblesvirtualLawlibraryI.

RENDERING A DECISION THAT IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE

II.

MISAPPRECIATING FACTS WHICH GRAVELY PREJUDICED THE RIGHTS OF THE

PETITIONERS.21
In their petition for review on certiorari, the petitioners ascribed grave abuse of discretion on the part of the CA
when it reassessed the evidence and reversed the findings of fact of the LA and the NLRC that ruled in their
favor.22chanrobleslaw

The petitioners also claimed that the CA violated the doctrine of stare decisis when it ruled that Interserve was a
legitimate job contractor. Citing Coca Cola Bottlers, Philippines, Inc. v. Agito (Agito),23the petitioners argued that
because the parties therein were the same parties in the subject controversy, then the appellate court should have
followed precedent and declared Interserve as a labor-only contractor. 24chanrobleslaw

In further support of their claim that Interserve was a labor-only contractor and that Coca-Cola, as principal, should
be made ultimately liable for their claims, the petitioners asserted that Interserve had no products to manufacture,
sell and distribute to customers and did not perform activities in its own manner and method other than that dictated
by Coca-Cola. They claimed that it was Coca-Cola that owned the softdrinks, the trucks and the equipment used by
Interserve and that Coca-Cola assigned supervisors to ensure that the petitioners perform their
46
duties.25cralawredchanrobleslaw

Lastly, the petitioners insisted that both Coca-Cola and Interserve should be made liable for moral and exemplary
damages, as well as attorney's fees, for having transgressed the petitioners' right to security of tenure and due
process.26chanrobleslaw
The Court's Ruling

Essentially, the core issue presented by the foregoing petition is whether the petitioners were illegally dismissed
from their employment with Coca-Cola. This, in turn, necessitates a determination of the characterization of the
relationship between route-helpers such as the petitioners, and softdrink manufacturers such as Coca-Cola,
notwithstanding the participation of entities such as ISI, Lipercon, PSI, ROMAC, and Interserve. The petitioners
insist that ISI, Lipercon, PSI, ROMAC, and Interserve are labor-only contractors, making Coca-Cola still liable for
their claims. The latter, on the other hand, asserts that the said agencies are independent job contractors and, thus,
liable to the petitioners on their own.

Procedural Issues

Before the Court proceeds to resolve the case on its merits, it must first be pointed out that the petitioners erred in
resorting to this petition for review on certiorari under Rule 45 of the Rules of Court and alleging, at the same time,
that the CA abused its discretion in rendering the assailed decision.

Well-settled is the rule that grave abuse of discretion or errors of jurisdiction may be corrected only by the special
civil action of certiorari under Rule 65. Such corrective remedies do not avail in a petition for review
on certiorari which is confined to correcting errors of judgment only. Considering that the petitioners have availed
of the remedy under Rule 45, recourse to Rule 65 cannot be allowed either as an add-on or as a substitute for
appeal.27chanrobleslaw

Moreover, it is observed that from a perusal of the petitioners' arguments, it is quite apparent that the petition raises
questions of facts, inasmuch as this Court is being asked to revisit and assess anew the factual findings of the CA
and the NLRC. The petitioners fundamentally assail the findings of the CA that the evidence on record did not
support their claims for illegal dismissal against Coca-Cola. In effect, they would have the Court sift through,
calibrate and re-examine the credibility and probative value of the evidence on record so as to ultimately decide
whether or not there is sufficient basis to hold the respondents accountable for their alleged illegal dismissal. This
clearly involves a factual inquiry, the determination of which is the statutory function of the NLRC. 28chanrobleslaw

Basic is the rule that the Court is not a trier of facts and this doctrine applies with greater force in labor cases.
Questions of fact are for the labor tribunals to resolve.29 Only errors of law are generally reviewed in petitions for
review on certiorari under Rule 45 of the Rules of Court.

In exceptional cases, however, the Court may be urged to probe and resolve factual issues when there is insufficient
or insubstantial evidence to support the findings of the tribunal or the court below, or when too much is concluded,
inferred or deduced from the bare or incomplete facts submitted by the parties or, where the LA and the NLRC came
up with conflicting positions.30 In this case, considering the conflicting findings of the LA and the NLRC on one
hand, and the CA on the other, the Court is compelled to resolve the factual issues along with the legal ones.

Substantial Issues

The Court finds for the petitioners. The reasons are:

chanRoblesvirtualLawlibraryFirst. Contrary to the position taken by Coca-Cola, it cannot be said that route-helpers,
such as the petitioners no longer enjoy the employee-employer relationship they had with Coca-Cola since they
became employees of Interserve. A cursory review of the jurisprudence regarding this matter reveals that the
controversy regarding the characterization of the relationship between route-helpers and Coca-Cola is no longer a
novel one.

As early as May 2003, the Court in Magsalin struck down the defense of Coca-Cola that the complainants therein,
who were route-helpers, were its "temporary" workers. In the said Decision, the Court
explained:ChanRoblesVirtualawlibrary
The basic law on the case is Article 280 of the Labor Code. Its pertinent provisions
read:ChanRoblesVirtualawlibrary
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
47
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.
Coca-Cola Bottlers Phils., Inc. is one of the leading and largest manufacturers of softdrinks in the country.
Respondent workers have long been in the service of petitioner company. Respondent workers, when hired, would
go with route salesmen on board delivery trucks and undertake the laborious task of loading and unloading softdrink
products of petitioner company to its various delivery points.

Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" worker's security of tenure, however, can hardly be doubted. In determining whether an employment
should be considered regular or non-regular, the applicable test is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied
by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the
general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal activities required in carrying on the particular business or trade. But,
although the work to be performed is only for a specific project or seasonal, where a person thus engaged has been
performing the job for at least one year, even if the performance is not continuous or is merely intermittent, the law
deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or
desirability of that activity to the business or trade of the employer. The employment of such person is also then
deemed to be regular with respect to such activity and while such activity exists.

The argument of petitioner that its usual business or trade is softdrink manufacturing and that the work assigned to
respondent workers as sales route helpers so involves merely "postproduction activities," one which is not
indispensable in the manufacture of its products, scarcely can be persuasive. If, as so argued by petitioner company,
only those whose work are directly involved in the production of softdrinks may be held performing functions
necessary and desirable in its usual business or trade, there would have then been no need for it to even maintain
regular truck sales route helpers. The nature of the work performed must be viewed from a perspective of the
business or trade in its entirety and not on a confined scope.

The repeated rehiring of respondent workers and the continuing need for their services clearly attest to the necessity
or desirability of their services in the regular conduct of the business or trade of petitioner company. The Court of
Appeals has found each of respondents to have worked for at least one year with petitioner company. While this
Court, in Brent School, Inc. vs. Zamora, has upheld the legality of a fixed-term employment, it has done so,
however, with a stern admonition that where from the circumstances it is apparent that the period has been imposed
to preclude the acquisition of tenurial security by the employee, then it should be struck down as being contrary to
law, morals, good customs, public order and public policy. The pernicious practice of having employees, workers
and laborers, engaged for a fixed period of few months, short of the normal six-month probationary period of
employment, and, thereafter, to be hired on a day-to-day basis, mocks the law. Any obvious circumvention of the
law cannot be countenanced. The fact that respondent workers have agreed to be employed on such basis and to
forego the protection given to them on their security of tenure, demonstrate nothing more than the serious problem
of impoverishment of so many of our people and the resulting unevenness between labor and capital. A contract of
employment is impressed with public interest. The provisions of applicable statutes are deemed written into the
contract, and "the parties are not at liberty to insulate themselves and their relationships from the impact of labor
laws and regulations by simply contracting with each other."31chanroblesvirtuallawlibrary
Shortly thereafter, the Court in Bantolino v. Coca-Cola,32 among others, agreed with the unanimous finding of the
LA, the NLRC and the CA that the route-helpers therein were not simply employees of Lipercon, Peoples Specialist
Services, Inc. or ISI, which, as Coca-Cola claimed were independent job contractors, but rather, those of Coca-Cola
itself. In the said case, the Court sustained the finding of the LA that the testimonies of the complainants therein
were more credible as they sufficiently supplied every detail of their employment, specifically identifying their
salesmen/drivers were and their places of assignment, aside from the dates of their engagement and dismissal.

Then in 2008, in Pacquing v. Coca-Cola Philippines, Inc. (Pacquing),33 the Court applied the ruling in Magsalin
under the principle of stare decisis et non quieta movere (follow past precedents and do not disturb what has been
settled). It was stressed therein that because the petitioners, as route helpers, were performing the same functions as
the employees in Magsalin, which were necessary and desirable in the usual business or trade of Coca- Cola
Philippines, Inc., they were considered regular employees of Coca-Cola entitled to security of tenure.

A year later, the Court in Agito34 similarly struck down Coca-Cola's contention that the salesmen therein were
employees of Interserve, notwithstanding the submission by Coca-Cola of their personal data files from the records
of Interserve; their Contract of Temporary Employment with Interserve; and the payroll records of Interserve. In
categorically declaring Interserve as a labor-only contractor,35 the Court found that the work of the respondent
salesmen therein, constituting distribution and sale of Coca-Cola products, was clearly indispensable to the principal
business of petitioner Coca-Cola.36chanrobleslaw

As to the supposed substantial capital and investment required of an independent job contractor, the Court stated that
it "does not set an absolute figure for what it considers substantial capital for an independent job contractor, but it
measures the same against the type of work which the contractor is obligated to perform for the principal." 37 The
48
Court reiterated that the contractor, not the employee, had the burden of proof that it has the substantial capital,
investment and tool to engage in job contracting. As applied to Interserve, the Court
ruled:ChanRoblesVirtualawlibrary
The contractor, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to
engage in job contracting. Although not the contractor itself (since Interserve no longer appealed the judgment
against it by the Labor Arbiter), said burden of proof herein falls upon petitioner who is invoking the supposed status
of Interserve as an independent job contractor. Noticeably, petitioner failed to submit evidence to establish that the
service vehicles and equipment of Interserve, valued at P510,000.00 and P200,000.00, respectively, were sufficient
to carry out its service contract with petitioner. Certainly, petitioner could have simply provided the courts with
records showing the deliveries that were undertaken by Interserve for the Lagro area, the type and number of
equipment necessary for such task, and the valuation of such equipment. Absent evidence which a legally compliant
company could have easily provided, the Court will not presume that Interserve had sufficient investment in service
vehicles and equipment, especially since respondents' allegation that they were using equipment, such as forklifts
and pallets belonging to petitioner, to carry out their jobs was uncontroverted.

In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and
work premises; and respondents, its supposed employees, performed work which was directly related to the
principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a labor-only contractor,
under Article 106 of the Labor Code; as well as Section 5(1) of the Rules Implementing Articles 106-109 of the
Labor Code, as amended.38chanroblesvirtuallawlibrary
As for the certification issued by the DOLE stating that Interserve was an independent job contractor, the Court
ruled:ChanRoblesVirtualawlibrary
The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this
Court to take it at face value, since the primary purpose stated in the Articles of Incorporation of Interserve is
misleading. According to its Articles of Incorporation, the principal business of Interserve is to provide janitorial and
allied services. The delivery and distribution of Coca-Cola products, the work for which respondents were employed
and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may have found that the
capital and/or investments in tools and equipment of Interserve were sufficient for an independent contractor for
janitorial services, this does not mean that such capital and/or investments were likewise sufficient to maintain an
independent contracting business for the delivery and distribution of Coca-Cola
products.39chanroblesvirtuallawlibrary
Finally, the Court determined the existence of an employer-employee relationship between the parties therein
considering that the contract of service between Coca-Cola and Interserve showed that the former indeed exercised
the power of control over the complainants therein.40chanrobleslaw

The Court once more asserted the findings that route-helpers were indeed employees of Coca-Cola in Coca-Cola
Bottlers Philippines, Inc. v. Dela Cruz41 and, recently, in Basan v. Coca-Cola Bottlers Philippines, Inc.42 and that the
complainants therein were illegally dismissed for want of just or authorized cause. Similar dispositions by the CA
were also upheld by this Court in N.O.W43 and Ostani,44through minute resolutions.

It bears mentioning that the arguments raised by Coca-Cola in the case at bench even bear a striking similarity with
the arguments it raised before the CA in N.O.W45 and Ostani.46chanrobleslaw

From all these, a pattern emerges by which Coca-Cola consistently resorts to various methods in order to deny its
route-helpers the benefits of regular employment. Despite this, the Court, consistent with sound pronouncements
above, adopts the rulings made in Pacquing that Interserve was a labor-only contractor and that Coca-Cola should
be held liable pursuant to the principle of stare decisis et non quieta movere.

It should be remembered that the doctrine of stare decisis et non quieta movere is embodied in Article 8 of the Civil
Code of the Philippines which provides:ChanRoblesVirtualawlibrary
ART. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system
of the Philippines.
And, as explained in Fermin v. People:47
The doctrine of stare decisis enjoins adherence to judicial precedents. It requires courts in a country to follow the
rule established in a decision of the Supreme Court thereof. That decision becomes a judicial precedent to be
followed in subsequent cases by all courts in the land. The doctrine of stare decisis is based on the principle that
once a question of law has been examined and decided, it should be deemed settled and closed to further
argument.48chanrobleslaw
[Emphasis supplied]
The Court's ruling in Chinese Young Men's Christian Association of the Philippine Islands v. Remington Steel
Corporation is also worth citing, viz:49
Time and again, the court has held that it is a very desirable and necessary judicial practice that when a court has
laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all
future cases in which the facts are substantially the same. Stare decisis et non quieta movere. Stand by the decisions
and disturb not what is settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in
one case should be applied to those that follow if the facts are substantially the same, even though the parties
may be different. It proceeds from the first principle of justice that, absent any powerful countervailing
considerations, like cases ought to be decided alike. Thus, where the same questions relating to the same event
49
have been put forward by the parties similarly situated as in a previous case litigated and decided by a competent
court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.50chanrobleslaw
[Emphases Supplied]
Verily, the doctrine has assumed such value in our judicial system that the Court has ruled that "[a]bandonment
thereof must be based only on strong and compelling reasons, otherwise, the becoming virtue of predictability
which is expected from this Court would be immeasurably affected and the public's confidence in the stability of the
solemn pronouncements diminished."51 Thus, only upon showing that circumstances attendant in a particular case
override the great benefits derived by our judicial system from the doctrine of stare decisis, can the courts be
justified in setting it aside.

In this case, Coca-Cola has not shown any strong and compelling reason to convince the Court that the doctrine
of stare decisis should not be applied. It failed to successfully demonstrate how or why both the LA and the NLRC
committed grave abuse of discretion in sustaining the pleas of the petitioners that they were its regular employees
and not of Interserve.

Second. A reading of the decision of the CA and the pleadings submitted by Coca-Cola before this Court reveals that
they both lean heavily on the service agreement52 entered into by Coca-Cola and Interserve; the admission by
Interserve that it paid the petitioners' salaries; and the affidavit of Sambilay who attested that it was Interserve which
exercised the power of control over the petitioners.

The service agreements entered into by Coca-Cola and Interserve, the earliest being that dated January
1998,53 (another one dated July 11, 2006)54 and the most recent one dated March 21, 200755 - all reveal that they
were entered into One, after the petitioners were hired by Coca-Cola (some of whom were hired as early as
1984); Two, after they were dismissed from their employment sometime in January 2004; and Three, after the
petitioners filed their complaint for illegal dismissal on November 10, 2006 with the LA.

To quote with approval the observations of the LA:ChanRoblesVirtualawlibrary

x x x The most formidable obstacle against the respondent's theory of lack of employer-employee relationship is that
complainants have [been] performing the tasks of route-helpers for several years and that practically all of them
have been rendering their services as such even before respondent Interserve entered into a service agreement
with Coca-Cola sometime in 1998. Thus, the complainants in their position paper categorically stated the record of
their service with Coca-Cola as having started on the following dates: Emmanuel Quintanar - October 15, 1994;
Benjamin Durano - November 16, [1987]; Cecilio Delaving - June 10, 1991; Ricardo Gaborni - September 28, 1992;
Romel Gerarman - June 20, 1995; Ramilo Gaviola - October 10, 1988; Joel John Aguilar - June 1, 1992; Restituto
Agsalud - September 7, 1989; Martin Celis - August 15, 1995; Patricio Arios - June 2, 1989; Michael Bello -
February 15, 1992; Lorenzo Quinlog - May 15, 1992; Junne Blaya - September 15, 1997; Santiago Tolentino, Jr. -
May 29, 1989; Nestor Magnaye - February 15, 1996; Arnold Polvorido - February 8, 1996; Allan Agapito - April 15,
1995; Ariel Baumbad - January 15, 1995; Jose Lutiya - February 15, 1995; Edgardo Tapalla - August 15, 1994;
Roldan Cadayona - May 14, 1996; Raynaldo Alburo - September 15, 1996; Rudy Ultra - February 28, 1997;
Marcelo Cabili - November 15, 1995; Arnold Asiaten - May 2, 1992; Raymundo Macaballug - July 31, 1995; Joel
Delena - January 15, 1991; Danilo Oquino - September 15, 1990; Greg Caparas - August 15, 1995; and Romeo
Escartin - May 15, 1986.

It should be mentioned that the foregoing allegation of the complainants' onset of their services with respondent
Coca-Cola has been confirmed by the Bio-Data Sheets submitted in evidence by the said respondent [Coca-
Cola]. Thus, in the Bio-Data Sheet of complainant Quintanar (Annex "4"), he stated therein that he was in the
service of respondent Coca-Cola continuously from 1993 up to 2002. Likewise, complainant Quinlog indicated in
his Bio-data Sheet submitted to respondent Interserve that he was already in the employ of respondent Coca-Cola
from 1992 (Annex "12"). Complainant Edgardo Tapalla also indicated in his Bio-Data Sheet that he was already in
the employ of Coca-Cola since 1995 until he was seconded to Interserve in 2002 (Annex "20").

As a matter of fact, complainants' allegation that they were directly hired by respondent Coca-Cola and had been
working with the latter for quite sometime when they were subsequently referred to successive agencies such as
Lipercon, ROMAC, People's Services, and most recently, respondent Interserve, has not been controverted by the
respondents. Even when respondent Coca-Cola filed its reply to the complainants' position paper, there is nothing
therein which disputed complainant's statements of their services directly with the respondent even before it entered
into service agreement with respondent Interserve.56chanroblesvirtuallawlibrary
As to the payment of salaries, although the CA made mention that it was Interserve which paid the petitioners'
salaries, no reference was made to any evidence to support such a conclusion. The Court, on the other hand, gives
credence to the petitioners' contention that they were employees of Coca-Cola. Aside from their collective account
that it was Coca-Cola's Route Supervisors who provided their daily schedules for the distribution of the company's
products, the petitioners' payslips,57 tax records,58 SSS59and Pag-Ibig60 records more than adequately showed that
they were being compensated by Coca-Cola. More convincingly, the petitioners even presented their employee
Identification Cards,61 which expressly indicated that they were "[d]irect hire[es]" of Coca-Cola.

As for the affidavit of Sambilay, suffice it to say that the same was bereft of evidentiary weight, considering that he
failed to attest not only that he was already with Interserve at the time of the petitioners hiring, but also that he had
personal knowledge of the circumstances surrounding the hiring of the petitioners following their alleged resignation
50
from Coca-Cola.

Third. As to the characterization of Interserve as a contractor, the Court finds that, contrary to the conclusion reached
by the CA, the petitioners were made to suffer under the prohibited practice of labor-only contracting. Article 106 of
the Labor Code provides the definition of what constitutes labor-only contracting. Thus:

chanRoblesvirtualLawlibraryArticle 106. Contractor or subcontractor. - x x x

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to me workers in the same manner and extent as if the latter were directly employed by
him.
Expounding on the concept, the Court in Agito explained:ChanRoblesVirtualawlibrary
The law clearly establishes an employer-employee relationship between the principal employer and the contractor's
employee upon a finding that the contractor is engaged in "labor-only" contracting. Article 106 of the Labor Code
categorically states: "There is labor-only' contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others,
and the workers recruited and placed by such persons are performing activities which are directly related to the
principal business of such employer." Thus, performing activities directly related to the principal business of
the employer is only one of the two indicators that "labor-only" contracting exists; the other is lack of
substantial capital or investment. The Court finds that both indicators exist in the case at bar.
[Emphases and Underscoring Supplied]
In this case, the appellate court considered the evidence of Interserve that it was registered with the DOLE as
independent contractor and that it had a total capitalization of P27,509,716.32 and machineries and equipment worth
P12,538859.55.62 As stated above, however, the possession of substantial capital is only one element. Labor-only
contracting exists when any of the two elements is present.63Thus, even if the Court would indulge Coca-Cola and
admit that Interserve had more than sufficient capital or investment in the form of tools, equipment, machineries,
work premises, still, it cannot be denied that the petitioners were performing activities which were directly related to
the principal business of such employer. Also, it has been ruled that no absolute figure is set for what is considered
'substantial capital' because the same is measured against the type of work which the contractor is obligated to
perform for the principal.64chanrobleslaw

More importantly, even if Interserve were to be considered as a legitimate job contractor, Coca-Cola failed to rebut
the allegation that petitioners were transferred from being its employees to become the employees of ISI, Lipercon,
PSI, and ROMAC, which were labor-only contractors. Well-settled is the rule that "[t]he contractor, not the
employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in job
contracting."65 In this case, the said burden of proof lies with Coca-Cola although it was not the contractor itself, but
it was the one invoking the supposed status of these entities as independent job contractors.

Fourth. In this connection, even granting that the petitioners were last employed by Interserve, the record is bereft of
any evidence that would show that the petitioners voluntarily resigned from their employment with Coca-Cola only
to be later hired by Interserve. Other than insisting that the petitioners were last employed by Interserve, Coca-Cola
failed not only to show by convincing evidence how it severed its employer relationship with the petitioners, but
also to prove that the termination of its relationship with them was made through any of the grounds sanctioned by
law.

The rule is long and well-settled that, in illegal dismissal cases such as the one at bench, the burden of proof is upon
the employer to show that the employees' termination from service is for a just and valid cause. 66 The employer's
case succeeds or fails on the strength of its evidence and not the weakness of that adduced by the employee, 67 in
keeping with the principle that the scales of justice must be tilted in favor of the latter in case doubts exist over the
evidence presented by the parties.68chanrobleslaw

For failure to overcome this burden, the Court concurs in the observation of the LA that it was highly inconceivable
for the petitioners, who were already enjoying a stable job at a multi-national company, to leave and become mere
agency workers. Indeed, it is contrary to human experience that one would leave a stable employment in a company
like Coca-Cola, only to become a worker of an agency like Interserve, and be assigned back to his original employer
— Coca-Cola.

Although it has been said that among the four (4) tests to determine the existence of any employer-employee
relationship, it is the "control test" that is most persuasive, the courts cannot simply ignore the other circumstances
obtaining in each case in order to determine whether an employer-employee relationship exists between the parties.

WHEREFORE, the petition is GRANTED. The July 11, 2013 Decision and the December 5, 2013 Resolution of
the Court of Appeals, in CA-G.R. SP No. 115469 are REVERSED and SET ASIDE and the August 29, 2008
Decision of the Labor Arbiter in NLRC Case Nos. 12-13956-07 and 12-14277-07, as affirmed in toto by the
National Labor Relations Commission, is hereby REINSTATED.

51
SO ORDERED.chanRoblesvirtualLawlibrary

VELASCO JR., J.:

The Case

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the October 4, 2011
Decision of the Court of Appeals (CA), as effectively reiterated in its January 30, 2012 Resolution, in CA-G.R. SP
No. 112102, entitled Manila International Freight Forwarders, Inc./MIFFI Logistics Company, Inc. v. National
Labor Relations Commission and Marian B. Navarette. The CA issuances reversed and set aside the February 27,
2009 Decision and October 19, 2009 Resolution of the National Labor Relations Commission (NLRC) and
reinstated the May 24, 2004 Decision of the Labor Arbiter which dismissed the complaint for illegal dismissal.

The Facts

Respondents Manila International Freight Forwarders, Inc. (MIFFI) and MIFFI Logistics Company, Inc. (MCLI) are
corporations engaged in the business of freight and cargo forwarding, hauling, carrying, handling, distributing,
loading and unloading of general cargoes and all classes of goods, wares and merchandise.

MIFF1 had, during the period material, entered into a contract with MBI Millennium Experts, Inc. (MBI) for the
provision of production workers and technical personnel for MIFFI's projects or temporary needs, including the
assignment of employees to temporarily replace those in the Packaging Department who are on maternity leave. To
be able to address the immediate concerns of the employees detailed to the aforesaid department, MBI assigned a
supervisor/coordinator, Ma. Glynnis Quindo (Quindo), to MIFFI.

On January 15, 2002, MBI hired petitioner Marian Navarette (Navarette) and, on the same day, assigned her as a
temporary project employee to MIFFI's Packaging Department. There, for a fixed period of three (3) months, or
until April of 2002, she worked amongst MIFFI's regular employees who performed the same tasks as hers. She also
used MIFFI's equipment and was supervised by Gidey Fajiculay and Sonny Porto, both employees of MIFFI.

A second contract was later concluded between Navarette and MBI, under which she was to serve as MIFFI's
warehouse staff from April 16, 2002 to October 1, 2002. Another contract effective March 1, 2003 until August 1,
2003 resulted in Navarette being transferred to respondent MLCI - MIFFI's subsidiary.

On July 29, 2003, Navarette, joined by other employees, filed a complaint for inspection against MIFFI, MLCI, MBI
and a certain PAMS with the Department of Labor and Employment (DOLE) Regional Arbitration Branch IV.
Following an inspection of respondents' premises on August 5, 2003, certain violations of labor laws were
uncovered, including labor-only contracting by MBI. Several hearings were had and eventually, the parties decided
to submit an agreement to be signed by all concerned and to be approved by DOLE officials.

Pursuant to said covenant, MBI called a meeting where Navarette and her co-workers were handed and asked to sign
a document entitled "Minutes of the Hearing/Agreement, [DOLE], Region IV." Navarette found the contents of the
document to be erroneous since it stated that the parties had already come to an agreement on the issues and
conditions when, in fact, no such agreement was made. This angered Navarette, causing her to throw the document
and to say, "Hindi ito ang pinag-usapan natin sa DOLE! Niloloko niyo long kami." Her actuations, to MBI,
constituted serious misconduct, for which a show cause memorandum was issued directing her to explain herself.
Dissatisfied with her explanation that her actuations were so because the Minutes did not reflect the truth MBI
issued another memorandum which Navarette, upon perusal, tore and threw away.

After issuing several memoranda setting conferences on the matter to which Navarette could not attend because of
her work schedule, MBI finally terminated Navarette's employment on October 6, 2003.[1] On October 23, 2003,
Navarette filed a complaint for illegal dismissal before the NLRC against MBI, MIFFI and MCLI, docketed as
NLRC-NCR Case No. 00-10-11705-03.

In a Decision dated May 24, 2004, Labor Arbiter Dolores M. Peralta-Beley dismissed the complaint on the finding
that Navarette's acts complained of constituted serious misconduct, a valid cause for dismissal. Too, MBI, being a
legitimate job contractor, is Navarette's employer, not MIFFI or MCLI. The fallo of the Decision reads:

In the light of the foregoing, the complaint for illegal dismissal must be dismissed for want of factual and legal
basis. Necessarily, the claim for back wages must likewise be dismissed as it is granted only to illegally dismissed
employees by way of relief.

xxxx

52
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint for lack of
merit.

SO ORDERED.[2]
On appeal,[3] the NLRC reversed the Decision of the Labor Arbiter and ordered Navarette's reinstatement with
backwages and other benefits. To the commission, MBI is a labor-only contractor, thus making MIFFI and MCLI
Navarette's employer. The NLRC disposed of the case in this wise:

WHEREFORE, premises considered, the appeal is GRANTED. The Decision of the Labor Arbiter dated May 24,
2004 is REVERSED and SET ASIDE, and a NEW ONE rendered finding respondent MBI as a labor-only
contractor. Consequently, respondents MIFFI/MCLI are declared to be complainant's employer, and accordingly
respondents MIFFI/MCLI are ordered to:

1. Reinstate complainant to her former position or equivalent position without loss of seniority rights;

2. Pay complainant her full backwages computed from the time she was illegally dismissed up to the finality
of this Decision; and

3. Pay complainant attorney's fees in an amount equivalent to ten (10%) of the total monetary award.

Complainant's monetary award is provisionally computed as follows:

Backwages

1.) Basic Salary

10/6/03-6/15/05
250x26x20.30 131,950.00
6/16/05-7/10/06
275x26x12.83 91,734.50
7/11/06-8/27/07
300x26x13.57 105,846.00
8/28/07-6/13/08
362x26x9.53 89,696.36
6/14/08-8/27/08
377x26x2.47 24,210.94
8/28/08-2/3/09
382x26x5.17 51,348.44 494,786.24
2.) 13th mo pay
494,786.24/12 41,232.19
3.) SILP

250x5/12x20.30 2,114.58
275x5/12x12.83 1.470.10
300x5/12x13.57 1,696.25
362x5/12x9.53 1,437.44
377x5/12x2.47 387.99
382x5/12x5.17 822.89 7,929.25
4.) COLA

10/6/03-7/9/04
50x26x9.10 11,830.00
7/10/04-8/27/07
50x26x37.60 48,880.00
6/14/08-8/27/08
5x26x24.7 321.10 61,031.10 604,978.78
Attorney's fee
60,497.88
10%
Total Award P665.476.66[4]
Aggrieved, respondents moved for reconsideration, alleging that Navarette is not their employee, MBI being a
legitimate job contractor, as held by the NLRC in the related case of Manlangit v. MIFFI and/or MCLI and MBI.
[5]
The NLRC, however, in its October 19, 2009 Resolution, found no merit therein and sustained its earlier Decision.

Respondents, thus, sought a review of the NLRC Decision and Resolution before the CA via a Petition for Certiorari
53
under Rule 65 of the Rules of Court. Before the CA could dispose of said petition, the Court, on August 31, 2011,
in Manlangit, et al. v. MIFFI, et al.,[6] issued a Resolution where it dismissed the Manlangit petition and upheld the
ruling of the CA that MBI's contract with MIFF1/MCL1, respondents in said case as well as in the case at bar, was
one of legitimate job contracting, contrary to the assertions of therein petitioners.

Eventually, the CA, in the present case, ordered the reversal of the NLRC Decision and the reinstatement of the
Labor Arbiter's ruling. The dispositive portion of the appellate court's Decision is hereunder quoted:

WHEREFORE, the petition is GRANTED. The Decision dated February 27, 2009 and Resolution dated October
19, 2009 of the [NLRC] are REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated May 24, 2004,
which dismissed the complaint for lack of merit is REINSTATED.

SO ORDERED.[7]
Petitioner's motion for reconsideration was also denied.

The Issues

Petitioner presently seeks a review of the CA Decision on the following grounds:

The Honorable [CA] misapplied the law and misapprehended the facts in ruling that there is absence of employer-
employee relationship between the petitioner and the respondent [MIFFI].

The Hon. [CA] misapplied the law in ruling that petitioner is not entitled to the reliefs prayed for.
The issues in the case at bar are as follows: (1) whether petitioner Navarette is respondents' employee; and (2)
whether her dismissal is illegal.

Our Ruling

We resolve to deny the petition.

Navarette is MBI's employee

A fundamental principle in Philippine labor law is the application of the four-fold test in determining the existence
of an employer-employee relationship, thus: (1) selection and engagement; (2) payment of wages; (3) power to
dismiss; and (4) power of control over the means and methods by which the work is to be accomplished. [8] There are,
however, instances when these elements are not exercised by a single person or entity. There are cases where one or
more of the said factors are assumed by another entity, for which reason, the Court made it clear that of the four tests
mentioned, it is the power of control that is determinative.[9] One such instance is whenever an employer supplies
workers to another pursuant to a contracting agreement, i.e., job contracting.

Per DOLE Order No. 3, Series of 2001, there is contracting or subcontracting whenever an employer, referred to as
the principal, farms out the performance of a part of its business to another, referred to as the contractor or
subcontractor, and for the purpose of undertaking the principal's business that is farmed out, the contractor or
subcontractor then employs its own employees. In such an arrangement, the four-fold test must be satisfied by the
contractor or subcontractor.[10] Otherwise, it is the principal that shall be considered as the employer.

Not all forms of contracting arrangements are, however, permitted. In contrast, there is the so-called labor-only
contracting.

Labor-only contracting exists when: (1) the person supplying workers to the purported principal does not have
substantial capital or investments in the form of tools, equipment, machineries, work premises, among others; and
(2) the workers recruited and placed by such person/entity perform activities which are directly related to the
principal business of the alleged principal.[11] Finding that a contractor is engaged in labor-only contracting is then
equivalent to declaring that there exists an employer-employee relationship between the supposed principal and the
employee of the purported contractor.[12] It also results in the following: (1) the subcontractor will be treated as the
agent of the principal whose acts and representations bind the latter; (2) the principal, being the employer, will be
responsible to the employees for all their entitlements and benefits under labor laws; and (3) the principal and the
subcontractor will be solidarity treated as the employer.

With the mentioned effects of labor-only contracting on employment status, a determination of the legitimacy or
illegality of the contracting arrangement between the principal and the contractor is necessary not only to determine
who between the two entities is the real employer of the employee but also to determine upon whom liability should
be imposed in the event that the employee is illegally dismissed, as here, among others.

In this respect, respondents contend that MBI is a legitimate job contractor [13] and consequently, Navarette is MBI's
employee, invoking the application of the principle of res judicata. According to respondents, the Court has already
54
passed upon and ruled on the legitimacy of MBI's contract with them that it is one of permissible job contracting
when We affirmed the contract's status through a Resolution dated August 31, 2011 in the adverted case
of Manlangit, et al. v. MIFFI, et al., docketed as G.R. No. 196175.

Briefly, Manlangit involved a complaint for regularization, illegal deduction, wage distortion and attorney's fees,
later amended to include illegal dismissal, filed by Gabriel Manlangit and thirty six (36) other workers against
MIFFI, MLCI, and MBI. Like Navarette, Manlangit, et al. were also hired by MBI and assigned to MIFFI.

After due proceedings, the Labor Arbiter found for MIFFI, MLCI and MBI and dismissed the complaint, ruling that
Manlangit, et al. were project employees of MBI, whose employments were coterminous with the service agreement
between MBI and MIFFI/MLCI. Therefrom, Manlangit, et al. went to the NLRC which dismissed their appeal for
lack of merit and for non-perfection in view of their failure to comply with the mandatory provision on verification
and certification of non-forum shopping. Upon the review of the case, the CA, then later this Court, veritably
affirmed the Decision of the Labor Arbiter, as effectively upheld by the NLRC.[14]

In light of Manlangit, respondents add, the ruling on the legality of MBI and respondents' contractual relationship,
being one of permissible job contracting, can no longer be disturbed.

We agree with respondents that Our adjudication in Manlangit of the issue of the legitimacy of MBI's contract with
respondents and necessarily, the question who between MBI and MIFFI is Navarette's employer, have already been
settled by the Court and must not be disturbed. Per Manlangit, MBI is respondents' employer and res judicata by
conclusiveness of judgment bars further challenge on this issue.

For res judicata by conclusiveness of judgment to apply, the following elements should be present, viz: (1) the
judgment sought to bar the new action must be final; (2) the decision must have been rendered by a court having
jurisdiction over the subject matter and the parties; (3) the disposition of the case must be a judgment on the merits;
and (4) there must be as between the first and second action, identity of parties, but not identity of causes of action.
[15]

When applicable, the doctrine of conclusiveness of judgment has this effect: the prior judgment is conclusive in the
second case only as to those matters actually and directly controverted and determined and not as to matters merely
involved therein. Stated differently, conclusiveness of judgment finds application when a fact or question has been
squarely put in issue, judicially passed upon, and adjudged in a former suit by a court of competent jurisdiction.[16]

As to the first requisite, Manlangit which is being set as a bar to the instant case is a final judgment. With respect to
the second requisite, the decision was rendered by the Court of Appeals which was affirmed by this Court, both of
which have jurisdiction over the subject matter and the parties. Anent the third requisite, the dispositions were
judgments on the merit.

Regarding the fourth requisite, there is identity or similarity of parties but no identity of causes of action. While
Navarette is not a party in Manlangit, there is commonality or similarity of parties in the two cases. Navarette and
the petitioners in Manlangit are similarly situated, being co-workers performing the same tasks of packaging,
barcoding, and sealing, among others. Too, their assignment to herein respondents proceeded from the same job
contracting agreement between MBI and respondents.[17] In fact, it was the petitioners in Manlangit who supported
herein petitioner, Navarette, their leader, when she filed the complaint for inspection against respondents before the
DOLE which, as previously mentioned, yielded a finding that there is a labor-only contracting arrangement between
MBI and respondents. It is this complaint for inspection that triggered the chain of events which eventually led to
the filing by therein petitioners of a complaint for regularization, later converted into one for illegal dismissal, [18] as
well as Navarette's subsequent filing of her own complaint for illegal dismissal against MBI and herein respondents.
Thus, based on these circumstances, there is commonality or similarity of parties. An absolute identity of parties is
not necessary because a shared identity of interest will suffice for res judicata to apply. A mere substantial identity
of parties or even community of interests between the parties in the prior and subsequent cases would be sufficient.
[19]

With respect to the causes of action, the cause of action in this petition is for illegal dismissal, while in Manlangit,
the causes of action are for regularization, illegal deduction, wage distortion and attorney's fees.

Thus, all the requisites of res judicata by conclusiveness of judgment are present. The Court applies Manlangit to
the instant petition moored on res judicata by conclusiveness of judgment. To rule otherwise will not enhance and
strengthen stability of judicial decisions.

With the finding that MBI is a legitimate labor contractor and is the employer of petitioner Navarette, the Court
cannot, however, pass upon the issue of whether MBI is guilty of illegal dismissal. The antecedents show that while
the MBI is a party respondent in NLRC-NCR Case No. 00-10-11705-03 together with respondents MIFFI and
MLCI, the ruling of Labor Arbiter Peralta-Beley is to dismiss petitioner's complaint upon a finding of a valid
dismissal grounded on serious misconduct.

Petitioner appealed said adverse decision to the NLRC against the MBI and herein respondents in NLRC CA No.
55
040934-04, and the NLRC found MIFFI and MLCI liable but not MBI. As a consequence, respondents MIFFI and
MLCI filed a petition under Rule 65 with the CA in CA-G.R. SP No. 112102. MBI did not join said respondents
since it was not adjudged liable by the NLRC. On the other hand, petitioner did not file a petition with the CA
questioning the NLRC decision declaring MIFFI and MLCI liable but absolving MBI. Thus, the NLRC decision
dated February 27, 2004 excluding MBI from any liability to petitioner became FINAL when petitioner no longer
challenged said ruling before the CA.

WHEREFORE, premises considered, the instant petition is hereby DENIED. Accordingly, the Decision of the
Court of Appeals dated October 4, 2011 and its Resolution dated January 30, 2012 in CA-G.R. SP No. 112102 are
hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

[G.R. No. 140812. August 28, 2001]

CANDIDO ALFARO, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION and STAR PAPER CORPORATION, respondents.

DECISION
PANGANIBAN, J.:
Generally, separation pay need not be paid to an employee who voluntarily resigns. However, an employer who
agrees to expend such benefit as an incident of the resignation should not be allowed to renege in the performance of
such commitment.

The Case
Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, seeking to set aside the
Decision[2] of the Court of Appeals (CA), which affirmed the June 16, 1998 Decision of the National Labor
Relations Commission (NLRC).[3]

The Facts
The facts as related by petitioner in his Memorandum[4] are hereunder reproduced as follows:

Petitioner was employed as a helper/operator of private respondent since November 8, 1990. From November 23,
1993 until December 5, 1993, he took a sick leave. When he reported back to work on December 6, 1993, he was
surprised to find out that another worker was recruited to take his place, and instead, he was transferred to [the]
wrapping section where he was required to work with overtime up to 9:30 PM, from his regular working hours of
from 7:00 a.m., to 4:00 p.m., despite the fact that he had just recovered from illness. On December 7, 1993, he was
given a new assignment where the work was even more difficult[;] when he complained o[f] what he felt was rude
treatment or sort of punishment since he was being exposed to hard labor notwithstanding his predicament of just
coming from sickness, petitioner was told to look for another job because he was dismissed effective on said date,
December 7, 1993, when petitioner was seeking his 13th month pay and fifteen (15) days sick leave pay [o]n the
afternoon of the same day, he was ignored when he refused to sign documents which indicated that he was
renouncing claims against private respondent. Before Christmas of 1993, petitioner sought private respondent to pay
his 13th month pay and [his] 15 days sick leave pay, but he was told to come next year.

On January 12, 1994, petitioner came to private respondent for his aforestated money claims. During that occasion,
private respondent dangled to petitioner a check worth P3,000.00 which [would] be released to him, only if he
[signed] the documents, being forced upon him to sign on December 7, 1993. Deperate for the money to support his
subsistence, and against his will, petitioner was constrained to sign the said documents which contained no amount
of money released to him. The actual sum of money received by petitioner from private respondent amounted
to P3,000.00 in the form of check, while his claims for 15 days sick leave pay was secured by him from the Social
Security System.

The documents forced upon the petitioner to sign were a resignation letter, and a Release and Quit Claim. Said
resignation letter read, thus:
To the Personal Manager
Mr. Michael Philip Elizalde
56
 Star Paper Corporation
46 Joy St., Grace Village, Q.C.

Dear Sir,

Ako po si Candido Alfaro ay nagbibigay ng aking resignation letter dahilan po sa aking sakit. Umaasa po ako na
mabigyan ng tulong.

Lubos na gumagalang
(sgd) Candido Alfaro

As submitted by private respondent in its pleadings on record, petitioner allegedly tendered said resignation letter on
January 12, 1994, on the basis of which, the former maintains that the latter was not illegally dismissed, was paid
[his] separation pay of P8,455.50, and that he voluntarily resigned from his job effective January 12, 1994.[5]
Private respondent, in its Memorandum[6], adopts Labor Arbiter Donato Quintos findings of fact as follows:

Complainant alleges that he was hired by respondent corporation in November 1990 [as] the latters machine tape
operator. Thereafter, or in the month[s] of September and October, 1993, he was suffered to do some painting work
on pallets guide using [a] spray gun. As a result, in the third week of October, 1993 he felt general body weakness
coupled with constant coughing and fever.

As a consequence of his illness, complainant alleges that he took a vacation leave from November 22, 1993 to
December 5, 1993. However, upon reporting for work on December 6, 1993, complainant was surprised to find out
that somebody was already recruited to take his place. Instead, he was transferred to the wrapping section.

On December 7, 1993, complainant complained of the work being given to him for being difficult which was
interpreted as some sort of a punishment given to him by the respondent. As a result thereof, complainant alleges
that he was dismissed without valid cause and without due process of law. He further alleges that he was not paid his
13th month pay and 15 days sick leave which he was claiming because he refused to sign a document renouncing all
his claim[s] against respondent corporation.

On January 12, 1994, complainant went to the respondent corporation to claim his 13th month pay and his 15 days
sick leave pay. He received the amount of P3,000.00 but he was allegedly pressured to sign a Quitclaim and Release
with no amount or consideration written on said document. Further, complainant also alleges that he was also made
to sign a prepared resignation letter in exchange for the P3,000.00 which he received which [was] contrary to the
claim of the respondent corporation that he received P8,452.00.

On June 14, 1996, the complainant filed a case against the respondent corporation for non-payment of separation
pay. Said complaint was later amended on August 1, 1996 by claiming illegal dismissal and damages in lieu of
separation pay, with a prayer for reinstatement with backwages and attorneys fees.

On the other hand, respondent corporation maintains that complainant while still under its employ contracted PTB
Minimal Active for which reason he applied for SSS benefits on November 25, 1993. Considering his illness,
complainant asked the respondent corporation that he be allowed to resign with benefits. After getting a favorable
reply, complainant submitted a resignation letter to the respondent corporation on January 12, 1994.

Because of his request for help, separation benefits were likewise given to complainant in the amount
of P8,452.50 Complainant, upon receipt of said benefits, executed a Release and Quitclaim in favor of respondent
corporation.

The CA Ruling
In denying petitioners claims, the CA ruled as follows:

It is not easy to uphold petitioners submission. For, the Labor Arbiters report to the National Labor Relations
Commission shows that petitioner resigned voluntarily. Thus, as written in the letter of resignation:

Ako po si candido Alfaro ay nagbibigay ng aking resignation dahilan po sa aking sakit.

Umaasa po ako na mabigyan ng tulong.

The same report likewise mentioned the Quitclaim and Release (Annex 2, of private respondents position paper)
which further strengthened the fact that petitioner resigned due to his ailment. If petitioners concatenation is true that
57
he was forced to sign the resignation letter against his better judgment, then why should he also sign the quitclaim
and release[?]

We find no reason to reverse and set aside the findings and recommendation of the Labor Arbiter, and affirmed by
the NLRC. As a quasi-judicial body, the findings of the NLRC deserve respect, even finality (M. Ramirez Industries
vs. Secretary of Labor, 266 SCRA 111; Bataan Shipyard and Engineering Corporation vs. NLRC, 269 SCRA 199;
Naguiat vs. NLRC, 269 SCRA 564; Conti vs. NLRC, 271 SCRA 114.)
Hence, this recourse.[7]

The Issues
Petitioner submits the following issues for the consideration of this Court:
1.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack or x x x excess of jurisdiction and/or serious reversible error in holding that petitioner was not
illegally dismissed by private respondent;
2.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of or x x x excess of jurisdiction, and/or serious reversible error in holding that petitioner
voluntarily resigned from employment
3.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of or x x x excess of jurisdiction and/or reversible error in holding that the finding of the NLRC,
deserve respect and even finality despite serious flaws in its appreciation of facts and evidence;
4.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of or x x x excess of jurisdiction, and/or serious reversible error in dismissing the petition for
certiorari[8]

The Courts Ruling

The Petition has no merit.

Main Issue: Illegal Dismissal and Separation Pay

At the outset, it bears stressing that in a petition for review on certiorari, the scope of the Supreme Courts
judicial review of decisions of the Court of Appeals is generally confined only to errors of law [9]; questions of fact
are not entertained.[10] Thus, only questions of law may be brought by the parties and passed upon by this Court in
the exercise of its power to review.[11]
The Supreme Court is not a trier of facts, and this doctrine applies with greater force in labor cases. [12] Factual
questions are for the labor tribunals to resolve. [13] In this case, the factual issues have already been determined by the
labor arbiter and the National Labor Relations Commission. Their findings were affirmed by the CA. Judicial review
by this Court does not extend to a reevaluation of the sufficiency of the evidence upon which the proper labor
tribunal has based its determination.[14]
Indeed, factual findings of labor officials who are deemed to have acquired expertise in matters within their
respective jurisdictions are generally accorded not only respect, but even finality, and are binding on the Supreme
Court.[15] Verily, their conclusions are accorded great weight upon appeal, especially when supported by substantial
evidence.[16] Consequently, the Supreme Court is not duty-bound to delve into the accuracy of their factual findings,
in the absence of a clear showing that the same were arbitrary and bereft of any rational basis.[17]
The factual findings of the labor arbiter and the NLRC, as affirmed by the CA, reveal that petitioner resigned
from his work due to his illness, with the understanding that private respondent would give him separation
pay. Unfortunately, it seems that private respondent did not keep its promise to grant the separation pay, prompting
petitioner to institute the present action for illegal dismissal. It was only for this reason that the Court gave due
course to this Petition.
Generally, an employee who voluntarily resigns from employment is not entitled to separation pay. [18] In the
present case, however, upon the request of petitioner, private respondent agreed to a scheme whereby the former
would receive separation pay despite having resigned voluntarily. Thus, the terms and conditions they both agreed
upon constituted a contract freely entered into, which should be performed in good faith, as it constituted the law
between the parties.
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered
into and represented a reasonable settlement, it is binding on the parties and may not later be disowned, simply

58
because of a change of mind.[19] The position taken by petitioner on the alleged illegal dismissal was vacillating and
indecisive, as correctly found by the labor arbiter who provided a ratiocination on the matter as follows:

Thus, after a careful perusal of the evidence on hand, we are of the opinion that the position taken by the respondent
corporation is more credible than that of complainant. This is evident from the fact that the complaint filed by
complainant on June 14, 1996, or more than two (2) years from his alleged dismissal on December 7, 1993, was
only payment of separation pay. It was only on August 1, 1996 when complainant abandoned his claim for
separation pay and instead filed an amended complaint claiming that he was, illegally dismissed.

To our mind, therefore, the foregoing coupled with the fact that there is practically no evidence on record which
shows that complainant was pressured and made to sign a resignation letter and Release and Quitclaim against his
will [and] better judgment only shows that his claim of illegal dismissal is unsubstantiated and is a mere
afterthought.

Moreover, if indeed complainant was illegally dismissed, he should have pursued his claim against the respondent
corporation by immediately filing a complaint for illegal dismissal. As it is, however, complainant filed a complaint
for separation pay against the respondent corporation only after two (2) years from his alleged dismissal which
complaint was amended for the purpose of claiming illegal dismissal almost two (2) months thereafter. [20]
Voluntary resignation is defined as the act of an employee, who finds himself in a situation in which he
believes that personal reasons cannot be sacrificed in favor of the exigency of the service; thus, he has no other
choice but to disassociate himself from his employment. [21] As discussed above, petitioner negotiated for a
resignation with separation pay as the manner in which his employment relations with private respondent would
end. He was already suffering from a lingering illness at the time he tendered his resignation. His continued
employment would have been detrimental not only to his health, but also to his performance as an employee of
private respondent.
Hence, the termination of the employment relations of petitioner with private respondent was ultimately, if not
outrightly inevitable. Resignation with separation pay was the best option for him under the circumstances. Rightly
so, this was the mode adopted and agreed upon by the parties, as evidenced by the Release and Quitclaim petitioner
executed in connection with his resignation.
Clearly then, the claim of petitioner that he was illegally dismissed cannot be sustained, considering that his
voluntary resignation has been indubitably established as a fact by the three tribunals below. Indeed, illegal
dismissal and voluntary resignation are adversely opposed modes of terminating employment relations, in that the
presence of one precludes that of the other.
Although the Supreme Court has, more often than not, been inclined towards 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. [22] An
employee who resigns and executes a quitclaim in favor of the employer is generally estopped from filing any
further money claims against the employer arising from the employment.[23]
However, private respondent has not complied with its obligation to give petitioners separation pay in the
amount of P8,542.50. It was this deliberate withholding of monetary benefits that necessitated the long, litigious and
lethargic proceedings in this case. Had private respondent simply paid the measly amount of P8,452.50 as separation
pay to petitioner, this legal controversy could have been avoided and the court dockets unclogged.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision of the Court of
Appeals AFFIRMED, with the modification that private respondent is directed to pay petitioner P8,452.50 plus legal
interest thereon, computed from December 7, 1993, until fully paid, representing the unpaid separation pay benefit
agreed upon by the parties.
SO ORDERED.

G.R. No. 81087 June 19, 1991

INTERTROD MARITIME, INC. and TROODOS SHIPPING CO., petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ERNESTO DE LA CRUZ, respondents.

Del Rosario & Del Rosario for petitioners.

PADILLA, J.:

This petition seeks the annulment and/or modification of the resolution * of the First Division of the National Labor
Relations Commission promulgated on 11 December 1987 in NSB Case No. 3997-82 entitled "Ernesto de la Cruz
59
vs. Intertrod Maritime, Inc. and Troodos Shipping Company," which reversed the decision of then POEA
Administrator Patricia Sto. Tomas dated 20 December 1983.

On 10 May 1982, private respondent Ernesto de la Cruz signed a shipboard employment contract with petitioner
Troodos Shipping Company as principal and petitioner Intertrod Maritime, Inc., as agent to serve as Third Engineer
on board the M/T "BREEDEN" for a period of twelve (12) months with a basic monthly salary of US$950.00.1

Private respondent eventually boarded a sister vessel, M/T "AFAMIS" and proceeded to work as the vessel's Third
Engineer under the same terms and conditions of his employment contract previously referred to.2

On 26 August 1982, while the ship (M/T "Afamis") was at Port Pylos, Greece, private respondent requested for
relief, due to "personal reason."3 The Master of the ship approved his request but informed private respondent that
repatriation expenses were for his account and that he had to give thirty (30) days notice in view of the Clause 5 of
the employment contract so that a replacement for him (private respondent) could be arranged. 4

On 30 August 1982, while the vessel was at Port Said in Egypt and despite the fact that it was only four (4) days
after private respondent's request for relief, the Master "signed him off" and paid him in cash all amounts due him
less the amount of US$780.00 for his repatriation expenses, as evidenced by the wages account signed by the private
respondent.5

On his return to the Philippines, private respondent filed a complaint with the National Seamen Board (NSB)(now
POEA) charging petitioners for breach of employment contract and violation of NSB rules and regulations. 6 Private
respondent alleged that his request for relief was made in order to take care of a Filipino member of the crew of M/T
"AFAMIS" who was hospitalized on 25 August 1982 in Athens, Greece. However, the Master of the ship refused to
let him immediately disembark in Greece so that the reason for his request for relief ceased to exist. Hence, when
the Master of the ship forced him to step out in Egypt despite his protestations to the contrary, there being no more
reason to request for relief, an illegal dismissal occurred and he had no other recourse but to return to the Philippines
at his own expense.7

In its Answer to the complaint, petitioners denied the allegations of the complainant and averred that the contract
was cut short because of private respondent's own request for relief so that it was only proper that he should pay for
his repatriation expenses in accordance with the provisions of their employment contract. 8

The sole issue to be resolved in this case is whether or not complainant's termination is illegal.

POEA rendered a decision dismissing the complaint for lack of merit.9 On appeal to the NLRC, the decision was
reversed.

The dispositive portion of the NLRC decision reads:

WHEREFORE, the appealed decision is hereby SET ASIDE and another one entered, directing
respondents-appellees to: (1) pay complainant-appellant the amount of US$780.00 representing his plane
fare from Egypt to Manila; and (2) pay complainant-appellant the amount of US$6,300.00 representing his
unearned salary for nine (9) months, the unexpired portion of the contract.

Foreign exchange conversions shall be paid in Philippine currency at the rate of exchange at the actual
payment thereof.

SO ORDERED.10

Hence, this petition.

Article 21(c) of the Labor Code requires that the Philippine Overseas Employment Administration (formerly NSB)
should approve and verify a contract for overseas Employment.11 A contract, which is approved by the National
Seamen Board, such as the one in this case, is the law between the contracting parties; and where there is nothing in
it which is contrary to law, morals, good customs, public policy or public order, the validity of said contract must be
sustained.12

In its resolution, the NLRC held that the immediate approval of private respondent's request for relief should have
resulted in his disembarkation in Port Pylos, Greece; that failure of the Master to allow disembarkation in Greece
nullified the request for relief and its approval, such that private respondent's subsequent disembarkation in Egypt is
no longer his doing but rather an illegal dismissal on the part of the Master. 13 We cannot support such a ruling for it
fails to consider the clear import of the provisions of the employment contract between petitioners and private
respondent.

60
Paragraph 5 of the Employment Contract between petitioners and private respondent Ernesto de la Cruz provides as
follows:

5. That, if the seaman decide to terminate his contract prior to the expiration of the service period as stated
and defined in paragraph 4 of this Employment Contract, without due cause, he will give the Master thirty
(30) days notice and agree to allow his repatriation expenses to be deducted from wages due him.14

Clearly, therefore, private respondent Ernesto de la Cruz was required by the employment contract not only to pay
his own repatriation expenses but also to give thirty (30) days notice should he decide to terminate his employment
prior to the expiration of the period provided in the contract. When the Master approved his request for relief, the
Master emphasized that private respondent was required to give thirty (30) days notice and to shoulder his own
repatriation expenses. Approval of his request for relief, therefore, did not constitute a waiver by petitioners of the
provisions of the contract, as private respondent would have us believe, for it was made clear to him that the
provisions of the contract, insofar as the thirty (30) days notice and repatriation expenses were concerned, were to be
enforced.

Private respondent claims that his request for relief was only for the reason of taking care of a fellow member of the
crew so much so that when he was not allowed to disembark in Port Pylos, Greece, the reason no longer existed and,
therefore, when he was forced to "sign off" at Port Said, Egypt even when he signified intentions of continuing his
work, he was illegally dismissed.15 We sympathize with the private respondent; however, we cannot sustain such
contention. Resignation is the voluntary act of an employee who "finds himself in a situation where he believes that
personal reasons cannot be sacrificed in favor of the exigency of the service, then he has no other choice but to
disassociate himself from his employment."16 The employer has no control over resignations and so, the notification
requirement was devised in order to ensure that no disruption of work would be involved by reason of the
resignation. This practice has been recognized because "every business enterprise endeavors to increase its profits by
adopting a device or means designed towards that goal."17

Resignations, once accepted and being the sole act of the employee, may not be withdrawn without the consent of
the employer. In the instant case, the Master had already accepted the resignation and, although the private
respondent was being required to serve the thirty (30) days notice provided in the contract, his resignation was
already approved. Private respondent cannot claim that his resignation ceased to be effective because he was not
immediately discharged in Port Pylos, Greece, for he could no longer unilaterally withdraw such resignation. When
he later signified his intention of continuing his work, it was already up to the petitioners to accept his withdrawal of
his resignation. The mere fact that they did not accept such withdrawal did not constitute illegal dismissal for
acceptance of the withdrawal of the resignation was their (petitioners') sole prerogative.

Once an employee resigns and his resignation is accepted, he no longer has any right to the job. If the employee later
changes his mind, he must ask for approval of the withdrawal of his resignation from his employer, as if he were re-
applying for the job. It will then be up to the employer to determine whether or not his service would be continued.
If the employer accepts said withdrawal, the employee retains his job. If the employer does not, as in this case, the
employee cannot claim illegal dismissal for the employer has the right to determine who his employees will be. To
say that an employee who has resigned is illegally dismissed, is to encroach upon the right of employers to hire
persons who will be of service to them.

Furthermore, the employment contract also provides as follows:

4. That all terms and conditions agreed herein are for a service period of twelve (12) months provided the
vessel is in a convenient port for his repatriation, otherwise at Master's discretion, on vessel's arrival at the
first port where repatriation is practicable provided that such continued service shall not exceed three
months.18

Under the terms of the employment contract, it is the ship's Master who determines where a seaman requesting relief
may be "signed off." It is, therefore, erroneous for private respondent to claim that his resignation was effective only
in Greece and that because he was not immediately allowed to disembark in Greece (as the employer wanted
compliance with the contractual conditions for termination on the part of the employee), the resignation was to be
deemed automatically withdrawn.

The decision of the NLRC is therefore set aside. To sustain it would be to authorize undue oppression of the
employer.1âwphi1 After all, "the law, in protecting the rights of the laborer, authorizes neither oppression nor self-
destruction of the employer."19

WHEREFORE, the petition is GRANTED. The questioned resolution of the National Labor Relations Commission
dated 11 December 1987 is hereby REVERSED and SET ASIDE and the decision of then POEA Administrator
Patricia Sto. Tomas dated 20 December 1983 is REVIVED. No pronouncement as to costs.

61
SO ORDERED.

Melencio-Herrera, Paras and Regalado, JJ., concur.

Sarmiento, J., is on leave.
BLUE ANGEL MANPOWER AND G.R. No. 161196
SECURITY SERVICES, INC.,
Petitioner,
Present:
QUISUMBING, J., Chairperson,
- versus - YNARES-SANTIAGO,*
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
HON. COURT OF APPEALS, Promulgated:
ROMEL CASTILLO, WILSON
CIRIACO, GARY GARCES, and July 28, 2008
CHESTERFIELD MERCADER,
Respondents.
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

In this petition for review under Rule 45, petitioner Blue Angel Manpower and Security Services, Inc.
(Blue Angel) assails and seeks to reverse the Decision[1] dated February 26, 2003 of the Court of Appeals (CA) in
CA-G.R. SP No. 67478, in part setting aside the Decision dated May 9, 2001 of the National Labor Relations
Commission (NLRC).

The facts are as found by the CA.

Blue Angel, a messengerial and security agency, hired private respondents Romel Castillo, Wilson Ciriaco,
Gary Garces, and Chesterfield Mercader as security guards and detailed them at the National College of Business
and Arts (NCBA) in Cubao, Quezon City.
On April 20, 1999, Castillo and Mercader, later joined by Ciriaco and Garces, filed a complaint for illegal
deductions and other money claims against Blue Angel. Eventually, they amended their complaint to include illegal
dismissal. According to the four guards, they were required, while still with Blue Angel, to work from 7:00
a.m. to 7:00 p.m. without overtime and premium holiday pay, among other benefits. They also alleged receiving
only PhP 5,000 a month or PhP 166 per day and, from this amount, Blue Angel deducted PhP 100 as cash
bond. They further averred that Blue Angel, when apprised of their original complaint, illegally terminated Garces
and Ciriaco on April 11 and 12, 1999, respectively, and Castillo and Mercader on April 28, 1999. The four guards
prayed for (1) payment of backwages, wage differentials, premium and overtime pay for holidays, and 13th month
pay; (2) reimbursement of their cash bond; (3) reinstatement or separation pay; and (4) damages.

Blue Angel, for its part, denied the charges of illegal dismissal. It alleged that, on two occasions, the
officer-in-charge (OIC) of the Security Force of NCBA, Reynaldo Dayag, reported that the four complaining guards
had, while on guard duty detail with the school, committed several infractions, among them: insubordination,
sleeping while on duty, and absence without leave (AWOL). When summoned to explain their side on the
derogatory report, only Castillo, Ciriaco, and Garces, according to Blue Angel, showed up, but not Mercader who
had since stopped reporting for work and thus considered on AWOL. Continuing, Blue Angel alleged that when told
that they would be subjected to an investigation, Castillo, Ciriaco, and Garces pleaded that they be allowed to resign
instead. The three, so Blue Angel claimed, then tendered their pro-forma letters of resignation followed by
handwritten resignation letters in the nature of quitclaims. To refute the guards claims of non-payment of what was
due them, Blue Angel presented the payrolls and vouchers from July 1997 to April 1999 that showed the four guards
respective gross salaries and deductions.

In a Decision[2] dated May 31, 2000, the labor arbiter, in part, found for the guards, Blue Angel being
ordered to immediately reinstate them with backwages. The dispositive portion of the labor arbiters decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering Blue Angel

Security and Manpower Services, Inc. to immediately reinstate the complainants to their former
positions pursuant to the ruling in the Pioneer Texturing case that an order of reinstatement is self-
executory even pending appeal.

Respondent is hereby ordered to pay the backwages of the complainants tentatively

computed as follows:

Rommel Castillo --------Php 82,971.00

Wilson Ciriaco ----------Php 86,139.00
62
 Gary Garces -------------Php 86,337.00
Chesterfield Mercader Php 82,971.00

SO ORDERED.

Dissatisfied, Blue Angel, on one hand, and Castillo, et al., on the other, interposed separate appeals to the
NLRC, the former faulting the labor arbiter mainly for his finding that the four guards in question were illegally
dismissed. The guards, for their part, took exception to the arbiters holding that some items of their money claim had
already been paid.

By the Decision dated May 9, 2001, the NLRC affirmed with modification that of the labor arbiter. The
NLRC predicated its modificatory action on the finding that Castillo, Ciriaco, and Garces were not terminated from
the service as they had indeed voluntarily resigned, and that only Mercader was illegally dismissed. In net effect, the
NLRC ruled that, of the four complaining guards, only Mercader deserved to be reinstated with backwages as he
was the only one dismissed illegally. The dispositive portion of the NLRC Decision reads:
WHEREFORE, in light of the foregoing, the appealed Decision is hereby AFFIRMED
with the modification only in so far as the dismissal of the complaints filed by Romel Castillo,
[Wilson] Ciriaco and Gary Garces; the judgment arrived at in the case of complainant Chesterfield
Mercader is hereby Affirmed.

All other reliefs herein sought and prayed for are DENIED for lack of merit.

SO ORDERED.[3]

According to the NLRC, the two sets of letters of resignation, the pro-forma resignations and the
handwritten resignations, were never disputed. Besides, the NLRC reasoned, the fact that the later resignation letters
were handwritten in Pilipino, a dialect known to them, militated against the claims of Castillo, Ciriaco, and Garces
that they were coerced and pressured to writing the letters.

On certiorari before the CA, the CA first noted that Blue Angel did not appeal the portion of the NLRC
Decision affirming the labor arbiters ruling that Mercader was illegally dismissed; hence, said portion of the
decision of the labor arbiter became final and binding on Blue Angel.

Now to the case of Castillo, Ciriaco, and Garces. In its February 26, 2003 Decision, the CA found
incredulous the claim of Blue Angel that the guards pleaded that they be allowed to resign and had voluntarily
resigned after they were told that an investigation would ensue. The CA concluded that Blue Angel had illegally
terminated Castillo, Ciriaco, and Garces. The fallo of its Decision reads:

WHEREFORE, THE PETITION is hereby GRANTED. The decision of the National

Labor Relations Commission dated May 9, 2001 is ANNULLED AND SET ASIDE except insofar
as it sustained the labor arbiters ruling that petitioner Chesterfield Mercader was illegally
dismissed, with the result that the decision of the labor arbiter dated May 31, 2000 is reinstated.

SO ORDERED.
Now before us, petitioner Blue Angel raises that the CA committed palpable and reversible error of law in:

I.

x x x HOLDING THAT PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED.

II.

x x x IN NOT HOLDING THAT PRIVATE RESPONDENTS ARE NOT ENTITLED TO THEIR

CLAIMS FOR BACKWAGES OR ANY OTHER MONETARY BENEFIT AS THEY HAVE
ALREADY RECEIVED ALL THE SALARIES AND BENEFITS THAT THEY ARE ENTITLED
TO.

It is to be stressed, as a preliminary consideration, that the illegality of Mercaders dismissal and his
entitlement to reinstatement with backwages is now a settled issue, the NLRCs holding on that regard being
conclusive on Blue Angel when it failed, as the CA aptly observed, to appeal that portion of the NLRCs decision. It
is a settled rule that no questions will be entertained on appeal unless they have been raised below. [4] Accordingly,
any disposition henceforth made herein bearing on the illegality of dismissal shall be limited only to the case of
private respondents Castillo, Ciriaco, and Garces. When mention, therefore, is hereinafter made of private
respondents or respondents-guards, the reference is to Castillo, Ciriaco and Garces only, unless the context indicates
that it shall include Mercader.
63
 The question of whether or not private respondents were illegally dismissed hinges on the determination of
whether or not they freely and voluntarily resigned as shown by the two sets of resignation letters.

We rule that the resignations were involuntary and the termination of private respondents was illegal.

Blue Angel insists that the guards had pleaded to be allowed to resign when they were told of the pending
investigation, and that they eventually tendered their pro-forma resignation letters followed by their own
handwritten resignation letters. Our review of the circumstances surrounding these resignation letters does not
support Blue Angels contentions that these letters are indications that private respondents had voluntarily resigned.
We agree with the labor arbiter when he pointed out that the undated, similarly worded resignation letters tended to
show that the guards were made to copy the pro-formaletters, in their own hand, to make them appear more
convincing that the guards had voluntarily resigned. As the labor arbiter noted, the element of voluntariness of the
resignations is even more suspect considering that the second set of resignation letters were pre-drafted, similarly
worded, and with blank spaces filled in with the effectivity dates of the resignations. [5] In their Comment, private
respondents claimed being forced to sign and copy the pro-forma resignation letters and quitclaims on pain that they
would not get their remaining compensations.[6]
We are more inclined to believe the dismissed guards. Other circumstances have been aptly pointed out by
respondents-guards in their Comment that we are wont to agree that they were forced into a situation where to refuse
to sign the resignation letters and quitclaims meant loss of money for the immediate and urgent basic needs of their
family. To buttress the conclusion that the resignation letters were involuntary on the part of the guards, we find
convincing the circumstances mentioned in the Comment of respondents-guards. For one, it seemed unlikely and
improbable that Garces and Ciriaco would voluntarily resign on April 26, 1999 when they had 15 and 12 days
earlier, or on April 11 and 12, 1999, already been terminated. Then again, it was likewise inconsistent and
implausible that Castillo would voluntarily tender his resignation and sign a quitclaim on April 28, 1999, when
Mercader and he had in fact already filed a complaint against Blue Angel with the NLRC regarding illegal
deductions of their salary eight days earlier, or on April 20, 1999.[7] Lastly, there is nothing on record showing that
Blue Angel provided any proof that Castillo, Ciriaco, and Garces had indeed committed the infractions attributed to
them. Blue Angel merely enumerated the offenses without providing particulars as to the date and place these
infractions were committed. Neither did Blue Angel present written notices, warnings, and affidavits of the OIC to
support its allegations against the guards.

We are not unaware that the execution of the resignation letters was undisputed, but the aforementioned
circumstances of this case and the fact that private respondents filed a complaint for illegal dismissal from
employment against Blue Angel completely negate the claim that private respondents voluntarily resigned. [8] Well-
entrenched is the rule that resignation is inconsistent with the filing of a complaint for illegal dismissal. [9] To
constitute resignation, the resignation must be unconditional with the intent to operate as such. There must be clear
intention to relinquish the position. In this case, private respondents actively pursued their illegal dismissal case
against Blue Angel such that they cannot be said to have voluntarily resigned from their jobs.

With the finding that private respondents were illegally dismissed, they are entitled to reinstatement to their
positions without loss of their seniority rights and with full backwages, inclusive of allowances, and to other benefits
or their monetary equivalent computed from the time private respondents compensation was withheld from them up
to the time of their actual reinstatement as provided for in Article 279 of the Labor Code.

As the law now stands, illegally dismissed employees are entitled to two reliefs, namely: backwages and
reinstatement. They are entitled to reinstatement, if viable, or separation pay, if reinstatement is no longer feasible,
and backwages.[10] The award of one does not preclude the other as the Court had, in proper cases, ordered the
payment of both.[11] Where an employee would have been entitled to reinstatement with full backwages, but
circumstances, i.e., strained relationships, make reinstatement impossible, the more equitable disposition would be
to award separation pay equivalent to at least one month pay, or one month pay for every year of service, whichever
is higher, in addition to full backwages, inclusive of allowances, and benefits or their monetary equivalent,
computed from the time the employees compensation was withheld up to the time of the employees actual
reinstatement.[12]

As to the other money claims of private respondents, the vouchers, [13] payrolls,[14] and other documentary
[15]
evidence show that the other monetary benefits being claimed by private respondents have already been duly paid.

WHEREFORE, the petition is DISMISSED for lack of merit. The Decision of the CA in CA-G.R. SP No. 67478
reinstating the Decision dated May 31, 2000 of the labor arbiter is AFFIRMED with the MODIFICATION that
petitioner Blue Angel Security and Manpower Services, Inc. is ordered to reinstate complainants Romel Castillo,
Wilson Ciriaco, and Gary Garces to their former positions without loss of seniority rights and other privileges and
with full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the
time their compensations were withheld from them up to the time of their actual reinstatements. In the event
reinstatement is not feasible, they shall be paid separation pay in the amount equivalent to at least one month pay or
one month pay for every year of service whichever is higher.

64
With respect to Chesterfield Mercader, the NLRC Decision dated May 9, 2001, affirming the labor arbiters Decision
dated May 31, 2000 which ordered petitioner to reinstate him to his former position and pay him backwages of PhP
82,971, had become final on November 2, 2001, in the absence of an appeal thereon to the CA.

SO ORDERED.

January 13, 2016

G.R. No. 177680

JENNIFER C. LAGAHIT, Petitioner,

vs.
PACIFIC CONCORD CONTAINER LINES/MONETTE CUENCA (BRANCH MANAGER), Respondents.

DECISION

BERSAMIN, J.:

We resolve the appeal of petitioner Jennifer Lagahit from the decision promulgated on May 10, 2006,1 whereby the
Court of Appeals (CA) disposed in CA-G.R. SP No. 00991 entitled Pacific Concord Container Lines and Monette
Cuenca v. National Labor Relations Commission, Fourth Division, and Jennifer Lagahit, as follows:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the assailed Decision dated
December 15, 2004 promulgated by the National Labor Relations Commission, Fourth Division, Cebu City, in
NLRC Case No. V-000529-2003/RAB Case No. VII-11-2271-2002, as well as the Resolution dated May 25, 2005
are hereby REVERSED and SET ASIDE. Petitioner is ORDERED to pay private respondent the amount of
P25,000.00 as nominal damages. Further, the preliminary injunction issued by this Court is likewise made
permanent.

No pronouncement as to costs.

SO ORDERED.2

Antecedents

In February 2000, respondent Pacific Concord Container Lines (Pacific Concord), a domestic corporation engaged
in cargo forwarding,3 hired the petitioner as an Account Executive/Marketing Assistant.4 In January 2002, Pacific
Concord promoted her as a sales manager with the monthly salary rate of P25,000.00, and provided her with a brand
new Toyota Altis plus gasoline allowance. 5 On November 8, 2002, she reported for work at 9:00 a.m. and left the
company premises at around 10:30 a.m. to make client calls. At 1:14 p.m. of that day, she received the following text
message from respondent Monette Cuenca, to wit:
TODAY U R OFFICIALY NT CONNECTED WITH US.
Sender: MONETTE
+639173215330
Sent: 8-Nov-2002
13:14:016

Cuenca also sent a text message to Roy Lagahit, the petitioner’s husband, as follows:
IBALIK KARON DAYON ANG AUTO OG PALIHUG LANG
KO OG KUHA SA NYONG BUTANG OG DI NAKO MO
STORYA NI JENIFER. IL WAIT7
Sender: MONETTE
+639173215330
Sent: 8-Nov-2002
12:50:548

The petitioner immediately tried to contact Cuenca, but the latter refused to take her calls. On the same day, the
petitioner learned from clients and friends that the respondents had disseminated notices, flyers and memos
informing all clients of Pacific Concord that she was no longer connected with the company as of November 8,
2002.9 Pacific Concord also caused the publication of the notice to the public in the Sunstar Daily issue of December
15, 2002.10

On November 13, 2002, the petitioner sent a letter to Pacific Concord,11 which reads as follows:

65
November 13, 2002

Branch Manager

PACIFIC CONCORD CONTAINER LINES, INC.

N&N Building A.C. Cortes Mandaue City

Attention: Monette Cuenca

Madam,

In connection with your text message and flyers advising me that you have terminated my employment, please
arrange and expedite settlement of all benefits due to me under the law.

In as much as the facts of my termination has not been formally detailed to me, I believe I was deprived of the due
process that would have given me the chance to formally present my side. It startled me at first but I have accepted
my fate. However, we both have names and reputations to protect. Factual incidents made as basis of my
termination can help us mutually clear our names.12

Thank you,

(Sgd)
JENNIFER LAGAHIT

Cuenca replied to the letter on November 25, 2002,13 advising the petitioner thusly:

25 November 2002
TO : MS. JENNIFER C. LAGAHIT
FM : PACIFIC CONCORD CONTAINER LINES, INC. CEBU BRANCH
RE : UNCOLLECTED ACCOUNTS

Herewith is the list of your uncollected accounts as of November 22, 2002.

Kindly take note that you have personally guaranteed the above accounts. Moreover, you have reported it as your
income and you have already availed the commission due for the above shipments.

We are therefore holding the release of the monies due to you until we can collect the above accounts.

xxxx
(Sgd)
MONETTE
G. CUENCA
Branch
Manager

On November 26, 2002, the petitioner filed her complaint for constructive dismissal in the Regional Arbitration
Branch of the National Labor Relations Commission (NLRC) in Cebu City. 14

In their position paper,15 the respondents denied having terminated the petitioner despite the fact that there were
valid grounds to do so. They insisted that the petitioner had betrayed the trust and confidence reposed in her when
she: (a) used the company-issued vehicle for her own personal interest; (b) failed to achieve her sales quota, and to
enhance and develop the Sales Department; (c) enticed her marketing assistant, Jo Ann Otrera, to resign and join her
in transferring to another forwarding company; (d) applied for other employment during office hours and using
company resources; (e) solicited and offered the services of Seajet International, Inc. during her employment with
Pacific Concord; (f) received a personal commission from Wesport Line, Inc. for container shipments; and (g)
illegally manipulated and diverted several containers to Seajet International.16

The respondents claimed that Pacific Concord even issued at one time a memorandum to the petitioner 17 to cite her
insubordination in refusing to participate in the company’s teambuilding activity; that in the two meetings held on
September 27, 200218 and October 9, 2002,19 she was afforded the chance to explain her side on the reports that she
was looking for other employment, but she dismissed the reports as mere speculations and assured them of her
loyalty; that although valid grounds to terminate the petitioner already existed, they did not dismiss her; and that she
voluntarily resigned on November 13, 2002 after probably sensing that the management had gotten wind of her
anomalous transactions.20 They submitted affidavits to support their allegations.21

66
Ruling of the Labor Arbiter

Labor Arbiter Julie C. Rendoque rendered a decision on June 9, 2003, declaring that the respondents were not able
to prove that the petitioner had committed acts constituting betrayal of trust; that they had not informed her prior to
her dismissal of the offenses she had supposedly committed;22 and that owing to the illegality of the dismissal, they
were liable for backwages and separation pay, to wit:

WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby rendered declaring

herein respondents GUILTY of ILLEGALLY DISMISSING complainant from her employment. Consequently,
respondents PACIFIC CONCORD CONTAINER LINES/MONEETTE [sic] CUENCA are hereby ordered to pay,
jointly and severally, complainant JENNIFER C. LAGAHIT with the following:
a. Separation Pay P 25,000.00
b. Backwages P175,000.00
TOTAL=============== P200,000.00
VVVVVVVVV

within ten (10) days from receipt hereof, through the Cashier of this Arbitration Branch.

Other claims are DISMISSED for lack of merit.1âwphi1

SO ORDERED.23

Ruling of the NLRC

On appeal, the NLRC affirmed the ruling of the Labor Arbiter with modification, viz.:

WHEREFORE, the Decision dated June 9, 2002 of the Labor Arbiter is MODIFIED by AFFIRMING his finding
that the respondents are guilty of illegally dismissing the complainant from her employment, but MODIFYING his
award for separation pay computed at one (1) month salary for every year of service, a fraction of at least six (6)
months being considered one (1) year from the complainant’s first day of employment in February 2000 UNTIL
THE FINALITY OF THIS DECISION; and backwages starting November 8, 2002 UNTIL THE FINALITY OF
THIS DECISION.

The appeal of the respondents is dismissed for lack of merit.

xxxx

SO ORDERED.24

The NLRC found that the respondents did not observe due process in terminating the services of the petitioner; and
rejected their claim that she had resigned on November 13, 2002.25

The respondents filed their motion for reconsideration,26 but the NLRC denied their motion on May 25, 2005.27

Decision of the CA

On May 10, 2006, the CA promulgated its decision granting the respondents’ petition for certiorari, and annulling
the decision of the NLRC. It pronounced that there were sufficient justifications to terminate the petitioner’s services
for disloyalty and willful breach of trust, viz.:

In the present case, it is clear that Lagahit deliberately committed successive acts which translated to blatant
disloyalty and willful breach of the trust reposed upon her by Pacific, and acts which, in the final reckoning are
obviously detrimental to the material interest of the company under which she is employed. From January 2002,
Lagahit was found to have committed a series of willful acts which may reasonably and expectedly arouse Pacific’s
distrust and a consequent finding of Lagahit’s unfitness to continue her employment, thus: (a) Lagahit has been
persistent in applying for employment in other competing cargoforwarding companies; (b) Lagahit even enticed her
Marketing Assistant to join her quest to find anoher job outside Pacific and at a competing company at that; (c)
Lagahit rendered actual services at competing companies for a fee and commission while she was still under the
employee of Pacific and was regularly receiving salary therefrom; and (d) Lagahit brought and referred prospective
shipping clients to other cargoforwarding corporations. Verily, the commission of the foregoing acts vividly
demonstrated, not only, Lagahit’s disloyalty and unfaithfulness to her employer, but likewise her blatant ingratitude
to the company from which she derives her regular source of livelihood, considering that, incidentally, the
performance of these disloyal and inimical acts commenced when Lagahit was just newly promoted to the higher
post of Sales Manager at Pacific.
67
 xxxx

Lagahit is not an ordinary rank-and-file employee of Pacific, but contrarily, is by far an employee authorized to
formulate significant company plans and policies, and whose designation and basic functions, on its face, betrays the
fact that too much trust and confidence was indeed reposed upon her. As borne by the records, Lagahit occupies the
responsible post of Sales Manager, and as such her basic functions, inter alia, consists [sic] of the following: (1)
formulation of strategic action and marketing plans to make the Pacific Sales Department successful, (2)
implementation of marketing strategies to help Pacific Sales team achieve its periodic target, (3) direct transaction
with various shipping clients, and (4) in having a free hand in dealing with various shipping lines. Quite
significantly, Lagahit was given sensitive and responsible functions that goes deep into the financial success, or
otherwise ruin, of Pacific, which is more than a clear testament to the fact her position is accorded with trust and
confidence.

Such being the case, Lagahit owes it to herself and to Pacific to work religiously and with undivided time and
attention to promote the latter’s business interests. Unfortunately, such was not the case. As it turned out, Lagahit
made a consistent attempt to seek employment at other cargo forwarding companies that directly compete with the
business of Pacific, obviously, constituting a willful breach of trust consequentially resulting to Pacific’s loss of
confidence in Lagahit’s loyalty and efficacy. Worse, Lagahit conducted her job applications during office hours
when she should have been rendering her services for Pacific. Furthermore, the height of her disloyalty exhibited its
face when Lagahit begun to actually render services and refer prospective shipping clients to other competing cargo-
forwarding companies for a fee and commission, at the same time employed with Pacific and receiving regular
salary therefrom.28

Nonetheless, the CA held that despite the existence of a valid cause to terminate her employment Pacific Concord
was liable for nominal damages of P25,000.00 for denying the petitioner’s right to due process. 29

The CA denied the petitioner’s motion for reconsideration on March 30, 2007.30 Hence, this appeal.

Issues

The petitioner imputes the following errors to the CA, namely:

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING UNDUE WEIGHT
AND CREDENCE TO THE RESPONDENTS’ LATEST DEFENSE, THEREBY DISTURBING THE FINDINGS
OF FACT OF THE LABOR ARBITER AND NLRC WHO SHARE THE SAME FINDINGS;

II

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING MS. LAGAHIT TO
HAVE BEEN VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST AND CONFIDENCE;

III

PETITIONER IS ENTITLED TO HER CLAIMS FOR SEPARATION PAY AND BACKWAGES 31

The petitioner argues that the CA erroneously concluded that she had been dismissed considering that the
respondents had initially denied her having dismissed her, and claimed instead that she had voluntarily resigned; that
the Labor Arbiter and the NLRC had correctly concluded that she had not resigned, but had been illegally terminated
without substantive and procedural due process;32 and that the evidence adduced against her that the CA relied upon
to sufficiently establish her breach of trust were speculative and hearsay. 33

In contrast, the respondents aver that:(a) the petitioner occupied a position of trust and confidence that she breached
by working for, serving, and soliciting clients in behalf of competing cargo-forwarding companies using the
respondents’ resources;34 (b) she had not explained her meetings, job applications and moonlighting with competing
companies;35 (c) the sworn statements narrating her breach of trust and disloyalty to the company submitted by the
respondents substantially justified her dismissal on the ground of loss of trust and confidence; 36 and (d) her
resignation letter confirmed that she no longer desired to work for the company considering that she succeeded in
landing a job with Seajet Lines in just three days after her resignation.37

Did the petitioner resign as sales manager of Pacific Concord? Did Pacific Concord have sufficient grounds to
terminate her for breach of trust and confidence under Article 28238 of the Labor Code?

68
 Ruling of the Court

We find merit in the appeal.

Lagahit did not resign from her employment

On the first issue, we find in favor of the petitioner.

In cases of unlawful dismissal, the employer bears the burden of proving that the termination was for a valid or
authorized cause, but before the employer is expected to discharge its burden of proving that the dismissal was legal,
the employee must first establish by substantial evidence the fact of her dismissal from employment. 39 In this case,
the petitioner proved the overt acts committed by the respondents in abruptly terminating her employment through
the text messages sent by Cuenca to the petitioner and her husband, as well as the notices distributed to the clients
and published in the Sun Star. It is notable that the respondents did not deny or controvert her evidence on the
matter. Thereby, she showed Pacific Concord’s resolve to terminate her employment effective November 8, 2002.

On the other hand, the respondents’ insistence that the petitioner had resigned was bereft of factual support. As a
rule, the employer who interposes the resignation of the employee as a defense should prove that the employee
voluntarily resigned.40 A valid resignation is the voluntary act of an employee who finds herself in a situation where
she believes that personal reasons cannot be sacrificed in favor of the exigency of the service and that she has no
other choice but to disassociate herself from employment.41 The resignation must be unconditional and with a clear
intention to relinquish the position.42 Consequently, the circumstances surrounding the alleged resignation must be
consistent with the employee’s intent to give up the employment.43 In this connection, the acts of the employee
before and after the resignation are considered to determine whether or not she intended, in fact, to relinquish the
employment.44

The facts and circumstances before and after the petitioner’s severance from her employment on November 8, 2002
did not show her resolute intention to relinquish her job. Indeed, it would be unfounded to infer the intention to
relinquish from her November 13, 2002 letter, which, to us, was not a resignation letter due to the absence therefrom
of anything evincing her desire to sever the employer-employee relationship. The letter instead presented her as a
defenseless employee unjustly terminated for unknown reasons who had been made the subject of notices and flyers
informing the public of her unexpected termination. It also depicted her as an employee meekly accepting her
unexpected fate and requesting the payment of her backwages and accrued benefits just to be done with the
employer.

For sure, to conclude that the petitioner resigned because of her letter of November 13, 2002 is absurd in light of the
respondents having insisted that she had been terminated from her employment earlier on November 8, 2002. In that
regard, every resignation presupposes the existence of the employer-employee relationship; hence, there can be no
valid resignation after the fact of termination of the employment simply because the employee had no employer-
employee relationship to relinquish.

II

Lagahit did not breach her employer’s trust;

her dismissal was, therefore, illegal

Having settled the issue of the dismissal in the petitioner’s favor, we next resolve whether or not the CA correctly
ruled the petitioner’s dismissal as justified on the ground of breach of trust and confidence.

The petitioner assails the CA for upholding her termination based on speculations and hearsay, and for entirely
disregarding the factual findings in her favor of the LA and the NLRC.45 In contrast, the respondents maintain that
the allegation of disloyalty against her was substantiated by the affidavits they had submitted that the CA relied on to
sustain the validity of her dismissal.46

We agree with the petitioner.

To justify the dismissal of an employee, the employer must, as a rule, prove that the dismissal was for a just cause,
and that the employee was afforded due process prior to dismissal. As a complementary principle, the employer has
the onus of proving the validity of the dismissal with clear, accurate, consistent, and convincing evidence. 47 The
employer’s case succeeds or fails on the strength of its evidence, not on the weakness of that adduced by the
employee, in keeping with the principle that the scales of justice should be tilted in favor of the latter in case of
doubt in the evidence presented by them.48

69
In its decision, the CA recognized the wide latitude of discretion given to the management in terminating managers
for breach of trust and confidence. It declared Pacific Concord to have justifiably resorted to terminating the
petitioner’s employment as a measure of self-preservation in view of her repeated acts of disloyalty that were
prejudicial to its interest.49

The CA was thereby gravely mistaken.

Article 282(c)50 of the Labor Code authorizes an employer to dismiss an employee for committing fraud, or for
willful breach of the trust reposed by the employer. However, loss of confidence is never intended to provide the
employer with a blank check for terminating its employee.51 For this to be a valid ground for the termination of the
employee, the employer must establish that: (1) the employee must be holding a position of trust and confidence;
and (2) the act complained against would justify the loss of trust and confidence. 52

There are two classes of employees vested with trust and confidence. To the first class belong the managerial
employees or 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 managerial
actions. The second class includes those who in the normal and routine exercise of their functions regularly handle
significant amounts of money or property. Cashiers, auditors, and property custodians are some of the employees in
the second class.53

The petitioner discharged the following duties and responsibilities as sales manager, to wit:

SALES MANAGER

Job Description
- Promotes services being offered by the company

- Must generate new accounts for the company

- Responsible for motivating the Sales Team to hit their respective QUOTA and TARGET

- Responsible for the Strategic Planning and Action Plan for the Sales Department

- Should submit Production Report on a weekly basis for the Sales Department specifying each sales contribution for
the week

- Responsible in inspiring and developing confidence of the Sales Team

- Responsible in promoting, formulating, implementing market strategy that will help achieve the target of the Sales
Department

- Coordinates regularly with the Sales people on their day to day activities regarding rates and operational matters

- Keeps track all sales transactions, assist the sales people in their problem regarding rates and operational matters

- Gathers and provides sales leads, replied to agents’ inquiries regarding sales matters

- Transacts rates and other related cargo needs with the shipping lines

- Promotes and maintains good relations with clients

- Prepares quotation to the clients for intended shipments

- Performs other tasks, duties and responsibilities as may be assigned from time to time

- Reports directly to the Branch Manager54

Her position as sales manager did not immediately make the petitioner a managerial employee. The actual work that
she performed, not her job title, determined whether she was a managerial employee vested with trust and
confidence.55 Her employment as sales manager was directly related with the sales of cargo forwarding services of
Pacific Concord, and had nothing to do with the implementation of the management’s rules and policies. As such,
the position of sales manager came under the second class of employees vested with trust and confidence. Therein
was the flaw in the CA’s assailed decision. Although the mere existence of the basis for believing that the managerial

70
employee breached the trust reposed by the employer would normally suffice to justify a dismissal, 56 we should
desist from applying this norm against the petitioner who was not a managerial employee.

At any rate, the employer must present clear and convincing proof of an actual breach of duty committed by the
employee by establishing the facts and incidents upon which the loss of confidence in the employee may fairly be
made to rest.57 The required amount of evidence for doing so is substantial proof. With these guidelines in mind, we
cannot hold that the evidence submitted by the respondents (consisting of the three affidavits) sufficiently
established the disloyalty of the petitioner. The affidavits did not show how she had betrayed her employer’s trust.
Specifically, the affidavit of Russell B. Noel58 only stated that she and her husband Roy had met over lunch with
Garcia Imports and a certain Wilbur of Sea-Jet International Forwarder in the first week of November 2002. To
conclude that such lunch caused Pacific Concord to lose its trust in the petitioner would be arbitrary. Similarly, the
affidavit of Mark Anthony G. Lim59 was inconclusive. Therein affiant Lim deposed:

1. That I was present when Ms. Vivian Veloso, former Branch Manager of Westport Line Inc., disclosed to Ms.
Monette Cuenca and Ms. Mitzie Ibona on November 11, 2002 at the office of Admiral Overseas Shipping Corp.,
where she is presently employed with, that Ms. Jennifer C. Lagahit received a personal commission or rebate for the
full container shipments moved via Westport Line Inc. in the amount of USD 50.00 per container. 60

The foregoing statement was bereft of the particulars about how the petitioner had entered into the transaction, as
well as about the prejudice that Pacific Concord had suffered from her receipt of the commission. Also, that this
information was made known to Cuenca three days after she had already terminated the petitioner belied the
relevance of the information to the termination.

In her affidavit,61 Jo Ann Otrera declared that the petitioner had called other forwarding companies to inquire about
any vacant positions, and that the petitioner had enticed her to transfer to another company. However, such
declarations did not provide the sufficient basis to warrant the respondents’ loss of confidence in the petitioner. We
stress that although her supposedly frantic search for gainful employment opportunities elsewhere should be
considered as inappropriate for being made during office hours, the same did not constitute willful breach of trust
and confidence of the employer. The loss of trust and confidence contemplated under Article 282(c) of the Labor
Code is not ordinary but willful breach of trust. Verily, the breach of trust is willful if it is intentional, knowing,
deliberate and without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.62 Most importantly, the cause of the loss of trust must be work-related as to expose the employee as
unfit to continue working for the employer.63

Considering that the petitioner’s duties related to the sales of forwarding services offered by Pacific Concord, her
calling other forwarding companies to inquire for vacant positions did not breach the trust reposed in her as sales
manager. Such act, being at worst a simple act of indiscretion, did not constitute the betrayal of trust that merited the
extreme penalty of dismissal from employment. We remind that dismissal is a penalty of last resort, to be meted only
after having appreciated and evaluated all the relevant circumstances with the goal of ensuring that the ground for
dismissal was not only serious but true.64

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE the
decision promulgated on May 10, 2006 by the Court of Appeals; REINSTATES the decision of the National Labor
Relations Commission rendered on December 15, 2004 subject to the MODIFICATION that the total monetary
awards shall earn interest at the rate of 6% per annum from the finality of this decision until full satisfaction;
and ORDERS the respondents to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN

G.R. No. 157633 September 10, 2014

NORTHWEST AIRLINES, INC., Petitioner,

vs.
MA. CONCEPCION M. DEL ROSARIO, Respondent.

DECISION

BERSAMIN, J.:

Under review is the decision promulgated on June 21, 2002,1 whereby the Court of Appeals (CA) dismissed the
petition for certiorari filed by Northwest Airlines, Inc. to assail on the ground of grave abuse of discretion amounting
to lack or excess of jurisdiction the adverse decision of the National Labor Relations Commission (NLRC).

71
 Antecedents

Petitioner Northwest Airlines, Inc. employed respondent Ma. Concepcion M. Del Rosario on December 10, 1994 as
one of its Manilabased flight attendants. On May 18, 1998, Del Rosario was assigned at the Business Class Section
of Northwest Flight NW 26 bound for Japan. During the boarding preparations, Kathleen Gamboa, another flight
attendant assigned at the First Class Section of Flight NW 26, needed to borrow a wine bottle opener from her
fellow attendants because her wine bottle opener was dull. Vivien Francisco, Gamboa’s runner, went to the Business
Class Section to borrow a wine bottle opener from Del Rosario, but the latter remarked that any flight attendant who
could not bring a wine bottle opener had no business working in the First Class Section. Upon hearing this, Aliza
Ann Escaño, another flight attendant, offered her wine bottle opener to Francisco. Apparently, Gamboa overheard
Del Rosario’s remarks, and later on verbally confronted her. Their confrontation escalated into a heated argument.
Escaño intervened but the two ignored her, prompting her to rush outside the aircraft to get Maria Rosario D.
Morales, the Assistant Base Manager, to pacify them.

The parties differed on what happened thereafter. Del Rosario claimed that only an animated discussion had
transpired between her and Gamboa, but Morales insisted that it was more than an animated discussion, recalling
that Del Rosario had even challenged Gamboa to a brawl (sabunutan). Morales asserted that she had tried topacify
Del Rosario and Gamboa, but the two did not stop; that because the two were still arguing although the Business
Class passengers were already boarding, she ordered them out of the plane and transfer to another nearby Northwest
aircraft; that she inquired from them about what had happened, and even asked if they were willing to fly on the
condition that they would have to stay away from each other during the entire flight; that because Del Rosario was
not willing to commit herself to do so, she decided not to allow both of them on Flight NW 26, and furnished them a
Notice of Removal from Service (effectively informing Del Rosario of her dismissal from the service pending an
investigation of the fighting incident between her and Gamboa).

On May 19, 1998, Morales sent a letter to Del Rosario telling her that Northwest would conduct an investigation of
the incident involving her and Gamboa. The investigation was held on May 28, 1998 before Atty. Ceazar Veneracion
III, Northwest’s Legal Counsel and Head of its Human Resources Department. All the parties attended the
investigation

On June 19, 1998, Del Rosario was informed of her termination from the service. Northwest stated that based on the
results of the investigation, Del Rosario and Gamboa had engaged in a fight on board the aircraft, even if there had
been no actual physical contact between them; and that because fighting was strictly prohibited by Northwest to the
point that fighting could entail dismissal from the service even if committed for the first time, Northwest considered
her dismissal from the service justified and in accordance with the Rules of Conduct for Employees, as follows:

Section 1, General

x x x. Rule infractions will be dealt with according to the seriousness of the offense and violators will be subjected
to appropriate disciplinary action up to and including discharge. Some acts of misconduct, even if committed for the
first time, are so serious that, standing alone, they justify immediate discharge. Some examples of these offenses are
violations of rules regarding theft,alcohol and drugs, insubordination, dishonesty, fighting, falsification of records,
sleeping on the job, failure to cooperate or lying in a Company investigation, intentional destruction or abuse of
property, threatening, intimidating or interfering with other employees, abuse of nonrevenue and reduced rate travel
privileges and unauthorized use of Company communications systems. x x x x

Section 24 (c), Disturbing Others, which states that:

Harassing, threatening, intimidating, assaulting, fighting or provoking a fight or similar interference with other
employees at any time, on or off duty is prohibited." (Italics supplied)

Del Rosario subsequently filed her complaint for illegal dismissal against Northwest. 2

Decision of the Labor Arbiter

In her decision dated January 18, 1999,3 Labor Arbiter Teresita D. Castillon-Lora ruled in favor of Northwest,
holding that the dismissal of Del Rosario had been justified and valid upon taking into account that Northwest had
been engaged in the airline business in which a good public image had been demanded, and in which
flightattendants had been expected to maintain an image of sweetness and amiability; that fighting among its
employees even in the form of heated arguments or discussions were very contradictory to that expected image; 4 and
that it could validly dismiss its employees like the respondent because it had been entitled to protect its business
interests by putting up an impeccable imageto the public.

Ruling of the NLRC

72
Upon appeal, the NLRC reversed the decision of the Labor Arbiter, and ruled in favor of Del Rosario, declaring that
the incident between her and Gamboa could not be considered as synonymous with fighting as the activity
prohibited by Northwest’s Rules of Conduct; that based on Black’s Law Dictionary, fightreferred to a hostile
encounter, affray, or altercation; a physical or verbal struggle for victory, pugilistic combat; that according to
Bouvier’s Law Dictionary, fighting did not necessarily imply that both parties should exchange blows, for it was
sufficient that they voluntarily put their bodies in position with that intent;5 and that the incident between Del
Rosario and Gamboa could notbe held similar to the fightthat Northwest penalized under its Rules of Conduct.

The NLRC further ratiocinated as follows:

Evident in the definition of fighting is the existence of an underlying hostility between the parties which is sointense
that there is an imminent danger of a physical conflict (if there is none yet). In other words, when we say two people
are fighting, at the very least, they should project a general appearance of wanting to physically strike each other.
Was this the image that appellant and FA Gamboaprojected when they were facing each other during the incident of
May 18, 1998[?] We do not think so.

x x x Almost unanimously, the witnesses of NWA refer to the incident as "arguing" or a "serious or animated
discussion." An argument is an effort to establish belief bya course of reasoning (Bouvier's Law Dictionary). In
ordinary parlance, arguing is merely talking or debating about a certain issue. There are nounderpinnings of
animosity in the discussion nor (sic) between the parties. These witnesses never saw any hostility between the
appellant and FA Gamboa. Neither did they see these two ladies wanting to strike each other. What they saw were
two FAs engaged in an animated verbal exchange, arguing but not fighting.6

The NLRC ordered the reinstatement of Del Rosario to her former position without loss of seniority rights and with
payment of backwages, per diems, other lost income and benefitsfrom June 19, 1998; as well as the payment of
attorney’s fees equivalent to 10% of the monetary award.

Decision of the CA

Aggrieved, Northwest elevated the adverse decision of the NLRC to the CA on certiorari, averring that the NLRC
thereby committed grave abuse of discretion in reversing the decision of the Labor Arbiter, and submitting that Del
Rosario’s dismissal from the service had been for a just cause, with the evidence presented against her being more
than sufficient to substantiate its position that there had really been a fight between her and Gamboa; and that the
NLRC likewise gravely abused its discretion in ordering the reinstatement of Del Rosario and the payment of her
backwages and attorney’s fees.

As stated, the CA sustained the NLRC through its decision promulgated on June 21, 2002, observing that Northwest
did not discharge its burden to prove not merely reversible error but grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the NLRC; and that, indeed, the NLRC had correctly held that Del Rosario’s
conduct did not constitute serious misconduct, because the NLRC, in determining the usual, ordinary and commonly
understood meaning of the word fighting, had resorted to authoritative lexicons that supported its conclusion that the
exchange of words between Del Rosario and Gamboadid not come within the definition of the word fighting.7

The CA disposed thusly:

WHEREFORE, for lack of merit, the instant petition is DISMISSED. Accordingly, the decision ofthe NLRC dated
January 11, 2000, is hereby AFFIRMEDwith the MODIFICATIONthat in lieu of reinstatement, petitioner is ordered
to pay private respondent separation pay equivalent to one month's salary for every year of service plus full
backwages without deduction or qualification, counted from the date of dismissal until finality of this decision
including other benefits to which she is entitled under the law. Petitioner is likewise ordered to pay respondent Del
Rosario attorney’s feesconsisting of five(5%) per cent of the adjudged relief.

SO ORDERED.8

Issues

The issues are the following, namely: (1) Was Del Rosario’s dismissal from the service valid?; and (2) Were the
monetary awards appropriate?

Ruling

The Court AFFIRMSthe decision of the CA.

As provided in Article 282 of the Labor Code, an employer may terminate an employee for a just cause, to wit:

73
Art. 282. TERMINATION BY EMPLOYER

An employer may terminate an employee for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

Northwest argues that Del Rosario was dismissed on the grounds of serious misconduct and willful disobedience.
Misconduct refers to the improper or wrong conduct that transgresses 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.
But misconduct or improper behavior, to be a just cause for termination of employment, must: (a) be serious; (b)
relate to the performance ofthe employee’s duties; and (c) show that the employee has become unfit to continue
working for the employer.9

There is no doubt that the last two elements of misconduct were present in the case of Del Rosario. The cause of her
dismissal related to the performance of her duties as a flightattendant, and she became unfit to continue working for
Northwest. Remaining to be determined is, therefore, whether the misconduct was serious as tomerit Del Rosario’s
dismissal. In that respect, the fightbetween her and Gamboa should beso seriousthat it entailed the termination of her
employment even if it was her first offense. Northwest insists that what transpired on May 18, 1998 between her and
Gamboa was obviously a form of fightthat it strictly prohibited, but Del Rosario disputes this by contending thatit
was only an animated discussion between her and Gamboa. She argues that as settled in American jurisprudence
fightpertained to combat or battle, like the hostile encounter or engagement between opposing forces, suggesting
primarily the notion of a brawl or unpremeditated encounter, or of a pugilistic combat;10while argumentwas a
connected discourse based upon reason, or a course of reasoning tending and intended to establish a position and to
induce belief.11

In several rulings where the meaning of fightwas decisive, the Court has observed that the term fightwas considered
to be different from the term argument. In People v. Asto,12 for instance, the Court characterized fightas not just a
merely verbal tussle but a physical combat between two opposing parties, to wit:

Well into their second bottle of gin, at about eleven o'clock that morning, Fernando Aquino and Peregrino had a
verbal tussle.1âwphi1 Fernando Aquino declared that he was going to run for councilor of Alcala, Pangasinan.
Peregrino countered by saying: "If you will run for that post, cousin, I will fight you." After a brief exchange of
words, Fernando Aquino, laughing, went to sit beside Abagat. As Aquino continued with his mirth, Abagat stared at
Peregrino with contempt.

xxx. A few minutes later, he heard a commotion in the plantation some two hundred meters away.1âwphi1 He claims
to have seen several people fightingeach other with pieces of wood butdid not go to the field to check what was
happening.13 (Italics supplied.)

Similarly, in Pilares, Sr. v. People,14 fightwas held to be more than just an exchange of words that usually succeeded
the provocation by either party, thus:

When the petitioner was about to hand over the bottles of beer to the private complainant, the latter called him
"coward" and dared him to get out for a fight. Insulted, the petitioner went out of his store and chased the private
complainant. (Italics supplied.)

Based on the foregoing, the incident involving Del Rosario and Gamboa could not be justly considered as akin to the
fightcontemplated by Northwest. In the eyes of the NLRC, Del Rosario and Gamboa were arguing but not fighting.
The understanding of fight as one that required physical combat was absent during the incident of May 18, 1998.
Moreover, the claim of Morales that Del Rosario challenged Gamboa to a brawl (sabunutan) could not be given
credence by virtue of its being self-serving in favor of Northwest, and of its being an apparent afterthought on the
part of Morales during the investigation of the incident, without Del Rosario having the opportunity to contest
Morales' statement. In that context, the investigation then served only as Northwest's means to establish that the
grounds of a valid dismissal based on serious misconduct really existed.
74
Moreover, even assuming arguendo that the incident was the kind of fight prohibited by Northwest's Rules of
Conduct, the same could not be considered as of such seriousness as to warrant Del Rosario's dismissal from the
service. The gravity of the fight, which was not more than a verbal argument between them, was not enough to
tarnish or diminish Northwest's public image.

Under the circumstances, therefore, the CA properly ruled that the NLRC did not gravely abuse its discretion
amounting to lack or excess of jurisdiction by declaring Del Rosario's dismissal unjustified. Northwest as the
petitioner for certiorari must demonstrate grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the NLRC. Grave abuse of discretion, according to De las Santos v. Metropolitan Bank and Trust
Company,15"must be grave, which means either that the judicial or quasi-judicial power was exercised in an arbitrary
or despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded
a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when
such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner
as to be equivalent to lack of jurisdiction." Alas, Northwest did not show how the NLRC could have abused its
discretion, let alone gravely, in ruling adversely against it.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on June 21, 2002; and
ORDERS the petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

[G.R. No. 137795. March 26, 2003]

COLEGIO DE SAN JUAN DE LETRAN CALAMBA, petitioner, vs. BELEN P. VILLAS, respondent.

DECISION
CORONA, J.:
This is a petition for review on certiorari of the decision[1] of the former Eleventh Division [2] of the Court of
Appeals affirming the decision[3] of Voluntary Arbitrator (VA) Apolonio S. Mayuga that respondent Belen P. Villas
was illegally dismissed by petitioner Colegio de San Juan de Letran (School) and thus, entitled to reinstatement and
full backwages.
The antecedent facts show that respondent Belen Villas was employed by the petitioner School as high school
teacher in September 1985. On May 15, 1995, she applied for a study leave for six months, from June to December
31, 1995. In a letter dated June 2, 1995, Mrs. Angelina Quiatchon, principal of the high school department, told
Villas that her request for study leave was granted for one school year subject to the following conditions:

1. The requested study leave takes effect on June 5, 1995 and ends on March 31, 1996;

2. The requested study leave involves no remuneration on the part of the School;

3. The documents that justify the requested study leave should be submitted upon return on April 1, 1996;

4. Faculty Manual Section 40 Special Provisions on the Granting of Leave of Absence should be
observed:

a. Once proven beyond reasonable doubt during the period of the approved leave of absence that the
faculty member shall engage himself in employment outside the institution, the administration
shall regard the faculty member on leave as resigned;

b. The maximum length of leave of absence that may be applied for by the faculty member and
granted by administration is twelve (12) months. If, at the lapse of the period, the faculty
member fails to return for work, the administration shall regard the faculty member as resigned.
[4]

Respondent alleged that she intended to utilize the first semester of her study leave to finish her masteral
degree at the Philippine Womens University (PWU). Unfortunately, it did not push through so she took up an Old
Testament course in a school of religion and at the same time utilized her free hours selling insurance and cookware
75
to augment her familys income. However, during the second semester of her study leave, she studied and passed 12
units of education subjects at the Golden Gate Colleges in Batangas City. In response to the letters sent her by
petitioner to justify her study leave, she submitted a certification from Golden Gate Colleges and a letter explaining
why she took up an Old Testament course instead of enrolling in her masteral class during the first semester.
On June 3, 1996, the President and Rector of the School, Fr. Ramonclaro G. Mendez, O. P., wrote her, stating
that her failure to enroll during the first semester was a violation of the conditions of the study leave and that the
reasons she advanced for failure to enroll during the first semester were not acceptable, thus:

In the first place, prudence dictates that you should have ascertained first that you are still eligible to study at PWU
to finish your masteral degree before applying and securing the approval of your leave by the School. In the second
place, you should have informed the School at once that you could not enroll in the first semester so that your leave
could have been adjusted for only one-half (1/2) year. Thirdly, your engaging in some part-time business instead of
studying in the first semester of your leave is sufficient justification for the School to consider you as resigned under
the Faculty Manual. And lastly, your failure to study in the first semester of your study leave without informing the
School beforehand constitutes deception, to say the least, which is not a good example to the other teachers. [5]
Her case was subsequently referred to the grievance committee, as provided for in the collective bargaining
agreement, and the report was submitted on July 12, 1996, both to the union and the School. However, since the
grievance committee could not reach a decision, the case was referred for voluntary arbitration.
Respondent then filed a case for illegal dismissal and the case was assigned to VA Mayuga who found that
respondent was illegally dismissed, thus:

WHEREFORE premises considered, we rule that complainant Mrs. BELEN P. VILLAS was illegally dismissed
from her employment by respondent, and as prayed for, respondent COLEGIO DE SAN JUAN DE LETRAN-
CALAMBA is hereby ordered to reinstate Mrs. Belen P. Villas to her former position or job in said school without
loss of seniority and with full backwages and other monetary benefits effective the start of school year 1996-1997 up
to the time she is reinstated.[6]
Upon denial of its motion for reconsideration, petitioner filed a petition for review with the Court of Appeals.
This was denied. Thus, this petition for review. The sole issue is whether or not respondents alleged violation of the
conditions of the study grant constituted serious misconduct which justified her termination from petitioner School.
Petitioner alleges that the dismissal of respondent was lawful inasmuch as (a) the requirements of due process
were followed and (b) she not only violated several lawful regulations but also breached her contractual obligations
to the School. All this constituted a valid ground for her dismissal. In assailing the decision of the Court of Appeals,
petitioner School basically questions the court a quos findings of fact on respondents alleged violation of petitioner
Schools policy on study leave grants.
The petition has no merit.
Under the Labor Code, there are twin requirements to justify a valid dismissal from employment: (a) the
dismissal must be for any of the causes provided in Article 282 of the Labor Code (substantive aspect) and (b) the
employee must be given an opportunity to be heard and to defend himself (procedural aspect). [7] The procedural
aspect requires that the employee be given two written notices before she is terminated consisting of a notice which
apprises the employee of the particular acts/omissions for which the dismissal is sought and the subsequent notice
which informs the employee of the employers decision to dismiss him.[8]
In the case at bar, the requirements for both substantive and procedural aspects were not satisfied.
According to petitioner, respondent violated the following conditions of her study leave: (a) she failed to report
for work on April 1, 1996, the day after the lapse of her leave period, which was violative of Section 40 of the
Faculty Manual; (b) she failed to submit proof of her studies during the first semester of her leave period, suggesting
that she was not enrolled during this period; and (c) she engaged in employment outside the School. In sum,
petitioner School argues that the conduct of respondent breached not only the provisions of the study grant (which
was a contractual obligation) but also the Faculty Manual. Respondent was thus guilty of serious misconduct which
was a ground for termination.
We affirm the findings of the Court of Appeals that there was no violation of the conditions of the study leave
grant. Thus, respondent could not be charged with serious misconduct warranting her dismissal as a teacher in
petitioner School. Petitioner has failed to convince us that the three alleged violations of the study leave grant
constituted serious misconduct which justified the termination of respondents employment.
Misconduct is improper or wrongful conduct. It is the transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of
judgment.[9] Under Article 282 of the Labor Code, the misconduct, to be a just cause for termination, must be
serious. This implies that it must be of such grave and aggravated character and not merely trivial or unimportant.
[10]
Examples of serious misconduct justifying termination, as held in some of our decisions, include: sexual
harassment (the managers act of fondling the hands, massaging the shoulder and caressing the nape of a secretary);
[11]
fighting within company premises;[12] uttering obscene, insulting or offensive words against a superior;

76
[13]
misrepresenting that a student is his nephew and pressuring and intimidating a co-teacher to change that students
failing grade to passing.[14]
In this light, the alleged infractions of the respondent could hardly be considered serious misconduct.
With regard to respondents alleged failure to report for work on April 1, 1996 and failure to enroll during the
first semester, the Court of Appeals and the Voluntary Arbitrator found that she did in fact report for work on April 1,
1996 and that she was in fact enrolled during the first semester. Wellsettled is the rule that the factual findings of the
Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. And they carry even
more weight when the Court of Appeals affirms the factual findings of a lower fact-finding body, in this case the
Voluntary Arbitrator.[15] Likewise, findings of fact of administrative agencies and quasi-judicial bodies which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only great
respect but even finality. They are binding upon this Court unless there is a showing of grave abuse of discretion or
where it is clearly shown that they were arrived at arbitrarily or in utter disregard of the evidence on record. [16]
Assuming arguendo that she did fail to report for work on April 1, 1996 and enroll during the first semester, the
most respondent could be charged with was simple misconduct. In both instances, there was evidence of substantial
compliance by respondent.
Her alleged failure to report for work exactly on April 1, 1996 is not equivalent to failure to return for work, a
sanctionable offense under the Faculty Manual. As correctly pointed out by the VA, petitioner failed to establish that
there was a distinct and definite assignment that needed to be done personally by respondent, and specifically on
April 1, 1996, which she failed to do on said date. Although we give credence to petitionersargument that a private
high school teacher still has work at the end of the schoolyear to assist in the graduation preparations and in the
beginning of the school year to assist in the enrollment such tasks cannot be considered a teachers main duties, the
failure to perform which would be tantamount to dereliction of duty or abandonment. Besides, there is no
disagreement that respondent reported for work on May 15, 1996 at which time petitioner School could have asked
her to assist in the enrollment period. At most, respondent failed to help out during the preparations for graduation
and this, to us, was not a significant reason for terminating or dismissing her from her job.
With regard to her alleged failure to enroll during the first semester, although we agree with the President and
Rector, Fr. Mendez, that respondent should have first ascertained whether she was still eligible to study at the PWU
before applying for a study leave,[17] such lapse was more of an error in judgment rather than an act of serious
misconduct. If respondent intended to use her study leave for other unauthorized purposes, as petitioner would like
us to believe, she would not have enrolled at the Golden Gate Colleges during the second semester. Yet she did, as
borne out by the certification[18] prepared by the Registrar of Golden Gate Colleges.
Furthermore, we find that respondent did not violate the prohibition on engaging in employment outside the
school as specified in her study leave grant and as provided in the Faculty Manual. Section 40 (a) of the
Manual[19] states:

a. Once proven beyond reasonable doubt during the period of the approved leave of absence that the faculty member
shall engage himself in employment outside the institution, the administration shall regard the faculty member on
leave resigned. (Emphasis supplied)
We find the provision of the Faculty Manual ambiguous as the term employment connotes a number of meanings.
Employment in its general sense connotes any work or service rendered in exchange for money. The loose
connotation of employment may therefore cover jobs without an employer-employee relationship. However,
inasmuch as in this case, petitioner School drafted the said policy, the term employment should be strictly construed
against it.[20] Moreover, it is a settled rule that in controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and writings should be resolved in the formers
favor.[21] The act of respondent in selling insurance and cookware was not the employment prohibited by the Faculty
Manual. The prohibition against outside employment was enacted to prevent the teacher from using the study leave
period for unsanctioned purposes since the School pays the teacher while pursuing further studies. That rationale
was not violated by respondent for the reason that her part-time activity of selling insurance and cookware could not
have prevented her in any way from studying and, more importantly, she was not being paid by the School while on
leave. How did the school expect her and her family to survive without any income for one whole year?
Petitioner also failed to comply with the procedural requirements for a valid dismissal. As earlier noted, the law
requires the employer to give the worker to be dismissed two written notices before terminating his
employment. Considering that these notices are mandatory, the absence of one renders any management decision to
terminate null and void. Petitioner failed to give respondent the first notice which should have informed the latter of
the formers intention to dismiss her. Petitioner argues that it complied with this requirement as there were several
exchanges of communication between the School and respondent regarding the cause of her termination. However,
we find that these letters did not apprise respondent that her dismissal was being sought by petitioner School as said
letters only required respondent to submit proof of enrollment. The letter of Principal Angelina Q. Quiatchon dated
April 17, 1996[22] was worded as follows:

In accordance with the terms of your study leave from June 5, 1995 to March 31, 1996, you must submit
credentials/proofs of your study to justify the approved leave.

77
To this date, April 17, this office has not received your credentials. Please do so within the next three days from
receipt hereof so that this office can act accordingly.
Similarly, the May 10, 1996 letter[23] of the Academic Affairs Director, Dr. Rhodora G. Odejar, was worded thus:

The Academic Affairs Office has received your certification of graduate studies completed in the second semester of
Schoolyear 1995-1996. However, there is no report as to how you utilized your leave in the first semester. You are
therefore instructed to submit your report on the matter within three days from receipt hereof.
The next letter from the petitioner, dated June 3, 1996, already informed respondent that she was considered
resigned effective schoolyear 1996-1997.
These letters did not comply with the requirements of the law that the first written notice must apprise the
employee that his termination is being considered due to a certain act or omission. These letters merely required
petitioner to submit proof of her studies and respondent could not have reasonably inferred from them that her
dismissal was being considered by the petitioner. The fact that there was a hearing conducted by the grievance
committee pursuant to the collective bargaining agreement did not work in petitioners favor because this was
done after petitioner had informed respondent that she was already considered resigned from her teaching job.
Besides, the rights of an employee to be informed of his proposed dismissal are personal to him [24] and, therefore, the
notice to the union was not notice to the employee.
With regard to the respondents claim for the six-month study leave and vacation pay, we affirm the
decision[25] of the Voluntary Arbitrator that respondent is not entitled to such benefits:

While it is true that the collective bargaining agreement between respondent and complainants union provides for
six months pay for qualified teachers who will go on sabbatical or study leave, the same was expressly waived by
complainant when she signed conforme to the letter dated June 2, 1995 approving her study leave which states
among others, to wit: 2. The requested study leave involves no remuneration on the part of the school. And
considering that her leave of absence for the whole school year 1995-1996 was presumed to be a leave of absence
without pay, then she did not earn her vacation leave incentive for the next coming summer. We find it just, fair and
reasonable to grant vacation pay on April and May of every calendar as additional incentive only to those teachers
who rendered continuous service to the Collegio the preceding school year.
We similarly affirm the Voluntary Arbitrators decision that respondent is not entitled to moral and exemplary
damages and attorneys fees because there is no evidence showing that bad faith or malice attended the dismissal of
respondent. Moral damages are recoverable only where the dismissal is attended by bad faith or fraud, or constitutes
an act oppressive to labor, or is done in a manner contrary to morals, good customs or public policy. A dismissal may
be contrary to law but, by itself alone, it does not necessarily establish bad faith.[26]
WHEREFORE, the petition is DENIED.
SO ORDERED.
Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

G.R. No. 187226 January 28, 2015

CHERYLL SANTOS LEUS, Petitioner,

vs.
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, Respondents.

DECISION

REYES, J.:

Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove (SSCW), a Catholic educational
institution, as a non-teaching personnel, engaged in pre-marital sexual relations, got pregnant out of wedlock,
married the father of her child, and was dismissed by SSCW, in that order. The question that has to be resolved is
whether the petitioner's conduct constitutes a ground for her dismissal.

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision1 dated September 24, 2008 and Resolution2 dated March 2, 2009 issued by the Court of Appeals
(CA) in CA-G.R. SP No. 100188, which affirmed the Resolutions dated February 28, 20073 and May 21, 20074 of
the National Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.

The Facts

SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001, SSCW hired the petitioner
as an Assistant to SSCW’s Director of the Lay Apostolate and Community Outreach Directorate.

78
Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock. When SSCW learned of the
petitioner’s pregnancy, Sr. Edna Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to file a resignation
letter effective June 1, 2003. In response, the petitioner informed Sr. Quiambao that she would not resign from her
employment just because she got pregnant without the benefit of marriage. 5

On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing why she should not be
dismissed for engaging in pre-marital sexual relations and getting pregnant as a result thereof, which amounts to
serious misconduct and conduct unbecoming of an employee of a Catholic school.6

In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of wedlock does not amount to
serious misconduct or conduct unbecoming of an employee. She averred that she is unaware of any school policy
stating that being pregnant out of wedlock is considered as a serious misconduct and, thus, a ground for dismissal.
Further, the petitioner requested a copy of SSCW’s policy and guidelines so that she may better respond to the
charge against her. On June 2, 2003, Sr. Quiambao informed the petitioner that, pending the promulgation of a
"Support Staff Handbook," SSCW follows the 1992 Manual of Regulations for Private Schools (1992 MRPS) on the
causes for termination of employments; that Section 94(e) of the 1992 MRPS cites "disgraceful or immoral conduct"
as a ground for dismissal in addition to the just causes for termination of employment provided under Article 282 of
the Labor Code.8

On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in part, reads:

To us, pre-marital sex between two consenting adults without legal impediment to marry each other who later on
married each other does not fall within the contemplation of "disgraceful or immoral conduct" and "serious
misconduct" of the Manual of Regulations for Private Schools and the Labor Code of the Philippines.

Your argument that what happened to our client would set a bad example to the students and other employees of
your school is speculative and is more imaginary than real. To dismiss her on that sole ground constitutes grave
abuse of management prerogatives.

Considering her untarnished service for two years, dismissing her with her present condition would also mean
depriving her to be more secure in terms of financial capacity to sustain maternal needs. 10

In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that pre-marital sexual relations, evenif between
two consenting adults without legal impediment to marry, is considered a disgraceful and immoral conduct or a
serious misconduct, which are grounds for the termination of employment under the 1992 MRPS and the Labor
Code. That SSCW, as a Catholic institution of learning, has the right to uphold the teaching of the Catholic Church
and expect its employees to abide by the same. They further asserted that the petitioner’s indiscretion is further
aggravated by the fact that she is the Assistant to the Director of the Lay Apostolate and Community Outreach
Directorate, a position of responsibility that the students look up to as rolemodel. The petitioner was again directed
to submit a written explanation on why she should not be dismissed.

On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsel’s letter dated June 4, 2003 as her
written explanation.12

Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the petitioner that her employment with
SSCW is terminated on the ground of serious misconduct. She stressed that pre-marital sexual relations between two
consenting adults with no impediment to marry, even if they subsequently married, amounts to immoral conduct.
She further pointed out that SSCW finds unacceptable the scandal brought about by the petitioner’s pregnancy out of
wedlock as it ran counter to the moral principles that SSCW stands for and teaches its students.

Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC
in Quezon City against SSCW and Sr. Quiambao (respondents). In her position paper, 14 the petitioner claimed that
SSCW gravely abused its management prerogative as there was no just cause for her dismissal. She maintained that
her pregnancy out of wedlock cannot be considered as serious misconduct since the same is a purely private affair
and not connected in any way with her duties as an employee of SSCW. Further, the petitioner averred that she and
her boyfriend eventually got married even prior to her dismissal.

For their part, SSCW claimed that there was just cause to terminate the petitioner’s employment with SSCW and
that the same is a valid exercise of SSCW’s management prerogative. They maintained that engaging in pre-marital
sex, and getting pregnant as a result thereof, amounts to a disgraceful or immoral conduct, which is a ground for the
dismissal of an employee under the 1992 MRPS.

They pointed out that SSCW is a Catholic educational institution, which caters exclusively to young girls; that
SSCW would lose its credibility if it would maintain employees who do not live up to the values and teachings it

79
inculcates to its students. SSCW further asserted that the petitioner, being an employee of a Catholic educational
institution, should have strived to maintain the honor, dignity and reputation of SSCW as a Catholic school. 15

The Ruling of the Labor Arbiter

On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case No. 6-17657-03-C which
dismissed the complaint filed by the petitioner. The LA found that there was a valid ground for the petitioner’s
dismissal; that her pregnancy out of wedlock is considered as a "disgraceful and immoral conduct." The LA pointed
out that, as an employee of a Catholic educational institution, the petitioner is expected to live up to the Catholic
values taught by SSCW to its students. Likewise, the LA opined that:

Further, a deep analysis of the facts would lead us to disagree with the complainant that she was dismissed simply
because she violate[d] a Catholic [teaching]. It should not be taken in isolation but rather it should be analyzed in the
lightof the surrounding circumstances as a whole. We must also take into [consideration] the nature of her work and
the nature of her employer-school. For us, it is not just an ordinary violation. It was committed by the complainant in
an environment where her strict adherence to the same is called for and where the reputation of the school is at
stake. x x x.17

The LA further held that teachers and school employees, both in their official and personal conduct, must display
exemplary behavior and act in a manner that is beyond reproach.

The petitioner appealed to the NLRC, insisting that there was no valid ground for the termination of her
employment. She maintained that her pregnancy out of wedlock cannot be considered as "serious misconduct" under
Article 282 of the Labor Code since the same was not of such a grave and aggravated character. She asserted that
SSCW did not present any evidence to establish that her pregnancy out of wedlock indeed eroded the moral
principles that it teaches its students.18

The Ruling of the NLRC

On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA Decision dated February 28, 2006.
The NLRC pointed out that the termination of the employment of the personnel of private schools is governed by the
1992 MRPS; that Section 94(e) thereof cites "disgraceful or immoral conduct" as a just cause for dismissal, in
addition to the grounds for termination of employment provided for under Article 282 of the Labor Code. The
NLRC held that the petitioner’s pregnancy out of wedlock is a "disgraceful or immoral conduct" within the
contemplation of Section 94(e) of the 1992 MRPS and, thus, SSCW had a valid reason to terminate her employment.

The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but it was denied by the NLRC in
its Resolution21 dated May 21, 2007.

Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the NLRC gravely abused its
discretion in ruling that there was a valid ground for her dismissal. She maintained that pregnancy out of wedlock
cannot be considered as a disgraceful or immoral conduct; that SSCW failed to prove that its students were indeed
gravely scandalized by her pregnancy out of wedlock. She likewise asserted that the NLRC erred in applying
Section 94(e) of the 1992 MRPS.

The Ruling of the CA

On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied the petition for certiorari filed
by the petitioner. The CA held that it is the provisions of the 1992 MRPS and not the Labor Code which governs the
termination of employment of teaching and non-teaching personnel of private schools, explaining that:

It is a principle of statutory construction that where there are two statutes that apply to a particular case, that which
was specially intended for the said case must prevail. Petitioner was employed by respondent private Catholic
institution which undeniably follows the precepts or norms of conduct set forth by the Catholic Church.
Accordingly, the Manual of Regulations for Private Schools followed by it must prevail over the Labor Code, a
general statute. The Manual constitutes the private schools’ Implementing Rules and Regulations of Batas Pambansa
Blg. 232 or the Education Act of 1982. x x x.24

The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s management prerogative to
discipline and impose penalties on erring employees pursuant toits policies, rules and regulations. The CA upheld
the NLRC’s conclusion that the petitioner’s pregnancy out of wedlock is considered as a "disgraceful and immoral
conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992 MRPS. The CA likewise opined that the
petitioner’s pregnancy out of wedlock is scandalous per segiven the work environment and social milieu that she
was in, viz:

80
Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of the Labor Code,
"disgraceful and immoral conduct" is a basis for termination of employment.

xxxx

Petitioner contends that her pre-marital sexual relations with her boyfriend and her pregnancy prior to marriage was
not disgraceful or immoral conduct sufficient for her dismissal because she was not a member of the school’s faculty
and there is no evidence that her pregnancy scandalized the school community.

We are not persuaded. Petitioner’s pregnancy prior to marriage is scandalous in itself given the work environment
and social milieu she was in. Respondent school for young ladies precisely seeks to prevent its students from
situations like this, inculcating in them strict moral values and standards. Being part of the institution,
petitioner’sprivate and public life could not be separated. Her admitted pre-marital sexual relations was a violation
of private respondent’s prescribed standards of conduct that views pre-marital sex as immoral because sex between a
man and a woman must only take place within the bounds of marriage.

Finally, petitioner’s dismissal is a valid exercise of the employer-school’s management prerogative to discipline and
impose penalties on erring employees pursuant to its policies, rules and regulations. x x x.25 (Citations omitted)

The petitioner moved for reconsideration26 but it was denied by the CA in its Resolution27 dated March 2, 2009.

Hence, the instant petition.

Issues

Essentially, the issues set forth by the petitioner for this Court’s decision are the following: first, whether the CA
committed reversible error in ruling that it is the 1992 MRPS and not the Labor Code that governs the termination of
employment of teaching and non-teaching personnel of private schools; and second, whether the
petitioner’spregnancy out of wedlock constitutes a valid ground to terminate her employment.

The Ruling of the Court

The Court grants the petition.

First Issue: Applicability of the 1992 MRPS

The petitioner contends that the CA, in ruling that there was a valid ground to dismiss her, erred in applying Section
94 of the 1992 MRPS. Essentially, she claims that the 1992 MRPS was issued by the Secretary of Education as the
revised implementing rules and regulations of Batas Pambansa Bilang 232 (BP 232) or the "Education Act of 1982."
That there is no provision in BP 232, which provides for the grounds for the termination of employment of teaching
and non-teaching personnel of private schools. Thus, Section 94 of the 1992 MRPS, which provides for the causes
of terminating an employment, isinvalid as it "widened the scope and coverage" of BP 232.

The Court does not agree.

The Court notes that the argument against the validity of the 1992 MRPS, specifically Section 94 thereof, is raised
by the petitioner for the first time in the instant petition for review. Nowhere in the proceedings before the LA, the
NLRC or the CA did the petitioner assail the validity of the provisions of the 1992 MRPS.

"It is well established that issues raised for the first time on appeal and not raised in the proceedings in the lower
court are barred by estoppel. Points of law, theories, issues, and arguments not brought to the attention of the trial
court ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal. To
consider the alleged facts and arguments belatedly raised would amount to trampling on the basic principles of fair
play, justice, and due process."28

In any case, even if the Court were to disregard the petitioner’s belated claim of the invalidity of the 1992 MRPS,
the Court still finds the same untenable.

The 1992 MRPS, the regulation in force at the time of the instant controversy, was issued by the Secretary of
Education pursuant to BP 232. Section 7029 of BP 232 vests the Secretary of Education with the authority to issue
rules and regulations to implement the provisions of BP 232. Concomitantly, Section 5730 specifically empowers the
Department of Education to promulgate rules and regulations necessary for the administration, supervision and
regulation of the educational system in accordance with the declared policy of BP 232.

81
The qualifications of teaching and non-teaching personnel of private schools, as well as the causes for the
termination of their employment, are an integral aspect of the educational system of private schools. Indubitably,
ensuring that the teaching and non-teaching personnel of private schools are not only qualified, but competent and
efficient as well goes hand in hand with the declared objective of BP 232 – establishing and maintaining relevant
quality education.31 It is thus within the authority of the Secretary of Education to issue a rule, which provides for
the dismissal of teaching and non-teaching personnel of private schools based on their incompetence, inefficiency, or
some other disqualification.

Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to "prescribe and impose such
administrative sanction as he may deem reasonable and appropriate in the implementing rules and regulations" for
the "[g]ross inefficiency of the teaching or non-teaching personnel" of private schools.32 Accordingly, contrary to the
petitioner’s claim, the Court sees no reason to invalidate the provisions of the 1992 MRPS, specifically Section 94
thereof. Second Issue: Validity of the Petitioner’s Dismissal

The validity of the petitioner’s dismissal hinges on the determination of whether pregnancy out of wedlock by an
employee of a catholic educational institution is a cause for the termination of her employment.

In resolving the foregoing question,the Court will assess the matter from a strictly neutral and secular point of view
– the relationship between SSCW as employer and the petitioner as an employee, the causes provided for by law in
the termination of suchrelationship, and the evidence on record. The ground cited for the petitioner’s dismissal, i.e.,
pre-marital sexual relations and, consequently, pregnancy outof wedlock, will be assessed as to whether the same
constitutes a valid ground for dismissal pursuant to Section 94(e) of the 1992 MRPS.

The standard of review in a Rule 45

petition from the CA decision in
labor cases.

In a petition for review under Rule 45 of the Rules of Court, such as the instant petition, where the CA’s disposition
in a labor case is sought to be calibrated, the Court’s review isquite limited. In ruling for legal correctness, the Court
has to view the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; the
Court has to examine the CA decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the
merits of the case was correct.33

The phrase "grave abuse of discretion" is well-defined in the Court’s jurisprudence. It exists where an act of a court
or tribunal is performed with a capricious or whimsical exercise ofjudgment equivalent to lack of jurisdiction. 34 The
determination of the presence or absence of grave abuse of discretion does not include an inquiry into the
correctness of the evaluation of evidence, which was the basis of the labor agency in reaching its conclusion. 35

Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the correctness of the evaluation
of evidence (that was the basis of the labor tribunals in determining their conclusion), the incorrectness of its
evidentiary evaluation should not result in negating the requirement of substantial evidence. Indeed, when there is a
showing that the findings or conclusions, drawn from the same pieces of evidence, were arrived at arbitrarily or in
disregard of the evidence on record, they may be reviewed by the courts. In particular, the CA can grant the petition
for certiorariif it finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by
substantial evidence. A decision that is not supported by substantial evidence is definitely a decision tainted with
grave abuse of discretion.36

The labor tribunals’ respective

conclusions that the petitioner’s
pregnancy is a "disgraceful or
immoral conduct" were arrived at
arbitrarily.

The CA and the labor tribunals affirmed the validity of the petitioner’s dismissal pursuant to Section 94(e) of the
1992 MRPS, which provides that:

Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated in the Labor Code, the
employment of school personnel, including faculty, may be terminated for any of the following causes:

xxxx

e. Disgraceful or immoral conduct;

xxxx
82
The labor tribunals concluded that the petitioner’s pregnancy out of wedlock, per se, is "disgraceful and
immoral"considering that she is employed in a Catholic educational institution. In arriving at such conclusion, the
labor tribunals merely assessed the fact of the petitioner’s pregnancy vis-à-visthe totality of the circumstances
surrounding the same.

However, the Court finds no substantial evidence to support the aforementioned conclusion arrived at by the labor
tribunals. The fact of the petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the
petitioner’s conduct as disgraceful or immoral. There must be substantial evidence to establish that pre-marital
sexual relations and, consequently, pregnancy outof wedlock, are indeed considered disgraceful or immoral.

The totality of the circumstances

surrounding the conduct alleged to
be disgraceful or immoral must be
assessed against the prevailing
norms of conduct.

In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the circumstances of each particular case
must be holistically considered and evaluated in light of the prevailing norms of conductand applicable
laws.38Otherwise stated, it is not the totality of the circumstances surrounding the conduct per se that determines
whether the same is disgraceful or immoral, but the conduct that is generally accepted by society as respectable or
moral. If the conduct does not conform to what society generally views as respectable or moral, then the conduct is
considered as disgraceful or immoral. Tersely put, substantial evidence must be presented, which would establish
that a particular conduct, viewed in light of the prevailing norms of conduct, is considered disgraceful or immoral.

Thus, the determination of whether a conduct is disgraceful or immoral involves a two-step process: first, a
consideration of the totality of the circumstances surrounding the conduct; and second, an assessment of the said
circumstances vis-à-visthe prevailing norms of conduct, i.e., what the society generally considers moral and
respectable.

That the petitioner was employed by a Catholic educational institution per se does not absolutely determine whether
her pregnancy out of wedlock is disgraceful or immoral. There is still a necessity to determine whether the
petitioner’s pregnancy out of wedlock is considered disgraceful or immoral in accordance with the prevailing norms
of conduct.

Public and secular morality should

determine the prevailing norms of
conduct, not religious morality.

However, determining what the prevailing norms of conduct are considered disgraceful or immoral is not an easy
task. An individual’s perception of what is moral or respectable is a confluence of a myriad of influences, such as
religion, family, social status, and a cacophony of others. In this regard, the Court’s ratiocination in Estrada v.
Escritor39 is instructive.

In Estrada, an administrative case against a court interpreter charged with disgraceful and immoral conduct, the
Court stressed that in determining whether a particular conduct can be considered as disgraceful and immoral, the
distinction between public and secular morality on the one hand, and religious morality, on the other, should be kept
in mind.40 That the distinction between public and secular morality and religious morality is important because the
jurisdiction of the Court extends only to public and secular morality. 41 The Court further explained that:

The morality referred to in the law is public and necessarily secular, not religiousx x x. "Religious teachings as
expressed in public debate may influence the civil public order but public moral disputes may be resolved only on
grounds articulable in secular terms." Otherwise, if government relies upon religious beliefs in formulating public
policies and morals, the resulting policies and morals would require conformity to what some might regard as
religious programs or agenda.The non-believers would therefore be compelled to conform to a standard of conduct
buttressed by a religious belief, i.e., to a "compelled religion," anathema to religious freedom. Likewise, if
government based its actions upon religious beliefs, it would tacitly approve or endorse that belief and thereby also
tacitly disapprove contrary religious or non-religious views that would not support the policy. As a result,
government will not provide full religious freedom for all its citizens, or even make it appear that those whose
beliefs are disapproved are second-class citizens. Expansive religious freedom therefore requires that government be
neutral in matters of religion; governmental reliance upon religious justification is inconsistent with this policy of
neutrality.

In other words, government action, including its proscription of immorality as expressed in criminal law like
concubinage, must have a secular purpose. That is, the government proscribes this conduct because it is "detrimental
(or dangerous) to those conditions upon which depend the existence and progress of human society" and not because
the conduct is proscribed by the beliefs of one religion or the other. Although admittedly, moral judgments based on
83
religion might have a compelling influence on those engaged in public deliberations over what actions would be
considered a moral disapprobation punishable by law. After all, they might also be adherents of a religion and thus
have religious opinions and moral codes with a compelling influence on them; the human mind endeavors to
regulate the temporal and spiritual institutions of society in a uniform manner, harmonizing earth with heaven.
Succinctly put, a law could be religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an
articulable and discernible secular purpose and justification to pass scrutiny of the religion clauses.x x x. 42(Citations
omitted and emphases ours)

Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to public and secular
morality; it refers to those conducts which are proscribed because they are detrimental to conditions upon which
depend the existence and progress of human society. Thus, in Anonymous v. Radam,43 an administrative case
involving a court utility worker likewise charged with disgraceful and immoral conduct, applying the doctrines laid
down in Estrada, the Court held that:

For a particular conduct to constitute "disgraceful and immoral" behavior under civil service laws, it must be
regulated on account of the concerns of public and secular morality. It cannot be judged based on personal bias,
specifically those colored by particular mores. Nor should it be grounded on "cultural" values not convincingly
demonstrated to have been recognized in the realm of public policy expressed in the Constitution and the laws. At
the same time, the constitutionally guaranteed rights (such as the right to privacy) should be observed to the extent
that they protect behavior that may be frowned upon by the majority.

Under these tests, two things may be concluded from the fact that an unmarried woman gives birth out of wedlock:

(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for
disgraceful and immoral conduct.It may be a not-so-ideal situation and may cause complications for both
mother and child but it does not give cause for administrative sanction. There is no law which penalizes an
unmarried mother under those circumstances by reason of her sexual conduct or proscribes the consensual
sexual activity between two unmarried persons. Neither does the situation contravene any fundamental
state policy as expressed in the Constitution, a document that accommodates various belief systems
irrespective of dogmatic origins.

(2) if the father of the child born out of wedlock is himself married to a woman other thanthe mother, then
there is a cause for administrative sanction against either the father or the mother. In sucha case, the
"disgraceful and immoral conduct" consists of having extramarital relations with a married person. The
sanctity of marriage is constitutionally recognized and likewise affirmed by our statutes as a special
contract of permanent union. Accordingly, judicial employees have been sanctioned for their dalliances
with married persons or for their own betrayals of the marital vow of fidelity.

In this case, it was not disputed that, like respondent, the father of her child was unmarried. Therefore, respondent
cannot be held liable for disgraceful and immoral conduct simply because she gave birth to the child Christian Jeon
out of wedlock.44 (Citations omitted and emphases ours)

Both Estrada and Radamare administrative cases against employees in the civil service. The Court, however, sees no
reason not to apply the doctrines enunciated in Estrada and Radamin the instant case. Estrada and Radamalso
required the Court to delineate what conducts are considered disgraceful and/or immoral as would constitute a
ground for dismissal. More importantly, as in the said administrative cases, the instant case involves an employee’s
security of tenure; this case likewise concerns employment, which is not merely a specie of property right, but also
the means by which the employee and those who depend on him live.45

It bears stressing that the right of an employee to security of tenure is protected by the Constitution. Perfunctorily, a
regular employee may not be dismissed unless for cause provided under the Labor Code and other relevant laws, in
this case, the 1992 MRPS. As stated above, when the law refers to morality, it necessarily pertains to public and
secular morality and not religious morality. Thus, the proscription against "disgraceful or immoral conduct" under
Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal, must necessarily refer to public and
secular morality. Accordingly, in order for a conduct tobe considered as disgraceful or immoral, it must be
"‘detrimental (or dangerous) to those conditions upon which depend the existence and progress of human society’
and not because the conduct is proscribed by the beliefs of one religion or the other."

Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an extra-marital affair with his co-
teacher, who is likewise married, on the ground of disgraceful and immoral conduct under Section 94(e) of the 1992
MRPS. The Court pointed out that extra-marital affair is considered as a disgraceful and immoral conduct is an
afront to the sanctity of marriage, which is a basic institution of society, viz:

We cannot overemphasize that having an extra-marital affair is an afront to the sanctity of marriage, which is a basic
institution of society. Even our Family Code provides that husband and wife must live together, observe mutual love,
respect and fidelity. This is rooted in the fact that both our Constitution and our laws cherish the validity of marriage
84
and unity of the family. Our laws, in implementing this constitutional edict on marriage and the family underscore
their permanence, inviolability and solidarity.47

The petitioner’s pregnancy out of

wedlock is not a disgraceful or
immoral conduct since she and the
father of her child have no
impediment to marry each other.

In stark contrast to Santos, the Court does not find any circumstance in this case which would lead the Court to
conclude that the petitioner committed a disgraceful or immoral conduct. It bears stressing that the petitioner and her
boyfriend, at the time they conceived a child, had no legal impediment to marry. Indeed, even prior to her dismissal,
the petitioner married her boyfriend, the father of her child. As the Court held in Radam, there is no law which
penalizes an unmarried mother by reason of her sexual conduct or proscribes the consensual sexual activity between
two unmarried persons; that neither does such situation contravene any fundamental state policy enshrined in the
Constitution.

Admittedly, the petitioner is employed in an educational institution where the teachings and doctrines of the Catholic
Church, including that on pre-marital sexual relations, is strictly upheld and taught to the students. That her
indiscretion, which resulted in her pregnancy out of wedlock, is anathema to the doctrines of the Catholic Church.
However, viewed against the prevailing norms of conduct, the petitioner’s conduct cannot be considered as
disgraceful or immoral; such conduct is not denounced by public and secular morality. It may be an unusual
arrangement, but it certainly is not disgraceful or immoral within the contemplation of the law.

To stress, pre-marital sexual relations between two consenting adults who have no impediment to marry each other,
and, consequently, conceiving a child out of wedlock, gauged from a purely public and secular view of morality,
does not amount to a disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS.

Accordingly, the labor tribunals erred in upholding the validity of the petitioner’s dismissal. The labor tribunals
arbitrarily relied solely on the circumstances surrounding the petitioner’s pregnancy and its supposed effect on
SSCW and its students without evaluating whether the petitioner’s conduct is indeed considered disgraceful or
immoral in view of the prevailing norms of conduct. In this regard, the labor tribunals’ respective haphazard
evaluation of the evidence amounts to grave abuse of discretion, which the Court will rectify.

The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock despite the absence of substantial
evidence is not only arbitrary, but a grave abuse of discretion, which should have been set right by the CA.

There is no substantial evidence to

prove that the petitioner’s pregnancy
out of wedlock caused grave scandal
to SSCW and its students.

SSCW claimed that the petitioner was primarily dismissed because her pregnancy out of wedlock caused grave
scandal to SSCW and its students. That the scandal brought about by the petitioner’s indiscretion prompted them to
dismiss her. The LA upheld the respondents’ claim, stating that:

In this particular case, an "objective" and "rational evaluation" of the facts and circumstances obtaining in this case
would lead us to focus our attention x x x on the impact of the act committed by the complainant. The act of the
complainant x x x eroded the moral principles being taught and project[ed] by the respondent [C]atholic school to
their young lady students.48 (Emphasis in the original)

On the other hand, the NLRC opined that:

In the instant case, when the complainant-appellant was already conceiving a child even before she got married,
such is considered a shameful and scandalous behavior, inimical to public welfare and policy. It eroded the moral
doctrines which the respondent Catholic school, an exclusive school for girls, is teaching the young girls. Thus,
when the respondent-appellee school terminated complainant-appellant’s services, it was a valid exercise of its
management prerogative. Whether or not she was a teacher is of no moment. There is no separate set of rules for
non-teaching personnel. Respondents-appellees uphold the teachings of the Catholic Church on pre-marital sex and
that the complainant-appellant as an employee of the school was expected to abide by this basic principle and to live
up with the standards of their purely Catholic values. Her subsequent marriage did not take away the fact that she
had engaged in pre-marital sex which the respondent-appellee school denounces as the same is opposed to the
teachings and doctrines it espouses.49 (Emphasis ours)

85
Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed to adduce substantial evidence to
prove that the petitioner’s indiscretion indeed caused grave scandal to SSCW and its students. Other than the
SSCW’s bare allegation, the records are bereft of any evidence that would convincingly prove that the petitioner’s
conduct indeed adversely affected SSCW’s integrity in teaching the moral doctrines, which it stands for. The
petitioner is only a non-teaching personnel; her interaction with SSCW’s students is very limited. Itis thus quite
impossible that her pregnancy out of wedlock caused such a grave scandal, as claimed by SSCW, as to warranther
dismissal.

Settled is the rule that in termination cases, the burden of proving that the dismissal of the employees was for a valid
and authorized cause rests on the employer. It is incumbent upon the employer to show by substantial evidence that
the termination of the employment of the employees was validly made and failure to discharge that duty would
mean that the dismissal is not justified and therefore illegal.50 "Substantial evidence is more than a mere scintilla of
evidence. It means such relevant evidence as a reasonable mind might accept as adequateto support a conclusion,
even if other minds equally reasonable mightconceivably opine otherwise." 51

Indubitably, bare allegations do not amount to substantial evidence. Considering that the respondents failed to
adduce substantial evidence to prove their asserted cause for the petitioner’s dismissal, the labor tribunals should not
have upheld their allegations hook, line and sinker. The labor tribunals’ respective findings, which were arrived at
sans any substantial evidence, amounts to a grave abuse of discretion, which the CA should have rectified. "Security
of tenure is a right which may not be denied on mere speculation of any unclearand nebulous basis."52

The petitioner’s dismissal is not a

valid exercise of SSCW’s
management prerogative.

The CA be labored the management prerogative of SSCW to discipline its employees. The CA opined that the
petitioner’s dismissal is a valid exercise of management prerogative to impose penalties on erring employees
pursuant to its policies, rules and regulations.

The Court does not agree.

The Court has held that "management is free to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place and manner of work, processes to
be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not
absolute as it must beexercised in good faith and with due regard to the rights of labor." Management cannot
exercise its prerogative in a cruel, repressive, or despotic manner.53

SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss themif there is a
valid cause to do so. However, as already explained, there is no cause to dismiss the petitioner. Her conduct is not
considered by law as disgraceful or immoral. Further, the respondents themselves have admitted that SSCW, at the
time of the controversy, does not have any policy or rule against an employee who engages in pre-marital sexual
relations and conceives a child as a result thereof. There being no valid basis in law or even in SSCW’s policy and
rules, SSCW’s dismissal of the petitioner is despotic and arbitrary and, thus, not a valid exercise of management
prerogative.

In sum, the Court finds that the petitioner was illegally dismissed as there was no just cause for the termination of
her employment. SSCW failed to adduce substantial evidence to establish that the petitioner’s conduct, i.e., engaging
in pre-marital sexual relations and conceiving a child out of wedlock, assessed in light of the prevailing norms of
conduct, is considered disgraceful or immoral. The labor tribunals gravely abused their discretion in upholding the
validity of the petitioner’s dismissal as the charge against the petitioner lay not on substantial evidence, but on the
bare allegations of SSCW. In turn, the CA committed reversible error in upholding the validity of the petitioner’s
dismissal, failing torecognize that the labor tribunals gravely abused their discretion in ruling for the respondents.

The petitioner is entitled to

separation pay, in lieu of actual
reinstatement, full backwages and
attorney’s fees, but not to moral and
exemplary damages.

Having established that the petitioner was illegally dismissed, the Court now determines the reliefs thatshe is entitled
to and their extent. Under the law and prevailing jurisprudence, "an illegally dismissed employee is entitled to
reinstatement as a matter of right."54 Aside from the instances provided under Articles 28355 and 28456 of the Labor
Code, separation pay is, however, granted when reinstatement is no longer feasible because of strained relations
between the employer and the employee. In cases of illegal dismissal, the accepted doctrine is that separation pay is
available in lieu of reinstatement when the latter recourse is no longer practical or in the best interest of the parties. 57
86
In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school to pay the illegally
dismissed high school teacher separation pay in lieu of actual reinstatement since her continued presence as a
teacher in the school "may well bemet with antipathy and antagonism by some sectors in the school community." 59

In view of the particular circumstances of this case, it would be more prudent to direct SSCW to pay the petitioner
separation pay inlieu of actual reinstatement. The continued employment of the petitioner with SSCW would only
serve to intensify the atmosphere of antipathy and antagonism between the parties. Consequently, the Court awards
separation pay to the petitioner equivalent to one (1) month pay for every year of service, with a fraction of at least
six (6) months considered as one (1) whole year, from the time of her illegal dismissal up to the finality of this
judgment, as an alternative to reinstatement.

Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time their actual compensation was withheld from them up
to the time of their actual reinstatement but if reinstatement is no longer possible, the backwages shall be computed
from the time of their illegal termination up to the finality of the decision."60 Accordingly, the petitioner is entitled to
an award of full backwages from the time she was illegally dismissed up to the finality of this decision.

Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A dismissed employee isentitled to
moral damages when the dismissal is attended by bad faith or fraud or constitutes an act oppressive to labor, or is
done in a manner contrary to good morals, good customs or public policy. Exemplary damages may be awarded if
the dismissal is effected in a wanton, oppressive or malevolent manner." 61

"Bad faith, under the law, does not simply connote bad judgment or negligence.1âwphi1 It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, or a breach of a known duty through some motive
or interest or ill will that partakes of the nature of fraud."62

"It must be noted that the burden of proving bad faith rests on the one alleging it"63 since basic is the principle that
good faith is presumed and he who alleges bad faith has the duty to prove the same.64 "Allegations of bad faith and
fraud must be proved by clear and convincing evidence."65

The records of this case are bereft of any clear and convincing evidence showing that the respondents acted in bad
faith or in a wanton or fraudulent manner in dismissing the petitioner. That the petitioner was illegally dismissed is
insufficient to prove bad faith. A dismissal may be contrary to law but by itself alone, it does not establish bad faith
to entitle the dismissed employee to moral damages. The award of moral and exemplary damages cannot be justified
solely upon the premise that the employer dismissed his employee without cause. 66

However, the petitioner is entitled to attorney’s fees in the amount of 10% of the total monetary award pursuant to
Article 11167 of the Labor Code. "It is settled that where an employee was forced to litigate and, thus, incur expenses
to protect his rights and interest, the award of attorney’s fees is legally and morally justifiable." 68

Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%) per
annumfrom the finality of this judgment until fully paid.69

WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED. The Decision dated
September 24, 2008 and Resolution dated March 2, 2009 of the Court of Appeals in CA-G.R. SP No. 100188 are
hereby REVERSED and SET ASIDE.

The respondent, St. Scholastica’s College Westgrove, is hereby declared guilty of illegal dismissal and is hereby
ORDERED to pay the petitioner, Cheryll Santos Leus, the following: (a) separation pay in lieu of actual
reinstatement equivalent to one (1) month pay for every year of service, with a fraction of at least six (6) months
considered as one (1) whole year from the time of her dismissal up to the finality of this Decision; (b) full
backwages from the time of her illegal dismissal up to the finality of this Decision; and (c) attorney’s fees equivalent
to ten percent (10%) of the total monetary award. The monetary awards herein granted shall earn legal interest at the
rate of six percent (6%) per annumfrom the date of the finality of this Decision untilfully paid. The case is
REMANDED to the Labor Arbiter for the computation of petitioner’s monetary awards.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

87
 PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
DIOSDADO M. PERALTA MARTIN S. VILLARAMA, JR.
Associate Justice Associate Justice

FRANCIS H. JARDELEZA
Associate Justice

ATT E S TAT I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

C E RT I F I CATI O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

THIRD DIVISION

G.R. No. 215047, November 23, 2016

UNIVERSAL CANNING INC., MS. MA. LOURDES A. LOSARIA, PERSONNEL OFFICER, AND ENGR.
ROGELIO A. DESOSA, PLANT MANAGER, Petitioners, v. COURT OF APPEALS AND DANTE
SAROSAL, FRANCISCO DUMAGAL, JR., NELSON E. FRANCISCO, ELMER C. SAROMINES AND
SAMUEL D. CORONEL, Respondents.

DECISION

PEREZ, J.:

For resolution by the Court is this instant Petition for Review on Certiorari1 filed by petitioners Universal Canning
Inc., Ma. Lourdes Losaria and Engr. Rogelio A. Desosa, seeking to reverse and set aside the Decision2 dated 13
December 2013 and the Resolution3 dated 9 September 2014 of the Court of Appeals in CA-G.R. SP. No. 03808-
MIN. The assailed decision and resolution reversed the ruling of the National Labor Relations Commission (NLRC)
in NLRC Case No. MAC-09-011031-2009 and declared the dismissal of respondents Dante M. Sarosal, Francisco
Dumagal. Jr., Nelson E. Francisco, Elmer C. Saromines and Samuel D. Coronel, as
illegal.chanroblesvirtuallawlibrary
The Facts

Petitioner Universal Canning Inc. is a domestic corporation duly authorized to engage in business by Philippine
laws. Petitioners Ma. Lourdes A. Losaria and Engr. Rogelio Desosa are respectively employed by the company as its
Personnel Officer and Plant Manager.4

Respondents Dante M. Sarosal, Francisco Dumagal. Jr., Nelson E. Francisco, Elmer C. Saromines and Samuel D.
Coronel were employed by petitioner Universal Canning on various capacities with wages ranging from P240.00 to
P280.00 a day.5

On 21 January 2009, respondents were caught by petitioner company's Purchasing Officer, Falconieri Almazan,
playing cards at the company's premises during working hours. The incident was immediately reported by Almazan
to the Personnel Officer, Ma. Lourdes Losaria, who immediately conducted an investigation to determine the names
and of those who were involved in the gambling activities. On the same day, respondents were placed under
preventive investigation pending further investigation by a panel indicated in a memorandum addressed to and duly
received by the individuals concerned. Under the same memorandum, respondents were required by the petitioner to
file their written explanation of the incident. Respondents complied with the directive. 6

88
In their letter-explanation dated 23 January 2009, respondents denied that they were involved in gambling activities
within the company's premises during work hours. It was argued by the respondents that while indeed they were
playing cards inside the company premises, it cannot be considered gambling as there was no money involved and
that it took place during noon break.7

On 9 February 2009, the investigation was conducted where respondents were questioned regarding their
participation in the 21 January 2009 activities inside the company's premises. After the inquiry, the Investigating
Officer found that respondents were playing cards during working hours which is considered an infraction of the
company's rules and regulations.8

On the basis of the Investigation Report, respondents were dismissed from employment through a notice thereof
dated 19 February 2016 which enumerated the grounds: (1) taking part in a betting, gambling or any unauthorized
game of chance inside the company premises while on duty; and (2) for loss of trust and confidence. The
termination of respondents was reported by the petitioner to the Department of Labor of Employment (DOLE) on 24
February 2009.

Aggrieved by the tum of events, respondents initiated an action for illegal dismissal, illegal suspension, payment of
separation pay, rest day pay and moral and exemplary damages before the Labor Arbiter. In their Position Paper,
respondents argued that their severance from employment is unlawful because of lack of sufficient basis for their
termination. They reiterated their position in their letter-explanation that they could not be considered guilty of
gambling because there were no stakes involved and the activity took place during authorized noon break.

For lack of merit, the Labor Arbiter dismissed the complaint in a Decision9 dated 24 August 2009. The Labor Arbiter
held that respondents were dismissed for just cause and after compliance with due process. The dispositive portion
of the Decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, the above-entitled case is hereby dismissed for lack of merit.

SO ORDERED.10
On appeal, the NLRC affirmed the dismissal of respondents' complaint. It was declared by the Commission that
"playing cards during office hours whether for a stake or fun is considered a dishonest act of stealing company time.
The company's working hours could be used for more profitable activities since they are paid by the company."
Setting aside the claim of respondents that their length of service should be considered a mitigating circumstance,
the NLRC held that "the fact that [respondents] have been employed by the company for a long period of time could
not work in their favor. Their attitude towards their work is smocked (sic) with disloyalty, lack of concern and
enthusiasm."11

On Certiorari, the Court of Appeals reversed and set aside the NLRC Decision on the ground that it was rendered
with grave abuse of discretion amounting to lack or excess in jurisdiction. According to the appellate court, there
exists no just cause to dismiss respondents from employment. As rank and file employees, respondents could not be
dismissed for lack of trust and confidence as they were not holding positions imbued with trust and
confidence.12 The Court of Appeals disposed in this wise:chanRoblesvirtualLawlibrary
THE FOREGOING CONSIDERED, the instant PETITION is thus GRANTED. The NLRC's Resolution dated
December 29, 2009 and June 29, 2010 are hereby REVERSED AND SET ASIDE, and a new entered mandating
UCI to:

1. Pay each [respondents] their respective full backwages, inclusive of allowances and other benefits required
by law or their monetary equivalent computed from the time they were actually dismissed effective
February 20, 2009 until the finality of this decision; and
2. To reinstate [respondents] without loss of seniority rights and other privileges, or if reinstatement is not
possible, to pay each of the petitioners their respective separation pay equivalent to one month to every
year of service, computed from the date of employment up to the finality of the decision. A fraction of at
least six (6) months shall be considered one (1) whole year. Any fraction below six (6) months shall be
paid pro rata.

SO ORDERED.
In a Resolution13 dated 9 September 2014, the Court of Appeals refused to reconsider its earlier Decision.

Petitioners are now before this Court via this instant Petition for Review on Certiorari assailing the Courts of
Appeals' Decision and Resolution on the ground that:chanRoblesvirtualLawlibrary
The Issue

THE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE NLRC DECISION WHICH
IN TURN, AFFIRMED THE LABOR ARBITER'S DECISION DISMISSING RESPONDENTS' COMPLAINT
FOR ILLEGAL DISMISSAL FOR LACK OF MERIT.
The Court's Ruling

The core issue here is whether the Court of Appeals erred in holding that there is no just cause for dismissing

89
respondents from employment.

The Court resolves to grant the petition.

It must be stressed at the onset that respondents were dismissed by petitioners for two reasons: (1) for violation of
company rules and regulations under Paragraph IV, Number 4 under Offenses Against Public Morals;14 and (2) for
loss of trust and confidence. While it is true that loss of trust and confidence alone could not stand as a ground for
dismissal in this case since respondents are rank and file employees who are not occupying positions of trust and
confidence, such is not the only ground, relied by the company in terminating respondents' employment. Petitioner
company also cited the infraction of company rules and regulations, in addition to loss and trust of confidence.
Infraction of the company rules and regulation which is akin to serious misconduct is a just cause for termination of
employment recognized under Article 282 (a) of the Labor Code which states that:chanRoblesvirtualLawlibrary
ARTICLE 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;
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 employee's 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.15

Here, there is no question that respondents were caught in the act of engaging in gambling activities inside the
workplace during work hours, a fact duly established during the investigation conducted by the petitioner company
and adopted by the labor tribunals below. As a matter of fact, respondents never controverted their participation in
the gambling activities, but instead raised the defense that it took place during noon break and that no stakes were
involved; these claims even if were proven true, will however not save the day for the respondents. The use of the
company's time and premises for gambling activities is a grave offense which warrants the penalty of dismissal for it
amounts to theft of the company's time and it is explicitly prohibited by the company rules on the ground that it is
against public morals.

Suffice it to state that an employee may be validly dismissed for violation of a reasonable company rule or
regulation adopted for the conduct of the company's business. It is the recognized prerogative of the employer to
transfer and reassign employees according to the requirements of its business. For indeed, regulation of manpower
by the company clearly falls within the ambit of management prerogative. A valid exercise of management
prerogative is one which, among others, covers: work assignment, working methods, time, supervision of workers,
transfer of employees, work supervision, and the discipline, dismissal and recall of workers. Except as provided for,
or limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects
of employment.16 As a general proposition, an employer has free reign over every aspect of its business, including
the dismissal of his employees as long as the exercise of its management prerogative is done reasonably, in good
faith, and in a manner not otherwise intended to defeat or circumvent the rights of workers. 17

Both the Labor Arbiter and the NLRC uniformly ruled that the complaint for illegal dismissal filed by the
respondents utterly lacks merit and, thus, upheld the petitioners' position that there exists a valid ground for
dismissing the respondents. The NLRC even went further by saying that respondents' length of service should not
mitigate the consequence of their acts as they owe the company loyalty and concern. Considering that there is
substantial evidence at hand to support the ruling of the labor tribunals, the Court hereby adopts their findings.

It is settled that this Court is not a trier of facts, and this applies with greater force in labor cases. 18Factual findings of
administrative or quasi-judicial bodies, including labor tribunals, are accorded much respect by this Court as they
are specialized to rule on matters falling within their jurisdiction especially when these are supported by substantial
evidence.19

WHEREFORE, premises considered, the petition is GRANTED. The assailed Resolutions of the Court of Appeals
are hereby REVERSED AND SET ASIDE.

SO ORDERED.

FIRST DIVISION

G.R. No. 212054, March 11, 2015

ST. LUKE’S MEDICAL CENTER, INC., Petitioner, v. MARIA THERESA V. SANCHEZ, Respondent.

90
 DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated November 21, 2013 and the
Resolution3 dated April 4, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 129108 which affirmed the
Decision4 dated November 19, 2012 and the Resolution5 dated January 14, 2013 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 06-001858-12, declaring the dismissal of respondent Maria Theresa V.
Sanchez (Sanchez) illegal.chanroblesvirtuallawlibrary
The Facts

On June 29, 2009, Sanchez was hired by petitioner St. Luke’s Medical Center, Inc. (SLMC) as a Staff Nurse, and
was eventually assigned at SLMC, Quezon City’s Pediatric Unit until her termination on July 6, 2011 for her
purported violation of SLMC’s Code of Discipline, particularly Section 1, Rule 1 on Acts of
Dishonesty, i.e., Robbery, Theft, Pilferage, and Misappropriation of Funds. 6cralawred

Records reveal that at the end of her shift on May 29, 2011, Sanchez passed through the SLMC Centralization
Entrance/Exit where she was subjected to the standard inspection procedure by the security personnel. In the course
thereof, the Security Guard on-duty, Jaime Manzanade (SG Manzanade), noticed a pouch in her bag and asked her
to open the same.7 When opened, said pouch contained the following assortment of medical stocks which were
subsequently confiscated: (a) Syringe 10cl [4 pieces]; (b) Syringe 5cl [3 pieces]; (c) Syringe 3cl [3 pieces]; (d)
Micropore [1 piece]; (e) Cotton Balls [1 pack]; (f) Neoflon g26 [1 piece]; (g) Venofix 25 [2 pieces]; and (h) Gloves
[4 pieces] (questioned items).8 Sanchez asked SG Manzanade if she could just return the pouch inside the treatment
room; however, she was not allowed to do so.9 Instead, she was brought to the SLMC In-House Security Department
(IHSD) where she was directed to write an Incident Report explaining why she had the questioned items in her
possession.10 She complied11 with the directive and also submitted an undated handwritten letter of
apology12 (handwritten letter) which reads as follows:chanRoblesvirtualLawlibrary
To In-House Security,

I am very sorry for bringing things from [SLMC] inside my bag. Pasensya na po. Taos-puso po akong humihingi ng
tawad sa aking pagkakasala, Alam ko po na ako ay nagkamali. Hindi ko po dapat dinala yung mga gamit sa
hospital. Hindi ko po alam kung [paano] ako magsisimulang humingi ng patawad. Kahit alam kong bawal ay
nagawa kong makapag uwi ng gamit. Marami pang gamit dahil sa naipon po. Paisa-isa nagagawa kong makakuha
pag nakakalimutan kong isoli. Hindi ko na po naiwan sa nurse station dahil naisip kong magagamit ko rin po pag
minsang nagkakaubusan ng stocks at talagang may kailangan.

Humihingi po ako ng tawad sa aking ginawa. Isinakripisyo ko ang hindi pagiging “toxic” sa pagkuha ng gamit
para sa bagay na alam kong mali. Inaamin ko na ako’y naging madamot, pasuway at makasalanan. Inuna ko ang
comfort ko keysa gumawa ng tama. Manikluhod po akong humihingi ng tawad.

Sorry po. Sorry po. Sorry po talaga.13cralawlawlibrary

In a memorandum14 of even date, the IHSD, Customer Affairs Division, through Duty Officer Hernani R. Janayon,
apprised SLMC of the incident, highlighting that Sanchez expressly admitted that she intentionally brought out the
questioned items.

An initial investigation was also conducted by the SLMC Division of Nursing15 which thereafter served Sanchez a
notice to explain.16cralawred

On May 31, 2011, Sanchez submitted an Incident Report Addendum17 (May 31, 2011 letter), explaining that the
questioned items came from the medication drawers of patients who had already been discharged, and, as similarly
practiced by the other staff members, she started saving these items as excess stocks in her pouch, along with other
basic items that she uses during her shift.18 She then put the pouch inside the lowest drawer of the bedside table in
the treatment room for use in immediate procedures in case replenishment of stocks gets delayed. However, on the
day of the incident, she failed to return the pouch inside the medication drawer upon getting her tri-colored pen and
calculator and, instead, placed it inside her bag. Eventually, she forgot about the same as she got caught up in work,
until it was noticed by the guard on duty on her way out of SMLC’s premises.

Consequently, Sanchez was placed under preventive suspension effective June 3, 2011 until the conclusion of the
investigation by SLMC’s Employee and Labor Relations Department (ELRD)19 which, thereafter, required her to
explain why she should not be terminated from service for “acts of dishonesty” due to her possession of the
questioned items in violation of Section 1, Rule I of the SLMC Code of Discipline. 20 In response, she submitted a
letter21 dated June 13, 2011, which merely reiterated her claims in her previous May 31, 2011 letter. She likewise
requested for a case conference,22 which SLMC granted.23 After hearing her side, SLMC, on July 4, 2011, informed
Sanchez of its decision to terminate her employment effective closing hours of July 6, 2011. 24 This prompted her to
file a complaint for illegal dismissal before the NLRC, docketed as NLRC NCR Case No. 07-11042-11.

91
In her position paper,25 Sanchez maintained her innocence, claiming that she had no intention of bringing outside the
SLMC’s premises the questioned items since she merely inadvertently left the pouch containing them in her bag as
she got caught up in work that day. She further asserted that she could not be found guilty of pilferage since the
questioned items found in her possession were neither SLMC’s nor its employees’ property. She also stressed the
fact that SLMC did not file any criminal charges against her. Anent her supposed admission in her handwritten letter,
she claimed that she was unassisted by counsel when she executed the same and, thus, was inadmissible for being
unconstitutional.26cralawred

For its part,27 SLMC contended that Sanchez was validly dismissed for just cause as she had committed theft in
violation of Section 1,28 Rule I of the SLMC Code of Discipline,29 which punishes acts of dishonesty, i.e., robbery,
theft, pilferage, and misappropriation of funds, with termination from service.chanroblesvirtuallawlibrary
The LA Ruling

In a Decision30 dated May 27, 2012, the Labor Arbiter (LA) ruled that Sanchez was validly dismissed31for
intentionally taking the property of SLMC’s clients for her own personal benefit, 32 which constitutes an act of
dishonesty as provided under SLMC’s Code of Discipline.

According to the LA, Sanchez’s act of theft was evinced by her attempt to bring the questioned items that did not
belong to her out of SLMC’s premises; this was found to be analogous to serious misconduct which is a just cause to
dismiss her.33 The fact that the items she took were neither SLMC’s nor her co-employees’ property was not found
by the LA to be material since the SLMC Code of Discipline clearly provides that acts of dishonesty committed to
SLMC, its doctors, its employees, as well as its customers, are punishable by a penalty of termination from
service.34 To this, the LA opined that “[i]t is rather illogical to distinguish the persons with whom the [said] acts may
be committed as SLMC is also answerable to the properties of its patients.” 35 Moreover, the LA observed that
Sanchez was aware of SLMC’s strict policy regarding the taking of hospital/medical items as evidenced by her
handwritten letter,36 but nonetheless committed the said misconduct. Finally, the LA pointed out that SLMC’s non-
filing of a criminal case against Sanchez did not preclude a determination of her serious misconduct, considering
that the filing of a criminal case is entirely separate and distinct from the determination of just cause for termination
of employment.37cralawred

Aggrieved, Sanchez appealed38 to the NLRC.chanroblesvirtuallawlibrary

The NLRC Ruling

In a Decision39 dated November 19, 2012, the NLRC reversed and set aside the LA ruling, and held that Sanchez
was illegally dismissed.

The NLRC declared that the alleged violation of Sanchez was a unique case, considering that keeping excess
hospital stocks or “hoarding” was an admitted practice amongst nurses in the Pediatric Unit which had been
tolerated by SLMC management for a long time.40 The NLRC held that while Sanchez expressed remorse for her
misconduct in her handwritten letter, she manifested that she only “hoarded” the questioned items for future use in
case their medical supplies are depleted, and not for her personal benefit. 41 It further held that SLMC failed to
establish that Sanchez was motivated by ill-will when she brought out the questioned items, noting: (a) the
testimony of SG Manzanade during the conference before the ELRD of Sanchez’s demeanor when she was
apprehended, i.e., “[d]i naman siya masyado nataranta,”42 and her consequent offer to return the pouch;43 and (b)
that the said pouch was not hidden underneath the bag.44 Finally, the NLRC concluded that the punishment of
dismissal was too harsh and the one (1) month preventive suspension already imposed on and served by Sanchez
was the appropriate penalty.45 Accordingly, the NLRC ordered her reinstatement, and the payment of backwages,
other benefits, and attorney’s fees.46cralawred

Unconvinced, SLMC moved for reconsideration47 which was, however, denied in a Resolution48 dated January 14,
2013. Thus, it filed a petition for certiorari49 before the CA.chanroblesvirtuallawlibrary
The CA Ruling

In a Decision50 dated November 21, 2013, the CA upheld the NLRC, ruling that the latter did not gravely abuse its
discretion in finding that Sanchez was illegally dismissed.

It ruled that Sanchez’s offense did not qualify as serious misconduct, given that: (a) the questioned items found in
her possession were not SLMC property since said items were paid for by discharged patients, thus discounting any
material or economic damage on SLMC’s part; (b) the retention of excess medical supplies was an admitted practice
amongst nurses in the Pediatric Unit which was tolerated by SLMC; (c) it was illogical for Sanchez to leave the
pouch in her bag since she would be subjected to a routine inspection; (d) Sanchez’s lack of intention to bring out
the pouch was manifested by her composed demeanor upon apprehension and offer to return the pouch to the
treatment room; and (e) had SLMC honestly believed that Sanchez committed theft or pilferage, it should have filed
the appropriate criminal case, but failed to do so.51 Moreover, while the CA recognized that SLMC had the
management prerogative to discipline its erring employees, it, however, declared that such right must be exercised
humanely. As such, SLMC should only impose penalties commensurate with the degree of infraction. Considering
that there was no indication that Sanchez’s actions were perpetrated for self-interest or for an unlawful objective, the
penalty of dismissal imposed on her was grossly oppressive and disproportionate to her offense. 52cralawred
92
Dissatisfied, SLMC sought for reconsideration,53 but was denied in a Resolution54 dated April 4, 2014, hence, this
petition.chanroblesvirtuallawlibrary
The Issue Before the Court

The core issue to be resolved is whether or not Sanchez was illegally dismissed by
SLMC.chanroblesvirtuallawlibrary
The Court’s Ruling

The petition is meritorious.

The right of an employer to regulate all aspects of employment, aptly called “management prerogative,” gives
employers the freedom to regulate, according to their discretion and best judgment, all aspects of employment,
including work assignment, working methods, processes to be followed, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. 55 In this light,
courts often decline to interfere in legitimate business decisions of employers. In fact, labor laws discourage
interference in employers’ judgment concerning the conduct of their business.56cralawred

Among the employer’s management prerogatives is the right to prescribe reasonable rules and regulations necessary
or proper for the conduct of its business or concern, to provide certain disciplinary measures to implement said rules
and to assure that the same would be complied with. At the same time, the employee has the corollary duty to obey
all reasonable rules, orders, and instructions of the employer; and willful or intentional disobedience thereto, as a
general rule, justifies termination of the contract of service and the dismissal of the employee. 57 Article 296
(formerly Article 282) of the Labor Code provides:58cralawred
Article 296. 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 his
representative in connection with his work;ChanRoblesVirtualawlibrary

x x x xcralawlawlibrary

Note that for an employee to be validly dismissed on this ground, the employer’s orders, regulations, or instructions
must be: (1) reasonable and lawful, (2) sufficiently known to the employee, and (3) in connection with the
duties which the employee has been engaged to discharge.”59cralawred

Tested against the foregoing, the Court finds that Sanchez was validly dismissed by SLMC for her willful disregard
and disobedience of Section 1, Rule I of the SLMC Code of Discipline, which reasonably punishes acts of
dishonesty, i.e., “theft, pilferage of hospital or co-employee property, x x x or its attempt in any form or manner
from the hospital, co-employees, doctors, visitors, [and] customers (external and internal)” with termination from
employment.60 Such act is obviously connected with Sanchez’s work, who, as a staff nurse, is tasked with the proper
stewardship of medical supplies. Significantly, records show that Sanchez made a categorical admission 61 in her
handwritten letter62 – i.e., “[k]ahit alam kong bawal ay nagawa kong [makapag-uwi] ng gamit”63 – that despite her
knowledge of its express prohibition under the SLMC Code of Discipline, she still knowingly brought out the
subject medical items with her. It is apt to clarify that SLMC cannot be faulted in construing the taking of the
questioned items as an act of dishonesty (particularly, as theft, pilferage, or its attempt in any form or manner)
considering that the intent to gain may be reasonably presumed from the furtive taking of useful property
appertaining to another.64 Note that Section 1, Rule 1 of the SLMC Code of Discipline is further supplemented by
the company policy requiring the turn-over of excess medical supplies/items for proper handling65 and providing a
restriction on taking and bringing such items out of the SLMC premises without the proper authorization or “pass”
from the official concerned,66 which Sanchez was equally aware thereof.67 Nevertheless, Sanchez failed to turn-over
the questioned items and, instead, “hoarded” them, as purportedly practiced by the other staff members in the
Pediatric Unit. As it is clear that the company policies subject of this case are reasonable and lawful, sufficiently
known to the employee, and evidently connected with the latter’s work, the Court concludes that SLMC dismissed
Sanchez for a just cause.

On a related point, the Court observes that there lies no competent basis to support the common observation of the
NLRC and the CA that the retention of excess medical supplies was a tolerated practice among the nurses at the
Pediatric Unit. While there were previous incidents of “hoarding,” it appears that such acts were – in similar fashion
– furtively made and the items secretly kept, as any excess items found in the concerned nurse’s possession would
have to be confiscated.68 Hence, the fact that no one was caught and/or sanctioned for transgressing the prohibition
therefor does not mean that the so-called “hoarding” practice was tolerated by SLMC. Besides, whatever maybe the
justification behind the violation of the company rules regarding excess medical supplies is immaterial since it has
been established that an infraction was deliberately committed. 69 Doubtless, the deliberate disregard or disobedience
of rules by the employee cannot be countenanced as it may encourage him or her to do even worse and will render a
mockery of the rules of discipline that employees are required to observe. 70cralawred

Finally, the Court finds it inconsequential that SLMC has not suffered any actual damage. While damage aggravates
93
the charge, its absence does not mitigate nor negate the employee’s liability.71 Neither is SLMC’s non-filing of the
appropriate criminal charges relevant to this analysis. An employee’s guilt or innocence in a criminal case is not
determinative of the existence of a just or authorized cause for his or her dismissal.72 It is well-settled that conviction
in a criminal case is not necessary to find just cause for termination of employment,73 as in this case. Criminal and
labor cases involving an employee arising from the same infraction are separate and distinct proceedings which
should not arrest any judgment from one to the other.

As it stands, the Court thus holds that the dismissal of Sanchez was for a just cause, supported by substantial
evidence, and is therefore in order. By declaring otherwise, bereft of any substantial bases, the NLRC issued a
patently and grossly erroneous ruling tantamount to grave abuse of discretion, which, in turn, means that the CA
erred when it affirmed the same. In consequence, the grant of the present petition is warranted.

WHEREFORE, the petition is GRANTED. The Decision dated November 21, 2013 and the Resolution dated April
4, 2014 of the Court of Appeals in CA-G.R. SP No. 129108 are REVERSED and SET ASIDE. The Labor Arbiter’s
Decision dated May 27, 2012 in NLRC Case No. NCR 07-11042-11 finding respondent Maria Theresa V. Sanchez
to have been validly dismissed by petitioner St. Luke’s Medical Center, Inc. is hereby REINSTATED.

SO ORDERED.cralawlawlibrary

FIRST DIVISION

G.R. No. 220998, August 08, 2016

HOLCIM PHILIPPINES, INC., Petitioner, v. RENANTE J. OBRA, Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari,1 filed by petitioner Holcim Philippines, Inc. (petitioner),
assailing the Decision2 dated February 13, 2015 and the Resolution3 dated September 7, 2015 of the Court of
Appeals (CA) in CA-G.R. SP No. 136413, which affirmed the Decision4 dated March 31, 2014 and the
Resolution5 dated April 30, 2014 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 03-
000696-14(8) / NLRC CN. RAB-I-09-1102-13(LU-l), holding that respondent Renante J. Obra (respondent) was
illegally dismissed and, thereby, ordering petitioner to pay him separation pay amounting to P569,772.00 in lieu of
reinstatement.
The Facts

Respondent was employed by petitioner as packhouse operator in its La Union Plant for nineteen (19) years, from
March 19, 19946 until August 8, 2013.7 As packhouse operator, respondent ensures the safe and efficient operation
of rotopackers, auto-bag placers, and cariramats, as well as their auxiliaries. 8 At the time of his dismissal, he was
earning a monthly salary of P29,988.00.9chanrobleslaw

On July 10, 2013, at around 4 o'clock in the afternoon, respondent was about to exit Gate 2 of petitioner's La Union
Plant when the security guard on duty, Kristian Castillo (Castillo), asked him to submit himself and the backpack he
was carrying for inspection.10 Respondent refused and confided to Castillo that he has a piece of scrap electrical wire
in his bag.11 He also requested Castillo not to report the incident to the management, and asked the latter if
respondent could bring the scrap wire outside the company premises; otherwise, he will return it to his locker in the
Packhouse Office.12 However, Castillo did not agree, which prompted respondent to turn around and hurriedly go
back to the said office where he took the scrap wire out of his bag.13 Soon thereafter, a security guard arrived and
directed him to go to the Security Office where he was asked to write a statement regarding the
incident.14chanrobleslaw

In his statement,15 respondent admitted the incident, but asserted that he had no intention to steal.16He explained that
the 16-meter electrical wire was a mere scrap that he had asked from the contractor who removed it from the
Packhouse Office.17 He also averred that as far as he knows, only scrap materials which are to be taken out of the
company premises in bulk required a gate pass and that he had no idea that it was also necessary to takeout a piece
of loose, scrap wire out of the company's premises.18 Respondent also clarified that he hurriedly turned around
because he had decided to just return the scrap wire to the said office.19chanrobleslaw

On July 16, 2013, respondent received a Notice of Gap20 requiring him to explain within five (5) days therefrom
why no disciplinary action, including termination, should be taken against him on account of the above-mentioned
incident.21 He was also placed on preventive suspension for thirty (30) days effective immediately. 22 In a
statement23 dated July 23, 2013, respondent reiterated that he had no intention to steal from petitioner and that the
scrap wire which he had asked from a contractor was already for disposal anyway.24 He also expressed his remorse
over the incident and asked that he be given a chance to correct his mistake. 25cralawred Meetings of petitioner's
Review Committee were thereafter conducted, with respondent and the security guards concerned in
94
attendance.26chanrobleslaw

On August 8, 2013, petitioner issued a Decision/Resolution Memo27 dismissing from service respondent for serious
misconduct.28 Petitioner found no merit in respondent's claim that he was unaware that a gate pass is required to take
out a piece of scrap wire, pointing out that the same is incredulous since he had been working thereat for nineteen
(19) years already.29 It also drew attention to the fact that respondent refused to submit his bag for inspection, which,
according to petitioner, confirmed his intention to take the wire for his personal use.30 Further, petitioner emphasized
that respondent's actions violated its rules which, among others, limit the use of company properties for business
purposes only and mandate the employees, such as respondent, to be fair, honest, ethical, and act responsibly and
with integrity.31chanrobleslaw

In a letter32 dated August 14, 2013, respondent sought reconsideration and prayed for a lower penalty, especially
considering the length of his service to it and the lack of intent to steal. 33 However, in a Memo34 dated August 28,
2013, petitioner denied respondent's appeal. Hence, on September 30, 2013, respondent filed a complaint35 before
the NLRC for illegal dismissal and money claims, docketed as NLRC Case No. (CN) RAB-I-09-1102-13(LU-l),
averring that the penalty of dismissal from service imposed upon him was too harsh since he had acted in good faith
in taking the piece of scrap wire.36 Respondent maintained that there was no wrongful intent on his part which would
justify his dismissal from service for serious misconduct, considering that the contractor who removed it from the
Packhouse Office led him to believe that the same was already for disposal.37chanrobleslaw

Meanwhile, petitioner countered that respondent's taking of the electrical wire for his personal use, without authority
from the management, shows his intent to gain.38 In addition to this, it was highlighted that respondent refused to
submit himself and his bag for inspection and attempted to corrupt Castillo by convincing him to refrain from
reporting the incident to the management.39 These, coupled with his sudden fleeing from Gate 2, bolster the charge
of serious misconduct against him.40 With respect to respondent's claim that the contractor who removed the wire
from the Packhouse Office led him to believe that the same was already for disposal, petitioner pointed out that the
contractor's personnel have issued statements belying respondent's claim and categorically stated that they did not
give away any electrical wire to anyone.41chanrobleslaw
The Labor Arbiter's Ruling

In a Decision42 dated January 24, 2014, the Labor Arbiter (LA) dismissed respondent's complaint and held that the
latter was validly dismissed from service by petitioner for committing the crime of theft, and therefore, not entitled
to reinstatement, backwages, and other money claims.43chanrobleslaw
The NLRC Ruling

In a Decision44 dated March 31, 2014, the NLRC reversed the LA's ruling and held that the penalty of dismissal
from service imposed upon respondent was unduly harsh since his misconduct was not so gross to deserve such
penalty.45 It found merit in respondent's defense that he took the scrap wire on the belief that it was already for
disposal, noting that petitioner never denied the same.46 The NLRC also emphasized that petitioner did not suffer
any damage since respondent was not able to take the wire outside the company premises.47 Moreover, he did not
hold a position of trust and confidence and was remorseful of his mistake, as evidenced by his repeated pleas for
another chance.48 These, coupled with the fact that he had been in petitioner's employ for nineteen (19) years, made
respondent's dismissal from service excessive and harsh.49 Considering, however, the strained relations between the
parties, the NLRC awarded separation pay in favor of respondent in lieu of reinstatement. 50chanrobleslaw

Petitioner moved for reconsideration,51 which was, however, denied in a Resolution52 dated April 30, 2014.
The CA Ruling

In a Decision53 dated February 13, 2015, the CA dismissed the petition for certiorari and affirmed the ruling of the
NLRC. It agreed with the NLRC's observation that respondent was illegally dismissed, pointing out that petitioner
failed to prove that it prohibited its employees from taking scrap materials outside the company premises. Besides,
respondent's taking of the scrap wire did not relate to the performance of his work as packhouse
operator.54chanrobleslaw

The CA also drew attention to respondent's unblemished record in the company where he had been employed for
nineteen (19) years already, adding too that bad faith cannot be ascribed to him since he volunteered the information
about the scrap wire to Castillo and offered to return the same if it was not possible to bring it outside of the
company premises.55 According to the CA, respondent's acts only constituted a lapse in judgment which does not
amount to serious misconduct that would warrant his dismissal from service. 56chanrobleslaw

Dissatisfied, petitioner moved for reconsideration,57 which was denied by the CA in its Resolution58 dated September
7, 2015; hence, the present petition.
The Issue Before the Court

The sole issue for the Court's resolution is whether or not the CA erred in affirming the ruling of the NLRC.
The Court's Ruling

The petition is partly meritorious.

95
There is no question that the employer has the inherent right to discipline, including that of dismissing its employees
for just causes.59 This right is, however, subject to reasonable regulation by the State in the exercise of its police
power.60 Accordingly, the finding that an employee violated company rules and regulations is subject to scrutiny by
the Court to determine if the dismissal is justified and, if so, whether the penalty imposed is commensurate to the
gravity of his offense.61chanrobleslaw

In this case, the Court agrees with the CA and the NLRC that respondent's misconduct is not so gross as to deserve
the penalty of dismissal from service. As correctly observed by the NLRC, while there is no dispute that respondent
took a piece of wire from petitioner's La Union Plant and tried to bring it outside the company premises, he did so in
the belief that the same was already for disposal. Notably, petitioner never denied that the piece of wire was already
for disposal and, hence, practically of no value. At any rate, petitioner did not suffer any damage from the incident,
given that after being asked to submit himself and his bag for inspection, respondent had a change of heart and
decided to just return the wire to the Packhouse Office. Respondent has also shown remorse for his mistake,
pleading repeatedly with petitioner to reconsider the penalty imposed upon him.62chanrobleslaw

Time and again, the Court has held that infractions committed by an employee should merit only the corresponding
penalty demanded by the circumstance.63 The penalty must be commensurate with the act, conduct or omission
imputed to the employee.64chanrobleslaw

In Sagales v. Rustan 's Commercial Corporation,65 the dismissal of a Chief Cook who tried to take home a pack of
squid heads, which were considered as scrap goods and usually thrown away, was found to be excessive. In arriving
at such decision, the Court took into consideration the fact that the Chief Cook had been employed by the company
for 31 years already and the incident was his first offense. Besides, the value of the squid heads was a negligible sum
of P50.00 and the company practically lost nothing since the squid heads were considered scrap goods and usually
thrown away. Moreover, the ignominy he suffered when he was imprisoned over the incident, and his preventive
suspension for one (1) month was enough punishment for his infraction.

Similarly, in Farrol v. CA,M66 a district manager of a bank was dismissed after he incurred a shortage of P5 0,985.3
7, which sum was used to pay the retirement benefits of five (5) employees of the bank. Despite being able to return
majority of the missing amount, leaving a balance of only P6,995.37, the district manager was dismissed on the
ground that under the bank's rules, the penalty therefor is dismissal. According to the Court, the "dismissal imposed
on [him] is unduly harsh and grossly disproportionate to the infraction which led to the termination of his services. A
lighter penalty would have been more just, if not humane,"67 considering that it was his first infraction and he has
rendered 24 years of service to the bank.

Meanwhile, in the earlier case of Associated Labor Unions-TUCP v. NLRC,68 the dismissal of an employee, who was
caught trying to take a pair of boots, an empty aluminum container, and 15 hamburger patties, was considered
excessive. The Court ruled that the employee's dismissal would be disproportionate to the gravity of the offense
committed, considering the value of the articles he pilfered and the fact that he had no previous derogatory record
during his two (2) years of employment in the company. According to the Court, while the items taken were of some
value, such misconduct was not enough to warrant his dismissal.

As in the foregoing cases, herein respondent deserves compassion and humane understanding more than
condemnation, especially considering that he had been in petitioner's employ for nineteen (19) years already, and
this is the first time that he had been involved in taking company property, which item, at the end of the day, is
practically of no value. Besides, respondent did not occupy a position of trust and confidence, the loss of which
would have justified his dismissal over the incident. As packhouse operator, respondent's duties are limited to
ensuring the safe and efficient operation of rotopackers, auto-bag placers, and cariramats, as well as their
auxiliaries.69 He is not a managerial employee 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 managerial actions, or one who, in the normal and routine exercise of his functions, regularly
handles significant amounts of money or property. 70chanrobleslaw

Neither can respondent's infraction be characterized as a serious misconduct which, under Article 282 (now Article
297) of the Labor Code,71 is a just cause for dismissal. Misconduct is an improper or wrong conduct, or 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.72 To constitute a valid cause for dismissal
within the text and meaning of Article 282 (now Article 297) 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,73 as in this case where the
item which respondent tried to takeout was practically of no value to petitioner. Moreover, ill will or wrongful intent
cannot be ascribed to respondent, considering that, while he asked Castillo not to report the incident to the
management, he also volunteered the information that he had a piece of scrap wire in his bag and offered to return it
if the same could not possibly be brought outside the company premises sans a gate pass.

The Court is not unaware of its ruling in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) –
KATIPUNAN,74 which was cited in the petition,75 where an employee was dismissed after being caught hiding six (6)
Reno canned goods wrapped in nylon leggings inside her bag. However, in that case, the main issue was the
96
payment of separation pay and/or financial assistance and not the validity of the employee's dismissal. Furthermore,
unlike the present case where respondent tried to take a piece of scrap wire, the employee in Reno Foods tried to
steal items manufactured and sold by the company. Her wrongful intent is also evident as she tried to hide the
canned goods by wrapping them in nylon leggings. Here, as earlier adverted to, respondent volunteered the
information that he had a piece of scrap wire in his bag.

In fine, the dismissal imposed on respondent as penalty for his attempt to take a piece of scrap wire is unduly harsh
and excessive. The CA therefore did not err in affirming the NLRC's ruling finding respondent's dismissal to be
invalid. Clearly, the punishment meted against an errant employee should be commensurate with the offense
committed.76 Thus, care should be exercised by employers in imposing dismissal to erring employees. 77 Based on the
circumstances of this case, respondent's dismissal was not justified. This notwithstanding, the disposition of the CA
should be modified with respect to the consequential award of "separation pay in lieu of reinstatement," which was
assailed in the instant petition as one which has "no factual, legal or even equitable basis." 78chanrobleslaw

As a general rule, an illegally dismissed employee is entitled to: (a) reinstatement (or separation pay, if reinstatement
is not viable); and (b) payment of full backwages.79chanrobleslaw

In this case, the Court cannot sustain the award of separation pay in lieu of respondent's reinstatement on the bare
allegation of the existence of "strained relations" between him and the petitioner. It is settled that the doctrine on
"strained relations" cannot be applied indiscriminately since every labor dispute almost invariably results in
"strained relations;" otherwise, reinstatement can never be possible simply because some hostility is engendered
between the parties as a result of their disagreement.80 It is imperative, therefore, that strained relations be
demonstrated as a fact and adequately supported by substantial evidence showing that the relationship between the
employer and the employee is indeed strained as a necessary consequence of the judicial
controversy.81chanrobleslaw

Unfortunately, the Court failed to find the factual basis for the award of separation pay to herein respondent. The
NLRC Decision did not state the facts which demonstrate that reinstatement is no longer a feasible option that could
have justified the alternative relief of granting separation pay.82 Hence, reinstatement cannot be barred, especially, as
in this case, when the employee has not indicated an aversion to returning to work, or does not occupy a position of
trust and confidence in, or has no say in the operation of the employer's business. 83 As priorly stated, respondent had
expressed remorse over the incident and had asked to be given the chance to correct his mistake. He had also prayed
for a lower penalty than dismissal, especially considering his lack of intent to steal, and his unblemished record of
19 years of employment with petitioner. All these clearly indicate his willingness to continue in the employ of
petitioner and to redeem himself. Considering further that respondent did not occupy a position of trust and
confidence and that his taking of the scrap wire did not relate to the performance of his work as packhouse operator,
his reinstatement remains a viable remedy. The award of separation pay, therefore, being a mere exception to the
rule, finds no application herein. Accordingly, he should be reinstated to his former position.

Meanwhile, anent the propriety of awarding backwages, the Court observes that respondent's transgression – even if
not deserving of the ultimate penalty of dismissal – warrants the denial of the said award following the parameters
in Integrated Microelectronics, Inc. v. Pionilla.84 In that case, the Court ordered the reinstatement of the employee
without backwages on account of the following: (a) the fact that the dismissal of the employee would be too harsh a
penalty; and (b) that the employer was in good faith in terminating the employee, viz. :
The aforesaid exception was recently applied in the case of Pepsi-Cola Products, Phils., Inc. v. Molon[(704 Phil.
120, 144-145 [2013 ]), wherein the Court, citing several precedents, held as follows:
An illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay[,] if reinstatement is
no longer viable, and backwages. In certain cases, however, the Court has ordered the reinstatement of the employee
without backwages[,] considering the fact that: (1) the dismissal of the employee would be too harsh a penalty; and
(2) the employer was in good faith in terminating the employee. For instance, in the case of Cruz v. Minister of
Labor and Employment [(205 Phil. 14, 18-19 [1983 ]), the Court ruled as follows:
The Court is convinced that petitioner's guilt was substantially established. Nevertheless, we agree with respondent
Minister's order of reinstating petitioner without backwages instead of dismissal which may be too drastic. Denial
of backwages would sufficiently penalize her for her infractions. The bank officials acted in good faith. They
should be exempt from the burden of paying backwages. The good faith of the employer, when clear under the
circumstances, may preclude or diminish recovery of backwages. Only employees discriminately dismissed are
entitled to backpay.
Likewise, in the case of Ilogon-Suyoc Mines, Inc. v. [NLRC] [(202 Phil. 850, 856 [1982 ]), the Court pronounced
that "the ends of social and compassionate justice would therefore be served if private respondent is reinstated but
without backwages in view of petitioner's good faith."
The factual similarity of these cases to Remandaban's situation deems it appropriate to render the same
disposition.85 (Emphases supplied)
Having established that respondent's dismissal was too harsh a penalty for attempting to take a piece of scrap wire
that was already for disposal and, hence, practically of no value, and considering that petitioner was in good faith
when it dismissed respondent for his misconduct, the Court deems it proper to order the reinstatement of respondent
to his former position but without backwages. Respondent was not entirely faultless and therefore, should not profit
from a wrongdoing.

97
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated February 13, 2015 and the Resolution
dated September 7, 2015 of the Court of Appeals in CA-G.R. SP No. 136413 are
hereby AFFIRMED with MODIFICATION deleting the award of separation pay and in lieu thereof, directing the
reinstatement of respondent Renante J. Obra to his former position without backwages.

SO ORDERED.chanRoblesvirtualLawlibrary

January 27, 2016

G.R. No. 212070

CEBU PEOPLE'S MULTI-PURPOSE COOPERATIVE and MACARIO G. QUEVEDO, Petitioners,

vs.
NICERATO E. CARBONILLA, JR., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated June 25, 2013 and the Resolution3 dated
March 17, 2014 of the Court of Appeals (CA) in CA-G.R. CEB SP No. 05403, which reversed and set aside the
Decision4 dated April 29, 2010 and the Resolution5 dated June 30, 2010 of the National Labor Relations
Commission (NLRC) in NLRC Case No. VAC-10-000977-2009, and accordingly, declared respondent Nicerato E.
Carbonilla, Jr. (Carbonilla, Jr.) to have been illegally dismissed by petitioner Cebu People's Multi-Purpose
Cooperative (CPMPC).

The Facts

On November 14, 2005, CPMPC hired Carbonilla, Jr. as a Credit and Collection Manager and, as such, was tasked
with the handling of the credit and collection activities of the cooperative, which included recommending loan
approvals, formulating and implementing credit and collection policies, and conducting trainings. 6 Sometime in
2007, CPMPC underwent a reorganization whereby Carbonilla, Jr. was also assigned to perform the duties of
Human Resources Department (HRD) Manager, i.e., assisting in the personnel hiring, firing, and handling of labor
disputes.7In 2008, he was appointed as Legal Officer and subsequently, held the position of Legal and Collection
Manager.8

However, beginning February 2008, CPMPC, through its HRD Manager, Ma. Theresa R. Marquez (HRD
Manager Marquez), sent various memoranda to Carbonilla, Jr. seeking explanation on the various
infractions he allegedly committed. The aforesaid memoranda, as well as his replies thereto, are detailed
as follows:
CPMPC'S MEMORANDA: CARBONILLA, JR.'S REPLIES:

HRD 202 File 2008.02.19.017 dated February 19,
20089
- Memorandum relative to his non-attendance to the
CLIMBS HOME PROTEK Dinner Meeting.
He claimed that he was belatedly informed and was
not given any written notification of the said meeting,
and that he did not find any relation of the said
meeting to his job as a Legal Officer. 10

HRD 202 File 2008.02.26.034 dated February 26, No reply.

200811- Memorandum relative to his non-submission
of Weekly Executive Summary Reports and Itinerary
for the months of January and February.

HRD 202 File 2008.02.26.035 dated February 26,
200812 - Memorandum on why he allowed Joelito
Aguipo (Aguipo), a contractual collector for the
Bantayan Branch, to drive a motorcycle without a
driver's license and not being the owner thereof.
He stated that there was no policy requiring field
collectors to own – in a strict legal sense - a
motorcycle, but merely to possess the same so he can
effect collections more efficiently. Besides, Aguipo
was allowed to drive due to the urgency of collecting
from the Bantayan Branch. In any case, there is an
Affidavit of Undertaking13 exonerating CPMPC from
any liability.14

98
HRD 202 File 2008.02.26.036 dated He sought clarification of the charges against him,
and at the same time, threatened HRD Manager
February 26, 2008 - Memorandum on why he failed Marquez that if this Memorandum is "proven
15

to: (a) account for a motorcycle being used by a malicious, [she] might be answerable to a certain
former employee under his branch; and ( b) reclassify degree of civil liability which the 1987 Constitution
the vehicle of another employee. has given to individuals."16

HRD 202 File 2008.06.26.086 dated June 26, 200817 He dismissed the charge as made with malicious
intent and aimed to discredit his person, claiming that
- Memorandum on why he insulted his superior, he only had a discussion with his superior,
CPMPC Chief Operation Officer Agustina L. Bentillo particularly, about Alfonso Vasquez (Vasquez), who
(COO Bentillo), in front of her subordinates, with the was unsystematically pulled out from his department
statement: "Ikaw ra may di mosalig ba, ka without his consent. He added that if COO Bentillo
kwalipikado adto niya, maski mag contest pa mo, was indeed offended by his remarks, then it should
18
lupigon gani ka" or "You're the only one who not have taken almost a month before his attention
doesn't trust her, she is very qualified, you even lose was called regarding the matter.20
in comparison to her."19

HRD 202 File 2008.06.26.087 dated June 26, 200821 Citing the Philippine Law Dictionary, he explained
that "[i]nsubordination means a quality or state of
- Memorandum on his alleged acts of insubordination being insubordinate to a person in authority." He
and gross disrespect when he questioned the authority maintained that he did not commit insubordination as
of HRD Manager Marquez to refuse the hiring of a he merely sought clarification about the deferment of
new staff. the hiring of a working student by HRD Manager
Marquez despite having prior approval of CPMPC
Chief Executive Officer (CEO), petitioner Macario G.
Quevedo (CEO Quevedo ).22

HRD 202 File 2008.06.26.088 dated June 26, 200823 Reiterating the definition of "insubordination" in
Philippine Law Dictionary, he maintained that his act
- Memorandum on his alleged acts of insubordination of clarifying with the CEO the policy on hiring
and gross disrespect when he insisted before CEO working students did not constitute insubordination,
Quevedo that he had the authority as Legal and but rather, was made in the exercise of his right to
Collection Manager to hire a new staff. express.24

HRD 202 File 2008.06.27.091 dated He only reviewed the subject documents and they
were never entrusted to him for safekeeping. 27
June 27, 200825

- Memorandum asking Carbonilla, Jr. to tum-over to

the officer-in-charge custody of the following
documents: Banco de Oro contract on staff loans,
CPMPC firearm contracts and licenses, branch offices
rentals, and others.26

HRD 202 File 2008.07.03.094 dated
July 3, 200828
- Memorandum on his alleged acts of gross
negligence in: (a) failing to submit the employment
assessment of one Marcelina M. Remonde
(Remonde ); ( b) promoting one Mary Grace R.
Batain (Batain) despite lack of any performance
appraisal; ( c) failing to report the shortage of Batain
amounting to Pl08,254.55; (d) disseminating a wrong
schedule of mediation activity which caused
confusion and pressure among branch managers;
( e) failing to annotate the encumbrance on the
certificate of title offered as collateral to
CPMPC; (j) failing to review and verify its contract
with the BISDA Security Agency (agency) which
He interposed the following defenses:29 (a) he was not
responsible for employment assessments having been
transferred to the Legal Department; ( b) as then HRD
Manager, it was within his discretion to promote
Batain whose appointment has been previously
concurred in by the CEO; ( c) he was not informed of
the shortage committed by Batain nor was it within
his primary obligation to disclose the same; (d) the
printing of invitation was managed only by his legal
assistant, Joel Semblante (Semblante) and Vasquez.
However, the latter was unexpectedly transferred to
another job assignment, leaving only Semblante to do
the job, which may have caused the unintentional
mistake;30 (e) a certain Brenda Dela Cruz was the one
responsible for the annotation of the encumbrances of
real and personal properties; (j) he was not
responsible for the review of the contract between the
agency and its security guards as CPMPC had no
employer-employee relationship with them; (g) he

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exposed CPMPC to third-party liability for failure of
the agency to remit the Social Security System,
Philhealth and Pag-IBIG premiums of its security
guards to the government; (g) failing to inform the
branch managers of any
settlements or compromise agreements entered into
by the head office resulting in confusion as to
payments; and (h) failing to submit to HRD Manager
Marquez the status of the firearms and licenses
assigned to the branch managers.
HRD 202 File 2008.07.04.095 dated July 4, 200832
- Memorandum on the allegations he made against the questioned the suspicious transactions of CEO
CEO during the Board of Directors' inquiry hearing,
which constituted gross misconduct, gross disrespect, owned by the cooperative for an inadequate
and loss of trust and confidence.
HRD 202 File 2008.07 .08.098 dated July 8, 200834
- Memorandum on his failure to attend the
management and operations committee meeting held
on July 7, 2008 despite prior notices.
HRD 202 File 2008.07.09.103 dated July 9, 200836 –
Memorandum relative to the mediation settlements
which were forwarded for notarization to one Atty.
Miñoza who is not the authorized legal retainer of
CPMPC.
HRD 202 File 2008.07.09.104 dated July 9, 200838
- Memorandum on his failure to update the CEO and
management committee of the dismissal of the cases
filed by CPMPC against Spouses Alex and Alma
Monisit in Civil Case No. R-52633 and against
Spouses Helen and Rogelio Lopez in Civil Case No.
R-53274.
HRD 202 File 2008.07.15.106 dated July 15, 200840
- Memorandum relative to Carbonilla, Jr. 's
instruction to Semblante to pull out important records
and vital documents, i.e., Compromise/ Settlement
Agreement, Mediation Tracking Form, Agreement to
Mediate, Mediator's Report, Evaluation of Mediation,
among others, from the head office without the
knowledge and approval of the management, which
documents were later on returned tampered and
altered.
was unaware of the complaints of the branch
managers regarding the payment confusion as a result
of settlements or compromise agreements; and (h) it
was not his duty to determine the status, custody, and
licenses of the firearms.31
His acts did not constitute gross misconduct, gross
disrespect, or loss of trust and confidence as he only
Quevedo regarding the sale of a titled parcel of land
consideration. He then added that as a member of
CPMPC, he has the right to demand transparency of
all the transactions made by CEO Quevedo, of which
its consequences will affect the cooperative.33
The said meeting was scheduled outside the regular
meeting day and he was only informed about it on the
day of the meeting at which time, he was personally
handling collection cases.35
He admitted that as head of the Legal Department, he
endorsed the documents for notarization to his friend
who only charged P50.00 per document as compared
to the legal retainers who charged Pl00.00 per
document. He added that "[t]he same is more
advantageous and secured rather than having it
notarized- by a 'murio-murio' notary public at the
back of the Cebu City Hall."37
The two cases were re-filed before the Regional Trial
Court on May 29, 2008 as the amounts involved were
beyond the jurisdiction of the Municipal Trial Court
(MTC). He also explained that he was not aware of
the filing of these cases before the MTC as he was
occupying the position of the HRD Manager at that
time.39
He explained that as head of the Legal Department, he
was responsible for the proper disposal of all legal
documents and contracts, and the cancellation of said
documents were done to protect the interest of the
cooperative. Moreover, he claimed that the erasures
were caused by the
cancellation of the notarial subscription since
Carbonilla, Jr. found the requirements of the notary
public - which required all 125 respondents to appear
personally and present their community tax
certificates - impractical. Moreover, he claimed that
the cancellation of the documents "was not for the
purpose of falsifying or tampering the same[,] but
merely to protect the interest of the cooperative
against possible sanctions [or] circulating bogus
documents. "41
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 HRD 202 File 2008.07.16.107 dated July 16,
200842 – Memorandum relative to the unliquidated
cash advances of the notarial transactions of the
mediation agreements.43
The delay in liquidation was due to the "agreement"
he had with the notary public about the disposition of
the notarized documents. He claimed that in the
afternoon of the same day, he turned over the amount
of P6,250.00 to the Accounting Department.44

HRD 202 File 2008.07.19.111 dated July 19, No reply.

200845 - Memorandum on the alleged tampering and
loss of CPMPC's vital records and
documents, i.e., two (2) copies of the compromise
settlement agreement.

Unconvinced by Carbonilla, Jr.'s explanations, CPMPC scheduled several clarificatory hearings, 46 but the former
failed to attend despite due notice.47 Later, CPMPC conducted a formal investigation where it ultimately found
Carbonilla, Jr. to have committed acts prejudicial to CPMPC's interests. 48 As such, CPMPC, CEO Quevedo, sent
Carbonilla, Jr. a Notice of Dismissal49 dated August 5, 2008 informing the latter of his termination on the grounds
of: (a) loss of trust and confidence; (b) gross disrespect; (c) serious misconduct; (d) gross negligence;
(e) commission of a crime of falsification/inducing Aguipo to violate the law or the Land Transportation and Traffic
Code; and (e) committing acts highly prejudicial to the interest of the cooperative. 50

Consequently, Carbonilla, Jr. filed the instant case for illegal dismissal, non-payment of salaries, 13th month pay, as
well as damages and backawages, against CPMPC, before the NLRC, docketed as NLRC RAB VII-08-1856-
2008.51In support of his claims, Carbonilla, Jr. denied the administrative charges against him, asserting that the
Management and Board of Directors of CPMPC merely orchestrated means to unjustly dismiss him from
employment.52

In defense, CPMPC maintained that the totality of Carbonilla, Jr.'s infractions was sufficient to warrant his
dismissal, and that it had complied with the procedural due process in terminating him.53 Further, CPMPC pointed
out that Carbonilla, Jr. had been fully paid of all his benefits, notwithstanding his unsettled obligations to it in the
form of loans, insurance policy premiums, and cash advances, among others, amounting to a total of P129,455.00.54

The LA Ruling

In a Decision55 dated July 1, 2009, the Labor Arbiter (LA) dismissed Carbonilla, Jr.' s complaint for lack of
merit.56The LA found that Carbonilla, Jr. committed a litany of infractions, the totality of which constituted just
cause for the termination of his employment.57 Likewise, it was determined that CPMPC afforded Carbonilla, Jr.
procedural due process prior to his termination, as evinced by the former's issuance of a series of memoranda, as
well as its conduct of investigation with notices to the latter. 58 Furthermore, the LA denied his claims for unpaid
salaries and 13th month pay, as records show that the aggregate amount of his monetary claims is not even enough
to pay his accountabilities to CPMPC in the total amount of P129,455.00.59

Aggrieved, Carbonilla, Jr. appealed to the NLRC, which was docketed as NLRC Case No. VAC-10-000977-2009.60

The NLRC Ruling

In a Decision61 dated April 29, 2010, the NLRC affirmed the LA ruling. It found CPMPC to have substantially
proven the existence of just causes in dismissing Carbonilla, Jr., i.e., abuse of authority; disrespect to his colleagues
and superiors; being remiss in his duties; and commission of acts of misrepresentation. 62 It further held that
Carbonilla, Jr. was given the opportunity to present his side and to disprove the charges against him, but failed to do
so.63Finally, the NLRC explained that while Carbonilla, Jr. may indeed be entitled to his claims for unpaid salaries
and 13th month pay, the same cannot be granted as his accountabilities with CPMPC were larger than said claims. 64

Carbonilla, Jr. moved for reconsideration,65 which was, however, denied in a Resolution66 dated June 30, 2010.
Undaunted, he elevated the matter to the CA via a petition for certiorari.67

The CA Ruling

In a Decision68 dated June 25, 2013, the CA reversed and set aside the NLRC ruling and accordingly, ordered
Carbonilla, Jr.'s reinstatement and the remand of the case to the LA for the computation of his full backwages,
inclusive of allowances and other benefits, as well as attorney's fees. 69 It held that the NLRC gravely abused its
discretion in declaring Carbonilla, Jr.'s dismissal as valid, considering that, other than CPMPC's series of
memoranda and self-serving allegations, it did not present substantial documents to support a conclusion that would

101
warrant Carbonilla, Jr.'s valid dismissal.70 In fine, CPMPC failed to discharge the burden of proving that Carbonilla,
Jr. 's dismissal was for just causes.71

Dissatisfied, petitioners moved for reconsideration,72 but the same was denied in a Resolution73 dated March 17,
2014; hence, this petition.

The Issue Before the Court

The core 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 Carbonilla, Jr. 's dismissal was valid.

The Court's Ruling

The petition is impressed with merit.

To justify the grant of the extraordinary remedy of certiorari, 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.74

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.75

Guided by the foregoing considerations, the Court finds that the CA committed reversible error in granting
Carbonilla, Jr. 's certiorari petition since the NLRC did not gravely abuse its discretion in ruling that he was validly
dismissed from employment as CPMPC was able to prove, through substantial evidence, the existence of just causes
warranting the same.

Basic is the rule that an employer may validly terminate the services of an employee for any of the just
causesenumerated under Article 296 (formerly Article 282) of the Labor Code,76 namely:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

As may be gathered from the tenor of CPMPC's Notice of Dismissal, it is apparent that Carbonilla, Jr.'s employment
was terminated on the grounds of, among others, serious misconduct and loss of trust and confidence. 77

On the first ground, case law characterizes misconduct as 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
injudgment.78 For misconduct to be considered as a just cause for termination, the following requisites must
concur: (a) the misconduct must be serious; (b) it must relate to the performance of the employee's duties showing
that the employee has become unfit to continue working for the employer; and (c) it must have been performed with
wrongful intent. 79

All of the foregoing requisites have been duly established in this case. Records reveal that Carbonilla, Jr. 's serious
misconduct consisted of him frequently exhibiting disrespectful and belligerent behavior, not only to his colleagues,
but also to his superiors. He even used his stature as a law graduate to insist that he is "above" them, often using
misguided legalese to weasel his way out of the charges against him, as well as to strong-arm his colleagues and
superiors into succumbing to his arrogance. Carbonilla Jr.'s obnoxious attitude is highlighted by the following
documents on record: (a) his reply to HRD 202 File 2008.02.26.036 dated February 26, 2008 wherein he threatened
HRD Manager Marquez with a lawsuit, stating that if the memorandum is "proven malicious, [she] might be
answerable to a certain degree of civil liability which the 1987 Constitution has given to individuals"; 80 (b) HRD 202

102
File 2008.06.26.086 dated June 26, 200881 wherein he berated COO Bentillo in front of her subordinates with the
statement: "[i]kaw ra may di mosalig ba, ka kwalipikado adto niya, maski mag contest pa mo, lupigon gani ka"82 or
"[y ]ou're the only one who doesn't trust her, she is very qualified, you even lose in comparison to her[,]" 83 and his
reply thereto wherein he dismissed the charge as made with malicious intent and aimed to discredit his
person;84 (c) HRD 202 File 2008.06.26.088 dated June 26, 200885 wherein he argued with the CEO Quevedo,
insisting that he had the authority to hire a new staff, and his reply thereto where he cited the Philippine Law
Dictionary to maintain that his act did not amount to insubordination;86 (d) HRD 202 File 2008.06.26.087 dated June
26, 200887 wherein he openly questioned the authority of HRD Manager Marquez in refusing to hire a new staff and
his reply thereto where he again cited the Philippine Law Dictionary to insist that he did not commit acts of
insubordination;88 and (e) HRD 202 File 2008.07.04.095 dated July 4, 200889 wherein he openly and improperly
confronted the CPMPC CEO during a Board of Directors' inquiry hearing, to which he again maintained that his acts
did not constitute misconduct, gross disrespect, and loss of trust and confidence as he was only looking after the
welfare of the cooperative.90

Indisputably, Carbonilla, Jr. 's demeanor towards his colleagues and superiors is serious in nature as it is not only
reflective of defiance but also breeds of antagonism in the work environment. Surely, within the bounds of law,
management has the rightful prerogative to take away dissidents and undesirables from the workplace. It should not
be forced to deal with difficult personnel, especially one who occupies a position of trust and confidence, as will be
later discussed, else it be compelled to act against the best interest of its business. Carbonilla, Jr.'s conduct is also
clearly work-related as all were incidents which sprung from the performance of his duties. Lastly, the misconduct
was performed with wrongful intent as no justifiable reason was presented to excuse the same. On the contrary,
Carbonilla, Jr. comes off as a smart aleck who would even go to the extent of dangling whatever knowledge he had
of the law against his employer in a combative manner. As succinctly put by CPMPC, "[e]very time [Carbonilla,
Jr.'s] attention was called for some inappropriate actions, he would always show his Book, Philippine Law
Dictionary and would ask the CEO or HRD Manager under what provision of the law he would be liable for the
complained action or omission."91 Irrefragably, CPMPC is justified in no longer tolerating the grossly discourteous
attitude of Carbonilla, Jr. as it constitutes conduct unbecoming of his managerial position and a serious breach of
order and discipline in the workplace.92

With all these factored in, CPMPC's dismissal of Carbonilla, Jr. on the ground of serious misconduct was amply
warranted.1âwphi1

For another, Carbonilla, Jr. 's dismissal was also justified on the ground of loss of trust and confidence. According to
jurisprudence, loss of trust and confidence will validate an employee's dismissal when it is shown that: (a) the
employee concerned holds a position of trust and confidence; and ( b) he performs an act that would justify such loss
of trust and confidence.93 There are two (2) classes of positions of trust: first, 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; and second, 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.94

Records reveal that Carbonilla, Jr. occupied a position of trust and confidence as he was employed as Credit and
Collection Manager, and later on, as Legal and Collection Manager, tasked with the duties of, among others,
handling the credit and collection activities of the cooperative, which included recommending loan approvals,
formulating and implementing credit and collection policies, and conducting trainings.95 With such responsibilities,
it is fairly evident that Carbonilla, Jr. is a managerial employee within the ambit of the first classification of
employees afore-discussed. The loss of CPMPC's trust and confidence in Carbonilla, Jr., as imbued in that position,
was later justified in light of the latter's commission of the following acts: (a) the forwarding of the mediation
settlements for notarization to a lawyer who was not the authorized legal retainer of CPMPC (HRD 202 File
2008.07.09.103 dated July 9, 200896); (b) the pull-out of important records and vital documents from the office
premises, which were either lost or returned already tampered and altered (HRD 202 File 2008.07.15.106 dated July
15, 200897 and HRD 202 File 2008.07.19.111 dated July 19, 200898); and (c) the incurring of unliquidated cash
advances related to the notarial transactions of the mediation agreements (HRD 202 File 2008.07.16.107 dated July
16, 200899). While Carbonilla, Jr. posited that these actuations were resorted with good intentions as he was only
finding ways for CPMPC to save up on legal fees, this defense can hardly hold, considering that all of these
transactions were not only highly irregular, but also done without the prior knowledge and consent of CPMPC's
management. Cast against this light, Carbonilla, Jr.'s performance of the said acts therefore gives CPMPC more than
enough reason to lose trust and confidence in him. To this, it must be emphasized that "employers are allowed a
wider latitude of discretion in terminating the services of employees who perform functions by which their nature
require the employer's full trust and confidence. Mere existence of basis for believing that the employee has
breached the trust and confidence of the employer is sufficient and does not require proof beyond reasonable doubt.
Thus, when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a labor
tribunal cannot deny the employer the authority to dismiss him,"100 as in this case.

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Perforce, having established the actual breaches of duty committed by Carbonilla, Jr. and CPMPC's observance of
due process, the Court no longer needs to further examine the other charges against Carbonilla, Jr., as it is already
clear that the CA erred in ascribing grave abuse of discretion on the part of the NLRC when the latter declared that
CPMPC validly dismissed Carbonilla, Jr. from his job. The totality and gravity of Carbonilla, Jr. 's infractions
throughout the course of his employment completely justified CPMPC's decision to finally terminate his
employment. The Court's pronouncement in Realda v. New Age Graphics, Inc.101 is instructive on this matter, to wit:

The totality of infractions or the number of violations committed during the period of employment shall be
considered in determining the penalty to be imposed upon an erring employee. The offenses committed by
petitioner should not be taken singly and separately. Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct and ability separate and
independent of each other. While it may be true that petitioner was penalized for his previous infractions, this does
not and should not mean that his employment record would be wiped clean of his infractions. After all, the record of
an employee is a relevant consideration in determining the penalty that should be meted out since an employee's past
misconduct and present behavior must be taken together in determining the proper imposable penalty[.] Despite the
sanctions imposed upon petitioner, he continued to commit misconduct and exhibit undesirable behavior on
board. Indeed, the employer cannot be compelled to retain a misbehaving employee, or one who is guilty of
acts inimical to its interests. 102 (Emphases and underscoring supplied)

On a final point, the Court notes that Carbonilla, Jr.'s award of unpaid salaries and 13th month pay were validly
offset by his accountabilities to CPMPC in the amount of P129,455.00.103 Pursuant to Article 1278104 in relation to
Article 1706105 of the Civil Code and Article 113 (c)106 of the Labor Code, compensation can take place between two
persons who are creditors and debtors of each other. 107 Considering that Carbonilla, Jr. had existing debts to CPMPC
which were incurred during the existence of the employer-employee relationship, the amount which may be due him
in wages was correctly deducted therefrom.

WHEREFORE, the petition is GRANTED. The Decision dated June 25, 2013 and the Resolution dated March 17,
2014 of the Court of Appeals in CA-G.R. CEB SP No. 05403 are hereby REVERSED and SET ASIDE.
Accordingly, the Decision dated April 29, 2010 and the Resolution dated June 30, 2010 of the National Labor
Relations Commission in NLRC Case No. VAC-10-000977-2009 declaring respondent Nicerato E. Carbonilla, Jr. to
have been validly dismissed by petitioner Cebu People's Multi-Purpose Cooperative are REINSTATED.

SO ORDERED.
MANSION PRINTING CENTER and G.R. No. 168120
CLEMENT CHENG,

Petitioners,

Present:

CARPIO, J.

Chairperson,
-versus-
PEREZ,

SERENO,

REYES, and

PERLAS-BERNABE, JJ.*

DIOSDADO BITARA, JR.

Promulgated:
Respondent.

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 January 25, 2012

x-----------------------------------------------------------------------------------------x

2. DECISION

PEREZ, J.:

Before us is a petition for review on certiorari seeking to reverse and set aside the issuances of the Court of
Appeals in CA-GR. SP No. 70965, to wit: (a) the Decision1 dated 18 March 2004 granting the petition
for certiorari under Rule 65 of herein respondent Diosdado Bitara, Jr.; and (b) the Resolution2 dated 10 May 2005
denying the petitioners Motion for Reconsideration of the Decision. The assailed decision of the Court of Appeals
reversed the findings of the National Labor Relations Commission3 and the Labor Arbiter4 that respondent was
validly dismissed from the service.

The Antecedents

Petitioner Mansion Printing Center is a single proprietorship registered under the name of its president and
co-petitioner Clement Cheng. It is engaged in the printing of quality self-adhesive labels, brochures, posters,
stickers, packaging and the like.5

Sometime in August 1998, petitioners engaged the services of respondent as a helper (kargador).
Respondent was later promoted as the company’s sole driver tasked to pick-up raw materials for the printing
business, collect account receivables and deliver the products to the clients within the delivery schedules. 6

105
 Petitioners aver that the timely delivery of the products to the clients is one of the foremost considerations
material to the operation of the business.7 It being so, they closely monitored the attendance of respondent. They
noted his habitual tardiness and absenteeism.

Thus, as early as 23 June 1999, petitioners issued a Memorandum8 requiring respondent to submit a written
explanation why no administrative sanction should be imposed on him for his habitual tardiness.

Several months after, respondent’s attention on the matter was again called to which he replied:

29 NOV. 1999

MR. CLEMENT CHENG

SIR:

I UNDERSTAND MY TARDINESS WHATEVER REASON I HAVE AFFECTS SOMEHOW

THE DELIVERY SCHEDULE OF THE COMPANY, THUS DISCIPLINARY ACTION WERE
IMPOSED TO ME BY THE MANAGEMENT. AND ON THIS END, ACCEPT MY APOLOGIES
AND REST ASSURED THAT I WILL COME ON TIME (ON OR BEFORE 8:30 AM) AND
WILLINGNESS TO EXTEND MY SERVICE AS A COMPANY DRIVER. WHATEVER HELP
NEEDED. (sic)

RESPECTFULLY YOURS,

(SGD.) DIOSDADO BITARA, JR.9

Despite respondent’s undertaking to report on time, however, he continued to disregard attendance policies.
His weekly time record for the first quarter of the year 200010 revealed that he came late nineteen (19) times out of
the forty-seven (47) times he reported for work. He also incurred nineteen (19) absences out of the sixty-six (66)
working days during the quarter. His absences without prior notice and approval from March 11-16, 2000 were
considered to be the most serious infraction of all11 because of its adverse effect on business operations.

Consequently, Davis Cheng, General Manager of the company and son of petitioner Cheng, issued on 17
March 2000 another Memorandum12 (Notice to Explain) requiring respondent to explain why his services should not
be terminated. He personally handed the Notice to Explain to respondent but the latter, after reading the directive,
refused to acknowledge receipt thereof.13 He did not submit any explanation and, thereafter, never reported for work.

On 21 March 2000, Davis Cheng personally served another Memorandum14 (Notice of Termination) upon
him informing him that the company found him grossly negligent of his duties, for which reason, his services were
terminated effective 1 April 2000.

On even date, respondent met with the management requesting for reconsideration of his termination from
the service. However, after hearing his position, the management decided to implement the 21 March 2000

106
 Memorandum. Nevertheless, the management, out of generosity, offered respondent financial assistance in the
amount of P6,110.00 equivalent to his one month salary. Respondent demanded that he be given the amount
equivalent to two (2) months’ salary but the management declined as it believed it would, in effect, reward
respondent for being negligent of his duties.15

On 27 April 2000, respondent filed a complaint16 for illegal dismissal against the petitioners before the
Labor Arbiter. He prayed for his reinstatement and for the payment of full backwages, legal holiday pay, service
incentive leave pay, damages and attorney’s fees.17

In his Position Paper18 filed with the Labor Arbiter, respondent claimed that he took a leave of absence
from March 17-23, 200019 due to an urgent family problem. He returned to work on 24 March 200020 but Davis
Cheng allegedly refused him admission because of his unauthorized absences. 21 On 1 April 2000, respondent was
summoned by Davis Cheng who introduced him to a lawyer, who, in turn, informed him that he will no longer be
admitted to work because of his 5-day unauthorized absences. Respondent explained that he was compelled to
immediately leave for the province on 17 March 200022 due to the urgency of the matter and his wife informed the
office that he will be absent for a week. The management found his explanation unacceptable and offered him an
amount equivalent to his one (1) month salary as separation pay but respondent refused the offer because he wanted
to keep the job.23 In his Reply to Respondents’ Position Paper,24 however, respondent averred that he rejected the
offer because he wanted an amount equivalent to one and a half months’ pay.

On 21 December 2000, the Labor Arbiter dismissed the complaint for lack of merit.25

On appeal to the National Labor Relations Commission (hereinafter referred to as the Commission), the findings of
the Labor Arbiter was AFFIRMED en toto. Thus, in its Resolution of 29 June 2001 in NLRC NCR CA No. 027871-
01, the Commission declared:

Upon Our review of the record of the case, We perceive no abuse of discretion as to
compel a reversal. Appellant failed to adduce convincing evidence to show that the Labor Arbiter in
rendering the assailed decision has acted in a manner inconsistent with the criteria set forth in the
foregoing pronouncement.

Neither are we persuaded to disturb the factual findings of the Labor Arbiter a quo. The
material facts as found are all in accordance with the evidence presented during the hearing as
shown by the record.

WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision
appealed from, the same is AFFIRMED en toto and the instant appeal DISMISSED for lack of
merit.26

It likewise denied respondent’s Motion for Reconsideration of the Resolution on 21 February 2002.27

Before the Court of Appeals, respondent sought the annulment of the Commission’s Resolution dated 29
June 2001 and Order dated 21 February 2002 on the ground that they were rendered with grave abuse of discretion
and/or without or in excess of jurisdiction.28

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 The Court of Appeals found for the respondent and reversed the findings of the Commission. The
dispositive portion of its Decision dated 18 March 2004 reads:

WHEREFORE, the petition is GRANTED. In lieu of the assailed Resolution and Order of
the respondent NLRC, a NEW DECISION is hereby rendered declaring petitioner Diosdado Bitara,
Jr. to have been Illegally Dismissed and, thus, entitled to the following:

1. Reinstatement or if no longer feasible, Separation Pay to be computed from the commencement of

his employment in August 1988 up to the time of his termination on April 1, 2000, including his
imputed service from April 1, 2000 until the finality of this decision, based on the salary rate
prevailing at the said finality;

2. Backwages, inclusive of allowances and other benefits, computed from April 1, 2000 up to the
finality of this decision, without qualification or deduction; and

3. 5-day Service Incentive Leave Pay for every year of service from the commencement of his
employment in August 1988 up to its termination on April 1, 2000.29

On 10 May 2005, the Court of Appeals denied respondent’s Motion for Reconsideration of the decision for
lack of merit. 30

Hence, the instant petition.31

Issue

The core issue in this case is whether or not the Court of Appeals correctly found that the Commission
acted without and/or in excess of jurisdiction and with grave abuse of discretion amounting to lack or excess of
jurisdiction (a) in upholding the termination of respondent’s employment and (b) in affirming the denial of his claim
for non-payment of holiday pay, service incentive leave pay, moral and exemplary damages.

Our Ruling

The petition is meritorious.

The special civil action for certiorari seeks to correct errors of jurisdiction and not errors of judgment.32

xxx The raison d’etre for the rule is when a court exercises its jurisdiction, an error
committed while so engaged does not deprive it of the jurisdiction being exercised when the
error is committed. If it did, every error committed by a court would deprive it of its jurisdiction
and every erroneous judgment would be a void judgment. xxx Hence, where the issue or question
involved affects the wisdom or legal soundness of the decision – not the jurisdiction of the
court to render said decision – the same is beyond the province of a special civil action for
certiorari. xxx33

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 xxx [J]udicial review does not go as far as to evaluate the sufficiency of evidence upon
which the Labor Arbiter and NLRC based their determinations, the inquiry being limited
essentially to whether or not said public respondents had acted without or in excess of its
jurisdiction or with grave abuse of discretion.34 The said rule directs us to merely determine
whether there is basis established on record to support the findings of a tribunal and such findings
meet the required quantum of proof, which in this case, is substantial evidence. Our deference to
the expertise acquired by quasi-judicial agencies and the limited scope granted to us in the
exercise of certiorari jurisdiction restrain us from going so far as to probe into the correctness of a
tribunal’s evaluation of evidence, unless there is palpable mistake and complete disregard thereof
in which case certiorari would be proper.35

It is on the alleged lack of substantial evidence that the Court of Appeals found for the respondents, thereby
reversing the decision of the Commission.

We hold otherwise.

Upon examination of the documents presented by the parties, we are convinced that the finding of facts on
which the conclusions of the Commission and the Labor Arbiter were based was actually supported bysubstantial
evidence – “that amount of relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other minds, equally reasonable, might conceivably opine otherwise.”36(Emphasis supplied.)

In order to validly dismiss an employee, the employer is required to observe both substantive and
procedural aspects – the termination of employment must be based on a just or authorized cause of dismissal and the
dismissal must be effected after due notice and hearing.37

Substantive Due Process

We cannot agree with the Court of Appeals that the sole basis of the termination of respondent’s
employment was his absences from March 11-16, 2000.

Indeed, the Notice to Explain38 clearly stated:

We are seriously considering your termination from service, and for this reason you
are directed to submit a written explanation, within seventy-two hours from your receipt of this
notice, why you should not be terminated from service for failure to report for work without
verbal or written notice or permission on March 11, 13, 14, 15 and 16, 2000. xxx (Emphasis
supplied.)

To give full meaning and substance to the Notice to Explain, however, the paragraph should be read together with its
preceding paragraph, to wit:

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 We have time and again, verbally and formally, called your attention to your
negligence from your tardiness and your frequent absences without any notice but still, you
remain to ignore our reminder. As you know, we are in need of a regular driver and your action
greatly affected the operation of our company. (Emphasis supplied.)

Necessarily, he was considered for termination of employment because of his previous infractions capped
by his recent unauthorized absences from March 11-16, 2000.

That the recent absences were unauthorized were satisfactorily established by petitioners. Two (2)
employees of the company belied the claim of respondent’s wife Mary Ann Bitara that she called the office on 11
March 2000, and, through a certain Delia, as allegedly later identified by respondent, informed petitioners that her
husband would take a leave of absence for a week because he went to the province.39

Delia Abalos, a “binder/finisher” of the company, stated in her Affidavit that she never received a call from
respondent nor his wife regarding his absences from March 11-16 and 17-23 during the month of March 2000.40 On
the other hand, Ritchie Distor, a messenger of the company, narrated in his Affidavit that, upon instruction of the
Management, he went to respondent’s house on 13 March 2000 to require him to report for work. Instead of relaying
the message to him, as respondent would have it, the wife informed him that respondent had already left the house
but that she did not know where he was going.41

The Court of Appeals relied heavily on our ruling in Stellar Industrial Services, Inc. vs. NLRC,42 which is
not on all fours with the present case. In that case, the employer dismissed respondent for non-observance of
company rules and regulations. On the basis of the facts presented, this Court honored the questioned medical
certificate justifying the absences he incurred. It further ratiocinated:

xxx [P]rivate respondent’s absences, as already discussed, were incurred with due notice
and compliance with company rules and he had not thereby committed a “similar offense” as those
he had committed in the past [to wit: gambling, for which he was preventively suspended; habitual
tardiness for which he received several warnings; and violation of company rules for carrying three
sacks of rice, for which he was required to explain.] xxx To refer to those earlier violations as added
grounds for dismissing him is doubly unfair to private respondent.43 (Emphasis supplied.)

In the present case, however, petitioners have repeatedly called the attention of respondent concerning his
habitual tardiness. The Memorandum dated 23 June 1999 of petitioner Cheng required him to explain his tardiness.
Also in connection with a similar infraction, respondent even wrote petitioner Cheng a letter dated 29 November
1999 where he admitted that his tardiness has affected the delivery schedules of the company, offered an apology,
and undertook to henceforth report for duty on time. Despite this undertaking, he continued to either absent himself
from work or report late during the first quarter of 2000.

We, therefore, agree with the Labor Arbiter’s findings, to wit:

The imputed absence and tardiness of the complainant are documented. He faltered on his
attendance 38 times of the 66 working days. His last absences on 11, 13, 14, 15 and 16 March
2000 were undertaken without even notice/permission from management. These attendance
delinquencies may be characterized as habitual and are sufficient justifications to terminate the
complainant’s employment.44

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 On this score, Valiao v. Court of Appeals45 is instructive:

xxx It bears stressing that petitioner’s absences and tardiness were not isolated incidents
but manifested a pattern of habituality. xxx The totality of infractions or the number of violations
committed during the period of employment shall be considered in determining the penalty to be
imposed upon an erring employee. The offenses committed by him should not be taken singly and
separately but in their totality. Fitness for continued employment cannot be compartmentalized into
tight little cubicles of aspects of character, conduct, and ability separate and independent of each
other.46

There is likewise no merit in the observation of the Court of Appeals that the petitioners themselves are not
certain of the official time of their employees after pointing out the seeming inconsistencies between the statement
of the petitioners that “there is no need for written rules since even the [respondent] is aware that his job starts from
8 am to 5 pm”47 and its Memorandum of 23 June 1999, where it was mentioned that respondent’s official time was
from 8:30 a.m. to 5:30 p.m. On the contrary, it was clearly stated in the Memorandum that the Management adjusted
his official time from 8:00 a.m. to 5:00 p.m. to 8:30 a.m. to 5:30 p.m.to hopefully solve the problem on his
tardiness.48

Neither is there basis to hold that the company tolerates the offsetting of undertime with overtime services.
The Weekly Time Record relied upon by respondent does not conclusively confirm the alleged practice.

In Valiao,49 we defined gross negligence as “want of care in the performance of one’s

50
duties” and habitual neglect as “repeated failure to perform one’s duties for a period of time, depending upon the
circumstances.”51 These are not overly technical terms, which, in the first place, are expressly sanctioned by the
Labor Code of the Philippines, to wit:

ART. 282. Termination by employer. - An employer may terminate an employment for any of the
following causes:

(a) xxx

(b) Gross and habitual neglect by the employee of his duties;

xxx

Clearly, even in the absence of a written company rule defining gross and habitual neglect of duties, respondent’s
omissions qualify as such warranting his dismissal from the service.

We cannot simply tolerate injustice to employers if only to protect the welfare of undeserving employees.
As aptly put by then Associate Justice Leonardo A. Quisumbing:

Needless to say, so irresponsible an employee like petitioner does not deserve a place in
the workplace, and it is within the management’s prerogative xxx to terminate his employment.
Even as the law is solicitous of the welfare of employees, it must also protect the rights of an
employer to exercise what are clearly management prerogatives. As long as the company’s exercise
of those rights and prerogative is in good faith to advance its interest and not for the purpose of
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 defeating or circumventing the rights of employees under the laws or valid agreements, such
exercise will be upheld.52

And, in the words of then Associate Justice Ma. Alicia Austria-Martinez in Philippine Long Distance and
Telephone Company, Inc. v. Balbastro:53

While it is true that compassion and human consideration should guide the disposition of
cases involving termination of employment since it affects one's source or means of livelihood, it
should not be overlooked that the benefits accorded to labor do not include compelling an employer
to retain the services of an employee who has been shown to be a gross liability to the employer.
The law in protecting the rights of the employees authorizes neither oppression nor self-destruction
of the employer.54 It should be made clear that when the law tilts the scale of justice in favor of
labor, it is but a recognition of the inherent economic inequality between labor and management.
The intent is to balance the scale of justice; to put the two parties on relatively equal positions.
There may be cases where the circumstances warrant favoring labor over the interests of
management but never should the scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to be denied to none).55

Procedural Due Process

Procedural due process entails compliance with the two-notice rule in dismissing an employee, to wit: (1)
the employer must inform the employee of the specific acts or omissions for which his dismissal is sought; and (2)
after the employee has been given the opportunity to be heard, the employer must inform him of the decision to
terminate his employment.56

Respondent claimed that he was denied due process because the company did not observe the two-notice
rule. He maintained that the Notice of Explanation and the Notice of Termination, both of which he allegedly
refused to sign, were never served upon him.57

The Court of Appeals favored respondent and ruled in this wise:

Furthermore, We believe that private respondents failed to afford petitioner due process.
The allegation of private respondents that petitioner refused to sign the memoranda dated March 17
and 21, 2000 despite receipt thereof is not only lame but also implausible. First, the said allegation is
self-serving and unsubstantiated. Second, a prudent employer would simply not accept such mere
refusal, but would exert effort to observe the mandatory requirement of due process. We cannot
accept the self-serving claim of respondents that petitioner refused to sign both memoranda.
Otherwise, We would be allowing employers to do away with the mandatory twin-notice rule in the
termination of employees. We find more credible the claim of petitioner that he was illegally
dismissed on April 1, 2000 when the lawyer of the company informed him, without prior notice and
in derogation of his right to due process, of his termination by offering him a 1-month salary as
separation pay. The petitioner’s immediate filing of a complaint for illegal dismissal on April 27,
2000 reinforced Our belief that petitioner was illegally dismissed and was denied due
process.58 (Emphasis in the original.)

We rule otherwise.

In Bughaw v. Treasure Island Industrial Corporation,59 this Court, in verifying the veracity of the allegation
that respondent refused to receive the Notice of Termination, essentially looked for the following: (1) affidavit of

112
 service stating the reason for failure to serve the notice upon the recipient; and (2) a notation to that effect, which
shall be written on the notice itself.60 Thus:

xxx Bare and vague allegations as to the manner of service and the circumstances
surrounding the same would not suffice. A mere copy of the notice of termination allegedly sent by
respondent to petitioner, without proof of receipt, or in the very least, actual service thereof upon
petitioner, does not constitute substantial evidence. It was unilaterally prepared by the petitioner
and, thus, evidently self-serving and insufficient to convince even an unreasonable mind.61

Davis Cheng, on the other hand, did both. First, he indicated in the notices the notation that respondent
“refused to sign” together with the corresponding dates of service. Second, he executed an Affidavit dated 29 July
2000 stating that: (1) he is the General Manager of the company; (2) he personally served each notice upon
respondent, when respondent went to the office/factory on 17 March 2000 and 21 March 2000, respectively; and (3)
on both occasions, after reading the contents of the memoranda, respondent refused to acknowledge receipt thereof.
We are, thus, convinced that the notices have been validly served.

Premises considered, we find that respondent was accorded both substantive and procedural due process.

II

As to respondent’s monetary claims, petitioners did not deny respondent’s entitlement to service incentive
leave pay as, indeed, it is indisputable that he is entitled thereto. In Fernandez v. NLRC,62 this Court elucidated:

The clear policy of the Labor Code is to grant service incentive leave pay to workers in
all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations63 provides that “[e]very employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.” Service
incentive leave is a right which accrues to every employee who has served “within 12 months,
whether continuous or broken reckoned from the date the employee started working, including
authorized absences and paid regular holidays unless the working days in the establishment as a
matter of practice or policy, or that provided in the employment contracts, is less than 12 months,
in which case said period shall be considered as one year.”64 It is also “commutable to its money
equivalent if not used or exhausted at the end of the year.” 65 In other words, an employee who has
served for one year is entitled to it. He may use it as leave days or he may collect its monetary
value. xxx66 (Emphasis supplied.)

Be that as it may, petitioners failed to establish by evidence that respondent had already used the service
incentive leave when he incurred numerous absences notwithstanding that employers have complete control over the
records of the company so much so that they could easily show payment of monetary claims against them by merely
presenting vouchers or payrolls,67 or any document showing the off-setting of the payment of service incentive leave
with the absences, as acknowledged by the absentee, if such is the company policy. Petitioners presented none.

We thus quote with approval the findings of the Court of Appeals on the following:

[P]rivate respondents bear the burden to prove that employees have received these benefits
in accordance with law. It is incumbent upon the employer to present the necessary documents to
prove such claim. Although private respondents labored to show that they paid petitioner his
holiday pay, no similar effort was shown with regard to his service incentive leave pay. We do not

113
 agree with the Labor Arbiter’s conclusion that petitioner’s service incentive leave pay has been
used up by his numerous absences, there being no proof to that effect.68

As to the payment of holiday pay, we are convinced that respondent had already received the same based
on the cash vouchers on record.

Accordingly, we affirm the ruling of the National Labor Relations Commission that the dismissal was valid.
However, respondent shall be entitled to the money equivalent of the five-day service incentive leave pay for every
year of service from the commencement of his employment in August 1988 up to its termination on 1 April 2000.
The Labor Arbiter shall compute the corresponding amount.

WHEREFORE, the Resolution dated 29 June 2001 and the Order dated 21 February 2002 of the National
Labor Relations Commission in NLRC NCR CASE No. 027871-01 are hereby REINSTATED with
the MODIFICATION that petitioners are ORDERED to pay respondent the money equivalent of the five-day
service incentive leave for every year of service covering his employment period from August 1988 to 1 April 2000.
This case is hereby REMANDED to the Labor Arbiter for the computation of respondent’s service incentive leave
pay.

SO ORDERED.
ARMANDO ALILING, G.R. No. 185829
Petitioner,
Present:

- versus - VELASCO, JR., J., Chairperson

PERALTA,
ABAD,
JOSE B. FELICIANO, MANUEL BERSAMIN, JJ. MENDOZA, and
F. SAN MATEO III, JOSEPH R. PERLAS-BERNABE, JJ.
LARIOSA, and WIDE WIDE Promulgated:
WORLD EXPRESS CORPORATION,
Respondents. Promulgated:

April 25, 2012

x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 assails and seeks to set aside the July 3, 2008
Decision[1] and December 15, 2008 Resolution[2] of the Court of Appeals (CA), in CA-G.R. SP No. 101309,
entitled Armando Aliling v. National Labor Relations Commission, Wide Wide World Express Corporation, Jose B.
Feliciano, Manuel F. San Mateo III and Joseph R. Lariosa. The assailed issuances modified the Resolutions dated
May 31, 2007[3] and August 31, 2007[4] rendered by the National Labor Relations Commission (NLRC) in NLRC
NCR Case No. 00-10-11166-2004, affirming the Decision dated April 25, 2006[5] of the Labor Arbiter.
The Facts

Via a letter dated June 2, 2004, [6] respondent Wide Wide World Express Corporation (WWWEC) offered to employ
petitioner Armando Aliling (Aliling) as Account Executive (Seafreight Sales), with the following compensation
package: a monthly salary of PhP 13,000, transportation allowance of PhP 3,000, clothing allowance of PhP 800,
cost of living allowance of PhP 500, each payable on a per month basis and a 14 th month pay depending on the
profitability and availability of financial resources of the company. The offer came with a six (6)-month probation
period condition with this express caveat: Performance during [sic] probationary period shall be made as basis for
confirmation to Regular or Permanent Status.

On June 11, 2004, Aliling and WWWEC inked an Employment Contract[7] under the following terms, among others:
114
 Conversion to regular status shall be determined on the basis of work performance; and

Employment services may, at any time, be terminated for just cause or in accordance with the
standards defined at the time of engagement.[8]

Training then started. However, instead of a Seafreight Sale assignment, WWWEC asked Aliling to handle
Ground Express (GX), a new company product launched on June 18, 2004 involving domestic cargo forwarding
service for Luzon. Marketing this product and finding daily contracts for it formed the core of Alilings new
assignment.

Barely a month after, Manuel F. San Mateo III (San Mateo), WWWEC Sales and Marketing Director,
emailed Aliling[9] to express dissatisfaction with the latters performance, thus:

Armand,

My expectations is [sic] that GX Shuttles should be 80% full by the 3 rd week (August 5) after
launch (July 15). Pls. make that happen. It has been more than a month since you came in. I am
expecting sales to be pumping in by now. Thanks.

Nonong

Thereafter, in a letter of September 25, 2004, [10] Joseph R. Lariosa (Lariosa), Human Resources Manager of
WWWEC, asked Aliling to report to the Human Resources Department to explain his absence taken without leave
from September 20, 2004.

Aliling responded two days later. He denied being absent on the days in question, attaching to his reply-letter [11] a
copy of his timesheet [12] which showed that he worked from September 20 to 24, 2004. Alilings explanation came
with a query regarding the withholding of his salary corresponding to September 11 to 25, 2004.

In a separate letter dated September 27, 2004,[13] Aliling wrote San Mateo stating: Pursuant to your instruction on
September 20, 2004, I hereby tender my resignation effective October 15, 2004. While WWWEC took no action on
his tender, Aliling nonetheless demanded reinstatement and a written apology, claiming in a subsequent letter dated
October 1, 2004[14] to management that San Mateo had forced him to resign.

Lariosas response-letter of October 1, 2004, [15] informed Aliling that his case was still in the process of being
evaluated. On October 6, 2004,[16] Lariosa again wrote, this time to advise Aliling of the termination of his services
effective as of that date owing to his non-satisfactory performance during his probationary period. Records show
that Aliling, for the period indicated, was paid his outstanding salary which consisted of:

PhP 4,988.18 (salary for the September 25, 2004 payroll)

1,987.28 (salary for 4 days in October 2004)
-------------
PhP 6,975.46 Total

Earlier, however, or on October 4, 2004, Aliling filed a Complaint [17] for illegal dismissal due to forced resignation,
nonpayment of salaries as well as damages with the NLRC against WWWEC. Appended to the complaint was
Alilings Affidavit dated November 12, 2004,[18] in which he stated: 5. At the time of my engagement, respondents did
not make known to me the standards under which I will qualify as a regular employee.
Refuting Alilings basic posture, WWWEC stated in its Position Paper dated November 22, 2004 [19] that, in
addition to the letter-offer and employment contract adverted to, WWWEC and Aliling have signed a letter of
appointment[20] on June 11, 2004 containing the following terms of engagement:

Additionally, upon the effectivity of your probation, you and your immediate superior are
required to jointly define your objectives compared with the job requirements of the position.
Based on the pre-agreed objectives, your performance shall be reviewed on the 3 rd month to
assess your competence and work attitude. The 5th month Performance Appraisal shall be
the basis in elevating or confirming your employment status from Probationary to Regular.

Failure to meet the job requirements during the probation stage means that your services may be
terminated without prior notice and without recourse to separation pay.

WWWEC also attached to its Position Paper a memo dated September 20, 2004 [21] in which San Mateo asked Aliling
to explain why he should not be terminated for failure to meet the expected job performance, considering that the
load factor for the GX Shuttles for the period July to September was only 0.18% as opposed to the allegedly agreed
upon load of 80% targeted for August 5, 2004. According to WWWEC, Aliling, instead of explaining himself,
simply submitted a resignation letter.

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In a Reply-Affidavit dated December 13, 2004,[22] Aliling denied having received a copy of San Mateos September
20, 2004 letter.

Issues having been joined, the Labor Arbiter issued on April 25, 2006 [23] a Decision declaring Alilings termination as
unjustified. In its pertinent parts, the decision reads:

The grounds upon which complainants dismissal was based did not conform not only the standard
but also the compliance required under Article 281 of the Labor Code, Necessarily, complainants
termination is not justified for failure to comply with the mandate the law requires. Respondents
should be ordered to pay salaries corresponding to the unexpired portion of the contract of
employment and all other benefits amounting to a total of THIRTY FIVE THOUSAND EIGHT
HUNDRED ELEVEN PESOS (P35,811.00) covering the period from October 6 to December 7,
2004, computed as follows:

Unexpired Portion of the Contract:

Basic Salary P13,000.00

Transportation 3,000.00
Clothing Allowance 800.00
ECOLA 500.00
--------------
P17,300.00

10/06/04 12/07/04
P17,300.00 x 2.7 mos. = P35,811.00

Complainants 13th month pay proportionately for 2004 was not shown to have been paid to
complainant, respondent be made liable to him therefore computed at SIX THOUSAND FIVE
HUNDRED THIRTY TWO PESOS AND 50/100 (P6,532.50).

For engaging the services of counsel to protect his interest, complainant is likewise entitled to a
10% attorneys fees of the judgment amount. Such other claims for lack of basis sufficient to
support for their grant are unwarranted.

WHEREFORE, judgment is hereby rendered ordering respondent company to pay complainant

Armando Aliling the sum of THIRTY FIVE THOUSAND EIGHT HUNDRED ELEVEN PESOS
(P35,811.00) representing his salaries and other benefits as discussed above.

Respondent company is likewise ordered to pay said complainant the amount of TEN
THOUSAND SEVEN HUNDRED SIXTY SIX PESOS AND 85/100 ONLY (10.766.85)
representing his proportionate 13th month pay for 2004 plus 10% of the total judgment as and by
way of attorneys fees.

Other claims are hereby denied for lack of merit. (Emphasis supplied.)

The labor arbiter gave credence to Alilings allegation about not receiving and, therefore, not bound by, San Mateos
purported September 20, 2004 memo. The memo, to reiterate, supposedly apprised Aliling of the sales quota he was,
but failed, to meet. Pushing the point, the labor arbiter explained that Aliling cannot be validly terminated for non-
compliance with the quota threshold absent a prior advisory of the reasonable standards upon which his performance
would be evaluated.

Both parties appealed the above decision to the NLRC, which affirmed the Decision in toto in its Resolution dated
May 31, 2007. The separate motions for reconsideration were also denied by the NLRC in its Resolution dated
August 31, 2007.

Therefrom, Aliling went on certiorari to the CA, which eventually rendered the assailed Decision, the dispositive
portion of which reads:
WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of respondent
(Third Division) National Labor Relations Commission are AFFIRMED, with the following
MODIFICATION/CLARIFICATION: Respondents Wide Wide World Express Corp. and its
officers, Jose B. Feliciano, Manuel F. San Mateo III and Joseph R. Lariosa, are jointly and
severally liable to pay petitioner Armando Aliling: (A) the sum of Forty Two Thousand Three
Hundred Thirty Three & 50/100 (P42,333.50) as the total money judgment, (B) the sum of Four
Thousand Two Hundred Thirty Three & 35/100 (P4,233.35) as attorneys fees, and (C) the
additional sum equivalent to one-half (1/2) month of petitioners salary as separation pay.

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 SO ORDERED.[24] (Emphasis supplied.)

The CA anchored its assailed action on the strength of the following premises: (a) respondents failed to prove that
Alilings dismal performance constituted gross and habitual neglect necessary to justify his dismissal; (b) not having
been informed at the time of his engagement of the reasonable standards under which he will qualify as a regular
employee, Aliling was deemed to have been hired from day one as a regular employee; and (c) the strained
relationship existing between the parties argues against the propriety of reinstatement.

Alilings motion for reconsideration was rejected by the CA through the assailed Resolution dated December 15,
2008.

Hence, the instant petition.

The Issues

Aliling raises the following issues for consideration:

A. The failure of the Court of Appeals to order reinstatement (despite its finding that
petitioner was illegally dismissed from employment) is contrary to law and applicable
jurisprudence.

B. The failure of the Court of Appeals to award backwages (even if it did not order
reinstatement) is contrary to law and applicable jurisprudence.
C. The failure of the Court of Appeals to award moral and exemplary damages (despite
its finding that petitioner was dismissed to prevent the acquisition of his regular status) is contrary
to law and applicable jurisprudence.[25]

In their Comment,[26] respondents reiterated their position that WWWEC hired petitioner on a probationary
basis and fired him before he became a regular employee.

The Courts Ruling

The petition is partly meritorious.

Petitioner is a regular employee

On a procedural matter, petitioner Aliling argues that WWWEC, not having appealed from the judgment of
CA which declared Aliling as a regular employee from the time he signed the employment contract, is now
precluded from questioning the appellate courts determination as to the nature of his employment.

Petitioner errs. The Court has, when a case is on appeal, the authority to review matters not specifically
raised or assigned as error if their consideration is necessary in reaching a just conclusion of the case. We said as
much in Sociedad Europea de Financiacion, SA v. Court of Appeals,[27] It is axiomatic that an appeal, once accepted
by this Court, throws the entire case open to review, and that this Court has the authority to review matters not
specifically raised or assigned as error by the parties, if their consideration is necessary in arriving at a just
resolution of the case.

The issue of whether or not petitioner was, during the period material, a probationary or regular employee
is of pivotal import. Its resolution is doubtless necessary at arriving at a fair and just disposition of the controversy.

The Labor Arbiter cryptically held in his decision dated April 25, 2006 that:

Be that as it may, there appears no showing that indeed the said September 20, 2004
Memorandum addressed to complainant was received by him. Moreover, complainants tasked
where he was assigned was a new developed service. In this regard, it is noted:

Due process dictates that an employee be apprised beforehand of the conditions

of his employment and of the terms of advancement therein. Precisely, implicit in Article
281 of the Labor Code is the requirement that reasonable standards be previously made
known by the employer to the employee at the time of his engagement (Ibid, citing
Sameer Overseas Placement Agency, Inc. vs. NLRC, G.R. No. 132564, October 20,
1999).[28]

From our review, it appears that the labor arbiter, and later the NLRC, considered Aliling a probationary
employee despite finding that he was not informed of the reasonable standards by which his probationary
employment was to be judged.
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 The CA, on the other hand, citing Cielo v. National Labor Relations Commission,[29] ruled that petitioner
was a regular employee from the outset inasmuch as he was not informed of the standards by which his probationary
employment would be measured. The CA wrote:

Petitioner was regularized from the time of the execution of the employment contract on
June 11, 2004, although respondent company had arbitrarily shortened his tenure. As pointed
out, respondent company did not make known the reasonable standards under which he will
qualify as a regular employee at the time of his engagement. Hence, he was deemed to have
been hired from day one as a regular employee.[30] (Emphasis supplied.)

WWWEC, however, excepts on the argument that it put Aliling on notice that he would be evaluated on the
3rd and 5th months of his probationary employment. To WWWEC, its efforts translate to sufficient compliance with
the requirement that a probationary worker be apprised of the reasonable standards for his regularization. WWWEC
invokes the ensuing holding in Alcira v. National Labor Relations Commission[31] to support its case:

Conversely, an employer is deemed to substantially comply with the rule on notification

of standards if he apprises the employee that he will be subjected to a performance evaluation on a
particular date after his hiring. We agree with the labor arbiter when he ruled that:

In the instant case, petitioner cannot successfully say that he was never informed
by private respondent of the standards that he must satisfy in order to be converted into
regular status. This rans (sic) counter to the agreement between the parties that after
five months of service the petitioners performance would be evaluated. It is only but
natural that the evaluation should be made vis--vis the performance standards for the job.
Private respondent Trifona Mamaradlo speaks of such standard in her affidavit referring
to the fact that petitioner did not perform well in his assigned work and his attitude was
below par compared to the companys standard required of him. (Emphasis supplied.)

WWWECs contention is untenable.

Alcira is cast under a different factual setting. There, the labor arbiter, the NLRC, the CA, and even finally
this Court were one in their findings that the employee concerned knew, having been duly informed during his
engagement, of the standards for becoming a regular employee. This is in stark contrast to the instant case where the
element of being informed of the regularizing standards does not obtain. As such, Alcira cannot be made to apply to
the instant case.

To note, the June 2, 2004 letter-offer itself states that the regularization standards or the performance norms
to be used are still to be agreed upon by Aliling and his supervisor. WWWEC has failed to prove that an
agreement as regards thereto has been reached. Clearly then, there were actually no performance standards to speak
of. And lest it be overlooked, Aliling was assigned to GX trucking sales, an activity entirely different to the
Seafreight Sales he was originally hired and trained for. Thus, at the time of his engagement, the standards relative
to his assignment with GX sales could not have plausibly been communicated to him as he was under Seafreight
Sales. Even for this reason alone, the conclusion reached in Alcira is of little relevant to the instant case.

Based on the facts established in this case in light of extant jurisprudence, the CAs holding as to the kind of
employment petitioner enjoyed is correct. So was the NLRC ruling, affirmatory of that of the labor arbiter. In the
final analysis, one common thread runs through the holding of the labor arbiter, the NLRC and the CA, i.e.,
petitioner Aliling, albeit hired from managements standpoint as a probationary employee, was deemed a regular
employee by force of the following self-explanatory provisions:

Article 281 of the Labor Code

ART. 281. Probationary employment. - Probationary employment shall not exceed six (6)
months from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee. (Emphasis supplied.)

Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code

Sec. 6. Probationary employment. There is probationary employment where the

employee, upon his engagement, is made to undergo a trial period where the employee determines
his fitness to qualify for regular employment, based on reasonable standards made known to him
at the time of engagement.
Probationary employment shall be governed by the following rules:
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 xxxx

(d) In all cases of probationary employment, the employer shall make known to the
employee the standards under which he will qualify as a regular employee at the time of his
engagement. Where no standards are made known to the employee at that time, he shall
be deemed a regular employee. (Emphasis supplied.)

To repeat, the labor arbiter, NLRC and the CA are agreed, on the basis of documentary evidence adduced,
that respondent WWWEC did not inform petitioner Aliling of the reasonable standards by which his probation
would be measured against at the time of his engagement. The Court is loathed to interfere with this factual
determination. As We have held:

Settled is the rule that the findings of the Labor Arbiter, when affirmed by the
NLRC and the Court of Appeals, are binding on the Supreme Court, unless patently
erroneous. It is not the function of the Supreme Court to analyze or weigh all over again the
evidence already considered in the proceedings below. The jurisdiction of this Court in a petition
for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual
findings being assailed are not supported by evidence on record or the impugned judgment is
based on a misapprehension of facts.[32]

The more recent Peafrancia Tours and Travel Transport, Inc., v. Sarmiento [33] has reaffirmed the above
ruling, to wit:

Finally, the CA affirmed the ruling of the NLRC and adopted as its own the latter's
factual findings. Long-established is the doctrine that findings of fact of quasi-judicial bodies x x x
are accorded respect, even finality, if supported by substantial evidence. When passed upon and
upheld by the CA, they are binding and conclusive upon this Court and will not normally be
disturbed. Though this doctrine is not without exceptions, the Court finds that none are applicable
to the present case.

WWWEC also cannot validly argue that the factual findings being assailed are not supported by
evidence on record or the impugned judgment is based on a misapprehension of facts. Its very own letter-offer
of employment argues against its above posture. Excerpts of the letter-offer:

Additionally, upon the effectivity of your probation, you and your immediate superior
are required to jointly define your objectives compared with the job requirements of the
position. Based on the pre-agreed objectives, your performance shall be reviewed on the 3rd
month to assess your competence and work attitude. The 5th month Performance Appraisal shall
be the basis in elevating or confirming your employment status from Probationary to Regular.

Failure to meet the job requirements during the probation stage means that your services
may be terminated without prior notice and without recourse to separation pay. (Emphasis
supplied.)

Respondents further allege that San Mateos email dated July 16, 2004 shows that the standards for his
regularization were made known to petitioner Aliling at the time of his engagement. To recall, in that email
message, San Mateo reminded Aliling of the sales quota he ought to meet as a condition for his continued
employment, i.e., that the GX trucks should already be 80% full by August 5, 2004. Contrary to respondents
contention, San Mateos email cannot support their allegation on Aliling being informed of the standards for his
continued employment, such as the sales quota, at the time of his engagement. As it were, the email message was
sent to Aliling more than a month after he signed his employment contract with WWWEC. The aforequoted Section
6 of the Implementing Rules of Book VI, Rule VIII-A of the Code specifically requires the employer to inform the
probationary employee of such reasonable standards at the time of his engagement, not at any time later; else, the
latter shall be considered a regular employee. Thus, pursuant to the explicit provision of Article 281 of the Labor
Code, Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code and settled jurisprudence,
petitioner Aliling is deemed a regular employee as of June 11, 2004, the date of his employment contract.

Petitioner was illegally dismissed

To justify fully the dismissal of an employee, the employer must, as a rule, prove that the dismissal was for
a just cause and that the employee was afforded due process prior to dismissal. As a complementary principle, the
employer has the onus of proving with clear, accurate, consistent, and convincing evidence the validity of the
dismissal.[34]
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 WWWEC had failed to discharge its twin burden in the instant case.

First off, the attendant circumstances in the instant case aptly show that the issue of petitioners alleged
failure to achieve his quota, as a ground for terminating employment, strikes the Court as a mere afterthought on the
part of WWWEC. Consider: Lariosas letter of September 25, 2004 already betrayed managements intention to
dismiss the petitioner for alleged unauthorized absences. Aliling was in fact made to explain and he did so
satisfactorily. But, lo and behold, WWWEC nonetheless proceeded with its plan to dismiss the petitioner for non-
satisfactory performance, although the corresponding termination letter dated October 6, 2004 did not even
specifically state Alilings non-satisfactory performance, or that Alilings termination was by reason of his failure to
achieve his set quota.

What WWWEC considered as the evidence purportedly showing it gave Aliling the chance to explain his
inability to reach his quota was a purported September 20, 2004 memo of San Mateo addressed to the latter.
However, Aliling denies having received such letter and WWWEC has failed to refute his contention of non-receipt.
In net effect, WWWEC was at a loss to explain the exact just reason for dismissing Aliling.

At any event, assuming for argument that the petitioner indeed failed to achieve his sales quota, his
termination from employment on that ground would still be unjustified.

Article 282 of the Labor Code considers any of the following acts or omission on the part of the employee
as just cause or ground for terminating employment:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer
or any immediate member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing. (Emphasis supplied)

In Lim v. National Labor Relations Commission,[35] the Court considered inefficiency as an analogous just
cause for termination of employment under Article 282 of the Labor Code:

We cannot but agree with PEPSI that gross inefficiency falls within the purview of
other causes analogous to the foregoing, this constitutes, therefore, just cause to terminate an
employee under Article 282 of the Labor Code. One is analogous to another if it is susceptible
of comparison with the latter either in general or in some specific detail; or has a close relationship
with the latter. Gross inefficiency is closely related to gross neglect, for both involve specific acts
of omission on the part of the employee resulting in damage to the employer or to his business.
In Buiser vs. Leogardo, this Court ruled that failure to observed prescribed standards to
inefficiency may constitute just cause for dismissal. (Emphasis supplied.)

It did so anew in Leonardo v. National Labor Relations Commission[36] on the following rationale:
An employer is entitled to impose productivity standards for its workers, and in fact, non-
compliance may be visited with a penalty even more severe than demotion. Thus,

[t]he practice of a company in laying off workers because they failed to make
the work quota has been recognized in this jurisdiction. (Philippine American
Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at
bar, the petitioners' failure to meet the sales quota assigned to each of them constitute a
just cause of their dismissal, regardless of the permanent or probationary status of their
employment. Failure to observe prescribed standards of work, or to fulfill reasonable
work assignments due to inefficiency may constitute just cause for dismissal. Such
inefficiency is understood to mean failure to attain work goals or work quotas, either by
failing to complete the same within the allotted reasonable period, or by producing
unsatisfactory results. This management prerogative of requiring standards may be
availed of so long as they are exercised in good faith for the advancement of the
employer's interest. (Emphasis supplied.)

In fine, an employees failure to meet sales or work quotas falls under the concept of gross inefficiency,
which in turn is analogous to gross neglect of duty that is a just cause for dismissal under Article 282 of the Code.
However, in order for the quota imposed to be considered a valid productivity standard and thereby validate a
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dismissal, managements prerogative of fixing the quota must be exercised in good faith for the advancement of its
interest. The duty to prove good faith, however, rests with WWWEC as part of its burden to show that the dismissal
was for a just cause. WWWEC must show that such quota was imposed in good faith. This WWWEC failed to do,
perceptibly because it could not. The fact of the matter is that the alleged imposition of the quota was a desperate
attempt to lend a semblance of validity to Alilings illegal dismissal. It must be stressed that even WWWECs sales
manager, Eve Amador (Amador), in an internal e-mail to San Mateo, hedged on whether petitioner performed below
or above expectation:

Could not quantify level of performance as he as was tasked to handle a new product (GX).
Revenue report is not yet administered by IT on a month-to-month basis. Moreover, this in a way
is an experimental activity. Practically you have a close monitoring with Armand with regards to
his performance. Your assessment of him would be more accurate.

Being an experimental activity and having been launched for the first time, the sales of GX services could
not be reasonably quantified. This would explain why Amador implied in her email that other bases besides sales
figures will be used to determine Alilings performance. And yet, despite such a neutral observation, Aliling was still
dismissed for his dismal sales of GX services. In any event, WWWEC failed to demonstrate the reasonableness and
the bona fides on the quota imposition.

Employees must be reminded that while probationary employees do not enjoy permanent status, they enjoy
the constitutional protection of security of tenure. They can only be terminated for cause or when they otherwise fail
to meet the reasonable standards made known to them by the employer at the time of their engagement.
[37]
Respondent WWWEC miserably failed to prove the termination of petitioner was for a just cause nor was there
substantial evidence to demonstrate the standards were made known to the latter at the time of his engagement.
Hence, petitioners right to security of tenure was breached.

Alilings right to procedural due process was violated

As earlier stated, to effect a legal dismissal, the employer must show not only a valid ground therefor, but
also that procedural due process has properly been observed. When the Labor Code speaks of procedural due
process, the reference is usually to the two (2)-written notice rule envisaged in Section 2 (III), Rule XXIII, Book V
of the Omnibus Rules Implementing the Labor Code, which provides:

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

employment, the following standards of due process shall be substantially observed.

I. For termination of employment based on just causes as defined in Article 282 of the
Code:
(a) A written notice served on the employee specifying the ground or grounds
for termination, and giving to said employee reasonable opportunity within which to
explain his side;

(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond to the
charge, present his evidence or rebut the evidence presented against him; and

(c) A written notice [of] termination served on the employee indicating that upon
due consideration of all the circumstance, grounds have been established to justify his
termination.

In case of termination, the foregoing notices shall be served on the employees last known
address.

MGG Marine Services, Inc. v. NLRC [38] tersely described the mechanics of what may be considered a two-
part due process requirement which includes the two-notice rule, x x x one, of the intention to dismiss, indicating
therein his acts or omissions complained against, and two, notice of the decision to dismiss; and an opportunity to
answer and rebut the charges against him, in between such notices.

King of Kings Transport, Inc. v. Mamac[39] expounded on this procedural requirement in this manner:

(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. Reasonable
opportunity under the Omnibus Rules means every kind of assistance that management must
accord to the employees to enable them to prepare adequately for their defense. This should be
construed as a period of at least five calendar days from receipt of the notice xxxx Moreover, in
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 order to enable the employees to intelligently prepare their explanation and defenses, the notice
should contain a detailed narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will not suffice. Lastly, the
notice should specifically mention which company rules, if any, are violated and/or which among
the grounds under Art. 288 [of the Labor Code] is being charged against the employees

(2) After serving the first notice, the employees should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity to (1) explain and
clarify their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing or
conference, the employees are given the chance to defend themselves personally, with the
assistance of a representative or counsel of their choice x x x.

(3) After determining that termination is justified, the employer shall serve the employees
a written notice of termination indicating that: (1) all the circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment. (Emphasis in the original.)

Here, the first and second notice requirements have not been properly observed, thus tainting petitioners
dismissal with illegality.

The adverted memo dated September 20, 2004 of WWWEC supposedly informing Aliling of the likelihood
of his termination and directing him to account for his failure to meet the expected job performance would have had
constituted the charge sheet, sufficient to answer for the first notice requirement, but for the fact that there is no
proof such letter had been sent to and received by him. In fact, in his December 13, 2004 Complainants Reply
Affidavit, Aliling goes on to tag such letter/memorandum as fabrication. WWWEC did not adduce proof to show
that a copy of the letter was duly served upon Aliling. Clearly enough, WWWEC did not comply with the first
notice requirement.

Neither was there compliance with the imperatives of a hearing or conference. The Court need not dwell at
length on this particular breach of the due procedural requirement. Suffice it to point out that the record is devoid of
any showing of a hearing or conference having been conducted. On the contrary, in its October 1, 2004 letter to
Aliling, or barely five (5) days after it served the notice of termination, WWWEC acknowledged that it was still
evaluating his case. And the written notice of termination itself did not indicate all the circumstances involving the
charge to justify severance of employment.
Aliling is entitled to backwages
and separation pay in lieu of reinstatement

As may be noted, the CA found Alilings dismissal as having been illegally effected, but nonetheless
concluded that his employment ceased at the end of the probationary period. Thus, the appellate court merely
affirmed the monetary award made by the NLRC, which consisted of the payment of that amount corresponding to
the unserved portion of the contract of employment.

The case disposition on the award is erroneous.

As earlier explained, Aliling cannot be rightfully considered as a mere probationary employee.

Accordingly, the probationary period set in the contract of employment dated June 11, 2004 was of no moment. In
net effect, as of that date June 11, 2004, Aliling became part of the WWWEC organization as a regular employee of
the company without a fixed term of employment. Thus, he is entitled to backwages reckoned from the time he was
illegally dismissed on October 6, 2004, with a PhP 17,300.00 monthly salary, until the finality of this Decision. This
disposition hews with the Courts ensuing holding in Javellana v. Belen:[40]

Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:

Art. 279. Security of Tenure. - In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause or when authorized
by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement. (Emphasis supplied)

Clearly, the law intends the award of backwages and similar benefits to accumulate past
the date of the Labor Arbiters decision until the dismissed employee is actually reinstated. But if,
as in this case, reinstatement is no longer possible, this Court has consistently ruled that
backwages shall be computed from the time of illegal dismissal until the date the
decision becomes final. (Emphasis supplied.)

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 Additionally, Aliling is entitled to separation pay in lieu of reinstatement on the ground of strained
relationship.

In Golden Ace Builders v. Talde,[41] the Court ruled:

The basis for the payment of backwages is different from that for the award of separation
pay. Separation pay is granted where reinstatement is no longer advisable because of strained
relations between the employee and the employer. Backwages represent compensation that should
have been earned but were not collected because of the unjust dismissal. The basis for computing
backwages is usually the length of the employee's service while that for separation pay is the
actual period when the employee was unlawfully prevented from working.

As to how both awards should be computed, Macasero v. Southern Industrial Gases

Philippines instructs:

[T]he award of separation pay is inconsistent with a finding that there was no
illegal dismissal, for under Article 279 of the Labor Code and as held in a catena of cases,
an employee who is dismissed without just cause and without due process is entitled to
backwages and reinstatement or payment of separation pay in lieu thereof:

Thus, an illegally dismissed employee is entitled to two reliefs:

backwages and reinstatement. The two reliefs provided are separate and
distinct. In instances where reinstatement is no longer feasible because of
strained relations between the employee and the employer, separation pay is
granted. In effect, an illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and backwages.

The normal consequences of respondents illegal dismissal, then, are

reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be
awarded as an alternative. The payment of separation pay is in addition to
payment of backwages. x x x

Velasco v. National Labor Relations Commission emphasizes:

The accepted doctrine is that separation pay may avail in lieu of reinstatement if
reinstatement is no longer practical or in the best interest of the parties. Separation pay in
lieu of reinstatement may likewise be awarded if the employee decides not to be
reinstated. (emphasis in the original; italics supplied)

Under the doctrine of strained relations, the payment of separation pay is

considered an acceptable alternative to reinstatement when the latter option is no longer
desirable or viable. On one hand, such payment liberates the employee from what could be a
highly oppressive work environment. On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer trust.

Strained relations must be demonstrated as a fact, however, to be adequately

supported by evidence substantial evidence to show that the relationship between the employer
and the employee is indeed strained as a necessary consequence of the judicial controversy.

In the present case, the Labor Arbiter found that actual animosity existed between
petitioner Azul and respondent as a result of the filing of the illegal dismissal case. Such
finding, especially when affirmed by the appellate court as in the case at bar, is binding upon
the Court, consistent with the prevailing rules that this Court will not try facts anew and
that findings of facts of quasi-judicial bodies are accorded great respect, even
finality. (Emphasis supplied.)

As the CA correctly observed, To reinstate petitioner [Aliling] would only create an atmosphere of
antagonism and distrust, more so that he had only a short stint with respondent company. [42] The Court need not
belabor the fact that the patent animosity that had developed between employer and employee generated what may
be considered as the arbitrary dismissal of the petitioner.

Following the pronouncements of this Court Sagales v. Rustans Commercial Corporation,[43] the
computation of separation pay in lieu of reinstatement includes the period for which backwages were awarded:

123
 Thus, in lieu of reinstatement, it is but proper to award petitioner separation pay
computed at one-month salary for every year of service, a fraction of at least six (6) months
considered as one whole year. In the computation of separation pay, the period where
backwages are awarded must be included. (Emphasis supplied.)

Thus, Aliling is entitled to both backwages and separation pay (in lieu of reinstatement) in the amount of
one (1) months salary for every year of service, that is, from June 11, 2004 (date of employment contract) until the
finality of this decision with a fraction of a year of at least six (6) months to be considered as one (1) whole year. As
determined by the labor arbiter, the basis for the computation of backwages and separation pay will be Alilings
monthly salary at PhP 17,300.

Finally, Aliling is entitled to an award of PhP 30,000 as nominal damages in consonance with prevailing
jurisprudence[44] for violation of due process.

Petitioner is not entitled to moral and exemplary damages

In Nazareno v. City of Dumaguete,[45] the Court expounded on the requisite elements for a litigants
entitlement to moral damages, thus:

Moral damages are awarded if the following elements exist in the case: (1) an injury
clearly sustained by the claimant; (2) a culpable act or omission factually established; (3) a
wrongful act or omission by the defendant as the proximate cause of the injury sustained by the
claimant; and (4) the award of damages predicated on any of the cases stated Article 2219 of the
Civil Code. In addition, the person claiming moral damages must prove the existence of bad faith
by clear and convincing evidence for the law always presumes good faith. It is not enough that one
merely suffered sleepless nights, mental anguish, and serious anxiety as the result of the actuations
of the other party. Invariably such action must be shown to have been willfully done in bad faith or
with ill motive. Bad faith, under the law, does not simply connote bad judgment or
negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a
wrong, a breach of a known duty through some motive or interest or ill will that partakes of
the nature of fraud. (Emphasis supplied.)

In alleging that WWWEC acted in bad faith, Aliling has the burden of proof to present evidence in support
of his claim, as ruled in Culili v. Eastern Telecommunications Philippines, Inc.:[46]

According to jurisprudence, basic is the principle that good faith is presumed and he who
alleges bad faith has the duty to prove the same. By imputing bad faith to the actuations of ETPI,
Culili has the burden of proof to present substantial evidence to support the allegation of unfair
labor practice. Culili failed to discharge this burden and his bare allegations deserve no credit.

This was reiterated in United Claimants Association of NEA (UNICAN) v. National Electrification
Administration (NEA),[47] in this wise:

It must be noted that the burden of proving bad faith rests on the one alleging it. As the
Court ruled in Culili v. Eastern Telecommunications, Inc., According to jurisprudence, basic is the
principle that good faith is presumed and he who alleges bad faith has the duty to prove the same.
Moreover, in Spouses Palada v. Solidbank Corporation, the Court stated, Allegations of bad faith
and fraud must be proved by clear and convincing evidence.

Similarly, Aliling has failed to overcome such burden to prove bad faith on the part of WWWEC. Aliling
has not presented any clear and convincing evidence to show bad faith. The fact that he was illegally dismissed is
insufficient to prove bad faith. Thus, the CA correctly ruled that [t]here was no sufficient showing of bad faith or
abuse of management prerogatives in the personal action taken against petitioner. [48] In Lambert Pawnbrokers and
Jewelry Corporation v. Binamira,[49] the Court ruled:

A dismissal may be contrary to law but by itself alone, it does not establish bad faith to
entitle the dismissed employee to moral damages. The award of moral and exemplary damages
cannot be justified solely upon the premise that the employer dismissed his employee without
authorized cause and due process.

The officers of WWWEC cannot be held

jointly and severally liable with the company

The CA held the president of WWWEC, Jose B. Feliciano, San Mateo and Lariosa jointly and severally
liable for the monetary awards of Aliling on the ground that the officers are considered employers acting in the
interest of the corporation. The CA cited NYK International Knitwear Corporation Philippines (NYK) v. National

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Labor Relations Commission[50] in support of its argument. Notably, NYK in turn cited A.C. Ransom Labor Union-
CCLU v. NLRC.[51]

Such ruling has been reversed by the Court in Alba v. Yupangco,[52] where the Court ruled:

By Order of September 5, 2007, the Labor Arbiter denied respondents motion to quash
the 3rd alias writ. Brushing aside respondents contention that his liability is merely joint, the
Labor Arbiter ruled:

Such issue regarding the personal liability of the officers of a corporation for the payment
of wages and money claims to its employees, as in the instant case, has long been resolved by the
Supreme Court in a long list of cases [A.C. Ransom Labor Union-CLU vs. NLRC (142 SCRA 269)
and reiterated in the cases of Chua vs. NLRC (182 SCRA 353), Gudez vs. NLRC (183 SCRA 644)].
In the aforementioned cases, the Supreme Court has expressly held that the irresponsible officer of
the corporation (e.g. President) is liable for the corporations obligations to its workers. Thus,
respondent Yupangco, being the president of the respondent YL Land and Ultra Motors Corp., is
properly jointly and severally liable with the defendant corporations for the labor claims of
Complainants Alba and De Guzman. x x x

xxxx

As reflected above, the Labor Arbiter held that respondents liability is solidary.

There is solidary liability when the obligation expressly so states, when the law so
provides, or when the nature of the obligation so requires. MAM Realty Development Corporation
v. NLRC, on solidary liability of corporate officers in labor disputes, enlightens:

x x x A corporation being a juridical entity, may act only through its directors,
officers and employees. Obligations incurred by them, acting as such corporate agents are
not theirs but the direct accountabilities of the corporation they represent. True solidary
liabilities may at times be incurred but only when exceptional circumstances warrant such
as, generally, in the following cases:

1. When directors and trustees or, in appropriate cases, the officers of a

corporation:

(a) vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate
affairs;

xxxx

In labor cases, for instance, the Court has held corporate directors and officers solidarily
liable with the corporation for the termination of employment of employees done with malice or in
bad faith.

A review of the facts of the case does not reveal ample and satisfactory proof that respondent officers of
WWEC acted in bad faith or with malice in effecting the termination of petitioner Aliling. Even
assuming arguendo that the actions of WWWEC are ill-conceived and erroneous, respondent officers cannot be held
jointly and solidarily with it. Hence, the ruling on the joint and solidary liability of individual respondents must be
recalled.

Aliling is entitled to Attorneys Fees and Legal Interest

Petitioner Aliling is also entitled to attorneys fees in the amount of ten percent (10%) of his total monetary
award, having been forced to litigate in order to seek redress of his grievances, pursuant to Article 111 of the Labor
Code and following our ruling in Exodus International Construction Corporation v. Biscocho,[53] to wit:

In Rutaquio v. National Labor Relations Commission, this Court held that:

It is settled that in actions for recovery of wages or where an employee was forced to
litigate and, thus, incur expenses to protect his rights and interest, the award of attorneys
fees is legally and morally justifiable.

In Producers Bank of the Philippines v. Court of Appeals this Court ruled that:

Attorneys fees may be awarded when a party is compelled to litigate or to incur expenses
to protect his interest by reason of an unjustified act of the other party.
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 While in Lambert Pawnbrokers and Jewelry Corporation,[54] the Court specifically ruled:

However, the award of attorneys fee is warranted pursuant to Article 111 of the Labor
Code. Ten (10%) percent of the total award is usually the reasonable amount of attorneys fees
awarded. It is settled that where an employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorneys fees is legally and morally justifiable.

Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of 6% per annum
from October 6, 2004 (date of termination) until fully paid.

WHEREFORE, the petition is PARTIALLY GRANTED. The July 3, 2008 Decision of the Court of
Appeals in CA-G.R. SP No. 101309 is hereby MODIFIED to read:

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Resolutions of

respondent (Third Division) National Labor Relations Commission are AFFIRMED, with the
following MODIFICATION/CLARIFICATION: Respondent Wide Wide World Express Corp.
is liable to pay Armando Aliling the following: (a) backwages reckoned from October 6, 2004 up
to the finality of this Decision based on a salary of PhP 17,300 a month, with interest at 6% per
annum on the principal amount from October 6, 2004 until fully paid; (b) the additional sum
equivalent to one (1) month salary for every year of service, with a fraction of at least six (6)
months considered as one whole year based on the period from June 11, 2004 (date of employment
contract) until the finality of this Decision, as separation pay; (c) PhP 30,000 as nominal damages;
and (d) Attorneys Fees equivalent to 10% of the total award.
SO ORDERED.

G.R. No. 174893 July 11, 2012

FLORDELIZA MARIA REYES-RAYEL, Petitioner,

vs.
PHILIPPINE LUEN THAI HOLDINGS, CORPORATION/L&T INTERNATIONAL GROUP
PHILIPPINES, INC.,Respondents.

DECISION

DEL CASTILLO, J.:

The law is fair and just to both labor and management. Thus, while the Constitution accords an employee security or
tenure, it abhors oppression to an employer who cannot be compelled to retain an employee whose continued
employment would he patently inimical to its interest.

This Petition for Review on Certiorari 1 assails the July IR, 2006 Decision 2 or the Court of Appeals (CA) in CJ\-G.R.
SP No. 86937, which (I) reversed the National Labor Relations Commission (NLRC) March 23, 2004
Resolution3and in effect, its July 21, 2004 4 Resolution as well, (2) declared petitioner Flordeliza Maria Reyes-
Rayel’s (petitioner) dismissal from employment valid, and (3) ordered respondents Philippine Luen Thai Holdings,
Corp. (PLTHC)/L&T International Group Phils., Inc. (L&T) (respondents) to pay petitioner an amount equivalent to
three months salary pursuant to the termination provision of the employment contract.

Factual Antecedents

In February 2000, PLTHC hired petitioner as Corporate Human Resources (CHR) Director for Manufacturing for its
subsidiary/affiliate company, L&T. In the employment contract, 5 petitioner was tasked to perform functions in
relation to administration, recruitment, benefits, audit/compliance, policy development/ structure, project plan, and
such other works as may be assigned by her immediate superior, Frank Sauceda (Sauceda), PLTHC’s Corporate
Director for Human Resources.

On September 6, 2001, petitioner received a Prerequisite Notice 6 from Sauceda and the Corporate Legal Counsel of
PLTHC, Ma. Lorelie T. Edles (Edles), which reads:

This has reference to your failure to perform in accordance with management directives in various instances, which
collectively have resulted in loss of confidence in your capability to promote the interests of the Company.

The most deleterious to the Company has been your pronouncements against the Human Resource Information
System (HRIS) or HR2 Program, a corporate initiative that is at the core and is crucial to the enhancement of
personnel management for the global operations of the Company. On numerous occasions, in the presence of

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colleagues and subordinates, you made statements that serve to undermine the Company’s efforts at pursuing the
HR2 Program. You ought to have realized that when leveled by an officer of your rank, no less than a Director of the
Corporate Human Resources Division, such remarks are highly inflammatory and their negative impact is
magnified.

Just as flagrant is your inability to incite collaboration and harmony within the Corporate Human Resources
Division. Instead, colleagues and subordinates complain of your negative attitude towards the Company, its officers
and people. You have established notoriety for your temper and have alienated most members of your division. You
ought to have realized that when exhibited by an officer of your rank, no less than a Director of the Corporate
Human Resources Division, poor interpersonal skills and the lack of moral suasion are extremely damaging.

The foregoing have, in fact, manifested in your own unsatisfactory performance rating, and in the departure of
promising employees who could not work with you.

In view of the above, we afford you the opportunity to submit your written reply to this memorandum within forty-
eight (48) hours from its receipt. Failure to so submit shall be construed as waiver of your right to be heard.
Consequently, the Company shall immediately decide on this matter.

xxx7

In petitioner’s written response 8 dated September 10, 2001, she explained that her alleged failure to perform
management directives could be attributed to the lack of effective communication with her superiors due to
malfunctioning email system. This caused her to miss certain directives coming from her superiors and likewise, for
her superiors to overlook the reports she was submitting. She denied uttering negative comments about the HR2
Program and instead claimed to have intimated her support for it. She further denied causing disharmony in her
division. Petitioner emphasized that in June 2001, she received a relatively good rating of 80.2% in her overall
performance appraisal 9 which meant that she displayed dependable work level performance as well as good
corporate relationship with her superiors and subordinates.

In a Termination Notice 10 dated September 12, 2001, respondents, through Sauceda and Edles, dismissed petitioner
from the service for loss of confidence on her ability to promote the interests of the company. This led petitioner to
file a Complaint 11 for illegal dismissal, payment of separation pay, 13th month pay, moral and exemplary damages,
attorney’s fees, and other unpaid company benefits against respondents and its officers, namely, Sauceda, Edles and
Willie

Tan (Tan), the Executive Vice-President of PLTHC.

Proceedings before the Labor Arbiter

In her Position Paper, 12 petitioner argued that her dismissal was without valid or just cause and was effected without
due process. According to her, the causes for her dismissal as stated in the Prerequisite Notice and Notice of
Termination are not proper grounds for termination under the Labor Code and the same do not even pertain to any
willful violation of the company’s code of discipline or any other company policy. Even the alleged loss of
confidence was not supported by any evidence of wrongdoing on her part. She likewise claimed that due process
was not observed since she was not afforded a hearing, investigation and right to appeal as per company procedure
for disciplining employees. Furthermore, respondents were guilty of violating the termination provision under the
employment contract which stipulated that employment after probationary period shall be terminated by giving the
employee a three-month notice in writing or by paying three months salary in lieu of notice. Petitioner also accused
respondents of having acted in bad faith by subjecting her to public humiliation and embarrassment when she was
ordered to immediately turn over the company car, vacate her office and remove all her belongings on the same day
she received the termination notice, in full view of all the other employees.

Respondents, on the other hand, claimed that they have a wide discretion in dismissing petitioner as she was
occupying a managerial position. They claimed in their Position Paper 13 that petitioner’s inefficiency and
lackadaisical attitude in performing her work were just and valid grounds for termination. In the same token, her
gross and habitual neglect of duties were enough bases for respondents to lose all their confidence in petitioner’s
ability to perform her job satisfactorily. Also, petitioner was accorded due process as she was furnished with two
notices - the first requiring her to explain why she should not be terminated, and the second apprising her of the
management’s decision to terminate her from employment.

Further in their Reply 14 to petitioner’s position paper, respondents enumerated the various instances which
manifested petitioner’s poor work attitude and dismal performance, to wit: 1) her failure to perform in accordance
with management directives such as when she unreasonably delayed the hiring of a Human Rights and Compliance
Manager; failed to establish communication with superiors and co-workers; failed to regularly update Sauceda of the
progress of her work; requested for reimbursement of unauthorized expenditures; and, gave orders contrary to policy

127
on the computation of legal and holiday pay; 2) her negative pronouncements against the company’s program in the
presence of colleagues and subordinates; 3) her inability to incite collaboration and harmony within her department;
4) her negative attitude towards the company, its officers and employees; and 5) her low performance appraisal
rating which is unacceptable for a top level personnel like herself. Exchange of emails, affidavits and other
documents were presented to provide proof of incidents which gave rise to these allegations. Respondents also
asserted that the procedure laid down in the company’s code of discipline, which provided for the mandatory
requirements of notice, hearing/investigation and right to appeal, only applies to rank and file, supervisory, junior
managerial and department managerial employees and not to petitioner, a CHR Director, who plays a key role in
these termination proceedings. Further, the three-month notice for termination, as written in the employment
contract, is only necessary when there is no just cause for the employee’s dismissal and, therefore, not applicable to
petitioner. Respondents then disputed petitioner’s money claims and also sought the dropping of Sauceda, Edles and
Tan from the complaint for not being real parties in interest.

In her rejoinder, 15 petitioner stood firm on her conviction that she was dismissed without valid cause by presenting
documentary evidence of her good performance. Further, she insisted that she was dismissed for reasons different
from those mentioned in the Prerequisite Notice and Notice of Termination, both of which did not state gross and
habitual neglect of duties as a ground. She also construed respondents’ act of offering her a settlement or
compensation right after her termination as their acknowledgement of the illegal act they committed against her.
Moreover, petitioner argued that the company policies on procedural due process apply to all its employees, whether
rank and file or managerial.

In a Decision 16 dated October 21, 2002, the Labor Arbiter declared petitioner to have been illegally dismissed. It was
held that petitioner cannot be charged with undermining the HR2 Program of the company since evidence was
presented to show that she was already divested of duties relative to this program. Also, respondents’ accusation that
petitioner caused disharmony among colleagues and subordinates has no merit as there was ample proof that
petitioner was in constant communication with her co-workers through official channels and email. Further, the
Labor Arbiter theorized that petitioner’s performance rating demonstrated a passing or satisfactory grade and
therefore could not be a sufficient and legitimate basis to terminate her for loss of trust and confidence. Moreover,
petitioner cannot be dismissed based merely on these vague offenses but only for specific offenses which, under the
company’s code of conduct, merit the penalty of outright dismissal. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring that complainant was illegally
dismissed by respondent corporation, and the latter is hereby directed to reinstate complainant to her former position
and pay her full backwages and benefits computed below, as follows:

A. Backwages September 12, 2001 to October 21, 2002

1. Salaries and Wages
P80,000 x 13.30 months = P1,064,000.00
2. 13th month pay
P1,064,000.00 / 12 = 88,666.67
3. VL
P80,000 / 26 x 10 days = 34,102.56

P1,186,769.23
B. Attorney’s Fees (10%) 118,676.92

P1,305,446.15

SO ORDERED, 17

Proceedings before the National Labor Relations Commission

Respondents appealed to the NLRC.18 For her part, petitioner filed before the Labor Arbiter a Motion for
Recomputation 19 of the awards. This motion was, however, denied in an Order 20 dated March 17, 2003 on the
ground that petitioner could challenge any disposition made only by way of an appeal within the reglementary
period and not through a motion.

In a Decision 21 dated August 20, 2003, the NLRC found merit in respondents’ appeal. To the NLRC, respondents
have sufficiently established the validity of petitioner’s dismissal on the ground of loss of trust and confidence
through the various emails, affidavits and other documents attached to the records. Specifically, respondents have
proven that petitioner failed to recruit a Human Rights and Compliance Manager, ignored company policies, failed
to effectively communicate with her superiors and subordinates, and displayed ineptitude in her work as a director
and in her relationship with her co-workers. These showed that there exist enough bases for respondents to lose the
trust they had reposed on petitioner, who, as a managerial employee, was expected to possess exemplary work

128
attitude. The NLRC, however, noted that the employment contract specifically provided for payment of three
months salary in lieu of the stipulated three-month notice in case of termination, thus:

IN LIGHT OF THE FOREGOING PREMISES, the decision appealed from is hereby MODIFIED, to
declare the dismissal of complainant legal but to order respondents to pay complainant the sum of
P240,000.00 representing three months salary as expressed in complainant’s contract of employment. All
other claims are DISMISSED for lack of merit.

SO ORDERED. 22

Petitioner filed a Motion for Reconsideration 23 which was granted by the NLRC. In a Resolution 24 dated March 23,
2004, the NLRC concluded that petitioner was not afforded due process as she was not given the opportunity to
refute the charges against her through an investigation and an appeal at the company level. Thus, respondents failed
to establish the truthfulness of the allegations against her as to support the validity of the dismissal. The NLRC also
agreed with petitioner’s claim that she was subjected to humiliation on the day of her termination. Consequently, the
NLRC declared petitioner’s dismissal as illegal and thus reinstated the Labor Arbiter’s Decision with modification
that respondents be ordered to pay petitioner separation pay in lieu of reinstatement due to the strained relation
between the parties.

In a Resolution 25 dated July 21, 2004, the NLRC resolved to dismiss respondents’ motion for reconsideration.

Proceedings before the Court of Appeals

Respondents thus filed with the CA a Petition for Certiorari with Urgent Motion for Issuance of Temporary
Restraining Order (TRO) or Writ of Preliminary Injunction.26 Petitioner then filed her Comment27 thereto.
Subsequently, the CA denied respondents’ prayer for TRO in a Resolution28 dated February 15, 2005.

On July 18, 2006, the CA rendered a Decision29 finding merit in the petition. The CA found sufficient evidence to
support the dismissal of petitioner on the ground of loss of trust and confidence. It regarded petitioner’s 80.2%
performance rating as below par and hence, declared that she cannot merely rely on the same in holding on to her
position as CHR Director, a highly sensitive and demanding post. Also, despite the opportunity to improve,
petitioner continued to display poor work attitude, dismal performance and rancorous and abusive behavior towards
co-workers as gleaned from the various emails and affidavits of her superiors and other employees. These
circumstances, taken together, constitute sufficient cause for respondents to lose confidence in petitioner’s ability to
continue in her job and to promote the interest of the company.

Moreover, the CA did not subscribe to petitioner’s allegation that she was denied due process.1âwphi1 On the
contrary, said court found that she was adequately notified of the charges against her through the show cause notice
which clearly stated the instances that served as sufficient bases for the loss of trust and confidence, to wit: her
failure to perform in accordance with management directives and her actions of undermining company goals and
causing disharmony among her co-workers. After finding her written response to be unsatisfactory, petitioner was
likewise properly notified of the company’s decision to terminate her services. Clearly, respondents observed the
requirements of procedural due process. Nevertheless, respondents, in effecting the dismissal, should have paid
petitioner her salary for three months as provided for in the employment contract. For its failure to do so, the CA
ordered respondents to pay petitioner three months salary in accordance with their contractual undertaking. The
dispositive portion of the CA Decision states:

WHEREFORE, the Resolution of the National Labor Relations Commission dated March 23, 2004 is REVERSED.
[Respondents] are hereby ordered to pay petitioner the amount corresponding to three [months] salary pursuant to
the termination provision of the employment contract.

SO ORDERED.30

Petitioner’s Motion for Reconsideration31 was denied in the CA Resolution32 dated October 4, 2006.

Issues

Hence, the present petition raising the following issues:

THAT PETITIONER WAS ILLEGALLY DISMISSED FROM HER EMPLOYMENT BY

RESPONDENTS.I. WHETHER X X X THE COURT OF APPEALS COMMITTED AN ERROR WHEN
IT REVERSED THE DECISION OF THE NLRC ON CERTIORARI DESPITE THE FACT THAT THE
NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED THE FACTUAL
FINDINGS OF THE LABOR ARBITER

129
 II. WHETHER X X X THE ALLEGED VALID OR JUST CAUSE FOR TERMINATION OF
PETITIONER FROM HER EMPLOYMENT WAS PROVEN AND ESTABLISHED BY SUBSTANTIAL
EVIDENCE ON RECORD.

III. WHETHER X X X RESPONDENTS DEPRIVED PETITIONER OF HER RIGHT TO DUE

PROCESS WHEN RESPONDENTS DISMISSED PETITIONER WITHOUT CONDUCTING ANY
INVESTIGATION TO DETERMINE THE VERACITY AND TRUTHFULNESS OF THE
ALLEGATIONS AGAINST PETITIONER IN VIOLATION OF RESPONDENTS’ OWN COMPANY
POLICIES.33

Petitioner posits that there is no substantial evidence to establish valid grounds for her dismissal since various emails
from her superiors illustrating her accomplishments and commendations, as well as her "good" overall performance
rating negate loss of trust and confidence. She also insists that she was not afforded due process at the company
level. She claims that she was not properly informed of the offenses charged against her due to the vagueness of the
terms written in the termination notices and that no investigation and hearing was conducted as required by company
policy.

Our Ruling

The petition is devoid of merit. The Court finds no cogent reason to depart from the ruling of the CA that petitioner
was validly dismissed.

There exists a valid ground for petitioner’s termination from employment.

Jurisprudence provides that an employer has a distinct prerogative and wider latitude of discretion in dismissing a
managerial personnel who performs functions which by their nature require the employer’s full trust and
confidence.34 As distinguished from a rank and file personnel, mere existence of a basis for believing that a
managerial employee has breached the trust of the employer justifies dismissal.35 "[L]oss of confidence as a ground
for dismissal does not require proof beyond reasonable doubt as the law requires only that there be at least some
basis to justify it."36

Petitioner, in the present case, was L&T’s CHR Director for Manufacturing. As such, she was directly responsible
for managing her own departmental staff. It is therefore without question that the CHR Director for Manufacturing
is a managerial position saddled with great responsibility. Because of this, petitioner must enjoy the full trust and
confidence of her superiors. Not only that, she ought to know that she is "bound by more exacting work ethics"37 and
should live up to thishigh standard of responsibility. However, petitioner delivered dismal performance and
displayed poor work attitude which constitute sufficient reasons for an employer to terminate an employee on the
ground of loss of trust and confidence. Respondents also impute upon petitioner gross negligence and incompetence
which are likewise justifiable grounds for dismissal.38 The burden of proving that the termination was for a valid
cause lies on the employer.39 Here, respondents were able to overcome this burden as the evidence presented clearly
support the validity of petitioner’s dismissal.

First, records show that petitioner indeed unreasonably failed to effectively communicate with her immediate
superior. There was an apparent neglect in her obligation to maintain constant communication with Sauceda in order
to ensure that her work is up to par. This is evident from the various emails40 showing that she failed to update
Sauceda on the progress of her important assignments on several occasions. While petitioner explained in her
written reply to the Prerequisite Notice that such failure to communicate was due to the company’s computer system
breakdown, respondents however were able to negate this as they have shown that the computer virus which
affected the company’s system only damaged some email addresses of certain employees which did not include that
of Sauceda’s. On the other hand, petitioner failed to present any concrete proof that the said computer virus also
damaged Sauceda’s email account as to effectively disrupt their regular communication. Moreover, we agree with
respondents’ stance that petitioner could still reach Sauceda through other means of communication and should not
completely rely on the web.

Second, the affidavits of petitioner’s co-workers revealed her negative attitude and unprofessional behavior towards
them and the company. In her affidavit,41 Agnes Suzette Pasustento, L&T’s Manager for the Corporate
Communications Department, attested to petitioner’s "badmouthing" of Sauceda in one of their meetings abroad and
of discussing with her about filing a labor case against the company. Also, in the affidavits of Rizza S.
Esplana42(Sauceda’s Executive Assistant), Cynthia Yñiguez 43 (Corporate Human Resources Manager of an affiliate
of L&T), and Ana Wilma Arreza44 (Human Resources and Administration Division Manager of an affiliate of L&T),
they narrated several instances which demonstrated petitioner’s notoriously bad temper. They all described her to
have an "irrational" behavior and "superior and condescending" attitude in the workplace. Unfortunately for
petitioner, these sworn statements which notably remain uncontroverted and unrefuted, militate against her
innocence and strengthen the adverse averments against her.45 It is well to state that as a CHR Director tasked to
efficiently manage the company’s human resource team and practically being considered the "face" of the Human
Resource, petitioner should exhibit utmost concern for her employer’s interest. She should likewise establish not
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only credibility but also respect from co-workers which can only be attained if she demonstrates maturity and
professionalism in the discharge of her duties. She is also expected to act as a role model who displays uprightness
both in her own behavior and in her dealings with others.

The third and most important is petitioner’s display of inefficiency and ineptitude in her job as a CHR Director. In
the affidavit46 of Ornida B. Calma, Chief Accountant of L&T’s affiliate company, petitioner, on two occasions, gave
wrong information regarding issues on leave and holiday pay which generated confusion among employees in the
computation of salaries and wages. Due to the nature of her functions, petitioner is expected to have strong working
knowledge of labor laws and regulations to help shed light on issues and questions regarding the same instead of
complicating them. Petitioner obviously failed in this respect.

No wonder she received a less than par performance in her performance evaluation conducted in June 2001, contrary
to her assertion that an 80.2% rating illustrates good and dependable work performance. As can be gleaned in the
performance appraisal form, petitioner received deficient marks and low ratings on areas of problem solving and
decision making, interpersonal relationships, planning and organization, project management and integrity
notwithstanding an overall passing grade. As aptly remarked by the CA, these low marks revealed the "degree of
[petitioner’s] work handicap" and should have served as a notice for her to improve on her job. However, she
appeared complacent and remained lax in her duties and this naturally resulted to respondents’ loss of confidence in
her managerial abilities.

Taking all these circumstances collectively, the Court is convinced that respondents have sufficient and valid reasons
in terminating the services of petitioner as her continued employment would be patently inimical to respondents’
interest. An employer "has the right to regulate, according to its discretion and best judgment, all aspects of
employment, including work assignment, working methods, processes to be followed, working regulations, transfer
of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers." 47 "[S]o long
as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid agreements," 48 the exercise
of this management prerogative must be upheld.

Anent petitioner’s imputation of bad faith upon respondents, the same deserves no credence. That she was publicly
embarrassed when she was coerced by Sauceda and Edles to vacate her office, return the company car and take all
her personal belongings on the day she was dismissed, are all mere allegations not substantiated by proof. And since
it is hornbook rule that he who alleges must prove, we could not therefore conclude that her termination was tainted
with any malice or bad faith without any sufficient basis to substantiate this bare allegation. Moreover, we are more
inclined to believe that respondents’ offer of settlement immediately after petitioner’s termination was more of a
generous offer of financial assistance rather than an indication of ill-motive on respondents’ part.

Petitioner was accorded due process.

Petitioner insists that she was not properly apprised of the specific grounds for her termination as to give her a
reasonable opportunity to explain. This is because the Prerequisite Notice and Notice of Termination did not mention
any valid or authorized cause for dismissal but rather merely contained general allegations and vague terms.

We have examined the Prerequisite Notice and contrary to petitioner’s assertion, find the same to be free from any
ambiguity. The said notice properly advised petitioner to explain through a written response her failure to perform in
accordance with management directives, which deficiency resulted in the company’s loss of confidence in her
capability to promote its interest. As correctly explained by the CA, the notice cited specific incidents from various
instances which showed petitioner’s "repeated failure to comply with work directives, her inclination to make
negative remarks about company goals and her difficult personality," that have collectively contributed to the
company’s loss of trust and confidence in her. Indeed, these specified acts, in addition to her low performance rating,
demonstrated petitioner’s neglect of duty and incompetence which support the termination for loss of trust and
confidence.

Neither can there be any denial of due process due to the absence of a hearing or investigation at the company level.
It has been held in a plethora of cases that due process requirement is met when there is simply an opportunity to be
heard and to explain one’s side even if no hearing is conducted.49 In the case of Perez v. Philippine Telegraph and
Telephone Company,50 this Court pronounced that an employee may be afforded ample opportunity to be heard by
means of any method, verbal or written, whether in a hearing, conference or some other fair, just and reasonable
way, in that:

xxxx

After receiving the first notice apprising him of the charges against him, the employee may submit a written
explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in
support thereof, like relevant company records (such as his 201 file and daily time records) and the sworn statements
of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a
131
representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His
written explanation may also include a request that a formal hearing or conference be held. In such a case, the
conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary
disputes or where company rules or practice requires an actual hearing as part of employment pretermination
procedure. To this extent, we refine the decisions we have rendered so far on this point of law.

xxxx

In sum, the following are the guiding principles in connection with the hearing requirement in dismissal cases:

(a) ‘ample opportunity to be heard’ means any meaningful opportunity (verbal or written) given to the
employee to answer the charges against him and submit evidence in support of his defense, whether in a
hearing, conference or some other fair, just and reasonable way.

(b) a formal hearing or conference becomes mandatory only when requested by the employee in writing or
substantial evidentiary disputes exist or a company rule or practice requires it, or when similar
circumstances justify it.

(c) the ‘ample opportunity to be heard’ standard in the Labor Code prevails over the ‘hearing or conference’
requirement in the implementing rules and regulations.51

In this case, petitioner's written response to the Prerequisite Notice provided her with an avenue to explain and
defend her side and thus served the purpose of due process. That there was no hearing. investigation or right to
appeal. which petitioner opined to be violation of company policies, is of no moment since the records is bereft of
any showing that there is an existing company policy that requires these procedures with respect to the termination
of a CHR Director like petitioner or that company practice calls for the same. There was also no request for a formal
hearing on the part of petitioner.

As she was served with a notice apprising her of the changes against her and also a subsequent notice informing her
of the management's decision to terminate her services alter respondents found her written response to the first
notice unsatisfactory, petitioner was clearly afforded her right to due process.

WHEREFORE, the petition is DENIED. The assailed Decision dated July 18, 2006 of the Court of Appeals in CA-
GR. SP No. 86937 is AFFIRMED.

SO ORDERED.

November 28, 2016

G.R. No. 218980

PHILIPPINE AUTO COMPONENTS, INC., Petitioner

vs.
RONNIE B. JUMADLA, ROY A. ARIZ AND ROY T. CONEJOS, Respondents

x-----------------------x

G.R. No. 219124

RONNIE B. JUMADLA, ROY A. ARIZ AND ROY T. CONEJOS, Petitioners,

vs.
PHILIPPINE AUTO COMPONENTS, INC., Respondent.

DECISION

MENDOZA, J.:

Assailed in these consolidated petitions for review on certiorari filed under Rule 45 of the Rules of Court are the
February 12, 2015 Decision1 and June 18, 2015 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
137752, which dismissed the petition for certiorari assailing the April 15, 2014 Decision3 and August 18, 2014
Resolution4 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 05-001625-13/NLRC RAB IV
Case No. 12-01812-12, a case for illegal dismissal.

The Facts
132
On October 12, 2012, Aleli Veronica Garcia (Garcia), the Human Resources and Administrative Department
Manager of Philippine Auto Components, Inc. (PACI), received information from an anonymous source that some of
its employees were planning to use the truck assigned to Ronilo D. Loyola (Loyola), the driver for domestic
deliveries of its Finished Goods Stock In and Delivery Group, in order to steal automotive parts the next day,
October 13, 2012.

Garcia then requested Lorenzo Arcilla (Arcilla), PACI's Administrative Supervisor, to coordinate with the Philippine
National Police-Criminal Investigation and, Detection Group (PNP-CIDG) for an entrapment operation.

On October 13, 2012, members of the PNP-CIDG caught Loyola in the act of unloading four (4) boxes of Radiator
Fan Assembly units in front of the residence of Melvin D. Salimpade (Salimpade) located at Newton Heights
Subdivision, Barangay1 Canlalay, Biñan, Laguna. The boxes each contained six (6) sets of Radiator Fan Assembly.
Loyola and Salimpade, upon demand from the PNP-CIDG, failed to produce documents authorizing the release of
the automotive parts from PACI's warehouse and its delivery to Salimpade. Thus, Loyola and Salimpade were
brought to the nearest police station.

In his Sworn Statement,5 Loyola claimed that he was instructed by Ronnie B. Jumadla (Jumadla) and Roy A.
Ariz (Ariz) to deliver the boxes to Salimpade. He also divulged three (3) prior instances when Jumadla and Ariz
ordered him to drop off stolen parts at various locations. Loyola likewise declared that on October 11, 2012, he was
approached by Roy T. Conejos (Conejos),6 who convinced him to participate in the stealing of PACI' s products for
sale to third persons.

In his Sworn Statement,7 Salimpade explained that the boxes were only left with him for safekeeping, as instructed
by Jumadla and Ariz.

On October 15, 2012, Ariz tendered his resignation because he needed to care for his sick father. He alleged that he
left his resignation letter, dated October 10, 2012, with his wife and instructed her to give it to Jumadla. In turn,
Jumadla submitted said resignation letter to PACI on October 15, 2012.

On October 15, 2012, PACI sent Show Cause Notices8 to Jumadla, Ariz and Conejos (respondents) directing them to
explain in writing within five (5) days from receipt thefeof, why no disciplinary action, including possible dismissal
from employment, should be imposed against them for violation of the Company Rules and Regulations. On the
same date, they were also placed under a thirty-day preventive suspension pending the result of the administrative
case.

In compliance thereto, respondents submitted their written explanation9 denying their involvement in the pilferage of
PACI's products.

On November 7 and 8, 2012, PACI conducted administrative hearings. During these hearings, Jumadla confirmed
that he personally knew Salimpade.

Subsequently, respondents were found liable for serious misconduct, willful disobedience, willful breach of trust,
and commission of a crime under Article 282 of the Labor Code. Thus, on November 27, 2012, PACI dismissed
respondents from employment.

On December 4, 2012, respondents filed a complaint for illegal dismissal, illegal suspension and unfair labor
practice against PACI.

On December 11, 2012, PACI instituted a complaint10 for Qualified Theft against Jumadla, Ariz, Lorola, and
Salimpade before the Office of the City Prosecutor of Biñan City, Laguna.

The LA Ruling

In its April 23, 2013 Decision,11 the Labor Arbiter (LA) found that respondents were illegally dismissed because the
allegation that they took part in the pilferage of PACI's products was not supported by evidence. Thus, it ordered
respondents' reinstatement. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants as having been illegally
dismissed. Accordingly, respondent Philippine Auto Components, Inc. is hereby ordered to reinstate complainants to
their former or substantially equivalent positions without loss of seniority rights and to pay them their full
backwages as follows:

1. Jumadla – ₱75,758.08

133
2. Cornejos – ₱53,176.50

3. Ariz – ₱75,758.08

All other claims are hereby dismissed for lack of merit.

SO ORDERED.12

Unconvinced, PACI elevated an appeal before the NLRC.

The NLRC Ruling

In its April 15, 2014 decision, the NLRC affirmed the LA decision.1âwphi1 It held that Ariz's assistance in the
loading of the products and Jumadla's act of managing the delivery were not sufficient to engender any suspicion
that both of them were performing acts in furtherance of their common design to steal PACI's products. The NLRC
observed that in those instances, Jumadla and Ariz were with other employees, who were not implicated in the theft
of PACI' s products.

With regard to Conejos, the NLRC was of the view that the evidence against him was wanting for the reason that
Loyola did not provide any details as to Conejos' act of coercing him to steal from PACI.

Hence, the NLRC concluded that PACI failed to establish respondents' participation in the pilferage of its products
and that, consequently, its act of dismissing them from employment was not justified. The fallo reads:

WHEREFORE, premises considered, the Decision dated April 23, 2013 is hereby AFFIRMED.

SO ORDERED.13

Undeterred, PACI filed a motion for reconsideration thereto. In its August 18, 2014 resolution, the NLRC denied the
same.

Aggrieved, PACI filed a petition for certiorari with the CA.

The CA Ruling

In its assailed February 12, 2015 decision, the CA sustained the NLRC decision. It declared that the transactions
which Loyola purportedly had with respondents were not substantiated by evidence; and that the sworn statements
of Loyola and Salimpade were self-serving, uncorroborated and insufficient to show respondents' complicity in the
theft of PACI's products.

The CA reasoned that there was no evidence to prove that: the boxes containing stolen products were actually
loaded, by or through the instructions of respondents into the truck assigned to Loyola; Jumadla's confirmation that
he knew Salimpade was inadequate to establish the former's participation in the pilferage; it was not shown that
respondents were the only ones who had access to the stolen products; the delivery receipts 14 only established that
Salimpade 's residence was not included for that day's scheduled deliveries; the photocopy of the police blotter 15and
the certification16 issued by Police Investigator Joselito Lanot, Jr. (Lanot) merely evinced that the boxes were
confiscated from Loyola and Salimpade; and the filing of a criminal complaint did not automatically make the
dismissal valid.

The CA, however, took into consideration the pendency of the criminal action for qualified theft against respondents
and the issuance of the warrants of arrest against them. Thus, it ordered the payment of separation pay instead of
reinstatement because of the strained relations between PACI and respondents. The dispositive portion reads:

WHEREFORE, premises considered, the Petition is DENIED. The Decision dated 15 April 2014 and Resolution
dated 18 August 2014 of the National Labor Relations Commission (Sixth Division) in NLRC LAC No. 05-001625-
13; NLRC RAB IV No. 12- 01812-12 are AFFIRMED with MODIFICATION in that in lieu of reinstatement,
petitioner Philippine Auto Components, Inc. is ORDERED to pay separation pay equivalent to one (1) month salary
for every year of service to private respondents Ronnie B. Jumadla, Roy A. Ariz, and Roy T. Conejos. No
pronouncement as to costs.

SO ORDERED. 17

PACI moved for reconsideration, but the same was denied by the CA in its assailed June 18, 2015 resolution.

134
Hence, this petition.

ISSUE

WHETHER RESPONDENTS WERE TERMINATED FROM EMPLOYMENT FOR A JUST AND VALID
CAUSE.

PACI argues that respondents conspired in stealing its properties; that Loyola and Salimpade positively identified
them to be involved in the modus operandi of stealing and transporting out of its warehouse various automotive
parts for sale to third persons; that the testimonies of Loyola and Salimpade corroborated each other and were not
self-serving because their admission that they had participated in the pilferage of PACI's properties gained them no
benefit; that in the absence of any proof that Loyola and Salimpade acted in bad faith or had any ill motive, their
good faith in having executed their Sworn Affidavits must be presumed; that respondents only offered bare denials
which could not prevail against the positive and uncontroverted statements of Loyola and Salimpade; that the
delivery receipts confirmed that Loyola was not authorized to bring the boxes of radiator fans to Salimpade's
residence; and that the police blotter record and the certification, dated October 15, 2012, as well as the photographs
of the stolen radiator fan units showed that the boxes containing stolen properties were in the possession of Loyola
and Salimpade.

PACI also asserts that circumstantial evidence was sufficient to sustain respondents' dismissal; that the
Resolution18of the Office of the City Prosecutor of Biñan, Laguna, showed that there was substantial evidence to
uphold their dismissal from employment; that respondents committed qualified theft and acts tantamount to serious
misconduct, willful disobedience of company rules and willful breach of trust, all of which were just causes for
dismissal; that it dutifully complied with the requirements of procedural due process; and that respondents were not
entitled to separation pay and backwages.

In their Comment,19 dated September 24, 2015, respondents averred that the petition did not raise questions of law;
that the findings of the NLRC and the CA were supported by substantial evidence and must be respected; and that
the CA should have ordered their reinstatement instead of payment of separation pay.

In its Reply,20 dated 1March 23, 2016, PACI contended, that circumstantial evidence showed that respondents were
involved in the theft of its properties; that they had access to the stolen products and could' have caused them to be
taken out of its warehouse; that Jumadla personally knew· Salimpade; that Ariz assisted his group during the
advance loading on October 12, 2012; that respondents merely denied the charges against them; that Ariz suddenly
tendered his resignation on October 15, 2012; and that Loyola was able to cite other instances when Jumadla and
Ariz instructed him to take possession of boxes suspected to contain stolen products so that they could be picked up
or dropped off at various locations.

The Court's Ruling

The petition of PACI is meritorious.

Respondents were dismissed on the grounds of (i) serious misconduct, particularly theft of PACI's products, (ii)
willful disobedience of company rules, and (iii) willful breach of the trust. PACI claimed that based on the sworn
statements of Loyola and Salimpade, the delivery receipts, the police blotter, the police certification, the
photographs of the stolen radiator fan assembly units, the resolution of the City Prosecutor finding
a prima,facie case of qualified theft, and the Information for qualified theft, there was reasonable ground to believe
that respondents were responsible for the pilferage of automotive parts, which justified their dismissal from
employment.

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, the quantum of
proof necessary is substantial evidence. 21 Substantial evidence is that amount of relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably
opine otherwise.22

After a judicious perusal of the records, the Court finds that there was sufficient cause to justify respondents'
dismissal from employment. The findings of the Court shall be discussed in seriatim.

Loss of trust and confidence as

just cause for respondents'
dismissal

The Labor Code provides that an employer may terminate an employment based on fraud or willful breach of the
trust reposed on the employee.23

135
Breach of trust and confidence, as a just cause for termination of employment, is premised on the fact that the
employee concerned holds a position of trust and confidence, where greater trust is placed by management and from
whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the essence of the offense for
which an employee is penalized.24 The Court discussion in Mabeza v. NLRC25 is instructive:

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given
the seal of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of
security of tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees
occupying positions of trust and confidence or to those situations where the employee is routinely charged with the
care and custody of the employer's money or property.26

In Wesleyan University Philippines v. Reyes,27 the Court discussed the requisites for a valid dismissal on the ground
of loss of trust and confidence:

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.

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 managerial actions. 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
managerial staff. Officers and members of the .managerial staff perform work directly related 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, 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.

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.28

With regard to the first requisite, respondents belong to the first class as they were officers of the managerial staff in
charge of particular departments. It is undisputed th4t at the time of their dismissal, Jumadla and Ariz were
Inventory Control Leaders of PACI'.s Parts and · Materials Handling and Control Group and Finished Goods and
Stock In Delivery Group, respectively. They were responsible for ensuring the veracity of the daily and monthly
reports as well as variance checking of all product models one (1) month before stock taking. Conejos, on the other
hand, was the Senior Inventory Control Associate for Air Conditioner and Radiators. His primary duty was to verify
that the shipping documents contained no discrepancies.

Their positions were necessarily imbued with trust and confidence as they were charged with the delicate task of
ensuring the safety, proper handling and distribution of PACI's products. Hence, a high degree of honesty and
responsibility was required and expected of them.

As to the second requisite, the police report showed that Loyola was caught in possession of PACI's products, which
he transported to an unauthorized location. On the principle of respondeat superior or command responsibility
alone, respondents are liable for negligence in the performance of their duties.29 The loss of a considerable amount
of automotive products under their custody remained unrefuted. Their failure to account for this loss of company
property betrays the trust reposed and expected of them. Further, respondents offered no explanation why PACl's
products were in the custody of unauthorized persons. PACI's loss of trust and confidence was directly rooted in the
manner of how they, as persons in charge of the inventory, had negligently handled the products. 30 They may not
have been directly involved in the pilferage of PACI's products, but their negligence facilitated the unauthorized
transporting of products out of PACI' s warehouse and their sale to third persons. Thus, respondents had violated
PACI's trust and for which their dismissal is justified on the ground of breach of confidence.

No substantial evidence to proye

serious misconduct

The affidavits executed by Loyola and Salimpade averred that respondents were the masterminds behind the
pilferage. It must be borne in mind that implicating a person in the wrongdoing of another is not done with relative
ease.

136
Nevertheless, PACI failed to provide evidence as to the missing link-that respondents sanctioned the delivery of the
products at Salimpade's residence: First, respondents were not the only ones who had access to PACI's
products. Second, that Jumadla personally knew Salimpade did not prove pilferage. Friendship or association is not
proof of culpability. Third, Ariz's resignation on October 15, 2012 may have just been an unfortunate coincidence.

Finally, it has been consi1stently held that the mere filing of a formal charge does not automatically make the
dismissal valid. Evidence submitted to support the charge should be evaluated to see if the degree of proof is met to
justify the respondents' termination.31

Nevertheless, despite the absence of serious misconduct, respondents, as previously discussed, were validly
dismissed due to breach of trust and confidence.

PACI complied with the

requirements of procedural due
process

To meet the requirements of due process in the dismissal of an employee, an employer must furnish the worker with
two (2) written notices: (1) a written notice specifying the grounds for termination and giving to said employee a
reasonable opportunity to explain his side; and (2) another written notice indicating that, upon due consideration of
all circumstances, grounds have been established to justify the employer's decision to dismiss the employee. 32

In this case, respondents were issued individual show cause notices requiring them to explain in writing, within five
(5) days from their receipt thereof, why no disciplinary action, including possible dismissal from employment,
should be meted against them for the alleged pilferage of PACI's products. Moreover, PACI conducted
administrative hearings on November 7 and 8, 2012. Thereafter, it found respondents liable for the charges hurled
against them and issued individual notices of the decision to inform them of their dismissal from employment. Thus,
PACI fully complied with the twin-notice rule.

Time and again, the Court has put emphasis on the right of an employer to exercise its management prerogative in
dealing with its company's affairs, including the right to dismiss erring employees. It is a general principle of labor
law to discourage interference with an employer's judgment in the conduct of his business. Even as the law is
solicitous of the welfare of the employees, it also recognizes employer's exercise of management prerogatives. As
long as the company's exercise of judgment is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the laws or valid agreements, such exercise will be
upheld.33

WHEREFORE, the petition in G.R. No. 218980 is GRANTED. The February 12, 2015 Decision and June 18,
2015 Resolution of the Court of Appeals in CA-G.R. SP No. 137752 are REVERSED and SET ASIDE.

SO ORDERED.

November 23, 2016

G.R. No. 207315

INTERADENT ZAHNTECHNIK PHILIPPINES, INC., BERNARDINO G. BANTEGUI, JR. and SONIA J.

GRANDEA, Petitioners
vs.
REBECCA F. SIMBILLO, Respondent

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the January 4, 2013 Decision2 and May 24; 2013 Resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 120474, which set aside the March 24, 20114 and May 19,
20115Resolutions of the National Labor Relations Commission (NLRC) in NLRC LAC No. 12-003076-10. The
NLRC affirmed the October 29, 2010 Decision6 of the Labor Arbiter declaring respondent Rebecca F. Simbillo's
(Simbillo) dismissal by petitioners Interadent Zahntechnik Philippines, Inc. (Interadent) and its officers Bernardino
G. Bantegui, Jr. (Bantegui) and Sonia J. Grandea (Grandea), as President and Human Resource & Organizational
Development Manager, respectively, valid on the ground of loss of trust and confidence.

Antecedent Facts

137
Simbillo worked at Interadent as a rank-and-file employee from May 2, 2004 up to March 2006. In April 2008, she
was rehired by Interadent as its Accounting Manager. On April 16, 2010) she was promoted to the position of
Finance and Accounting Manager. She was also Interadent' s Treasurer upon being elected by the Board of Directors
on March 31, 2010.

On July 23, 2010, Interadent sought a company-wide implementation of the following security meas1rres: body
frisking and bag/personal items inspection of all employees upon ingress and egress of office, disconnection of all
USB ports and prohibition of cellular phone usage.7 The immediate implementation of these security procedures was
brought about by an alleged leakage of security information uncovered by Interadent's external auditors.

On July 28, 2010, upon the directive of Bantegui, all network and internet connections in Interadent's Accounting
Department were removed and disabled. Simbillo's electronic mail (email) account was likewise suspended. 8

On July 29, 2010, petitioners served Simbillo a Memorandum9 (Notice to Explain) requiring her to submit a written
explanation and to attend an administrative hearing on August 2, 2010, regarding a message she posted on her
Facebook account "referring to company concerns with the Bureau of Internal Revenue (BIR) and insulting
statements against a co-worker." In the Notice to Explain, Sirr1billo was reminded that as Treasurer, as well as
Finance and Accounting Manager, she should observe the highest degree of confidentiality in handling sensitive
information. She was preventively suspended for seven days effective July 29, 2010 to August 6, 2010.

On the following day, Simbillo, through counsel, wrote a reply-letter10 arguing that she was already constructively
dismissed even prior to her receipt of the Notice to Explain considering the discriminatory acts committed by
petitioners starting July 23, 2010 when certain security procedures were directed exclusively and solely against her.
Simbillo claimed that the Notice to Explain was defective and was only used to disguise the intent to dismiss her;
hence there was no need for her to submit an answer or attend the hearing. Simbillo further asserted that she
committed no violation of any rule or law relative to the message she posted on her personal and private Facebook
account that would justify any disciplinary action.

In a letter11 dated August 6, 2010, petitioners extended Simbillo's suspension up to August 25, 2010 in view of her
failure to submit a written explanation and to attend the scheduled hearing. In a reply-letter 12 dated August 9, 2010,
Simbillo reiterated her claim of constructive dismissal and that there was no need for her to answer and attend the
hearing.

On August 9, 2010, Simbillo filed with the Labor Arbiter a Complaint13 for constructive illegal dismissal, non-
payment of service incentive leave pay, 13th month pay, illegal suspension, claims for moral and exemplary damages
and attorney's fees against petitioners.

On August 24, 2010, petitioners issued a Second Notice14 informing Simbillo of her termination from service
effective August 25, 2010 on the ground of loss of trust and confidence. Petitioners found Simbillo to have disclosed
sensitive and confidential information when she posted on her Facebook account on July 15, 2010, the following:

Sana maisip din nila na ang kompanya kailangan ng mga taong di tulad nila, nagtatrabaho at di puro #$, *% ang
pinaggagagawa, na kapag super demotivated na yung tao nayun baka iwan narin nya ang kawawang kumpanya na
pinagpepyestahan ng mga b ).!'.....: Wala na ngang credibility wala pang conscience, portraying so respectable and
so religious pa. Hay naku talaga, nakakasuka, puro nalang animus lucrandi ang laman ng isip.15

Parties' Respective Positions

Simbillo asserted that her dismissal was without just cause or compliance with procedural due process since the
alleged loss of trust and confidence was based on self-serving allegations and mere speculation. She averred that the
Facebook entry cannot support the charge of breach of trust since it did not mention Interadent or any of its
personnel. She maintained that the message actually pertained to a friend's predicament in another company. She
explained that the tenn "ng mga b_i_r" in the Facebook message was short for "bwitre" and certainly did not refer to
the BIR. She claimed that the sentiments that she expressed did not refer to herself or her work. She denied having
been penalized for a past infraction which involved disclosure of confidential information.

Petitioners, for their part, denied Simbillo' s claim of constructive dismissal for absence of proof. They asserted that
the security measures were implemented company-wide without favoring or discriminating against anyone.

Moreover, Simbillo was terminated for a valid and just cause and with compliance with procedural due process. As a
managerial and confidential employee of Interadent, the highest degree of professionalism and confidentiality was
expected of Simbillo and the presence of the basis for the loss of the trust and confidence reposed upon her has
warranted her dismissal. Petitioners posited that Simbillo's Facebook message implying that the BIR is "feasting on"
the company was derogatory because it compromised the company's reputation, making it vulnerable to ridicule and
suspicion particularly in its dealings with government agencies. Such act violated the company's Code of Conduct as

138
well as the Code of Ethics for Professional Accountants. Furthermore, Simbillo's second infraction of divulging
sensitive and confidential financial information has merited the penalty of termination.

Petitioners maintained that they observed due process by serving Simbillo both the Notice to Explain and the Second
Notice of Termination. Simbillo was afforded the opportunity to answer but instead waived her chance to do so by
opting not to submit an answer and attend the hearing.

Ruling of the Labor Arbiter

In a Decision16 dated October 29, 2010, the Labor Arbiter ruled that Simbillo was not constructively dismissed
because she failed to prove her claim of discrimination. The security measures were implemented as part of
management prerogative to preserve the integrity of Interadent's network system and encompassed all employees as
gleaned from a poster17 Simbillo herself submitted. The Labor Arbiter sustained Simbillo's preventive suspension
since her continued presence during investigation posed an imminent threat to the company's confidential
information and records.

The Labor Arbiter also ruled that Simbillo was validly dismissed. He held that there was no need for an actual
leakage of confidential information for Simbillo to be held accountable; her mere laxity and carelessness in posting a
statement on her Facebook account that exposed the company to ridicule already rendered her unworthy of the trust
and confidence reposed on her. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, we uphold the legality of the dismissal of complainant. No pronouncement as
to costs.18

Ruling of the National Labor Relations Commission

In a Resolution19 dated March 24, 2011, the NLRC affirmed the ruling of the Labor Arbiter that Simbillo was not
constructively dismissed but was validly dismissed for loss of trust and confidence. The NLRC held that the
Facebook entry was "indeed alanning" as it compromised Interadent's reputation and was sufficient basis for the
finding of willful breach of trust. It also ruled that Simbillo was not denied due process and that she was the one who
did not avail herself of the opportunity to explain her side. The dispositive portion of the NLRC ruling reads as
follows:

WHEREFORE, premises considered, the appeal is hereby DISMISSED, and the appealed decision AFFIRMED.

SO ORDERED.20

Simbillo filed a Motion for Reconsideration which was, however, denied in the NLRC Resolution21 dated May 19,
2011.

Ruling of the Court of Appeals

Aggrieved, Simbillo filed a Petition for Certiorari22 before the CA ascribing upon the NLRC grave abuse of
discretion amounting to lack or in excess of jurisdiction in upholding the legality of her dismissal.

The CA, in a Decision23 dated January 4, 2013, found merit in Simbillo's Petition.1âwphi1 It ruled that to constitute
a valid cause for dismissal, the breach of trust should be willful and intentional, which petitioners failed to prove in
this case. It rejected petitioners' allegation that Simbillo divulged confidential company information. It noted that the
Facebook entry did not contain any corporate record or confidential information but was mere1y "a vague
expression of feelings or opinion towards a person or entity, which was not even identified with certainty ." 24 It
pointed out that the term "b_i_r_" in the entry cannot be construed as the acronym "B.I.R." or the Bureau of Internal
Revenue. Finding no willful breach of trust, the CA held that Simbillo's dismissal was illegal and ordered the
payment of her separation pay in lieu of reinstatement due to strained relations of the parties plus backwages. The
dispositive portion of the CA Decision reads:

WHEREFORE, the instant petition of GRANTED. The Resolutions dated March 24, 2011 and May 19, 2011 of the
National Labor Relations Commission, are hereby SET ASIDE. Finding private respondent InteraDent Zahntechnik
Philippines, Inc. to have dismissed petitioner Rebecca Simbillo without valid or just cause, InteraDent is hereby
ordered to pay her a separation pay in lieu of reinstatement, of one (1) month salary for every year of service plus
full backwages, inclusive of allowances and other benefits or their monetary equivalent from the time her
compensation was withheld until the finality of this decision.

SO ORDERED.25

139
Petitioners filed a Motion for Reconsideration but was denied by the CA in its Resolution 26 dated May 24, 2013.

Hence, petitioners filed this Petition for Review on Certiorari27 and a Motion for Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction28 to restrain the implementation of the CA Decision and
Resolution.

Issues

Petitioners raise the question on whether the CA may reverse the factual declarations of both the Labor Arbiter and
the NLRC that there was substantial evidence of willful and intentional breach of trust. According to petitioners, the
CA has no power to revisit the findings of fact of the NLRC by making the following erroneous interpretations in its
Decision; a) that the Facebook entry "does not contain any corporate record or confidential information;" b) that the
entry is "[a ]t worst, x x x a vague expression of feelings or opinion towards a person or entity, which was not even
identified with certainty;"29 and (c) that the term "b_ i_r_ " "does not, in any way, represent the acronym 'B.I.R.' or
Bureau of Internal Revenue."30 In essence, they insist that, on account of such Facebook post, Simbillo has failed to
observe the degree of cautiousness expected of a manager like herself and therefore may be dismissed on the ground
of loss of trust and confidence.

Our Ruling

The Petition lacks merit.

As a rule, factual findings of quasi-judicial agencies such as the NLRC are generally accorded not only respect but
also finality because of the special knowledge and expertise gained by these agencies from handling matters under
their specialized jurisdiction.31 However, well-settled is the rule that for want of substantial basis, in fact or in law,
these factual findings cannot be given the stamp of finality and conclusiveness normally accorded to it. 32 Hence, the
CA can review the factual findings or legal conclusions of the NLRC and "is not proscribed from 'examining
evidence anew to determine whether the factual findings of the NLRC are supported by the evidence presented and
the conclusions derived therefrom accurately ascertained' ."33 In the exercise of its power to review decisions of the
NLRC, the CA can make its own factual determination when it finds that the NLRC gravely abused its discretion in
overlooking or disregarding the evidence which are material to the controversy.34 In the instant case, the Court
agrees with the CA that the conclusions arrived at by the Labor Arbiter and the NLRC are manifestly erroneous
because the evidence does not support their findings.

As a managerial employee, the existence of a basis for believing that Simbillo has breached the trust of petitioners
justifies her dismissal.35 However, to be a valid ground, loss of trust and confidence must be based on willful breach
of trust, that is, done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act
done carelessly, thoughtlessly, heedlessly, or inadvertently. 36

It bears emphasizing that the right of an employer to dismiss its employees on the ground of loss of trust and
confidence must not be exercised arbitrarily, For loss of trust and confidence to be a valid ground for dismissal, it
must be substantial and founded on clearly established facts. Loss of confidence must not be used as a subterfuge for
causes which are improper, illegal or unjustified; it must be genuine, not a mere afterthought, to justify earlier action
taken in bad faith. Because of its subjective nature, this Court has been very scrutinizing in cases of dismissal based
on loss of trust and confidence because the same can easily be concocted by an abusive employer. x x x37

In this case, the act alleged to have caused the loss of trust and confidence of petitioners in Simbillo was her
Facebook post which supposedly suggests that Interadent was being "feasted on" by the BIR and also contains
insulting statements against a co-worker and hence has compromised the reputation of the company. According to
petitioners, there was disclosure of confidential information that gives the impression that Interadent is under
investigation by the BIR for irregular transactions. However, we agree with the CA's observation that the Facebook
entry did not contain any corporate record or any confidential information. Otherwise stated, there was really no
actual leakage of information. No company information or corporate record was divulged by Simbillo.

Simbillo' s failure to substantiate her claim that the Face book entry was posted for a friend who consulted her on a
predicament she has with her company and that the term "b_i_r_" represents ' ' bwitre" will not weaken her case
against petitioners. It must be emphasized at this point that in illegal dismissal cases, the burden of proof is upon the
employer to show that the employee's dismissal was for a valid cause. 38 "The employer's case succeeds or fails on
the strength of its evidence and not on the weakness of that adduced by the employee, in keeping with the principle
that the scales of justice should be tilted in favor of the latter in case of doubt in the evidence presented by
them."39The Facebook entry did not mention any specific name of employer/company/ government agency or
person. Contrary to petitioners' insistence, the intended subject matter was not clearly identifiable. As acknowledged
by petitioners themselves, Simbillo's Facebook account contained a list of her former and present employers. If
anything, the entry would merely merit some suspicion on the part of Interadent being the present employer, but it
would be far-fetched to conclude that Interadent may be involved in anomalous transactions with the BIR. Clearly,
petitioners' theory was based on mere speculations.
140
If at all, Simbillo can only be said to have acted "carelessly, thoughtlessly, heedlessly or inadvertently" in making
such a comment on Facebook; however, such would not amount to loss of trust and confidence as to justify the
termination of her employment. When the breach of trust or loss of confidence conjectured upon is not borne by
clearly established facts, as in this case, such dismissal on the ground of loss of trust and confidence cannot be
upheld.

Petitioners’ contention that Simbillo’s second offense of divulging confidential company information merits her
termination deserves scant consideration.1âwphi1 Other that self-serving allegations of petitioners, there was no
concrete proof that Simbillo had a past infraction involving disclosure of confidential information of the company. If
indeed Simbillo has been found guilty for not being trustworthy due to an incident that happened in July 2009 as
alleged by petitioners, she should not have been promoted to a higher position as Finance and Accounting Manager
in April 2010 and elected as Treasurer in March 2010. Moreover, she was given salary and merit increases for the
period covering June 2009-May 2010,40 which is an indication of her high performance rating.

All told, we find no reversible error on the CA in finding that Simbillo was illegally dismissed. The allegation of
loss of trust and confidence was not supported by substantial evidence, hence, we find Simbillo 's dismissal
unjustified. A lighter penalty would have sufficed for Simbillo's laxity and carelessness. As this Court has held,
termination of employment is a drastic measure reserved for the most serious of offenses. 41

WIIEREFORE, the Petition is DENIED. The January 4, 2013 Decision and May 24, 2013 Resolution of the Court
of Appeals in CA-G.R. SP No. 120474 are AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 197393, June 15, 2016

PHILIPPINE SAVINGS BANK, Petitioner, v. MANUEL P. BARRERA, Respondent.

DECISION

SERENO, C.J.:

This is a Petition1 for Review under Rule 45 of the Rules of Court. The Petition assails the Court of Appeals (CA)
Decision2 dated 17 February 2011 and Resolution3 dated 15 June 2011 in C.A.-G.R. SP No. 02612, nullifying the
National Labor Relations Commission (NLRC) Decision4 dated 29 September 2006 and Resolution5 dated 20
December 2006 in NLRC Case No. V-000445-2006. The CA reinstated the labor arbiter's Decision6 dated 16
December 2005 in RAB Case No. VI-04-10274-05.

Petitioner argues that the CA committed reversible error in overturning and setting aside the NLRC Decision and
Resolution on the sole ground that the supersedeas bond posted was invalid.7 The CA concluded that the bond was
irregular and had no force and effect, because the surety company's authority to transact business as a bonding
company refers only to civil cases and does not include labor cases.

We do not agree with this conclusion.

THE FACTS

Petitioner is a banking institution organized and existing under the laws of the Philippines. 8 Respondent worked for
petitioner for seven years in various capacities.9 In 2004, he was assigned to the Bacolod branch as a marketing
officer and was put in command of the loans department.10ChanRoblesVirtualawlibrary

During a quality assurance review, it was discovered that respondent had allowed a contractual employee to use the
former's user ID for account booking and approval in the bank's Integrated Loans System.11The unauthorized
disclosure of system ID and password was a violation of bank policy. 12ChanRoblesVirtualawlibrary

Respondent admitted that he had disclosed his user ID and password, but only to a Ms. Mary Ann Cacal - a regular
employee who had to go on maternity leave.13 He explained that he did so for the continuity of transactions in
instances when he had to go out of the bank to coordinate with dealers or interview clients.14 He insisted that he was
merely following a precedent set by the branch head, Mr. Loubert Sajo.15ChanRoblesVirtualawlibrary

While the investigation of this matter was pending, the bank discovered another infraction committed by respondent
- the unauthorized issuance of bank certifications.16 The internal audit group found that he, along with other officers,
was involved in lending the account of Spouses Armando and Grace Ong (Sps. Ong) to different individuals in order
to generate bank certifications in favor of the latter.17 Bank policy explicitly stated that "no account shall be allowed
to be opened for certification purposes only."18ChanRoblesVirtualawlibrary
141
As a result of the investigation, it was discovered that a Request for Change was accomplished on 2 June 2004 to
change the account name of Sps. Ong to that of Spouses Orville and Lolita Bautista (Sps. Bautista). The account
number remained the same. Respondent was shown to be a signatory to the Certification that there existed a deposit
with the bank of a sum of money as of 1 June 2004 in the name of Sps. Bautista. After two days, another Request for
Change was processed to revert the account name to that of Sps. Ong. On 7 June 2004, respondent again signed and
approved a bank certification in favor of a certain Karen Galoyo using the same account number. 19 Documents
showed deficiencies in the signature cards and other requirements for the processing of a request for change of
account name.20ChanRoblesVirtualawlibrary

On 15 February 2005, an administrative hearing was conducted.21 On 15 March 2005, petitioner served on
respondent a Notice of Termination for grave violation of bank policies, code of conduct, and trust and
confidence.22ChanRoblesVirtualawlibrary

On 4 April 2005, respondent filed a Complaint for illegal dismissal.

THE RULING OF THE LABOR ARBITER

The labor arbiter ruled in favor of respondent and ordered his immediate reinstatement, as well as the payment of
P476,137.39 representing back wages, 13th month pay, moral and exemplary damages, attorney's fees, quarterly
bonus, and refund for travel expenses and other benefits. The labor arbiter found that the alleged infractions were
never fully substantiated by clear and convincing evidence:
It appeared that complainant's failure to report the alleged bank's irregularities/anomalies was never established
since there was no clear irregularities/anomalies to reckon with, nor was he apprised that failure to do so, if there is
any, would constitute valid ground for dismissal.

As to complainant's unauthorized disclosure of system ID and password to an agency staff who was just assigned as
replacement of an employee who was on leave is, to the mind of this Labor Tribunal, is not enough ground to
constitute serious/grave misconduct to warrant outright dismissal of the complainant xxx In the instant case, this
Office finds that complainant was honest enough to admit that although he shared his system ID and password to
Ms. Chua, it was done in good faith and with good intention to insure that booking transactions can be made even if
he was out in the field as Marketing Officer. 23

Petitioner appealed to the NLRC.

THE RULING OF THE NLRC

Respondent filed a Motion to Dismiss24 on the ground of lack of authority to file appeal memorandum and non-
perfection thereof. He pointed out that the supersedeas bond was irregular, because the Certification of
Accreditation and Authority issued by the Office of the Court Administrator (OCA) stated that the Philippine
Charter Insurance Corporation (PCIC) was only authorized to issue bonds for civil cases:
PHILIPPINE CHARTER INSURANCE CORPORATION

is hereby granted the authority to transact, through its authorized agents specified herein, surety in relation
to CIVIL CASES ONLY filed/pending before the Municipal Trial Courts in Cities of Bacolod City, Cebu City and
lloilo City. Valid until January 31, 2006, unless otherwise suspended or revoked.

Nevertheless, the NLRC gave due course to the appeal and reversed the Decision of the labor arbiter. It found that
the complainant had been dismissed for cause and afforded due process.25 It went over the evidence presented and
found that petitioner was able to substantiate the validity of complainant's termination. 26 The NLRC found that
respondent had violated the bank's Code of Conduct when he disclosed his user ID and password despite the strict
prohibition on its disclosure.27 With regard to the bank certifications, it did not give credence to his defense that it
was a ministerial duty on the part of the respondent to affix his signature. 28 According to the NLRC, the reasons
given by respondent revealed his laxity in protecting the interest of the bank.29 The management prerogative of the
bank to institute measures that would curb irregularities was upheld.

The NLRC Decision, however, did not address the argument raised in the Motion to Dismiss regarding the
irregularity of the appeal bond. Respondent therefore filed a Petition for Certiorari with the CA.
THE RULING OF THE CA

The CA held that the NLRC had committed grave abuse of discretion amounting to lack or excess of jurisdiction
when the latter gave due course to the bank's appeal even if it was apparent that the appeal had not been perfected
owing to a defective and irregular appeal bond.30ChanRoblesVirtualawlibrary

The CA observed that the certification and accreditation issued by the OCA did not state that the PCIC was allowed
to issue bonds relative to labor cases filed before the NLRC.31 The appellate court further held that the appeal should
not have been given due course because of its non-perfection within the reglementary
period.32ChanRoblesVirtualawlibrary

The CA did not see the need to resolve the other issue - whether the NLRC gravely abused its discretion in reversing
142
the Decision of the labor arbiter - because "to do so is tantamount to allowing a lost remedy to
prosper."33ChanRoblesVirtualawlibrary

Petitioner's Motion for Reconsideration was denied.

Petitioner attributes grave and reversible error to the CA in granting respondent's Petition for Certiorari based solely
on an erroneous technical ground without adjudicating the case on the merits. Petitioner prays that this Court
reinstate the Decision of the NLRC.

In his Comment,34 respondent asserts that the CA properly found that the appeal before the NLRC had not been
perfected; hence, the Decision of the labor arbiter has become final and executory.
OUR RULING

The Petition is meritorious.

The Court was confronted with a similar question in U-Bix Corp. v. Hollero.35 In that case, both the NLRC and the
CA held that the supersedeas bond posted by petitioners had no force and effect, because a perusal of the bond
revealed that the Certification of Accreditation and Authority issued by the OCA covers an authority to transact
surety business in relation to "civil/special proceedings cases only" and does not include labor cases filed before the
NLRC. The Court therein ruled that the bonds may also be used for labor cases.

In the present case, the CA overlooked the fact that it is within the province of the NLRC to accredit surety
companies for cases it hears. The Supreme Court only accredits surety companies for judicial courts:
II. ACCREDITATION OF SURETY COMPANIES: In order to preclude spurious and delinquent surety companies
from transacting business with the courts, no surety company or its authorized agents shall be allowed to transact
business involving surety bonds with the Supreme Court, Court of Appeals, the Court of Tax Appeals, the
Sandiganbayan, Regional Trial Courts, Shari'a District Courts, Metropolitan Trial Courts, Municipal Trial Courts in
Cities, Municipal Trial Courts, Municipal Circuit Trial Courts, Shari'a Circuit Courts and other courts which may
thereafter be created, unless accredited and authorized by the Office of the Court Administrator. 36

This fact explains why labor cases were not enumerated in the Certification of Accreditation and Authority issued to
the PC1C. This is not to say that the certification issued by the OCA is worthless before the NLRC. On the contrary,
the 2005 Revised Rules of Procedure of the NLRC expressly provided that bonds issued by a reputable bonding
company duly accredited by the Supreme Court are acceptable.37ChanRoblesVirtualawlibrary

In addition, the Court has relaxed the requirement of posting a supersedeas bond for the perfection of an appeal
when there has been substantial compliance with the rule.38 For example, in Del Rosario v. Philippine Journalists,
Inc.,39 the Court allowed the appeal to proceed despite the subsequent revocation of the authority of a bonding
company, because "technical rules of procedure should not hamper the quest for justice and truth."

We find that the purpose of the appeal bond - to ensure, during the period of appeal, against any occurrence that
would defeat or diminish recovery by the aggrieved employees under the judgment if subsequently affirmed 40 - has
been met. Records show that as of 22 January 2011, the supersedeas bond in the amount of P476,137.39 was still in
existence.41ChanRoblesVirtualawlibrary

We now resolve the prayer to reinstate the NLRC Decision.

Generally, only errors of law are reviewed by this Court in petitions for review. However, there are well-recognized
exceptions42 to this rule, as in this case, when the factual findings of the NLRC contradict those of the labor arbiter.

In the interest of judicial economy and efficiency, and given that the records are sufficient to make a determination
of the validity of respondent's dismissal, the Court has decided to reevaluate and review the factual findings.

We uphold the finding of the NLRC that respondent was validly dismissed.

The unauthorized disclosure of

username and password exposed
the bank to incalculable losses.

The loss of confidence had sufficient basis. As an account and marketing officer, respondent was tasked with the
approval of loans, which is an element of a core banking function.43 Without a doubt, he was entrusted with delicate
matters, including the custody, handling, care and protection of the bank's assets. Given the sensitive functions of his
position, he was expected to strictly observe and comply with the bank's standard operating procedures.

This he failed to do.

The bank has an existing policy on user IDs and passwords: BOPD Code 003-01 -04.244 dated 6 August 2002,
obligating designated branch personnel to keep their passwords confidential at all times. The purpose was to
143
establish accountabilities and limit control over transactions and/or functions.45Respondent, who was one of those
branch personnel so designated, disclosed his password to another employee, who later disclosed it to a contractual
employee.

Respondent tried to excuse his action by pointing out that the branch head was also guilty of the same offense.
(After investigation, this allegation proved to be false.) Although respondent later attempted to seek understanding
on account of his heavy workload, we cannot force the employer to accept these excuses. We understand that the
failure of respondent to report irregularities being committed in the branch, coupled with his disregard of the control
procedure, allowed unauthorized access into the bank system. To a great degree, it exposed the bank to unauthorized
transactions that would have been difficult to trace and determine.

Aside from breaking the trust of his employer, respondent also demonstrated gross and habitual negligence when he
delegated a function that had been specifically reposed in him. His thoughtless disregard of the consequences of
allowing an unauthorized person to have unbridled access to the bank's system and his repeated failure to perform
his duties for a period of time justified his dismissal.

Respondent's complicity in the

issuance of fraudulent bank
certifications justifies the
loss of confidence.

On 19 October 2001, the bank released IOL No. OPS 01-02346 regarding the issuance of bank certifications for
deposits and loans, the relevant portions of which state:
All concerned Department/Branches are hereby reminded to be careful in issuing bank certification by observing
necessary procedures such as but not limited to the following:

1. The branch/department shall restrict the issuance of Bank Certificate to bonafide Bank clients who:

- must have opened their accounts legitimately, complete with the usual identity requirements, and

- has written a request for bank certifications on deposits and loans, signed by him, signature verified and approved
by the concerned Operating/Department Hea.
x x x x.

3. No account shall be allowed to be opened for certification purposes only.

x x x x.

Issuance of false certification shall be dealt with in accordance with the Bank's Officers/Employees Code of Ethics
and Behavior.

Respondent claimed that he was merely prevailed upon by the branch head to sign the bank certifications, and that
the signing was ministerial upon the presentation of a letter-request and a printout of the client's name and account
number.47ChanRoblesVirtualawlibrary

First, We cannot fault petitioner for dismissing a bank officer who has failed to grasp the significance of bank
certifications despite his employment with the bank for seven years. In his reply to petitioner's Memorandum dated
29 December 2004, respondent explained that he had signed the Bank Certification dated 4 June 2004, because there
were only two bank officers at that time - he and the branch head - and "the client was getting impatient waiting for
his document."48ChanRoblesVirtualawlibrary

In Sajo v. Philippine Saving's Bank49 involving the very same branch head and including the very same bank
certifications referred to in this case, the Court did not find reversible error on the part of the CA in ruling that the
termination was valid. Indeed, the question of whether the employee received monetary consideration for the
issuance of fraudulent bank certificates was immaterial; what was reprehensible was that the employee allowed
himself to be a conduit for defrauding persons and/or institutions that relied on the
certificates.50ChanRoblesVirtualawlibrary

In Rivera v. Allied Banking Corp.,51 the dismissed employee explained that the arrangement with the client regarding
the opening of joint accounts for her foreign currency check deposits used for rediscounting transactions was merely
an accommodation service, which was done in good faith and in accordance with the bank's policies. The Court,
nonetheless, upheld the validity of his termination.

Second, respondent was guilty of gross and habitual negligence when he failed to exercise the requisite amount of
care or diligence in signing the bank certifications. Bank policy clearly required that certifications be issued only to
clients who had opened their accounts legitimately with the usual identity requirements. Even if it were true that he
had no access to the information, respondent should have been alerted of the irregularity by the fact that at least
three requests for change of account name had been submitted in the course of a week. However, respondent
proceeded to sign the certifications without question, evincing a thoughtless disregard of the consequences of his
144
actions.52ChanRoblesVirtualawlibrary

Third, respondent cannot hide behind his designation as an account officer in charge of loans to claim ignorance of
branch operations. It must be emphasized that he admitted to having been appointed as branch head of PSB-Bacolod
from 1 June 1998 to 30 June 2001; and assistant branch head of PSB-Cebu City and PSB-General Santos from 1
July 2001 to 31 August 2002 and from 1 August 2002 to 30 June 2003, respectively. 53 He cannot deny that for at
least five years, he should have had an in-depth knowledge and understanding of bank operations and policies.

Fourth, respondent had the discretion to refuse to sign the document. Even if he was under compulsion from the
branch head to sign, the act would still have been inexcusable. In fact, the Court has upheld the dismissal of
employees who claimed that they only committed illegal acts upon the instructions of their
superior.54ChanRoblesVirtualawlibrary

Petitioner properly exercised its

management prerogative in
terminating the services of respondent.

Because of its status as a business affected with public interest, 55 a bank is expected to exercise the highest degree of
diligence in the selection and supervision of its employees.56ChanRoblesVirtualawlibrary

We cannot coerce petitioner to retain an employee whom it cannot trust to perform duties of the highest fiduciary
nature.57 As a general rule, employers are allowed wider latitude of discretion in terminating the employment of
managerial employees, as the latter perform functions that require the employers' full trust and
confidence.58ChanRoblesVirtualawlibrary

The NLRC correctly ruled:

We cannot prevent respondent in the exercise of its management prerogative to institute measures that will curb
irregularities. Hence, respondent bank cannot be faulted when it scrutinized the violative acts of complainant and
considered him unworthy to remain in its employ after affording him ample opportunity to defend
himself.59cralawred

The degree of responsibility, care and trustworthiness expected of bank officials and employees is, by the very
nature of their work, far greater than that of ordinary officers and employees in other business firms.60 Hence, no
effort must be spared by banks and their officers and employees to ensure and preserve the trust and confidence of
their clients and the general public, as well as the integrity of bank records. 61ChanRoblesVirtualawlibrary

WHEREFORE, the instant petition is GRANTED. The assailed decision and resolution of the Court of Appeals
are SET ASIDE, and the Decision dated 29 September 2006 of the National Labor Relations Commission in NLRC
Case No. V-000445-2006 is REINSTATED.

SECOND DIVISION

G.R. No. 202621, June 22, 2016

ZAIDA R. INOCENTE, Petitioner, v. ST. VINCENT FOUNDATION FOR CHILDREN AND AGING,
INC./VERONICA MENGUITO, Respondents.

DECISION

BRION, J.:

In this petition for review on certiorari,1 we resolve the challenge to the February 27, 2012 decision2 and the July 11,
2012 resolution3 of the Court of Appeals (CA) in CA-G.R. Sp No. 118576.

The CA's February 27, 2012 decision affirmed the October 28, 2010 decision4 of the National Labor Relations
Commission (NLRC) in NLRC LAC Case No. 05-001025-10 (NLRC NCR Case No. 07-10270-09) as it, in turn,
affirmed the November 27, 2009 decision5 of the Labor Arbiter (LA).

The LA's November 27, 2009 decision denied the complaint for illegal dismissal filed by petitioner ZaidaR.
Inocente for lack of merit.
The Factual Antecedents

Respondent St. Vincent Foundation for Children and Aging, Inc. (St. Vincent) is a non-stock, non-profit foundation
engaged in providing assistance to children and aging people and conducting weekly social and educational
activities among them. It is financially supported by the Kansas based Catholic Foundation for Children and
Aging (CFCA), a Catholic foundation dedicated to promoting Christian values and uplifting the welfare of the
children all over the world. Respondent Veronica Menguito is St. Vincent's President/Directress (collectively, they
145
shall be referred to as respondents).

In 2000, St. Vincent hired Zaida as Program Assistant; it promoted her as Program Officer the following year. Zaida,
then single, was known as Zaida Febrer Ranido. Zaida's duties as program officer included the following:
monitoring and supervising the implementation of the programs of the foundation, providing training to the staff and
sponsored members, formulating and developing program policies for the foundation, facilitating staff meetings,
coordinating and establishing linkages with other resource agencies and persons, as well as preparing St. Vincent's
annual program plan and budget, and year-end reports.

In 2001, Zaida met Marlon D. Inocente. Marlon was then assigned at St. Vincent's Bataan sub-project. In 2002,
Marlon was transferred to St. Vincent's sub-project in Quezon City. Zaida and Marlon became close and soon
became romantically involved with each other.

In September 2006, St. Vincent adopted the CFCA's Non-Fraternization Policy; it reads in full:

chanRoblesvirtualLawlibrary
CFCA Policy 4.2.2.3. Non-Fraternization Policy

While CFCA does not wish to interfere with the off-duty and personal conduct of its employees, to prevent
unwarranted sexual harassment claims, uncomfortable working relationships, morale problems among other
employees, and even the appearance of impropriety, employees who direct and coordinate the work of others
are strongly discouraged from engaging in consensual romantic or sexual relationships with any employee or
volunteer of CFCA.6 [Emphasis supplied]

Despite St. Vincent's adoption of the Non-Fraternization Policy, Zaida and Marlon discretely continued their
relationship; they kept their relationship private and unknown to St. Vincent even after Marlon resigned in July
2008.

On February 19, 2009, Zaida experienced severe abdominal pain requiring her to go to the hospital. The doctor later
informed her that she had suffered a miscarriage. While confined at the hospital, Zaida informed St. Vincent of her
situation. Menguito verbally allowed Zaida to go on maternity leave until April 21, 2009. Zaida was released from
the hospital two days after her confinement.

On March 31, 2009, Zaida was again confined at the hospital for ectopic pregnancy. Zaida, thereafter, underwent
surgery7 to have one of her fallopian tubes removed. She was discharged from the hospital on April 4, 2009.

On May 18, 2009, Zaida received from St. Vincent a letter8 dated May 14, 2009 and signed by Menguito requiring
her to explain in writing why no administrative action should be taken against her. St. Vincent charged her
with violation of the CFCA Non-Fraternization Policy and of the St. Vincent's Code of Conduct provisions
prohibiting: (1) acts against agency interest and policy by indulging in immoral and indecent act; (2) acts against
persons by challenging superiors' authority, threatening and intimidating co-employees, and exerting undue
influence on subordinates to gain personal benefit; and (3) violations within the terms of employment by doing an
act offensive to the moral standard of the Foundation.

In her May 19, 2009 reply-letter, Zaida defended that: (1) her relationship with Marlon started long before St.
Vincent's Non-Fraternization Policy took effect; (2) Marlon was no longer connected with St. Vincent since 2008;
(3) her relationship with Marlon is not immoral as they were both of legal age and with no impediments to marry;
(4) they kept their relationship private and were discreet in their actions; (5) Marlon stayed at her place only to take
care of her while she was sick; and (6) they already planned to get married as soon as she recovers and their finances
improve.

Zaida's explanation failed to convince St. Vincent. In the letter dated May 30, 2009,9 St. Vincent terminated Zaida's
employment for immorality, gross misconduct and violation of St. Vincent's Code of Conduct.

Zaida and Marlon were subsequently married on June 23, 2009.10chanrobleslaw

On July 14, 2009, Zaida filed before the LA her complaint for illegal dismissal, with prayer for reinstatement,
backwages, moral and exemplary damages and litigation expenses.
The Labor Tribunal's Rulings

In its decision11 dated November 27, 2009, the labor arbiter (LA) dismissed Zaida's complaint for lack of basis. The
LA found that, despite the implementation of the Non-Fraternization Policy in 2006, Zaida maintained Eind
concealed from St. Vincent her relationship with Marlon. The LA pointed out that as a program officer, Zaida was
under the obligation to observe this Policy and to inform her employer of her relationship. Her acts, therefore, could
be characterized as an act of dishonesty constituting willful breach of trust and confidence justifying her dismissal.

The LA also found the dismissal compliant with the due process requirements of two notices, each of which properly
apprised Zaida of the specific acts that formed the basis for her dismissal.
146
In its October 28, 2010 decision,12 the NLRC agreed with the LA's findings. It additionally pointed out that Zaida's
act of continuing her intimate relationship with Marlon despite the implementation of the Non-Fraternization Policy
constituted not only immoral conduct; it also prejudiced the interest of St. Vincent as it set a bad example not only to
her subordinates but also to the children-beneficiaries of St. Vincent. Her act, therefore, amounted to serious
misconduct justifying her dismissal.

The NLRC denied Zaida's motion for reconsideration13 in its January 11, 2011 resolution.14 The denial prompted
Zaida's certiorari petition15 before the CA.
The CA's Ruling

The CA denied Zaida's certiorari petition for lack of merit.16chanrobleslaw

The CA agreed that Zaida's dismissal was valid, reiterating that Zaida's act of continuing her relationship with
Marlon despite the implementation of the Non-Fraternization Policy, and without the benefit of marriage, went
against the very policy of promoting Christian values that she was charged to uphold. Her subsequent marriage to
Marlon did not help her situation as, under the circumstances, it appeared more of an afterthought intended to
circumvent St. Vincent's rules and code of conduct.

Lastly, the CA declared that her dismissal was not due to her pregnancy and, therefore, did not violate Article 137(2)
of the Labor Code. Rather, her pregnancy was merely the operative act that led to the discovery of her immoral
conduct.

Zaida filed the present petition after the CA denied her motion for reconsideration 17 in the CA's July 11, 2012
resolution.18chanrobleslaw
The Petition

Zaida considers St. Vincent's Non-Fraternization Policy to be an invalid exercise of its management prerogative. She
argues that the Policy is unreasonable; it infringes on the constitutional rights of persons as it seeks to control even
those conduct committed outside of the workplace and beyond office hours. She contends that her relationship with
Marlon, who ceased to be connected with St. Vincent since 2008 and which relationship they had kept private,
clearly goes beyond aspects of the employment and St. Vincent's legitimate business interests - matters which it
could validly regulate under its management prerogative.

She also argues that the charge of loss of trust and confidence was without clear legal and factual basis as St.
Vincent failed to meet the standards that would justify loss of trust and confidence. She points out that:

chanRoblesvirtualLawlibraryFirst, as Program Officer, she merely recommends, but does not formulate, program
policies; the responsibility to formulate would have made her position as one of trust and confidence. Neither was
she invested with confidence on delicate matters, nor charged with the custody or care of St. Vincent's assets and
properties.

Second, St. Vincent dismissed her for immorality, gross misconduct and violation of the Code of Conduct. The labor
tribunals' finding of willful breach of trust and confidence, therefore, smacks of bad faith as it deprived her of the
opportunity to properly answer the charge.

Third, the acts of fraternization and pregnancy outside of marriage which the respondents used as grounds for her
dismissal are not work related and do not render her unfit to continue working for St. Vincent.

Fourth, her relationship with Marlon started long before St. Vincent implemented its Non-Fraternization Policy; it
should not retroactively apply to her.

And fifth, at the time of her dismissal, Marlon had long ceased to be St. Vincent's employee such that the
respondents could not validly use their relationship and the Non-Fraternization Policy as grounds for her dismissal.

Further, Zaida argues that, as worded, St. Vincent's Non-Fraternization Policy does not altogether prohibit
consensual romantic or sexual relationships between employees and/or volunteers of CFCA, but merely discourages
such relationships. The Policy, in fact, does not even require full disclosure (of such relationships) that could have
otherwise justified the respondents in terminating her employment on the ground of dishonesty.
Granting arguendo that her relationship with Marlon and her pregnancy outside of marriage could be considered
immoral, the respondents failed to prove that these acts were prejudicial or detrimental to their interests.

Finally, Zaida argues that her dismissal constitutes discrimination against women. She points out that at the time the
respondents dismissed her, allegedly for immorality, she was still recovering from her miscarriage. The respondents'
act, therefore, clearly violated Article 137(2) of the Labor Code, Republic Act No. 9710 (the Magna Carta of
Women) and the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW).
The Case for the Respondents

147
The respondents counter19 that Zaida's petition should be denied outright because it is procedurally flawed; it raises:
(1) factual issues that are prohibited under Rule 45 of the Rules of Court; and (2) new issues that cannot be raised
only on appeal. Findings of fact of the labor tribunals are conclusive and should no longer be disturbed, especially
when, as in this case, they are affirmed by the CA.

In any case, the respondents submit that the Non-Fraternization Policy was issued in the valid exercise of
management prerogative. It was intended to "prevent unwarranted sexual harassment claims, uncomfortable working
relationships, morale problems among other employees, and even the appearance of impropriety."

Zaida's employment was terminated not because of her violation of its policy, and certainly not because of her
pregnancy that could otherwise have contravened the laws prohibiting discrimination against women. Rather, her
employment was terminated because of immorality constituting serious misconduct and willful breach of trust and
confidence - grounds that the Labor Code provides as just causes for dismissal.
The Court's Ruling

We grant the petition.

I. Procedural issue: jurisdictional limitations of the Court's Rule 45 review of the CA's Rule 65 decision in
labor cases

In a Rule 45 review of a CA Labor decision rendered under Rule 65 of the Rules of Court, what we review are
the legal errors that the CA may have committed in arriving at the assailed decision, in contrast with the review for
jurisdictional errors that underlie an original certiorari action.

In determining this legal correctness, we examine the CA decision in the same context that it determined the
presence or the absence of grave abuse of discretion in the NLRC decision that it reviewed, not on the basis of
whether the NLRC decision was correct on the merits. In simple terms, we test the CA's decision within the same
context that the Rule 65 petition was presented before it.

Under this approach, the question that we ask is: Did the CA correctly determine whether the NLRC committed
grave abuse of discretion in ruling on the case?20chanrobleslaw

We point out as well that underlying this jurisdictional limitation of our Rule 45 review is the legal reality that in the
review of the labor tribunals' rulings, the courts generally accord respect to their factual findings and the conclusions
that they draw from them in view of the tribunals' expertise in their field. There is also the legal reality that the
NLRC decision brought before the CA under the original certiorariaction is already final and executory and can
only be reversed on a finding of grave abuse of discretion.

In resolving the present Rule 45 petition, we are therefore, bound by the intrinsic limitations of a Rule
65 certiorari proceeding: it is an extraordinary remedy aimed solely at correcting errors of jurisdiction or acts
committed without jurisdiction, or in excess of jurisdiction, or with grave abuse of discretion amounting to lack of
jurisdiction. It does not address mere errors of judgement, unless the error transcends the bounds of the tribunal's
jurisdiction.

As defined, "grave abuse of discretion" refers to the arbitrary or despotic exercise of power due to passion, prejudice
or personal hostility; or the whimsical, arbitrary or capricious exercise of power that amounts to an evasion or
refusal to perform a positive duty enjoined by law or to act at all in contemplation of law.

To be sure, the rule that precludes an inquiry into the correctness of the labor tribunals' appreciation and assessment
of the evidence, and the conclusions drawn from them, is not without exceptions. The Court, in the past, has
recognized that certain exceptional situations require a review of the labor tribunals' factual findings and the
evidence. When there is a showing that the NLRC's factual findings and conclusions were arrived at arbitrarily, as
when its judgement was based on misapprehension or erroneous apprehension of facts or on the use of wrong or
irrelevant considerations21 - situations that are tainted with grave abuse of discretion -the Court may review these
factual findings.

Finally, we should not forget that a Rule 45 review is an appeal from the ruling of the CA on pure questions of law.
We do not admit and review questions of facts unless necessary to determine whether the CA correctly affirmed the
NLRC decision for lack of grave abuse of discretion.

In the present case, the labor tribunals ruled that Zaida's intimate relationship with Marlon out of wedlock (resulting
in her failed pregnancy) and her continuation and concealment of this relationship despite the implementation of the
Non-Fraternization Policy, constituted immorality and dishonesty that, taken together, justified her dismissal on the
ground of serious misconduct and willful breach of trust and confidence. The CA fully agreed with the labor
tribunals' findings and conclusions.

148
Using the above analysis as guide, we are convinced that the CA grievously erred in upholding the NLRC's ruling.
To our mind, the NLRC gravely abused its discretion when it declared that the acts imputed against Zaida were
sufficient bases for her dismissal.

II. Substantive issue: validity of Zaida's dismissal

A. Burden of proof in dismissal situations

In every dismissal situation, the employer bears the burden of proving the existence of just or authorized cause for
the dismissal and the observance of due process requirements. This rule implements the security of tenure of the
Constitution by imposing the burden of proof on employers in termination of employment situations. 22 The failure
on the part of the employer to discharge this burden renders the dismissal invalid.

Articles 282, 283, and 284 (now Articles 296, 297 and 298)23 of the Labor Code enumerates the grounds that
justifies the dismissal of an employee. These include: serious misconduct or willful disobedience, gross and habitual
neglect of duty, fraud or willful breach of trust, commission of a crime, and causes analogous to any of these, all
under Article 282; closure of establishment and reduction of personnel, under Article 283; and disease, under Article
284.

Article 277 (now Article 291) of the Labor Code, and Books V and VI of the Omnibus Rules Implementing the
Labor Code, on the other hand, lay down the procedural requirements of a valid dismissal. These are: (1) written
notice specifying the ground or grounds for the dismissal; (2) ample opportunity for the employee to be heard and
defend himself; and (3) written notice of termination stating that upon due consideration of all the circumstances,
grounds have been established to justify his dismissal.

We recognize, in this respect, that of these two requisites for a valid dismissal, the presence or absence of just or
authorized cause is the more crucial. The absence of a valid cause automatically renders any dismissal action
invalid, regardless of the employer's observance of the procedural due process requirements.

B. Presence or Absence of Valid Cause for the dismissal

Based on the notice to explain and on the termination letter, we find that St. Vincent essentially dismissed Zaida for:
(1) engaging in intimate out-of-wedlock relationship with Marlon which it considered immoral; (2) her failure to
disclose the relationship to the management - an omission violating its Non-Fraternization Policy which it
characterized as gross misconduct; and (3) violating its Code of Conduct, i.e. committing acts against her superiors'
authority and her co-employees, violating the terms of her employment, and engaging in immoral conduct that goes
against its interest as a Christian institution.

In their respective decisions, the LA, the NLRC, and the CA found the dismissal valid on the ground of loss of trust
and confidence and serious misconduct.

The LA, the NLRC, and the CA considered Zaida's act of maintaining her relationship with Marlon, despite the
implementation of the Non-Fraternization Policy, immoral act that is prejudicial to St. Vincent's interests and which
amounted to serious misconduct. They also considered her failure to disclose the relationship as an act of dishonesty
that willfully breached St. Vincent's trust.

Willful breach of trust (or loss of confidence as interchangeably referred to in jurisprudence) and serious misconduct
are just causes for the dismissal of an employee under Article 282 (a) and (c), respectively, (now Article 296) 24 of the
Labor Code. To justify the employee's dismissal on these grounds, the employer must show that the employee
indeed committed act/s constituting breach of trust or serious misconduct, which acts the courts must gauge within
the parameters defined by the law and jurisprudence.

To place our discussions in proper perspective, the determination of whether Zaida was validly dismissed on the
ground of willful breach of trust and serious misconduct requires the prior determination of, first, whether Zaida's
intimate relationship with Marlon was, under the circumstances, immoral; and, second, whether such relationship is
absolutely prohibited by or is strictly required to be disclosed to the management under St. Vincent's Non-
Fraternization Policy.

We shall separately address these grounds in the discussions below.

On the charge of immorality and

engaging in conduct prejudicial to the
interest of St. VincentWe find the NLRC's findings of immorality or of committing acts prejudicial to the interest of
St. Vincent to be baseless.
The totality of the attendant circumstances
must be considered in determining whether
an employee's conduct is immoralImmorality pertains to a course of conduct that offends the morals of the
community.25cralawred It connotes conduct or acts that are willful, flagrant or shameless, and that shows
149
indifference to the moral standards of the upright and respectable members of the community.26chanrobleslaw

Conducts described as immoral or disgraceful refer to those acts that plainly contradict accepted standards of right
and wrong behavior; they are prohibited because they are detrimental to the conditions on which depend the
existence and progress of human society.27chanrobleslaw

Notwithstanding this characterization, the term "immorality" still often escapes precise definition; the determination
of whether it exists or has taken place depends on the attendant circumstances, prevailing norms of conduct, and
applicable laws.28chanrobleslaw

In other words, it is the totality of the circumstances surrounding the conduct per se viewed in relation with the
conduct generally accepted by society as respectable or moral, which determines whether the conduct is disgraceful
or immoral.29 The determination of whether a particular conduct is immoral involves: (1) a consideration of the
totality of the circumstances surrounding the conduct; and (2) an assessment of these circumstances in the light of
the prevailing norms of conduct, i.e., what the society generally considers moral and respectable, 30 and of the
applicable laws.

In dismissal situations, the sufficiency

of a conduct claimed to be immoral
must be judged based on secular,
not religious standards.
In general, in determining whether the acts complained of constitute "disgraceful and immoral" behavior under our
laws, the distinction between public and secular morality on the one hand, and religious morality, on the other hand,
should be kept in mind. This distinction as expressed - albeit not exclusively - in the law, on the one hand, and
religious morality, on the other, is important because the jurisdiction of the Court extends only to public and secular
morality.31chanrobleslaw

In this case, we note that both Zaida and Marlon at all times had no impediments to marry each other. They were
adults who met at work, dated, fell in love and became sweethearts. The intimate sexual relations between them
were consensual, borne by their love for one another and which they engaged in discreetly and in strict privacy.
They continued their relationship even after Marlon left St. Vincent in 2008. They took their marriage vows soon
after Zaida recovered from her miscarriage, thus validating their union in the eyes of both men and God.

All these circumstances show the sincerity and honesty of the relationship between Zaida and Marlon. They also
show their genuine regard and love for one another - a natural human emotion that is neither shameless, callous, nor
offensive to the opinion of the upright and respectable members of the secular community. While their actions might
not have strictly conformed with the beliefs, ways, and mores of St. Vincent - which is governed largely by religious
morality - or with the personal views of its officials, these actions are not prohibited under any law nor are they
contrary to conduct generally accepted by society as respectable or moral.

Significantly, even the timeline of the events in this case supports our observation that their intimate relations was
founded on love, viz: Zaida and Marlon met in 2002 and soon become sweethearts; St. Vincent adopted the Non-
Fraternization policy in September 2006; Marlon resigned from St. Vincent in July 2008; in February 2009, Zaida
had the miscarriage that disclosed to St. Vincent Zaida's relationship with Marlon; and St. Vincent terminated
Zaida's employment in May 2009.

Clearly from this timeline, Zaida and Marlon have long been in their relationship (for about four years) by the time
St. Vincent adopted the Policy; their relationship, by that time and given the turn out of the events, would have
already been very serious. To be sure, no reasonable person could have expected them to sever the relationship
simply because St. Vincent chose to adopt the Non-Fraternization Policy in 2006. As Zaida aptly argued, love is not
a mechanical emotion that can easily be turned on and off. This is the lesson Shakespeare impressed on us in Romeo
and Juliet - a play whose setting antedated those of Marlon and Zaida by about 405 hundred years. 32chanrobleslaw

We thus reiterate that mere private sexual relations between two unmarried and consenting adults, even if the
relations result in pregnancy or miscarriage out of wedlock and without more, are not enough to warrant liability for
illicit behavior. The voluntary intimacy between two unmarried adults, where both are not under any impediment to
marry, where no deceit exists, and which was done in complete privacy, is neither criminal nor so unprincipled as to
warrant disciplinary action.33chanrobleslaw

To use an example more recent than Shakespeare's, if the Court did not consider the complained acts
in Escritor immoral, more so should the Court in this case not consider Zaida's consensual intimate relationship with
Marlon immoral.
Zaida's relationship with Marlon was not
an act per se prejudicial to the interest
of St. Vincent.
Since Zaida and Marlon's relationship was not per se immoral based on secular morality standards, St. Vincent
carries the burden of showing that they were engaged in an act prejudicial to its interest and one that it has the right
to protect against. We reiterate, in this respect, that Zaida and Marlon were very discrete in their relationship and
150
kept this relationship strictly private. They did not flaunt their affections for each other at the workplace. No
evidence to the contrary was ever presented. Zaida and Marlon's relationship, in short, was almost completely
unknown to everyone in St. Vincent; the respondents in fact even admitted that they discovered the relationship only
in 2009.

Significantly, St. Vincent has fully failed to expound on the interest that is within its own right to protect and uphold.
The respondents did not specify in what manner and to what extent Zaida and Marlon's relationship prejudiced or
would have prejudiced St. Vincent's interest. To be sure, the other employees and volunteers of St. Vincent know, by
now, what had happened to Zaida and the circumstances surrounding her dismissal. But, the attention which the
relationship had drawn could hardly be imputed to her; if at all, it was the respondents' actions and reactions which
should be blamed for the undesired publicity.

Moreover, aside from the relationship that St. Vincent considered to be immoral, it did not specify, nor prove any
other act or acts that Zaida might have committed to the prejudice of St. Vincent's interest. A mere allegation that
Zaida committed act or acts prejudicial to St. Vincent's interest, without more, does not constitute sufficient basis for
her dismissal.

On the charge of violation of the Non-

Fraternization Policy
Neither can we agree with the NLRC's findings that Zaida's relationship with Marlon violated St. Vincent's Non-
Fraternization Policy.

For reference, we reiterate below the Policy's provisions:

chanRoblesvirtualLawlibrary
CFCA Policy 4.2.2.3. Non-Fraternization Policy

While CFCA does not wish to interfere with the off-duty and personal conduct of its employees, to prevent
unwarranted sexual harassment claims, uncomfortable working relationships, morale problems among other
employees, and even the appearance of impropriety, employees who direct and coordinate the work of others are
strongly discouraged from engaging in consensual romantic or sexual relationships with any employee or
volunteer of CFCA.34 [Emphasis supplied]

A reading of the Policy's provisions shows that they profess to touch only on on-duty conduct of its employees.
Contrary to the respondents' arguments, too, the CFCA employees who direct or coordinate the work of others are
only "strongly discouraged from engaging in consensual romantic or sexual relationships with any employee or
volunteer of CFCA. " It does not prohibit them, (either absolutely or with qualifications) from engaging in
consensual romantic or sexual relationships.

To discourage means "to deprive of courage or confidence: dishearten, deject; to attempt to dissuade from action:
dampen or lessen the boldness or zeal of for some action."35chanrobleslaw

To prohibit, on the other hand, means "to forbid by authority or command: enjoin, interdict; to prevent from doing or
accomplishing something: effectively stop; to make impossible: disbar, hinder, preclude." 36chanrobleslaw

While "to discourage" and "to prohibit" are essentially similar in that both seek to achieve similar ends,i.e., the non-
happening or non-accomplishment of an event or act, they are still significantly different in degree and in terms of
their effect and impact in the realm of labor relations laws.

The former - "to discourage" - may lead the actor i.e., the employee, to disfavor, disapprobation, or some other
unpleasant consequences, but the actor/employee may still nonetheless do or perform the "discouraged" act. If the
actor/employee does or performs the "discouraged" act, the employee may not be subjected to any punishment or
disciplinary action as he or she does not violate any rule, policy, or law.

In contrast, "to prohibit" will certainly subject the actor/employee to punishment or disciplinary action if the
actor/employee does or performs the prohibited act as he or she violates a rule, policy or law.

From this perspective, a St. Vincent employee who directs or coordinates the work of other St. Vincent employee or
volunteer, and who engages in a consensual romantic or sexual relationship with a St. Vincent employee or volunteer
will not violate the Non-Fraternization Policy unless circumstances are shown that the act goes beyond the usual
norms of morality. For example, the employees' ascendancy or supervising authority, over another employee with
whom he or she had a relationship, and the undue advantage taken because of this ascendancy or authority, if shown,
would lead to a different conclusion. At most, the employee may be considered to have committed an act that is
frowned upon; but certainly, the employee does not commit an act that would warrant his or her dismissal.

In addition, an examination of the Policy's provisions shows that it does not require St. Vincent's employees to
disclose any such consensual romantic or sexual relationships to the management. In fact, nowhere in the records
does it show that St. Vincent employees are under any obligation to make the disclosure, whose violation would
151
subject the employee to disciplinary action.

Accordingly, the failure of a St. Vincent employee to disclose to the management his or her consensual romantic or
sexual relationship with another employee or volunteer does not constitute a violation of the Non-Fraternization
Policy.

Based on these considerations, we find that Zaida clearly did not violate the Non-Fraternization Policy when she
continued her relationship with Marlon despite the Policy's adoption in 2006. As explicitly worded, the Policy "does
not wish to interfere with the off-duty and personal conduct of its employees," and only strongly discourages (thus
still technically allows) consensual romantic or sexual relationships; it does not prohibit such relationships. No
evidence furthermore has been shown indicating Zaida's abuse of her supervisory position, before or after the Policy
was put in place. Her failure, therefore, to observe the Policy or to otherwise disclose the relationship, which
continued even after the adoption of the Policy, did not constitute a violation of company policy to justify her
dismissal.

On the charge of violation of the Code of Conduct

provisions prohibiting acts against agency
interest, acts against persons, and violations
of the terms of employment
We also do not find sufficient basis for Zaida's dismissal for violation of the Code of Conduct provisions prohibiting:
acts against agency interest by indulging in immoral and indecent act; acts against persons by challenging superiors'
authority, threatening and intimidating co-employees and exerting undue influence on subordinates to gain personal
benefit; and violations of the terms of employment by doing an act offensive to the moral standards of the
foundation.

We point out in this respect that the charges of violating the Code of Conduct provisions prohibiting acts against
agency interest and violations of the terms of employment are both premised on the alleged immoral and indecent
acts committed by Zaida in engaging in consensual romantic or sexual relationship with Marlon. Since Zaida did not
violate the Non-Fraternization Policy, these other charges were clearly unwarranted and baseless.

In the same vein, we likewise find no sufficient basis for Zaida's dismissal for allegedly violating the Code of
Conduct provisions prohibiting acts against persons. While St. Vincent claimed, in the May 28, 2009 Notice of
Termination, that Zaida "exerted undue influence on [her co-workers and subordinates] to favor [herself] and/or Mr.
Inocente", it did not specify in what manner and to what extent she unduly influenced her co-workers and
subordinates for hers and Marlon's benefit.

To justify a dismissal based on the act of "exert[ing] undue influence," the charge must be supported by a narration
of the specific act/s she allegedly committed by which she unduly influenced her co-worker and subordinates, of the
dates when these act/s were committed, and of the names of the co-workers and/or subordinates affected by her
alleged actions. The respondents, however, miserably failed to establish these relevant facts. In other words, the
charge of exerting undue influence is a conclusion that was not supported by any factual or evidentiary basis.

Dismissal on the ground of serious misconduct

and willful breach of trust and confidence
Based on the above considerations, we find Zaida's dismissal illegal for lack of valid cause. St. Vincent failed to
sufficiently prove its charges against Zaida to justify her dismissal for serious misconduct and loss of trust and
confidence.

a. Serious misconduct

Misconduct has been defined as improper or wrong conduct. It is the transgression of some established or definite
rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error of judgment. To be serious, the misconduct must be of such grave or aggravated character and not merely
trivial and unimportant; it must be connected with the employee's work to constitute just cause for
separation.37chanrobleslaw

Thus, for an employee to be validly dismissed on the ground of serious misconduct, the employee must first, have
committed misconduct or an improper or wrong conduct. And second, the misconduct or improper behavior
is: (1) serious; (2) relate to the performance of the employee's duties; and (3) show that the employee has
become unfit to continue working for the employer. 38chanrobleslaw

As we explained above, Zaida's relationship with Marlon is neither illegal nor immoral; it also did not violate the
Non-Fraternization Policy. In other words, Zaida did not commit any misconduct, serious or otherwise, that would
justify her dismissal based on serious misconduct.

Moreover, St. Vincent failed to show how Zaida's relationship with Marlon affected her performance of her duties as
a Program Officer and that she has become unfit to continue working for it, whether for the same position or
otherwise. Her dismissal based on this ground, therefore, is without any factual or legal basis.
152
b. Willful breach of trust and confidence

Willful breach of trust, as just cause for the termination of employment, is founded on the fact that the employee
concerned: (1) holds a position of trust and confidence, i.e., managerial personnel or those vested with powers and
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees; or (2) is routinely charged with the care and custody of the employer's money or property, i.e.,
cashiers, auditors, property custodians, or those who, in normal and routine exercise of their functions, regularly
handle significant amounts of money or property.39 In any of these situations, it is the employee's breach of the trust
that his or her position holds which results in the employer's loss of confidence.

Significantly, loss of confidence is, by its nature, subjective and prone to abuse by the employer. Thus, the law
requires that the breach of trust -which results in the loss of confidence - must be willful. The 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.40chanrobleslaw

We clarify, however, that it is the breach of the employer's trust, not the specific employee act/s which the employer
claims caused the breach, which the law requires to be willful, knowingly and purposefully done by the employee to
justify the dismissal on the ground of loss of trust and confidence.

In Vitarich Corp. v. NLRC,41 we laid out the guidelines for the application of the doctrine of loss of confidence,
namely: (1) the loss of confidence should not be simulated; (2) it should not be used as a subterfuge for causes
which are improper, illegal or unjustified; (3) it should not be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and (4) it must be genuine, not a mere afterthought to justify earlier action taken in
bad faith.42 In short, there must be an actual breach of duty which must be established by substantial
evidence.43chanrobleslaw

We reiterated these guidelines in Nokom v. National Labor Relations Commission,44 Fujitsu Computer Products
Corp. of the Phils, v. Court of Appeals,45Lopez v. Keppel Bank Philippines, Inc,46 citing Nokom, and Lima Land, Inc.,
et al. v. Cuevas.47chanrobleslaw

In the present case, we agree that Zaida indeed held a position of trust and confidence. Nonetheless, we cannot
support the NLRC's findings that she committed act/s that breached St. Vincent's trust. Zaida's relationship with
Marlon, to reiterate, was not wrong, illegal, or immoral from the perspective of secular morality; it is also not
prohibited by the Non-Fraterni2^ation Policy nor is it required, by the Policy, to be disclosed to St. Vincent's
management or officials. In short, Zaida did not commit any act or misconduct that willfully, intentionally, or
purposely breached St. Vincent's trust.

Notably, St. Vincent did not charge Zaida with, nor terminate her employment for, willful breach of trust. Rather, it
charged her with violation of the Non-Fraternization Policy and of the Code of Conduct, and dismissed her for
immorality, gross misconduct, and violation of the Code of Conduct - none of which implied or suggested willful
breach of trust.

In this regard, we reiterate, with approval, Zaida's observations on this point: the labor tribunals' findings of willful
breach of trust and confidence shows clear bad faith as it effectively deprived her of an opportunity to rebut any
charge of willful breach of trust.

C. Compliance with the Procedural Due Process Requirements

All three tribunals agreed, in this case, that the due process requirements, as laid out under Article 277 of the Labor
Code and its IRR, were sufficiently observed by St. Vincent in its dismissal action.

We disagree with the three tribunals.

As pointed out above, St. Vincent did not specify in what manner and to what extent Zaida unduly influenced her co-
workers and subordinates for hers and Marlon's benefit with regard to the charge of committing acts against persons.
For the charge of "exert[ing] undue influence" to have validly supported Zaida's dismissal, it should have been
supported by a narration of the specific act/s she allegedly committed by which she unduly influenced her co-worker
and subordinates, of the dates when these act/s were committed, and of the names of the co-workers and/or
subordinates affected by her alleged actions.

The specification of these facts and matters is necessary in order to fully apprise her of all of the charges against her
and enable her to present evidence in her defense. St. Vincent's failure to make this crucial specification in the notice
to explain and in the termination letter clearly deprived Zaida of due process.

In light of these findings, we find the NLRC in grave abuse of its discretion in affirming the LA's ruling as it
declared that St. Vincent complied with the due process requirements.

153
Specifically, the NLRC capriciously and whimsically exercised its judgment by using the wrong considerations and
by failing to consider all relevant facts and evidence presented by the parties, as well as the totality of the
surrounding circumstances, as it upheld Zaida's dismissal. Consequently, we find the CA in grave error as it affirmed
the NLRC's ruling; the CA reversibly erred in failing to recognize the grave abuse of discretion which the NLRC
committed in concluding that Zaida's dismissal was valid.

WHEREFORE, in light of these considerations, we hereby GRANT the petition. We REVERSE and SET
ASIDE the decision dated February 27, 2012 and the resolution dated July 11, 2012 of the Court of Appeals in CA-
G.R. SP No. 118576. We declare petitioner Zaida R. Inocente as illegally dismissed.

SO ORDERED.chanRoblesvirtualLawlibrary

G.R. No. 206629, September 14, 2016

NARCISO T. MATIS, Petitioner, v. MANILA ELECTRIC COMPANY, Respondent.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari filed by petitioner Narciso T. Matis (Matis) assailing the
Decision1 and Resolution,2 dated June 11, 2012 and March 1, 2013, respectively, of the Court of Appeals (CA),
which affirmed with modification the Decision3 dated July 22, 2009 and Resolution4 dated December 28, 2009 of
the National Labor Relations Commission (NLRC).
The antecedents follow.
Respondent Manila Electric Company (Meralco) hired petitioner Matis, and complainants Nemencio Hipolito, Jr.
(Hipolito), Raymundo M. Zufiiga5 (Zuniga), Gerardo de Guia (De Guia), and Ricardo Ignacio (Ignacio) on various
dates and in various capacities.6 At the time of their dismissal, Matis was a foreman; Hipolito and Zuniga were
acting foremen; De Guia was a stockman/driver; and Ignacio was a leadman.

On July 27, 2006, Matis and the others were dismissed on the grounds of serious misconduct, fraud or willful breach
of trust, commission of a crime or offense against the employer and other causes analogous to the foregoing. 7 They
were dismissed for their alleged cooperation in the pilferages of Meralco's electrical supplies by one Norberto
Llanes (Llanes), a non-Meralco employee, particularly, in an incident which took place on May 25, 2006. On that
same day, Matis and the rest of the crew of Trucks 1837 and 1891 were replacing a rotten pole in Pacheco
Subdivision, Dalandan, Valenzuela City.8chanrobleslaw

At around 10:30 in the morning while the Meralco crew were working at a distance, Llanes was hanging around the
work site. He appeared familiar with the crew as he was handing tools and drinking water with them. He
nonchalantly boarded the truck in the presence of Zuniga and De Guia, and rummaged through the cargo bed for
tools and materials and stashed them in his backpack without being stopped by any of the crew. Thereafter, Matis
and the other crew manning Truck 1891 arrived. Llanes boarded Truck 1891 and filched materials while Matis was
around. For more than two hours, Llanes was walking around, boarding the trucks, freely sorting and choosing
materials and tools inside the trucks then putting them in his backpack, talking casually with the crew, and even
drinking water from the crew's jug.9chanrobleslaw

Unknown to them, a Meralco surveillance team, composed of Joseph Aguilar (Aguilar), Ariel Dola (Bola) and
Frederick Riano (Riano), was monitoring their activities and recording the same with a Sony Video 8 camera. Due to
reports of alleged pilferages occurring in Trucks 1837 and 1891, Meralco was prompted to create the said team or
"task force" to tail and monitor Matis and the others.

In a Memorandum dated June 16, 2006, Meralco required them to appear before Meralco's counsel for an
investigation relative to the incident on May 25, 2006. Matis and the others denied any involvement in the stealing
of the company properties. Subsequently, they were dismissed.

Matis and the other complainants alleged that Meralco's dismissal of their employment violated their constitutional
right to property protection, social justice and security of tenure. They denied any complicity or participation in the
pilferage. They claimed that the affidavits presented by Meralco have weak probative value. They also alleged that
Meralco did not observe due process in their termination.

Meralco, on the other hand, maintained that petitioner and the complainants were validly dismissed on the ground of
serious misconduct. Meralco presented the affidavits of Aguilar, Dola and the probationary employees who were
members of the crew, and the video showing the incident on May 25, 2006 to show that complainants had
knowledge, direct participation and complicity in the stealing. Meralco insisted that there is evidence to support that
it was not the first instance that Llanes has been stealing supplies and materials, and that such were done in the
presence of, and with clear knowledge of the dismissed crew.

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In a Decision10 dated April 11, 2007, the Labor Arbiter (LA) ruled that Matis and the others were not illegally
dismissed. The LA considered their dismissal from service too harsh when suspension would have sufficed given
that they were not entirely faultless. The charge of serious misconduct cannot prosper as there is no substantial
evidence of their alleged cooperation and participation in the theft. Likewise, the LA rejected respondent's claim that
complainants are guilty of gross negligence since there was no evidence of complainants' habitual neglect of duty.
The dispositive portion of the decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, all foregoing premises considered, judgment is hereby rendered finding complainants' dismissal too
harsh a penalty being not commensurate with their simple neglect of duties as earlier discussed above. Accordingly,
complainants are hereby ordered to immediately report back to work within ten (10) working days from receipt of
this decision without loss of seniority rights and benefits but without the payment of backwages. As clarified above,
this return-to-work order is NOT a reinstatement order within the ambit of Article 279 of the Labor Code since there
is NO finding of illegal dismissal herein.

For being a nominal party, Mr. Manuel M. Lopez is hereby ordered dropped as party-respondent in these
consolidated cases.

All other claims are dismissed for lack of merit.

SO ORDERED.11chanroblesvirtuallawlibrary
On appeal, the NLRC ruled that Matis and the other complainants were validly dismissed. Their suspicious leniency
and laxity in allowing Llanes to board the trucks, conversing with him intimately, permitting him to return to the
trucks with empty sacks in tow, and the quantity of materials stolen, all video-taped and described in detail by the
surveillance team, belie their denial of involvement.12 Even assuming that they were not conspirators in the crime of
theft, their dismissal is still justified for they were guilty of gross negligence. Considering the circumstances
surrounding the pilferage, the willful inaction of the complainants when there is a duty to stop the stealing amounted
to gross negligence.13 The complainants were also validly dismissed on the ground of loss of trust and confidence.
Their gross negligence amounted to a breach of trust and confidence reposed upon them as employees entrusted with
properties of respondent. However, the NLRC held that Ignacio was illegally dismissed in the absence of evidence
showing his complicity or participation in the theft. The decretal portion of the decision
reads:ChanRoblesVirtualawlibrary
WHEREFORE, the appeals are PARTIALLY GRANTED and the Decision appealed from is hereby MODIFIED as
follows:

chanRoblesvirtualLawlibrary1) Complainants Narciso Matis, Nemencio Hipolito, Jr., Raymund Zuniga and
Gerardo De Guia were validly terminated from their employment, hence they are not entitled to the relief of
"returning to work" and their complaint is DISMISSED for lack of merit.

2) Complainant Ricardo Ignacio was illegally terminated and, therefore, he is entitled to full backwages from the
time of his termination until his actual reinstatement.

The dropping of Mr. Manuel M. Lopez as party-respondent is AFFIRMED.

SO ORDERED.14chanroblesvirtuallawlibrary
Finding no cogent reason to disturb the findings of the NLRC, the CA denied the petition for certiorarifiled by
Matis and the others, and affirmed the decision of the NLRC. The CA held that the ruling of the NLRC deserves
respect since the same was based on factual findings supported by clear and convincing evidence and accepted
jurisprudence. The fallo of the decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, PREMISES CONSIDERED, the herein petition for certiorari is DENIED. The assailed Decision of
the National Labor Relations Commission, First Division, in NLRC CA No 052667-07 dated July 22, 2009 and the
Resolution promulgated on 28 December 2009 STAND.

SO ORDERED.15chanroblesvirtuallawlibrary
Upon the denial of the motion for reconsideration, Matis filed before this Court the instant petition raising the
following issues:ChanRoblesVirtualawlibrary

I. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THERE WAS NO
DISMISSAL IN THE INSTANT CASE.
II. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION.

In essence, the issue to be resolved by this Court is whether petitioner Matis was illegally dismissed.
This Court resolves to deny the instant petition.

Matis prays that this Court relax the application of the Rules where strong considerations of substantial justice are
manifest in the petition. He avowed that his counsel informed him of the denial by the CA of his Motion for
Reconsideration only on April 12, 2013.

Section 2, Rule 45 of the Rules of Court provides:ChanRoblesVirtualawlibrary

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Section 2. Time for filing; extension. — The petition shall be filed within fifteen (15) days from notice of the
judgment or final order or resolution appealed from, or of the denial of the petitioner's motion for new trial or
reconsideration filed in due time after notice of the judgment. On motion duly filed and served, with full payment of
the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the
Supreme Court may for justifiable reasons grant an extension of thirty (30) days only within which to file the
petition. (Emphasis supplied)
It is settled that the rules of procedure are meant to be tools to facilitate a fair and orderly conduct of
proceedings.16 The relaxation or suspension of procedural rules, or the exemption of a case from their
operation, is warranted when the purpose of justice requires it.17 However We held in the case ofSebastian v. Hon.
Morales18 that:

chanRoblesvirtualLawlibraryLitigation is not a game of technicalities, but every case must be prosecuted in

accordance with the prescribed procedure so that issues may be properly presented and justly resolved. Hence, rules
of procedure must be faithfully followed except only when for persuasive reasons, they may be relaxed to relieve a
litigant of an injustice not commensurate with his failure to comply with the prescribed procedure. Concomitant to a
liberal application of the rules of procedure should be an effort on the part of the party invoking liberality to explain
his failure to abide by the rules.

We note that in his statement of material dates, Matis alleged that his counsel received the denial of his Motion for
Reconsideration on April 11, 2013, while he asseverated in his statement of the matters and in his verification and
certification of non-forum shopping that his counsel received the same on March 11, 2013.

This Court, in a Resolution19 dated July 22, 2013, granted a 30-day extension within which to file his petition for
review on certiorari, counted from the expiration of the reglementary period, and granted his second motion for
extension of fifteen (15) days to file the petition filed by his new counsel. Thus, Matis filed his petition for review
on certiorari on May 30, 2013.

We resolve to allow the instant petition and decide on the merits of the case as petitioner adequately explained in his
petition the reason for his belated filing, and given that he promptly sought for extensions of time for cogent grounds
before the expiration of the time sought to be extended.

As to the substantive issue, Matis maintains that Meralco failed to prove that he was legally dismissed based on the
ground that he was grossly negligent which constituted breach of trust as provided by the Labor Code. To be a
ground for dismissal, the neglect of duty must be both gross and habitual. The case stemmed from a single incident
which occurred on May 25, 2006, thus, he cannot be validly dismissed from employment.

Gross negligence connotes want of care in the performance of one's duties.20 It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.21 Fraud and willful neglect of duties imply bad faith on the
part of the employee in failing to perform his job to the detriment of the employer and the latter's business. On the
other hand, habitual neglect implies repeated failure to perform one's duties for a period of time, depending upon the
circumstances.

Records reveal that it was not only on May 25, 2006 that Llanes, the pilferer, was seen during a Meralco operation
as he was previously noticed by Meralco employees in past operations. Also, the evidence ascertained the presence
of Matis in the worksite where the pilferage took place, and his familiarity with Llanes. Matis's tolerance of the
activities of Llanes demonstrates his complicity in the theft, and not a mere want of care in the performance of his
duty or gross negligence.

Assuming Matis were negligent, his inaction can only be regarded as a single or isolated act of negligence which
cannot be considered as gross and habitual, hence, cannot be considered as a just cause for his dismissal.
Nevertheless, such finding will not warrant the reversal of the instant case.

Article 282 (c) of the Labor Code provides that an employer may terminate an employment for fraud or willful
breach by the employee of the trust reposed in him by his employer or duly-authorized representative. It is stressed
that loss of confidence as a just cause for the termination of employment is based on the premise that the employee
holds a position where greater trust is placed by management and from whom greater fidelity to duty is
correspondingly expected.22 The essence of the offense for which an employee is penalized is the betrayal of such
trust.

Loss of confidence as a ground for dismissal has never been intended to afford an occasion for abuse by the
employer of its prerogative, as it can easily be subject to abuse because of its subjective nature. 23 A 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.24chanrobleslaw

Matis alleges that he may not be removed on the ground of breach of trust and confidence as he was not a
managerial employee or an employee primarily entrusted with the handling of company funds or property.

We are not persuaded. Loss of confidence applies to: (1) employees occupying positions of trust and confidence, the
156
managerial employees; and (2) employees who are routinely charged with the care and custody of the
employer's money or property which may include rank-and-file employees,e.g., cashiers, auditors, property
custodians, or those who, in the normal routine exercise of their functions, regularly handle significant amounts of
money or property.25cralawredchanrobleslaw

It is established that Matis was a foreman with a monthly salary of P57,000.00 at the time of his dismissal. 26 The
vehicles being utilized in the repair and maintenance of Meralco's distribution lines ordinarily carried necessary
equipment, tools, supplies and materials. Thus, Matis, as the foreman, is routinely entrusted with the care and
custody of Meralco's properties in the exercise of his function.

In the case of Apo Cement Corp. v. Baptisma,27 it was held that for an employer to validly dismiss an employee on
the ground of loss of trust and confidence, the following guidelines must be observed: (1) loss of confidence should
not be simulated; (2) it should not be used as subterfuge for causes which are improper, illegal or unjustified; (3) it
may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (4) it must be genuine, not
a mere afterthought to justify earlier action taken in bad faith. More importantly, the loss must be founded on clearly
established facts sufficient to warrant the employee's separation from work.28chanrobleslaw

Contrary to his allegation that he failed to notice the thievery because he and the crew were preoccupied with the
replacement of the rotting post, Matis lingered, by his admission, to supposedly look after the truck. 29 As
established, the crew exhibited familiarity with the culprit during the entire operations. Based on the testimonies of
the witnesses, Llanes was seen picking up unused supplies and materials that were not returned to the company in
the past operations. He was casually boarding the trucks despite the same being prohibited from non-Meralco
employees. Matis was seen conversing intimately with Llanes inside Truck 1891. Thereafter, Llanes was able to
filch Meralco properties in the presence of Matis. Thus, Matis was complicit in the pilferage by being familiar with
Llanes, by his inaction while the looting was being perpetrated, and by not reporting the same to the authorities and
to Meralco. The totality of the circumstances convinces this Court that Matis is guilty of breach of trust.

We reiterate this Court's ruling about the very same incident on May 25, 2006 in the case of Meralco v. Gala,30 that
to Our mind, the Meralco crew (the foremen and the linemen) allowed or could have even asked Llanes to be there
during their operations for one and only purpose — to serve as their conduit for pilfered company supplies to be sold
to ready buyers outside Meralco worksites. As held in the Galacase:ChanRoblesVirtualawlibrary
The established fact that Llanes, a non-Meralco employee, was often seen during company operations,
conversing with the foremen, for reason or reasons connected with the ongoing company operations, gives
rise to the question: what was he doing there? Apparently, he had been visiting Meralco worksites, at least in
the Valenzuela Sector, not simply to socialize, but to do something else. As testified to by witnesses, he was
picking up unused supplies and materials that were not returned to the company. From these factual
premises, it is not hard to conclude that this activity was for the mutual pecuniary benefit of himself and the
crew who tolerated the practice. For one working at the scene who had seen or who had shown familiarity with
Llanes (a non-Meralco employee), not to have known the reason for his presence is to disregard the obvious, or at
least the very suspicious.31chanroblesvirtuallawlibrary
Proof beyond reasonable doubt is not needed to justify the loss of confidence as long as the employer has reasonable
ground to believe that the employee is responsible for the misconduct and his participation therein renders him
unworthy of the trust and confidence demanded of his position.32Meralco was able to establish through substantial
evidence that it has reasonable ground to believe that Matis's involvement in the incident rendered him unworthy of
the trust and confidence reposed upon him as a foreman of Meralco.

As settled in Vergara v. NLRC,33 the filing of the complaint by the public prosecutor is sufficient ground for a
dismissal of an employee for loss of trust and confidence. The evidence supporting the criminal charge, found
sufficient to show prima facie guilt after preliminary investigation, constitutes just cause for termination based on
loss of trust and confidence.34 In this case, the Assistant City Prosecutor of Valenzuela City recommended the filing
of information for qualified theft against Matis and the others. 35chanrobleslaw

Additionally, an employee's acquittal in a criminal case does not automatically preclude a determination that he has
been guilty of acts inimical to the employer's interest resulting in loss of trust and confidence. 36 An acquittal in
criminal prosecution does not have the effect of extinguishing liability for dismissal on the ground of
breach of trust and confidence.37 The trial court acquitted Matis and the others due to insufficiency of
evidence to warrant conviction beyond reasonable doubt.38 While the evidence presented failed to satisfy the
quantum of proof required in criminal cases, the same substantially proved the dishonest act of Matis which
warranted his dismissal from employment.

To be sure, length of service is taken into consideration in imposing the penalty to be meted upon an erring
employee.39 However, in cases of breach of trust and loss of confidence, the length of time, if considered at all, shall
be taken against the employee, as his involvement in dishonest acts reflects a regrettable lack of loyalty which
should have been strengthened, instead of betrayed. 40 Unlike other just causes for dismissal, trust in an employee,
once lost is difficult, if not impossible, to regain.41 In the case at bar, Matis's involvement in the pilferage of
Meralco's properties resulted in respondent's loss of confidence in him. If considered, petitioner's length of service
should be taken against him as his familiarity with Llanes, his disregard of the company rules, and passivity during
the thievery echo his disloyalty with his employer which he served for thirty-one years. As such, fairness dictates
157
that Matis, who has breached the confidence reposed on him, should not be allowed to continue his employment
with Meralco.

WHEREFORE, the petition for review on certiorari filed by petitioner Narciso T. Matis is hereby DENIED. The
Decision and Resolution, dated June 11, 2012 and March 1, 2013, respectively, of the Court of Appeals affirming
with modification the Decision dated July 22, 2009 and Resolution dated December 28, 2009 of the National Labor
Relations Commission are hereby AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrary

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