Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
L-48494 February 5, 1990 considered Brent School's report as an application for clearance to terminate
employment (not a report of termination), and accepting the recommendation
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, of the Labor Conciliator, refused to give such clearance and instead required
vs. the reinstatement of Alegre, as a "permanent employee," to his former
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office position without loss of seniority rights and with full back wages. The Director
of the President, and DOROTEO R. ALEGRE, respondents. pronounced "the ground relied upon by the respondent (Brent) in terminating
the services of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442,"
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners. and, quite oddly, as prohibited by Circular No. 8, series of 1969, of the
Bureau of Private Schools. 7
Mauricio G. Domogon for respondent Alegre.
Brent School filed a motion for reconsideration. The Regional Director denied
the motion and forwarded the case to the Secretary of Labor for review. 8 The
latter sustained the Regional Director. 9 Brent appealed to the Office of the
President. Again it was rebuffed. That Office dismissed its appeal for lack of
NARVASA, J.: merit and affirmed the Labor Secretary's decision, ruling that Alegre was a
permanent employee who could not be dismissed except for just cause, and
The question presented by the proceedings at bar 1 is whether or not the expiration of the employment contract was not one of the just causes
provisions of the Labor Code, 2 as amended,3 have anathematized "fixed provided in the Labor Code for termination of services. 10
period employment" or employment for a term.
The School is now before this Court in a last attempt at vindication. That it
The root of the controversy at bar is an employment contract in virtue of will get here.
which Doroteo R. Alegre was engaged as athletic director by Brent School,
Inc. at a yearly compensation of P20,000.00. 4 The contract fixed a specific The employment contract between Brent School and Alegre was executed
term for its existence, five (5) years, i.e., from July 18, 1971, the date of on July 18, 1971, at a time when the Labor Code of the Philippines (P.D.
execution of the agreement, to July 17, 1976. Subsequent subsidiary 442) had not yet been promulgated. Indeed, the Code did not come into
agreements dated March 15, 1973, August 28, 1973, and September 14, effect until November 1, 1974, some three years after the perfection of the
1974 reiterated the same terms and conditions, including the expiry date, as employment contract, and rights and obligations thereunder had arisen and
those contained in the original contract of July 18, 1971. 5 been mutually observed and enforced.
Some three months before the expiration of the stipulated period, or more At that time, i.e., before the advent of the Labor Code, there was no doubt
precisely on April 20,1976, Alegre was given a copy of the report filed by whatever about the validity of term employment. It was impliedly but
Brent School with the Department of Labor advising of the termination of his nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as
services effective on July 16, 1976. The stated ground for the termination amended by R.A. 1787. 12 Basically, this statute provided that—
was "completion of contract, expiration of the definite period of employment."
And a month or so later, on May 26, 1976, Alegre accepted the amount of In cases of employment, without a definite period, in a
P3,177.71, and signed a receipt therefor containing the phrase, "in full commercial, industrial, or agricultural establishment or
payment of services for the period May 16, to July 17, 1976 as full payment enterprise, the employer or the employee may terminate at
of contract." any time the employment with just cause; or without just
cause in the case of an employee by serving written notice
However, at the investigation conducted by a Labor Conciliator of said report on the employer at least one month in advance, or in the
of termination of his services, Alegre protested the announced termination of case of an employer, by serving such notice to the employee
his employment. He argued that although his contract did stipulate that the at least one month in advance or one-half month for every
same would terminate on July 17, 1976, since his services were necessary year of service of the employee, whichever is longer, a
and desirable in the usual business of his employer, and his employment had fraction of at least six months being considered as one whole
lasted for five years, he had acquired the status of a regular employee and year.
could not be removed except for valid cause. 6 The Regional Director
The employer, upon whom no such notice was served in were explicitly recognized as valid by this Court, for instance, in Biboso
case of termination of employment without just cause, may v. Victorias Milling Co., Inc., promulgated on March 31,
hold the employee liable for damages. 1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on
December 29, 1983. 14 The Thompson case involved an executive who had
The employee, upon whom no such notice was served in been engaged for a fixed period of three (3) years. Biboso involved teachers
case of termination of employment without just cause, shall in a private school as regards whom, the following pronouncement was
be entitled to compensation from the date of termination of made:
his employment in an amount equivalent to his salaries or
wages corresponding to the required period of notice. What is decisive is that petitioners (teachers) were well
aware an the time that their tenure was for a limited duration.
There was, to repeat, clear albeit implied recognition of the licitness of term Upon its termination, both parties to the employment
employment. RA 1787 also enumerated what it considered to be just causes relationship were free to renew it or to let it lapse. (p. 254)
for terminating an employment without a definite period, either by the
employer or by the employee without incurring any liability therefor. Under American law 15 the principle is the same. "Where a contract specifies
the period of its duration, it terminates on the expiration of such period." 16 "A
Prior, thereto, it was the Code of Commerce which governed employment contract of employment for a definite period terminates by its own terms at
without a fixed period, and also implicitly acknowledged the propriety of the end of such period." 17
employment with a fixed period. Its Article 302 provided that —
The status of legitimacy continued to be enjoyed by fixed-period employment
In cases in which the contract of employment does not have contracts under the Labor Code (Presidential Decree No. 442), which went
a fixed period, any of the parties may terminate it, notifying into effect on November 1, 1974. The Code contained explicit references
the other thereof one month in advance. to fixed period employment, or employment with a fixed or definite period.
Nevertheless, obscuration of the principle of licitness of term employment
The factor or shop clerk shall have a right, in this case, to the began to take place at about this time
salary corresponding to said month.
Article 320, entitled "Probationary and fixed period employment," originally
stated that the "termination of employment of probationary employees
The salary for the month directed to be given by the said Article 302
and those employed WITH A FIXED PERIOD shall be subject to such
of the Code of Commerce to the factor or shop clerk, was known as
the mesada (from mes, Spanish for "month"). When Article 302 regulations as the Secretary of Labor may prescribe." The asserted
objective to was "prevent the circumvention of the right of the employee to be
(together with many other provisions of the Code of Commerce) was
secured in their employment as provided . . . (in the Code)."
repealed by the Civil Code of the Philippines, Republic Act No. 1052
was enacted avowedly for the precise purpose of reinstating
the mesada. Article 321 prescribed the just causes for which an employer could terminate
"an employment without a definite period."
Now, the Civil Code of the Philippines, which was approved on June 18,
1949 and became effective on August 30,1950, itself deals with obligations And Article 319 undertook to define "employment without a fixed period" in
with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of the following manner: 18
labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII,
respectively, of Book IV. No prohibition against term-or fixed-period An employment shall be deemed to be without a definite
employment is contained in any of its articles or is otherwise deducible period for purposes of this Chapter where the employee has
therefrom. been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
It is plain then that when the employment contract was signed between Brent employer, except where the employment has been fixed for
School and Alegre on July 18, 1971, it was perfectly legitimate for them to a specific project or undertaking the completion or
include in it a stipulation fixing the duration thereof Stipulations for a term termination of which has been determined at the time of the
engagement of the employee or where the work or service to Article 320, dealing with "Probationary and fixed period employment," was
be performed is seasonal in nature and the employment is altered by eliminating the reference to persons "employed with a fixed
for the duration of the season. period," and was renumbered (becoming Article 271). The article 22 now
reads:
The question immediately provoked by a reading of Article 319 is whether or
not a voluntary agreement on a fixed term or period would be valid where the . . . Probationary employment.—Probationary employment
employee "has been engaged to perform activities which are usually shall not exceed six months from the date the employee
necessary or desirable in the usual business or trade of the employer." The started working, unless it is covered by an apprenticeship
definition seems a non sequitur. From the premise — that the duties of an agreement stipulating a longer period. The services of an
employee entail "activities which are usually necessary or desirable in the employee who has been engaged in a probationary basis
usual business or trade of the employer the" — conclusion does not may be terminated for a just cause or when he fails to qualify
necessarily follow that the employer and employee should be forbidden to as a regular employee in accordance with reasonable
stipulate any period of time for the performance of those activities. There is standards made known by the employer to the employee at
nothing essentially contradictory between a definite period of an employment the time of his engagement. An employee who is allowed to
contract and the nature of the employee's duties set down in that contract as work after a probationary period shall be considered a
being "usually necessary or desirable in the usual business or trade of the regular employee.
employer." The concept of the employee's duties as being "usually necessary
or desirable in the usual business or trade of the employer" is not Also amended by PD 850 was Article 319 (entitled "Employment with a fixed
synonymous with or identical to employment with a fixed term. Logically, the period," supra) by (a) deleting mention of employment with a fixed or definite
decisive determinant in term employment should not be the activities that the period, (b) adding a general exclusion clause declaring irrelevant written or
employee is called upon to perform, but the day certain agreed upon by the oral agreements "to the contrary," and (c) making the provision treat
parties for the commencement and termination of their employment exclusively of "regular" and "casual" employment. As revised, said article,
relationship, a day certain being understood to be "that which must renumbered 270, 23 now reads:
necessarily come, although it may not be known
when." 19 Seasonalemployment, and employment for a particular project are . . . Regular and Casual Employment.—The provisions of
merely instances employment in which a period, where not expressly set written agreement to the contrary notwithstanding and
down, necessarily implied. regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
Of course, the term — period has a definite and settled signification. It employee has been engaged to perform activities which are
means, "Length of existence; duration. A point of time marking a termination usually necessary or desirable in the usual business or trade
as of a cause or an activity; an end, a limit, a bound; conclusion; termination. of the employer except where the employment has been
A series of years, months or days in which something is completed. A time of fixed for a specific project or undertaking the completion or
definite length. . . . the period from one fixed date to another fixed date . . termination of which has been determined at the time of the
." 20 It connotes a "space of time which has an influence on an obligation as a engagement of the employee or where the work or service to
result of a juridical act, and either suspends its demandableness or produces be employed is seasonal in nature and the employment is for
its extinguishment." 21 It should be apparent that this settled and familiar the duration of the season.
notion of a period, in the context of a contract of employment, takes no
account at all of the nature of the duties of the employee; it has absolutely no
An employment shall be deemed to he casual if it is not
relevance to the character of his duties as being "usually necessary or covered by the preceding paragraph: provided,that, any
desirable to the usual business of the employer," or not.
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
Subsequently, the foregoing articles regarding employment with "a definite considered a regular employee with respect to the activity in
period" and "regular" employment were amended by Presidential Decree No. which he is employed and his employment shall continue
850, effective December 16, 1975. while such actually exists.
The first paragraph is identical to Article 319 except that, as just fixed for a specific project or undertaking the completion or
mentioned, a clause has been added, to wit: "The provisions of termination of which has been determined at the time of the
written agreement to the contrary notwithstanding and regardless of engagement of the employee or where the work or service to
the oral agreements of the parties . . ." The clause would appear to be employed is seasonal in nature and the employment is for
be addressed inter alia to agreements fixing a definite period for the duration of the season.
employment. There is withal no clear indication of the intent to deny
validity to employment for a definite period. Indeed, not only is the An employment shall be deemed to be casual if it is not
concept of regular employment not essentially inconsistent with covered by the preceding paragraph: provided,that, any
employment for a fixed term, as above pointed out, Article 272 of the employee who has rendered at least one year of service,
Labor Code, as amended by said PD 850, still impliedly whether such service is continuous or broken, shall be
acknowledged the propriety of term employment: it listed the "just considered a regular employee with respect to the activity in
causes" for which "an employer may terminate employment without a which he is employed and his employment shall continue
definite period," thus giving rise to the inference that if the while such actually exists.
employment be with a definite period, there need be no just cause for
termination thereof if the ground be precisely the expiration of the There is, on the other hand, the Civil Code, which has always recognized,
term agreed upon by the parties for the duration of such
and continues to recognize, the validity and propriety of contracts and
employment.
obligations with a fixed or definite period, and imposes no restraints on the
freedom of the parties to fix the duration of a contract, whatever its object, be
Still later, however, said Article 272 (formerly Article 321) was further it specie, goods or services, except the general admonition against
amended by Batas Pambansa Bilang 130, 24 to eliminate altogether stipulations contrary to law, morals, good customs, public order or public
reference to employment without a definite period. As lastly amended, the policy. 26 Under the Civil Code, therefore, and as a general proposition, fixed-
opening lines of the article (renumbered 283), now pertinently read: "An term employment contracts are not limited, as they are under the present
employer may terminate an employment for any of the following just causes: Labor Code, to those by nature seasonal or for specific projects with pre-
. . . " BP 130 thus completed the elimination of every reference in the Labor determined dates of completion; they also include those to which the parties
Code, express or implied, to employment with a fixed or definite period or by free choice have assigned a specific date of termination.
term.
Some familiar examples may be cited of employment contracts which may be
It is in the light of the foregoing description of the development of the neither for seasonal work nor for specific projects, but to which a fixed term is
provisions of the Labor Code bearing on term or fixed-period employment an essential and natural appurtenance: overseas employment contracts, for
that the question posed in the opening paragraph of this opinion should now one, to which, whatever the nature of the engagement, the concept of regular
be addressed. Is it then the legislative intention to outlaw stipulations in employment will all that it implies does not appear ever to have been applied,
employment contracts laying down a definite period therefor? Are such Article 280 of the Labor Code not withstanding; also appointments to the
stipulations in essence contrary to public policy and should not on this positions of dean, assistant dean, college secretary, principal, and other
account be accorded legitimacy? administrative offices in educational institutions, which are by practice or
tradition rotated among the faculty members, and where fixed terms are a
On the one hand, there is the gradual and progressive elimination of necessity, without which no reasonable rotation would be possible. Similarly,
references to term or fixed-period employment in the Labor Code, and the despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister
specific statement of the rule 25 that— of Labor 27 implicitly recognize that certain company officials may be elected
for what would amount to fixed periods, at the expiration of which they would
. . . Regular and Casual Employment.— The provisions of have to stand down, in providing that these officials," . . . may lose their jobs
written agreement to the contrary notwithstanding and as president, executive vice-president or vice-president, etc. because the
regardless of the oral agreement of the parties, an stockholders or the board of directors for one reason or another did not re-
employment shall be deemed to be regular where the elect them."
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade There can of course be no quarrel with the proposition that where from the
of the employer except where the employment has been circumstances it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down over the letter thereof, for whatever is within the spirit of a
or disregarded as contrary to public policy, morals, etc. But where no such statute is within the statute, since adherence to the letter
intent to circumvent the law is shown, or stated otherwise, where the reason would result in absurdity, injustice and contradictions and
for the law does not exist, e.g., where it is indeed the employee himself who would defeat the plain and vital purpose of the statute. 30
insists upon a period or where the nature of the engagement is such that,
without being seasonal or for a specific project, a definite date of termination Accordingly, and since the entire purpose behind the development of
is a sine qua non, would an agreement fixing a period be essentially evil or legislation culminating in the present Article 280 of the Labor Code clearly
illicit, therefore anathema? Would such an agreement come within the scope appears to have been, as already observed, to prevent circumvention of the
of Article 280 which admittedly was enacted "to prevent the circumvention of employee's right to be secure in his tenure, the clause in said article
the right of the employee to be secured in . . . (his) employment?" indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein should
As it is evident from even only the three examples already given that Article be construed to refer to the substantive evil that the Code itself has singled
280 of the Labor Code, under a narrow and literal interpretation, not only fails out: agreements entered into precisely to circumvent security of tenure. It
to exhaust the gamut of employment contracts to which the lack of a fixed should have no application to instances where a fixed period of employment
period would be an anomaly, but would also appear to restrict, without was agreed upon knowingly and voluntarily by the parties, without any force,
reasonable distinctions, the right of an employee to freely stipulate with his duress or improper pressure being brought to bear upon the employee and
employer the duration of his engagement, it logically follows that such a absent any other circumstances vitiating his consent, or where it satisfactorily
literal interpretation should be eschewed or avoided. The law must be given appears that the employer and employee dealt with each other on more or
a reasonable interpretation, to preclude absurdity in its application. Outlawing less equal terms with no moral dominance whatever being exercised by the
the whole concept of term employment and subverting to boot the principle of former over the latter. Unless thus limited in its purview, the law would be
freedom of contract to remedy the evil of employer's using it as a means to made to apply to purposes other than those explicitly stated by its framers; it
prevent their employees from obtaining security of tenure is like cutting off thus becomes pointless and arbitrary, unjust in its effects and apt to lead to
the nose to spite the face or, more relevantly, curing a headache by lopping absurd and unintended consequences.
off the head.
Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of
It is a salutary principle in statutory construction that there an agreed period of employment as still good rule—a rule reaffirmed in the
exists a valid presumption that undesirable consequences recent case of Escudero vs. Office of the President (G.R. No. 57822, April
were never intended by a legislative measure, and that a 26, 1989) where, in the fairly analogous case of a teacher being served by
construction of which the statute is fairly susceptible is her school a notice of termination following the expiration of the last of three
favored, which will avoid all objecionable mischievous, successive fixed-term employment contracts, the Court held:
undefensible, wrongful, evil and injurious consequences. 28
Reyes (the teacher's) argument is not persuasive. It loses
Nothing is better settled than that courts are not to give sight of the fact that her employment was probationary,
words a meaning which would lead to absurd or contractual in nature, and one with a definitive period. At the
unreasonable consequences. That s a principle that does expiration of the period stipulated in the contract, her
back to In re Allen decided oil October 27, 1903, where it appointment was deemed terminated and the letter informing
was held that a literal interpretation is to be rejected if it her of the non-renewal of her contract is not a condition
would be unjust or lead to absurd results. That is a strong sine qua non before Reyes may be deemed to have ceased
argument against its adoption. The words of Justice Laurel in the employ of petitioner UST. The notice is a mere
are particularly apt. Thus: "The fact that the construction reminder that Reyes' contract of employment was due to
placed upon the statute by the appellants would lead to an expire and that the contract would no longer be renewed. It
absurdity is another argument for rejecting it. . . ." 29 is not a letter of termination. The interpretation that the notice
is only a reminder is consistent with the court's finding
. . . We have, here, then a case where the true intent of the in Labajo supra. ...32
law is clear that calls for the application of the cardinal rule of
statutory construction that such intent of spirit must prevail
Paraphrasing Escudero, respondent Alegre's employment was terminated filming crew with a salary of P375.00 per week. About four months
upon the expiration of his last contract with Brent School on July 16, 1976 later, he was designated Assistant Electrician with a weekly salary
without the necessity of any notice. The advance written advice given the of P400.00, which was increased to P450.00 in May 1990. In June
Department of Labor with copy to said petitioner was a mere reminder of the 1991, he was promoted to the rank of Electrician with a weekly
impending expiration of his contract, not a letter of termination, nor an salary of P475.00, which was increased to P539.00 in September
application for clearance to terminate which needed the approval of the 1991.
Department of Labor to make the termination of his services effective. In any
case, such clearance should properly have been given, not denied.
Petitioner Paulino Enero, on his part, claims that private
respondents employed him in June 1990 as a member of the
WHEREFORE, the public respondent's Decision complained of is
shooting crew with a weekly salary of P375.00, which was
REVERSED and SET ASIDE. Respondent Alegre's contract of employment
with Brent School having lawfully terminated with and by reason of the increased to P425.00 in May 1991, then to P475.00 on 21
expiration of the agreed term of period thereof, he is declared not entitled to December 1991. 3
reinstatement and the other relief awarded and confirmed on appeal in the
proceedings below. No pronouncement as to costs. Petitioners' tasks consisted of loading, unloading and arranging
movie equipment in the shooting area as instructed by the
SO ORDERED. cameraman, returning the equipment to Viva Films' warehouse,
assisting in the "fixing" of the lighting system, and performing
G.R. No. 120969 January 22, 1998 other tasks that the cameraman and/or director may assign. 4
ALEJANDRO MARAGUINOT, JR. and PAULINO Sometime in May 1992, petitioners sought the assistance of their
ENERO, Petitioners, vs. NATIONAL LABOR RELATIONS supervisors, Mrs. Alejandria Cesario, to facilitate their request that
COMMISSION (SECOND DIVISION) composed of Presiding private respondents adjust their salary in accordance with the
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. minimum wage law. In June 1992, Mrs. Cesario informed
RAYALA and Commissioner VICTORIANO R. CALAYCAY petitioners that Mr. Vic del Rosario would agree to increase their
(Ponente), VIC DEL ROSARIO and VIVA FIMS, Respondents. salary only if they signed a blank employment contract. As
petitioners refused to sign, private respondents forced Enero to go
on leave in June 1992, then refused to take him back when he
reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but
DAVIDE, JR., J.: was returned on 22 June 1992. He was again asked to sign a blank
employment contract, and when he still refused, private
By way of this special civil action for certiorari under Rule 65 of the respondents terminated his services on 20 July 1992. 5 Petitioners
Rules of Court, petitioners seek to annul the 10 February 1995 thus sued for illegal dismissal 6 before the Labor Arbiter.
Decision 1 of the National Labor Relations Commission (hereafter
NLRC), and its 6 April 1995 Resolution 2 denying the motion to On the other hand, private respondents claim that Viva Films
reconsider the former in NLRC-NCR-CA No. 006195-94. The (hereafter VIVA) is the trade name of Viva Productions, Inc., and
decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. that it is primarily engaged in the distribution and exhibition of
00-07-03994-92. movies - but not in the business of making movies; in the same
vein, private respondent Vic del Rosario is merely an executive
The parties present conflicting sets of facts. producer, i.e., the financier who invests a certain sum of money for
the production of movies distributed and exhibited by VIVA. 7
Petitioner Alejandro Maraguinot, Jr. maintains that he was
employed by private respondents on 18 July 1989 as part of the
Private respondents assert that they contract persons called Respondents are hereby ordered to reinstate complainant to their
"producers" - also referred to as "associate producers" 8 - to former positions without loss [of] seniority rights and pay their
"produce" or make movies for private respondents; and contend backwages starting July 21, 1992 to December 31, 1993
that petitioners are project employees of the association producers temporarily computed in the amount of P38,000.00 for complainant
who, in turn, act as independent contractors. As such, there is no Paulino Enero and P46,000.00 for complainant Alejandro
employer-employee relationship between petitioners and private Maraguinot, Jr. and thereafter until actually reinstated.
respondents.
Respondents are ordered to pay also attorney's fees equivalent to
Private respondents further contend that it was the associate ten (10%) and/or P8,400.00 on top of the award. 11
producer of the film "Mahirap Maging Pogi," who hired petitioner
Maraguinot. The movie shot from 2 July up to 22 July 1992, and it Private respondents appealed to the NLRC (docketed as NLRC NCR-
was only then that Maraguinot was released upon payment of his CA No. 006195-94). In its decision 12 of 10 February 1995, the
last salary, as his services were no longer needed. Anent petitioner NLRC found the following circumstances of petitioners' work
Enero, he was hired for the movie entitled "Sigaw ng Puso," later "clearly established:"
re-tired "Narito and Puso." He went on vacation on 8 June 1992,
and by the time he reported for work on 20 July 1992, shooting for 1. Complainants [petitioners herein] were hired for specific movie
the movie had already been completed. 9 projects and their employment was co-terminus with each movie
project the completion/termination of which are pre-determined,
After considering both versions of the facts, the Labor Arbiter found such fact being made known to complainants at the time of their
as follows: engagement.
On the first issue, this Office rules that complainants are the xxx xxx xxx
employees of the respondents. The producer cannot be considered
as an independent contractor but should be considered only as a 2 Each shooting unit works on one movie project at a time. And the
labor-only contractor and as such, acts as a mere agent of the real work of the shooting units, which work independently from each
employer, the herein respondent. Respondents even failed to name other, are not continuous in nature but depends on the availability
and specify who are the producers. Also, it is an admitted fact that of movie projects.
the complainants received their salaries from the respondents. The
case cited by the respondents, Rosario Brothers, Inc. v. Ople, 131
3. As a consequence of the non-continuous work of the shooting
SCRA 72 does not apply in this case.
units, the total working hours logged by complainants in a month
show extreme variations. . . For instance, complainant Maraguinot
It is very clear also that complainants are doing activities which are worked for only 1.45 hours in June 1991 but logged a total
necessary and essential to the business of the respondents, that of of 183.25 hours in January 1992. Complainant Enero logged a total
movie-making. Complainant Maraguinot worked as an electrician of only 31.57 hours in September 1991 but worked
while complainant Enero worked as a crew [member]. 10 for 183.35 hours the next month, October 1991.
Hence, the Labor Arbiter, in his decision of 20 December 1993, 4. Further shown by respondents is the irregular work schedule of
decreed as follows: complainants on a daily basis. Complainant Maraguinot was
supposed to report on 05 August 1991 but reported only on 30
WHEREFORE, judgment is hereby rendered declaring that August 1991, or a gap of 25 days. Complainant Enero worked on
complainants were illegally dismissed. 10 September 1991 and his next scheduled working day was 28
September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants' employees; point to petitioners' irregular work load and work
work explain the lump sum payment for complainants' services for schedule; emphasize the NLRC's finding that petitioners never
each movie project. Hence, complainants were paid a standard controverted the allegation that they were not prohibited from
weekly salary regardless of the number of working days and hours working with other movie companies; and ask that the facts be
they logged in. Otherwise, if the principle of "no work no pay" was viewed in the context of the peculiar characteristics of the movie
strictly applied, complainants' earnings for certain weeks would be industry.
very negligible.
The Office of the Solicitor General (OSG) is convinced that this
6. Respondents also alleged that complainants were not prohibited petition is improper since petitioners raise questions of fact,
from working with such movie companies like Regal, Seiko and FPJ particularly, the NLRC's finding that petitioners were project
Productions whenever they are not working for the independent employees, a finding supported by substantial evidence; and
movie producers engaged by respondents . . . This allegation was submits that petitioners' reliance on Article 280 of the Labor Code
never rebutted by complainants and should be deemed admitted. to support their contention that they should be deemed regular
employees is misplaced, as said section "merely distinguishes
The NLRC, in reversing the Labor Arbiter, then concluded that between two types of employees, i.e., regular employees and
these circumstances, taken together, indicated that complainants casual employees, for purposes of determining the right of an
(herein petitioners) were "project employees." employee to certain benefits."
After their motion for reconsideration was denied by the NLRC in its The OSG likewise rejects petitioners' contention that since they
Resolution 13 of 6 April 1995, petitioners filed the instant petition, were hired not for one project, but for a series of projects, they
claiming that the NLRC committed grave abuse of discretion should be deemed regular employees. Citing Mamansag
amounting to lack or excess of jurisdiction in: (1) finding that v. NLRC, 14 the OSG asserts that what matters is that there was a
petitioners were project employees; (2) ruling that petitioners were time-frame for each movie project made known to petitioners at
not illegally dismissed; and (3) reversing the decision of the Labor the time of their hiring. In closing, the OSG disagrees with
Arbiter. petitioners' claim that the NLRC's classification of the movie
producers as independent contractors had no basis in fact and in
To support their claim that they were regular (and not project) law, since, on the contrary, the NLRC "took pains in explaining its
employees of private respondents, petitioners cited their basis" for its decision.
performance of activities that were necessary or desirable in the
usual trade or business of private respondents and added that their As regards the propriety of this action, which the Office of the
work was continuous, i.e., after one project was completed they Solicitor General takes issue with, we rule that a special civil action
were assigned to another project. Petitioners thus considered for certiorari under Rule 65 of the Rules of Court is the proper
themselves part of a work pool from which private respondents remedy for one who complains that the NLRC acted in total
drew workers for assignment to different projects. Petitioners disregard of evidence material to or decisive of the
lamented that there was no basis for the NLRC's conclusion that controversy. 15 In the instant case, petitioners allege that the
they were project employees, while the associate producers were NLRC's conclusions have no basis in fact and in law, hence the
independent contractors; and thus reasoned that as regular petition may not be dismissed on procedural or jurisdictional
employees, their dismissal was illegal since the same was premised grounds.
on a "false cause," namely, the completion of a project, which was
not among the causes for dismissal allowed by the Labor Code. The judicious resolution of this case hinges upon, first, the
determination of whether an employer-employee relationship
Private respondents reiterate their version of the facts and stress existed between petitioners and private respondents or any one of
that their evidence supports the view that petitioners are project private respondents. If there was none, then this petition has no
merit; conversely, if the relationship existed, then petitioners could platforms, 17cameras and "shooting equipment;" 18 in fact, VIVA
have been unjustly dismissed. likewise owns the trucks used to transport the equipment. 19 It is
thus clear that the associate producer merely leases the equipment
A related question is whether private respondents are engaged in from VIVA. 20Indeed, private respondents' Formal Offer of
the business of making motion pictures. Del Rosario is necessarily Documentary Evidence stated one of the purposes of Exhibit "148"
engaged in such business as he finances the production of movies. as:
VIVA, on the other hand, alleges that it does not "make" movies,
but merely distributes and exhibits motion pictures. There being no To prove further that the independent Producers rented Shooting
further proof to this effect, we cannot rely on this self-serving Unit No. 2 from Viva to finish their films. 21
denial. At any rate, and as will be discussed below, private
respondents' evidence even supports the view that VIVA is While the purpose of Exhibits "149," "149-A" and "149-B" was:
engaged in the business of making movies.
[T]o prove that the movies of Viva Films were contracted out to the
We now turn to the critical issues. Private respondents insist that different independent Producers who rented Shooting Unit No. 3
petitioners are project employees of associate producers who, in with a fixed budget and time-frame of at least 30 shooting days or
turn, act as independent contractors. It is settled that the 45 days whichever comes first. 22
contracting out of labor is allowed only in case of job contracting.
Section 8, Rule VIII, Book III of the Omnibus Rules Implementing Private respondent further narrated that VIVA's generators broke
the Labor Code describes permissible job contracting in this wise: down during petitioners' last movie project, which forced the
associate producer concerned to rent generators, equipment and
Sec. 8. Job contracting. - There is job contracting permissible crew from another company. 23 This only shows that the associate
under the Code if the following conditions are met: producer did not have substantial capital nor investment in the
form of tools, equipment and other materials necessary for making
(1) The contractor carries on an independent business and a movie. Private respondents in effect admit that their producers,
undertakes the contract work on his own account under his own especially petitioners' last producer, are not engaged in permissible
responsibility according to his own manner and method, free from job contracting.
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the If private respondents insist that the associate producers are labor
results thereof; and contractors, then these producers can only be "labor-only"
contractors, defined by the Labor Code as follows:
(2) The contractor has substantial capital or investment in the form
of tools, equipment, machineries, work premises, and other Art. 106. Contractor or subcontractor. - . . .
materials which are necessary in the conduct of his business.
There is "labor-only" contracting where the person supplying
Assuming that the associate producers are job contractors, they workers to an employer does not have substantial capital or
must then be engaged in the business of making motion pictures. investment in the form of tools, equipment, machineries, work
As such, and to be a job contractor under the preceding premises, among others, and the workers recruited and placed by
description, associate producers must have tools, equipment, such persons are performing activities which are directly related to
machinery, work premises, and other materials necessary to make the principal business of such employer. In such cases, the person
motion pictures. However, the associate producers here have none or intermediary shall be considered merely as an agent of the
of these. Private respondents' evidence reveals that the movie- employer who shall be responsible to the workers in the same
making equipment are supplied to the producers and owned by manner and extent as if the latter were directly employed by him.
VIVA. These include generators, 16 cables and wooden
A more detailed description is provided by Section 9, Rule VIII, associate producers did not supply the workers required by the
Book III of the Omnibus Rules Implementing the Labor Code: movie project.
Sec. 9. Labor-only contracting. - (a) Any person who undertakes to The relationship between VIVA and its producers or associate
supply workers to an employer shall be deemed to be engaged in producers seems to be that of agency, 26 as the latter make movies
labor-only contracting where such person: on behalf of VIVA, whose business is to "make" movies. As such,
the employment relationship between petitioners and producers is
(1) Does not have substantial capital or investment in the form of actually one between petitioners and VIVA, with the latter being
tools, equipment, machineries, work premises and other materials; the direct employer.
and
The employer-employee relationship between petitioners and VIVA
(2) The workers recruited and placed by such person are can further be established by the "control test." While four
performing activities which are directly related to the principal elements are usually considered in determining the existence of an
business or operations of the employer in which workers are employment relationship, namely: (a) the selection and
habitually employed. engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control of the
(b) Labor-only contracting as defined herein is hereby prohibited employee's conduct, the most important element is the employer's
and the person acting as contractor shall be considered merely as control of the employee's conduct, not only as to the result of the
an agent or intermediary of the employer who shall be responsible work to be done but also as to the means and methods to
to the workers in the same manner and extent as if the latter were accomplish the same. 27 These four elements are present here. In
directly employed by him. their position paper submitted to the Labor Arbiter, private
respondents narrated the following circumstances:
(c) For cases not falling under this Article, the Secretary of Labor
shall determine through appropriate orders whether or not the [T]he PRODUCER has to work within the limits of the budget he is
contracting out of labor is permissible in the light of the given by the company, for as long as the ultimate finish[ed]
circumstances of each case and after considering the operating product is acceptable to the company . . .
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure The ensure that qualify films are produced by the PRODUCER who
the protection and welfare of the workers. is an independent contractor, the company likewise employs a
Supervising PRODUCER, a Project accountant and a Shooting unit
As labor-only contracting is prohibited, the law considers the supervisor. The Company's Supervising PRODUCER is Mr. Eric
person or entity engaged in the same a mere agent or intermediary Cuatico, the Project accountant varies from time to time, and the
of the direct employer. But even by the preceding standards, the Shooting Unit Supervisor is Ms. Alejandria Cesario.
associate producers of VIVA cannot be considered labor-only
contractors as they did not supply, recruit nor hire the workers. In The Supervising PRODUCER acts as the eyes and ears of the
the instant case, it was Juanita Cesario, Shooting Unit Supervisor company and of the Executive Producer to monitor the progress of
and an employee of VIVA, who recruited crew members from an the PRODUCER's work accomplishment. He is there usually in the
"available group of free-lance workers which includes the field doing the rounds of inspection to see if there is any problem
complainants Maraguinot and Enero." 24 And in their Memorandum, that the PRODUCER is encountering and to assist in threshing out
private respondents declared that the associate producer "hires the the same so that the film project will be finished on schedule. He
services of . . . 6) camera crew which includes (a) cameraman; (b) supervises about 3 to 7 movie projects simultaneously [at] any
the utility crew; (c) the technical staff; (d) generator man and given time by coordinating with each film "PRODUCER". The Project
electrician; (e) clapper; etc. . . . ." 25 This clearly showed that the Accountant on the other hand assists the PRODUCER in monitoring
the actual expenses incurred because the company wants to insure that members of the shooting crew except the driver are project
that any additional budget requested by the PRODUCER is really employees of the Independent Producers" 29 reads as follows:
justified and warranted especially when there is a change of
original plans to suit the tast[e] of the company on how a certain VIVA PRODUCTIONS, INC.
scene must be presented to make the film more interesting and 16 Sct. Albano St.
more commercially viable. (emphasis supplied). Diliman, Quezon City
VIVA's control is evident in its mandate that the end result must be PEDRO NICOLAS Date: June 15, 1992
a "quality film acceptable to the company." The means and
methods to accomplish the result are likewise controlled by
VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be
APPOINTMENT SLIP
justified; certain scenes are subject to change to suit the taste of
the company; and the Supervising Producer, the "eyes and ears" of
VIVA and del Rosario, intervenes in the movie-making process by You are hereby appointed as SOUNDMAN for the film project
assisting the associate producer in solving problems encountered in entitled "MANAMBIT". This appointment shall be effective upon the
making the film. commencement of the said project and shall continue to be
effective until the completion of the same.
It may not be validly argued then that petitioners are actually
subject to the movie director's control, and not VIVA's direction. For your services you shall receive the daily/weekly/monthly
The director merely instructs petitioners on how to better comply compensation of P812.50.
with VIVA's requirements to ensure that a quality film is completed
within schedule and without exceeding the budget. At bottom, the During the term of this appointment you shall comply with the
director is akin to a supervisor who merely oversees the activities duties and responsibilities of your position as well as observe the
of rank-and-file employees with control ultimately resting on the rules and regulations promulgated by your superiors and by Top
employer. Management.
During the term of this appointment you shall comply with the (an illegible signature)
duties and responsibilities of your position as well as observe the
rules and regulations promulgated by your superiors and by Top CONFORME:
Management.
_________________
The words "supervisors" and "Top Management" can only refer to
the "supervisors" and "Top Management" of VIVA. By commanding Name of appointee
crew members to observe the rules and regulations promulgated
by VIVA, the appointment slips only emphasize VIVA's control over Signed in the presence of:
petitioners.
___________________
Aside from control, the element of selection and engagement is
likewise present in the instant case and exercised by VIVA. A Notably, nowhere in the appointment slip does it appear that it was
sample appointment slip offered by private respondents "to prove the producer or associate producer who hired the crew members;
moreover, it is VIVA's corporate name which appears on the
FILM DATE DATE ASSOCIATE
heading of the appointment slip. What likewise tells against VIVA is
STARTED COMPLETED PRODUCER
that it paid petitioners' salaries as evidenced by vouchers,
containing VIVA's letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG
petitioners and VIVA alone, thus the inevitable conclusion is that
petitioners are employees only of VIVA.
PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL
The next issue is whether petitioners were illegally dismissed.
ROCKY & ROLLY 2/13/90 3/29/90 M. ONG
Private respondents contend that petitioners were project
employees whose employment was automatically terminated with
the completion of their respective projects. Petitioners assert that PAIKOT-IKOT (addl. 1/2) 3/12/90 4/3/90 E. MANUEL
they were regular employees who were illegally dismissed.
ROCKY & ROLLY (2nd contract) 4/6/90 5/20/90 M. ONG
It may not be ignored, however, that private respondents expressly
admitted that petitioners were part of a work pool; 31 and, while NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING
petitioners were initially hired possibly as project employees, they
had attained the status of regular employees in view if VIVA's BAKIT KAY TAGAL NG SANDALI 6/26/90 10/20/90 E. MANUEL
conduct.
BAKIT KAY TAGAL (2nd contract) 8/10/90 9/23/90 E. MANUEL
A project employee or a member of a work pool may acquire the
status of a regular employee when the following concur: HINUKAY KO NA ANG LIBINGAN 9/6/90 10/20/90 JUN CHING
MO
1) There is a continuous rehiring of project employees even after
cessation of a project; 32 and MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA
However, the length of time during which the employee was NOEL JUICO (2nd contract) 3/15/91 4/6/91 JUN CHING
continuously re-hired is not controlling, but merely serves as a
badge of regular employment. 34
ROBIN GOOD 5/7/91 6/20/91 M. ONG
IRAM NA MUKHA 3/15/92 4/29/92 M. ONG PITONG GAMOL 8/30/91 10/13/91 M. ONG
IGAW NG PUSO 7/1/92 8/4/92 M. ONG BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT
NAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA The denial by petitioners of the existence of a work pool in the
company because their projects were not continuous is amply
B. AMA (addl 1/2) 10/17/90 11/8/90 RUTH GRUTA belied by petitioners themselves who admit that: . . .
B. AMA (addl 2nd 1/2) 11/9/90 12/1/90 R. GRUTA
A work pool may exist although the workers in the pool do not
OYONG MANALAC 11/30/90 1/14/91 MARIVIC ONG receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall
be available when called to report of a project. Although primarily distinction exists between the projects undertaken in the
applicable to regular seasonal workers, this set-up can likewise be construction industry and the motion picture industry. On the
applied to project workers insofar as the effect of temporary contrary, the raison d' etre of both industries concern projects with
cessation of work is concerned. This is beneficial to both the a foreseeable suspension of work.
employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time At this time, we wish to allay any fears that this decision unduly
enables the workers to attain the status of regular employees. burdens an employer by imposing a duty to re-hire a project
Clearly, the continuous rehiring of the same set of employees employee even after completion of the project for which he was
within the framework of the Lao Group of Companies is strongly hired. The import of this decision is not to impose a positive and
indicative that private respondents were an integral part of a work sweeping obligation upon the employer to re-hire project
pool from which petitioners drew its workers for its various employees. What this decision merely accomplishes is a judicial
projects. recognition of the employment status of a project or work pool
employee in accordance with what is fait accompli, i.e., the
In a final attempt to convince the Court that private respondents continuous re-hiring by the employer of project or work pool
were indeed project employees, petitioners point out that the employees who perform tasks necessary or desirable to the
workers were not regularly maintained in the payroll and were free employer's usual business or trade. Let it not be said that this
to offer their services to other companies when there were no on- decision "coddles" labor, for as Lao has ruled, project or work pool
going projects. This argument however cannot defeat the workers' employees who have gained the status of regular employees are
status of regularity. We apply by analogy the vase of Industrial- subject to the "no work-no pay" principle, to repeat:
Commercial-Agricultural Workers Organization v. CIR [16 SCRA
526, 567-568 (1966)] which deals with regular seasonal A work pool may exist although the workers in the pool do not
employees. There we held: . . . receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall
Truly, the cessation of construction activities at the end of every be available when called to report for a project. Although primarily
project is a foreseeable suspension of work. Of course, no applicable to regular seasonal workers, this set-up can likewise be
compensation can be demanded from the employer because the applied to project workers insofar as the effect of temporary
stoppage of operations at the end of a project and before the start cessation of work is concerned. This is beneficial to both the
of a new one is regular and expected by both parties to the labor employer and employee for it prevents the unjust situation of
relations. Similar to the case of regular seasonal employees, the "coddling labor at the expense of capital" and at the same time
employment relation is not severed by merely being enables the workers to attain the status of regular employees.
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)]
The employees are, strictly speaking, not separated from services The Court's ruling here is meant precisely to give life to the
but merely on leave of absence without pay until they are constitutional policy of strengthening the labor sector, 40 but, we
reemployed. Thus we cannot affirm the argument that non- stress, not at the expense of management. Lest it be
payment of salary or non-inclusion in the payroll and the misunderstood, this ruling does not mean that simply because an
opportunity to seek other employment denote project employee is a project or work pool employee even outside the
employment. 37 (emphasis supplied) construction industry, he is deemed, ipso jure, a regular employee.
All that we hold today is that once a project or work pool employee
While Lao admittedly involved the construction industry, to which has been: (1) continuously, as opposed to intermittently, re-hired
Policy Instruction No. 20/Department Order No. 19 38 regarding by the same employer for the same tasks or nature of tasks; and
work pools specifically applies, there seems to be no impediment to (2) these tasks are vital, necessary and indispensable to the usual
applying the underlying principles to industries other than the business or trade of the employer, then the employee must be
construction industry. 39Neither may it be argued that a substantial deemed a regular employee, pursuant to Article 280 of the Labor
Code and jurisprudence. To rule otherwise would allow G.R. No. 164315 July 3, 2009
circumvention of labor laws in industries not falling within the
ambit of Policy Instruction No. 20/Department Order No. 19, hence ALCATEL PHILIPPINES, INC., and YOLANDA DELOS
allowing the prevention of acquisition of tenurial security by project REYES, Petitioners,
or work pool employees who have already gained the status of vs.
regular employees by the employer's conduct. RENE R. RELOS, Respondent.
On 11 December 1995, Alcatel informed respondent that the project would Respondent appealed to the Court of Appeals.
be completed on 31 December 1995 and that his contract with Alcatel would
expire on the same day.15 Alcatel asked respondent to settle all his In its 31 March 2004 Decision, the Court of Appeals set aside the NLRC’s
accountabilities with the company and advised him that he would be called if Decision and reinstated the Labor Arbiter’s Decision.
it has future projects that require his expertise.
Alcatel filed a motion for reconsideration. In its 14 June 2004 Resolution, the
In March 1997, respondent filed a complaint for illegal dismissal, separation Court of Appeals denied Alcatel’s motion.
pay, unpaid wages, unpaid overtime pay, damages, and attorney’s fees
against Alcatel. Respondent alleged that he was a regular employee of Hence, this petition.
Alcatel and that he was dismissed during the existence of the project.
The Ruling of the Labor Arbiter
In its 24 September 1998 Decision, the Labor Arbiter declared that
respondent was a regular employee of Alcatel. The Labor Arbiter also ruled The Labor Arbiter declared that, since respondent was repeatedly hired by
that respondent was illegally dismissed and, therefore, entitled to back Alcatel, respondent performed functions that were necessary and desirable
wages. The Labor Arbiter’s Decision provides: in the usual business or trade of Alcatel. The Labor Arbiter concluded that
respondent belonged to the "work pool of non-project employees" of Alcatel.
WHEREFORE, premises considered, judgment is hereby rendered, finding
that [sic] complainant to be a regular employee and finding further that [sic] As to the project, the Labor Arbiter noted that respondent’s employment
complainant to have been illegally dismissed from employment and ordering contracts did not specify the project’s completion date. The Labor Arbiter said
respondents, jointly and severally, to pay complainant the following: that a short extension of respondent’s employment contract was believable,
but an extension up to 1995, when respondent was originally engaged only
1. Backwages from the time he was illegally dismissed until his from 1 February to 31 March 1991, was unbelievable. The Labor Arbiter also
actual reinstatement in the amount of THREE HUNDRED FORTY said that Alcatel’s unsubstantiated claim, that the project was merely
EIGHT THOUSAND PESOS (₱348,000.00). The award of extended for "unavoidable causes," was absurd. The Labor Arbiter
backwages shall be re-computed once this decision has become concluded that there was really no fixed duration of the project and that
final; Alcatel used the periods of employment as a facade to show that respondent
was only a project employee.
2. Money claims in the total amount of FOURTEEN THOUSAND
TWO HUNDRED FORTY PESOS (₱14,240.00); The Ruling of the NLRC
3. Attorney’s fees of ten (10%) percent of the total monetary award. The NLRC set aside the Labor Arbiter’s ruling and declared that respondent
was a project employee. The NLRC said respondent was assigned to carry
out a specific project or undertaking and the duration of his services was it is constrained to hire project employees to meet the demands of specific
always stated in his employment contracts. The NLRC also pointed out that, projects.
by the nature of Alcatel’s business, respondent would remain a project
employee regardless of the number of projects for which he had been On the other hand, respondent insists that he is a regular employee because
employed. Since respondent was a project employee, the NLRC said he was he was assigned by Alcatel on its various projects since 4 January 1988
not illegally dismissed, but that his dismissal was brought about by the performing functions desirable or necessary to Alcatel’s business.
expiration of his employment contract. Respondent adds that his employment contracts were renewed successively
by Alcatel for seven years. Respondent contends that, even assuming that
The Ruling of the Court of Appeals he was a project employee, he became a regular employee because he was
re-hired every termination of his employment contract and he performed
The Court of Appeals set aside the NLRC’s decision and reinstated the Labor functions necessary to Alcatel’s business. Respondent also claims that he
Arbiter’s ruling. The Court of Appeals declared that respondent was a regular was illegally dismissed because he was dismissed during the existence of
employee of Alcatel because (1) respondent was assigned to positions and the project.
performed tasks that were necessary to the main line and business
operations of Alcatel; (2) respondent was repeatedly hired and contracted, The principal test for determining whether a particular employee is a project
continuously and for prolonged periods, with his employment contracts employee or a regular employee is whether the project employee was
renewed each time they fell due; and (3) Alcatel did not report the termination assigned to carry out a specific project or undertaking, the duration and
of the projects with the nearest public employment office. The Court of scope of which were specified at the time the employee is engaged for the
Appeals also said that, although respondent’s employment contracts project.18 "Project" may refer to a particular job or undertaking that is within
specified that he was being engaged for a specific period, there was no clear the regular or usual business of the employer, but which is distinct and
provision on the actual scope of the project for which respondent was separate and identifiable as such from the undertakings of the company.
engaged or the actual length of time that the project was going to last. The Such job or undertaking begins and ends at determined or determinable
Court of Appeals concluded that Alcatel imposed the periods of employment times.191avvphi1
to preclude respondent from acquiring tenurial security.
In our review of respondent’s employment contracts, we are convinced that
The Issues respondent was a project employee. The specific projects for which
respondent was hired and the periods of employment were specified in his
Alcatel raises the following issues: employment contracts. The services he rendered, the duration and scope of
each employment are clear indications that respondent was hired as a
project employee.
1. Whether respondent was a regular employee or a project
employee; and
We do not agree with respondent that he became a regular employee
2. Whether respondent was illegally dismissed. because he was continuously rehired by Alcatel every termination of his
contract. In Maraguinot, Jr. v. NLRC,20 we said:
The Ruling of the Court
A project employee or a member of a work pool may acquire the status of a
regular employee when the following concur:
The petition is meritorious.
1) There is a continuous rehiring of project employees even
Alcatel argues that respondent was a project employee because he worked after the cessation of a project; and
on distinct projects with the terms of engagement and the specific project
made known to him at the time of the engagement. Alcatel clarifies that
respondent’s employment was coterminous with the project for which he was 2) The tasks performed by the alleged "project employee" are vital,
hired and, therefore, respondent was not illegally dismissed but was validly necessary and indispensable to the usual business or trade of the
employer.21 (Emphasis ours)
dismissed upon the expiration of the term of his project employment. Alcatel
explains that its business relies mainly on the projects it enters into and thus,
While respondent performed tasks that were clearly vital, necessary and when it ruled that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally
indispensable to the usual business or trade of Alcatel, respondent was not dismissed from her employment.
continuously rehired by Alcatel after the cessation of every project. Records
show that respondent was hired by Alcatel from 1988 to 1995 for three The Facts
projects, namely the PLDT X-5 project, the PLDT X-4 IOT project and the
PLDT 1342 project. On 30 April 1988, upon the expiration of respondent’s
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott)
contract for the PLDT X-4 IOT project, Alcatel did not rehire respondent until
caused the publication in a major broadsheet newspaper of its need for a
1 February 1991, or after a lapse of 33 months, for the PLDT 1342 project.
Medical and Regulatory Affairs Manager (Regulatory Affairs Manager) who
Alcatel’s continuous rehiring of respondent in various capacities from would: (a) be responsible for drug safety surveillance operations, staffing,
February 1991 to December 1995 was done entirely within the framework of
and budget; (b) lead the development and implementation of standard
one and the same project ― the PLDT 1342 project. This did not make
operating procedures/policies for drug safety surveillance and vigilance; and
respondent a regular employee of Alcatel as respondent was not
(c) act as the primary interface with internal and external customers
continuously rehired after the cessation of a project. Respondent remained a
regarding safety operations and queries.4 Alcaraz - who was then a
project employee of Alcatel working on the PLDT 1342 project. Regulatory Affairs and Information Manager at Aventis Pasteur Philippines,
Incorporated (another pharmaceutical company like Abbott) – showed
The employment of a project employee ends on the date specified in the interest and submitted her application on October 4, 2004.5
employment contract. Therefore, respondent was not illegally dismissed but
his employment terminated upon the expiration of his employment contract.
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned
Here, Alcatel employed respondent as a Site Inspector until 31 December position which was an item under the company’s Hospira Affiliate Local
1995. Surveillance Unit (ALSU) department.6 In Abbott’s offer sheet.7 it was stated
that Alcaraz was to be employed on a probationary basis.8 Later that day,
WHEREFORE, we GRANT the petition. We SET ASIDE the 31 March 2004 she accepted the said offer and received an electronic mail (e-mail) from
Decision and 14 June 2004 Resolution of the Court of Appeals Abbott’s Recruitment Officer, petitioner Teresita C. Bernardo (Bernardo),
and REINSTATE the 20 February 2002 Decision and 19 December 2002 confirming the same. Attached to Bernardo’s e-mail were Abbott’s
Order of the National Labor Relations Commission. organizational chart and a job description of Alcaraz’s work.9
SO ORDERED. On February 12, 2005, Alcaraz signed an employment contract which stated,
inter alia, that she was to be placed on probation for a period of six (6)
G.R. No. 192571 July 23, 2013 months beginning February 15, 2005 to August 14, 2005. The said contract
was also signed by Abbott’s General Manager, petitioner Edwin Feist
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, (Feist):10
EDWIN D. FEIST, MARIA OLIVIA T. YABUTMISA, TERESITA C.
BERNARDO, AND ALLAN G. ALMAZAR, Petitioners, PROBATIONARY EMPLOYMENT
vs.
PEARLIE ANN F. ALCARAZ, Respondent. Dear Pearl,
DECISION After having successfully passed the pre-employment requirements, you are
hereby appointed as follows:
PERLAS-BERNABE, J.:
Position Title : Regulatory Affairs Manager
Assailed in this petition for review on certiorari1 are the Decision2 dated
December 10,2009 and Resolution3 dated June 9, 2010 of the Court of Department : Hospira
Appeals (CA) in CA-G.R. SP No. 101045 which pronounced that the National
Labor Relations Commission (NLRC) did not gravely abuse its discretion
The terms of your employment are:
Nature of Employment : Probationary Abbott’s management, excluding the technical aspects of the operations
which is under the control and supervision of Walsh; and (f) the processing of
Effectivity : February 15, 2005 to August 14, 2005 information and/or raw material data subject of Hospira ALSU operations will
be strictly confined and controlled under the computer system and network
being maintained and operated from the United States. For this purpose, all
Basic Salary : ₱110,000.00/ month
those involved in Hospira ALSU are required to use two identification cards:
one, to identify them as Abbott’s employees and another, to identify them as
It is understood that you agree to abide by all existing policies, rules and Hospira employees.11
regulations of the company, as well as those, which may be hereinafter
promulgated.
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbott’s
Human Resources (HR) Director, sent Alcaraz an e-mail which contained an
Unless renewed, probationary appointment expires on the date indicated explanation of the procedure for evaluating the performance of probationary
subject to earlier termination by the Company for any justifiable reason. employees and further indicated that Abbott had only one evaluation system
for all of its employees. Alcaraz was also given copies of Abbott’s Code of
If you agree to the terms and conditions of your employment, please signify Conduct and Probationary Performance Standards and Evaluation (PPSE)
your conformity below and return a copy to HRD. and Performance Excellence Orientation Modules (Performance Modules)
which she had to apply in line with her task of evaluating the Hospira ALSU
Welcome to Abbott! staff.12
Very truly yours, Abbott’s PPSE procedure mandates that the job performance of a
probationary employee should be formally reviewed and discussed with the
Sgd. employee at least twice: first on the third month and second on the fifth
EDWIN D. FEIST month from the date of employment. The necessary Performance
General Manager Improvement Plan should also be made during the third-month review in
case of a gap between the employee’s performance and the standards set.
These performance standards should be discussed in detail with the
CONFORME:
employee within the first two (2) weeks on the job. It was equally required
that a signed copy of the PPSE form must be submitted to Abbott’s Human
Sgd. Resources Department (HRD) and shall serve as documentation of the
PEARLIE ANN FERRER-ALCARAZ employee’s performance during his/her probationary period. This shall form
the basis for recommending the confirmation or termination of the
During Alcaraz’s pre-employment orientation, petitioner Allan G. Almazar probationary employment.13
(Almazar), Hospira’s Country Transition Manager, briefed her on her duties
and responsibilities as Regulatory Affairs Manager, stating that: (a) she will During the course of her employment, Alcaraz noticed that some of the staff
handle the staff of Hospira ALSU and will directly report to Almazar on had disciplinary problems. Thus, she would reprimand them for their
matters regarding Hopira’s local operations, operational budget, and unprofessional behavior such as non-observance of the dress code,
performance evaluation of the Hospira ALSU Staff who are on probationary moonlighting, and disrespect of Abbott officers. However, Alcaraz’s method
status; (b) she must implement Abbott’s Code of Good Corporate Conduct of management was considered by Walsh to be "too strict."14 Alcaraz
(Code of Conduct), office policies on human resources and finance, and approached Misa to discuss these concerns and was told to "lie low" and let
ensure that Abbott will hire people who are fit in the organizational discipline; Walsh handle the matter. Misa even assured her that Abbott’s HRD would
(c) petitioner Kelly Walsh (Walsh), Manager of the Literature Drug support her in all her management decisions.15
Surveillance Drug Safety of Hospira, will be her immediate supervisor; (d)
she should always coordinate with Abbott’s human resource officers in the
On April 12, 2005, Alcaraz received an e-mail from Misa requesting
management and discipline of the staff; (e) Hospira ALSU will spin off from
immediate action on the staff’s performance evaluation as their probationary
Abbott in early 2006 and will be officially incorporated and known as Hospira,
periods were about to end. This Alcaraz eventually submitted.16
Philippines. In the interim, Hospira ALSU operations will still be under
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible she was still an employee thereof; and (c) they publicly announced that she
(Terrible), Abbott’s former HR Director, to discuss certain issues regarding already resigned in order to humiliate her.27
staff performance standards. In the course thereof, Alcaraz accidentally saw
a printed copy of an e-mail sent by Walsh to some staff members which On the contrary, petitioners maintained that Alcaraz was validly terminated
essentially contained queries regarding the former’s job performance. from her probationary employment given her failure to satisfy the prescribed
Alcaraz asked if Walsh’s action was the normal process of evaluation. standards for her regularization which were made known to her at the time of
Terrible said that it was not.17 her engagement.28
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible The LA Ruling
where she was informed that she failed to meet the regularization standards
for the position of Regulatory Affairs Manager.18 Thereafter, Walsh and
In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s complaint
Terrible requested Alcaraz to tender her resignation, else they be forced to
for lack of merit.
terminate her services. She was also told that, regardless of her choice, she
should no longer report for work and was asked to surrender her office
identification cards. She requested to be given one week to decide on the The LA rejected Alcaraz’s argument that she was not informed of the
same, but to no avail.19 reasonable standards to qualify as a regular employee considering her
admissions that she was briefed by Almazar on her work during her pre-
employment orientation meeting30 and that she received copies of Abbott’s
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales Code of Conduct and Performance Modules which were used for evaluating
(Gonzales), that she would be on leave for that day. However, Gonzales told all types of Abbott employees.31 As Alcaraz was unable to meet the
her that Walsh and Terrible already announced to the whole Hospira ALSU
standards set by Abbott as per her performance evaluation, the LA ruled that
staff that Alcaraz already resigned due to health reasons.20
the termination of her probationary employment was justified.32 Lastly, the LA
found that there was no evidence to conclude that Abbott’s officers and
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to employees acted in bad faith in terminating Alcaraz’s employment.33
Alcaraz a letter stating that her services had been terminated effective May
19, 2005.21 The letter detailed the reasons for Alcaraz’s termination –
Displeased with the LA’s ruling, Alcaraz filed an appeal with the National
particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to
Labor Relations Commission (NLRC).
gain the trust of her staff and to build an effective rapport with them; (c) failed
to train her staff effectively; and (d) was not able to obtain the knowledge and
ability to make sound judgments on case processing and article review which The NLRC Ruling
were necessary for the proper performance of her duties.22 On May 27, 2005,
Alcaraz received another copy of the said termination letter via registered On September 15, 2006, the NLRC rendered a Decision,34 annulling and
mail.23 setting aside the LA’s ruling, the dispositive portion of which reads:
Alcaraz felt that she was unjustly terminated from her employment and thus, WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is
filed a complaint for illegal dismissal and damages against Abbott and its hereby reversed, annulled and set aside and judgment is hereby rendered:
officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible, and Feist.24 She
claimed that she should have already been considered as a regular and not a 1. Finding respondents Abbot [sic] and individual respondents to
probationary employee given Abbott’s failure to inform her of the reasonable have committed illegal dismissal;
standards for her regularization upon her engagement as required under
Article 29525 of the Labor Code. In this relation, she contended that while her 2. Respondents are ordered to immediately reinstate complainant to
employment contract stated that she was to be engaged on a probationary her former position without loss of seniority rights immediately upon
status, the same did not indicate the standards on which her regularization receipt hereof;
would be based.26 She further averred that the individual petitioners
maliciously connived to illegally dismiss her when: (a) they threatened her
with termination; (b) she was ordered not to enter company premises even if
3. To jointly and severally pay complainant backwages computed The LA denied the said motion in an Order dated July 8, 2008 which was,
from 16 May 2005 until finality of this decision. As of the date hereof however, eventually reversed on appeal by the NLRC.42 Due to the
the backwages is computed at foregoing, petitioners filed another Petition for Certiorari with the CA,
docketed as CA G.R. SP No. 111318 (Second CA Petition), assailing the
propriety of the execution of the NLRC decision.43
a. Backwages for 15 months - PhP 1,650,000.00
The CA Ruling
b. 13th month pay - 110,000.00
TOTAL PhP 1,760,000.00 With regard to the First CA Petition, the CA, in a Decision44 dated December
10, 2009, affirmed the ruling of the NLRC and held that the latter did not
commit any grave abuse of discretion in finding that Alcaraz was illegally
4. Respondents are ordered to pay complainant moral damages of dismissed.
₱50,000.00 and exemplary damages of ₱50,000.00.
It observed that Alcaraz was not apprised at the start of her employment of
5. Respondents are also ordered to pay attorney’s fees of 10% of the the reasonable standards under which she could qualify as a regular
total award. employee.45 This was based on its examination of the employment contract
which showed that the same did not contain any standard of performance or
6. All other claims are dismissed for lack of merit. any stipulation that Alcaraz shall undergo a performance evaluation before
she could qualify as a regular employee.46 It also found that Abbott was
unable to prove that there was any reasonable ground to terminate Alcaraz’s
SO ORDERED.35
employment.47 Abbott moved for the reconsideration of the aforementioned
ruling which was, however, denied by the CA in a Resolution48 dated June 9,
The NLRC reversed the findings of the LA and ruled that there was no 2010.
evidence showing that Alcaraz had been apprised of her probationary status
and the requirements which she should have complied with in order to be a The CA likewise denied the Second CA Petition in a Resolution dated May
regular employee.36 It held that Alcaraz’s receipt of her job description and
18, 2010 (May 18, 2010 Resolution) and ruled that the NLRC was correct in
Abbott’s Code of Conduct and Performance Modules was not equivalent to
upholding the execution of the NLRC Decision.49 Thus, petitioners filed a
her being actually informed of the performance standards upon which she
motion for reconsideration.
should have been evaluated on.37 It further observed that Abbott did not
comply with its own standard operating procedure in evaluating probationary
employees.38 The NLRC was also not convinced that Alcaraz was terminated While the petitioners’ motion for reconsideration of the CA’s May 18, 2010
for a valid cause given that petitioners’ allegation of Alcaraz’s "poor Resolution was pending, Alcaraz again moved for the issuance of a writ of
performance" remained unsubstantiated.39 execution before the LA. On June 7, 2010, petitioners received the LA’s
order granting Alcaraz’s motion for execution which they in turn appealed to
the NLRC – through a Memorandum of Appeal dated June 16, 2010 (June
Petitioners filed a motion for reconsideration which was denied by the NLRC 16, 2010 Memorandum of Appeal ) – on the ground that the implementation
in a Resolution dated July 31, 2007.40
of the LA’s order would render its motion for reconsideration moot and
academic.50
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for
Issuance of a Temporary Restraining Order and/or Writ of Preliminary Meanwhile, petitioners’ motion for reconsideration of the CA’s May 18, 2010
Injunction, docketed as CA G.R. SP No. 101045 (First CA Petition), alleging Resolution in the Second CA Petition was denied via a Resolution dated
grave abuse of discretion on the part of NLRC when it ruled that Alcaraz was
October 4, 2010.51 This attained finality on January 10, 2011 for petitioners’
illegally dismissed.41
failure to timely appeal the same.52 Hence, as it stands, only the issues in the
First CA petition are left to be resolved.
Pending resolution of the First CA Petition, Alcaraz moved for the execution
of the NLRC’s Decision before the LA, which petitioners strongly opposed.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges present, namely: (a) identity of parties, or at least such parties who represent
that petitioners were guilty of forum shopping when they filed the Second CA the same interests in both actions; (b) identity of rights asserted and relief
Petition pending the resolution of their motion for reconsideration of the CA’s prayed for, the relief being founded on the same facts; and (c) the identity
December 10, 2009 Decision i.e., the decision in the First CA Petition. 53 She with respect to the two preceding particulars in the two (2) cases is such that
also contends that petitioners have not complied with the certification any judgment that may be rendered in the pending case, regardless of which
requirement under Section 5, Rule 7 of the Rules of Court when they failed to party is successful, would amount to res judicata in the other case.57
disclose in the instant petition the filing of the June 16, 2010 Memorandum of
Appeal filed before the NLRC.54 In this case, records show that, except for the element of identity of parties,
the elements of forum shopping do not exist. Evidently, the First CA Petition
The Issues Before the Court was instituted to question the ruling of the NLRC that Alcaraz was illegally
dismissed. On the other hand, the Second CA Petition pertains to the
The following issues have been raised for the Court’s resolution: (a) whether propriety of the enforcement of the judgment award pending the resolution of
or not petitioners are guilty of forum shopping and have violated the the First CA Petition and the finality of the decision in the labor dispute
certification requirement under Section 5, Rule 7 of the Rules of Court; (b) between Alcaraz and the petitioners. Based on the foregoing, a judgment in
whether or not Alcaraz was sufficiently informed of the reasonable standards the Second CA Petition will not constitute res judicata insofar as the First CA
to qualify her as a regular employee; (c) whether or not Alcaraz was validly Petition is concerned. Thus, considering that the two petitions clearly cover
terminated from her employment; and (d) whether or not the individual different subject matters and causes of action, there exists no forum
petitioners herein are liable. shopping.
The Court’s Ruling As to the second, Alcaraz further imputes that the petitioners violated the
certification requirement under Section 5, Rule 7 of the Rules of Court58 by
not disclosing the fact that it filed the June 16, 2010 Memorandum of Appeal
A. Forum Shopping and
before the NLRC in the instant petition.
Violation of Section 5, Rule 7
of the Rules of Court.
In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a
plaintiff who files a case should provide a complete statement of the present
At the outset, it is noteworthy to mention that the prohibition against forum
status of any pending case if the latter involves the same issues as the one
shopping is different from a violation of the certification requirement under
Section 5, Rule 7 of the Rules of Court. In Sps. Ong v. CA,55 the Court that was filed. If there is no such similar pending case, Section 5(a) of the
explained that: same rule provides that the plaintiff is obliged to declare under oath that to
the best of his knowledge, no such other action or claim is pending.
x x x The distinction between the prohibition against forum shopping and the
Records show that the issues raised in the instant petition and those in the
certification requirement should by now be too elementary to be
misunderstood. To reiterate, compliance with the certification against forum June 16, 2010 Memorandum of Appeal filed with the NLRC likewise cover
shopping is separate from and independent of the avoidance of the act of different subject matters and causes of action. In this case, the validity of
Alcaraz’s dismissal is at issue whereas in the said Memorandum of Appeal,
forum shopping itself. There is a difference in the treatment between failure
the propriety of the issuance of a writ of execution was in question.
to comply with the certification requirement and violation of the prohibition
against forum shopping not only in terms of imposable sanctions but also in
the manner of enforcing them. The former constitutes sufficient cause for the Thus, given the dissimilar issues, petitioners did not have to disclose in the
dismissal without prejudice to the filing of the complaint or initiatory pleading present petition the filing of their June 16, 2010 Memorandum of Appeal with
upon motion and after hearing, while the latter is a ground for summary the NLRC. In any event, considering that the issue on the propriety of the
dismissal thereof and for direct contempt. x x x. 56 issuance of a writ of execution had been resolved in the Second CA Petition
– which in fact had already attained finality – the matter of disclosing the
June 16, 2010 Memorandum of Appeal is now moot and academic.
As to the first, forum shopping takes place when a litigant files multiple suits
involving the same parties, either simultaneously or successively, to secure a
favorable judgment. It exists where the elements of litis pendentia are
Having settled the foregoing procedural matter, the Court now proceeds to Aberdeen Court, Inc. v. Agustin,62 it has been held that the rule on notifying a
resolve the substantive issues. probationary employee of the standards of regularization should not be used
to exculpate an employee who acts in a manner contrary to basic knowledge
B. Probationary employment; and common sense in regard to which there is no need to spell out a policy
grounds for termination. or standard to be met. In the same light, an employee’s failure to perform the
duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employee’s non-
A probationary employee, like a regular employee, enjoys security of tenure.
However, in cases of probationary employment, aside from just or authorized regularization.
causes of termination, an additional ground is provided under Article 295 of
the Labor Code, i.e., the probationary employee may also be terminated for In this case, petitioners contend that Alcaraz was terminated because she
failure to qualify as a regular employee in accordance with the reasonable failed to qualify as a regular employee according to Abbott’s standards which
standards made known by the employer to the employee at the time of the were made known to her at the time of her engagement. Contrarily, Alcaraz
engagement.59 Thus, the services of an employee who has been engaged on claims that Abbott never apprised her of these standards and thus, maintains
probationary basis may be terminated for any of the following: (a) a just or (b) that she is a regular and not a mere probationary employee.
an authorized cause; and (c) when he fails to qualify as a regular employee
in accordance with reasonable standards prescribed by the employer. 60 The Court finds petitioners’ assertions to be well-taken.
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of A punctilious examination of the records reveals that Abbott had indeed
the Labor Code provides that if the employer fails to inform the probationary complied with the above-stated requirements. This conclusion is largely
employee of the reasonable standards upon which the regularization would impelled by the fact that Abbott clearly conveyed to Alcaraz her duties and
be based on at the time of the engagement, then the said employee shall be responsibilities as Regulatory Affairs Manager prior to, during the time of her
deemed a regular employee, viz.: engagement, and the incipient stages of her employment. On this score, the
Court finds it apt to detail not only the incidents which point out to the efforts
(d) In all cases of probationary employment, the employer shall make known made by Abbott but also those circumstances which would show that Alcaraz
to the employee the standards under which he will qualify as a regular was well-apprised of her employer’s expectations that would, in turn,
employee at the time of his engagement. Where no standards are made determine her regularization:
known to the employee at that time, he shall be deemed a regular employee.
(a) On June 27, 2004, Abbott caused the publication in a major
In other words, the employer is made to comply with two (2) requirements broadsheet newspaper of its need for a Regulatory Affairs Manager,
when dealing with a probationary employee: first, the employer must indicating therein the job description for as well as the duties and
communicate the regularization standards to the probationary employee; and responsibilities attendant to the aforesaid position; this prompted
second, the employer must make such communication at the time of the Alcaraz to submit her application to Abbott on October 4, 2004;
probationary employee’s engagement. If the employer fails to comply with
either, the employee is deemed as a regular and not a probationary (b) In Abbott’s December 7, 2004 offer sheet, it was stated that
employee. Alcaraz was to be employed on a probationary status;
Keeping with these rules, an employer is deemed to have made known the (c) On February 12, 2005, Alcaraz signed an employment contract
standards that would qualify a probationary employee to be a regular which specifically stated, inter alia, that she was to be placed on
employee when it has exerted reasonable efforts to apprise the employee of probation for a period of six (6) months beginning February 15, 2005
what he is expected to do or accomplish during the trial period of probation. to August 14, 2005;
This goes without saying that the employee is sufficiently made aware of his
probationary status as well as the length of time of the probation. (d) On the day Alcaraz accepted Abbott’s employment offer,
Bernardo sent her copies of Abbott’s organizational structure and her
The exception to the foregoing is when the job is self-descriptive in nature, job description through e-mail;
for instance, in the case of maids, cooks, drivers, or messengers. 61 Also, in
(e) Alcaraz was made to undergo a pre-employment orientation on.64 It, however, overlooked the legal implication of the other attendant
where Almazar informed her that she had to implement Abbott’s circumstances as detailed herein which should have warranted a contrary
Code of Conduct and office policies on human resources and finance finding that Alcaraz was indeed a probationary and not a regular employee –
and that she would be reporting directly to Walsh; more particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same would
(f) Alcaraz was also required to undergo a training program as part of lead to her non-regularization and eventually, her termination.
her orientation;
Accordingly, by affirming the NLRC’s pronouncement which is tainted with
(g) Alcaraz received copies of Abbott’s Code of Conduct and grave abuse of discretion, the CA committed a reversible error which,
Performance Modules from Misa who explained to her the procedure perforce, necessitates the reversal of its decision.
for evaluating the performance of probationary employees; she was
further notified that Abbott had only one evaluation system for all of C. Probationary employment;
its employees; and termination procedure.
(h) Moreover, Alcaraz had previously worked for another A different procedure is applied when terminating a probationary employee;
pharmaceutical company and had admitted to have an "extensive the usual two-notice rule does not govern.65 Section 2, Rule I, Book VI of the
training and background" to acquire the necessary skills for her job. 63 Implementing Rules of the Labor Code states that "if the termination is
brought about by the x x x failure of an employee to meet the standards of
Considering the totality of the above-stated circumstances, it cannot, the employer in case of probationary employment, it shall be sufficient that a
therefore, be doubted that Alcaraz was well-aware that her regularization written notice is served the employee, within a reasonable time from the
would depend on her ability and capacity to fulfill the requirements of her effective date of termination."
position as Regulatory Affairs Manager and that her failure to perform such
would give Abbott a valid cause to terminate her probationary employment. As the records show, Alcaraz's dismissal was effected through a letter dated
May 19, 2005 which she received on May 23, 2005 and again on May 27,
Verily, basic knowledge and common sense dictate that the adequate 2005. Stated therein were the reasons for her termination, i.e., that after
performance of one’s duties is, by and of itself, an inherent and implied proper evaluation, Abbott determined that she failed to meet the reasonable
standard for a probationary employee to be regularized; such is a standards for her regularization considering her lack of time and people
regularization standard which need not be literally spelled out or mapped into management and decision-making skills, which are necessary in the
technical indicators in every case. In this regard, it must be observed that the performance of her functions as Regulatory Affairs Manager.66 Undeniably,
assessment of adequate duty performance is in the nature of a management this written notice sufficiently meets the criteria set forth above, thereby
prerogative which when reasonably exercised – as Abbott did in this case – legitimizing the cause and manner of Alcaraz’s dismissal as a probationary
should be respected. This is especially true of a managerial employee like employee under the parameters set by the Labor Code.67
Alcaraz who was tasked with the vital responsibility of handling the personnel
and important matters of her department. D. Employer’s violation of
company policy and
In fine, the Court rules that Alcaraz’s status as a probationary employee and procedure.
her consequent dismissal must stand. Consequently, in holding that Alcaraz
was illegally dismissed due to her status as a regular and not a probationary Nonetheless, despite the existence of a sufficient ground to terminate
employee, the Court finds that the NLRC committed a grave abuse of Alcaraz’s employment and Abbott’s compliance with the Labor Code
discretion. termination procedure, it is readily apparent that Abbott breached its
contractual obligation to Alcaraz when it failed to abide by its own procedure
To elucidate, records show that the NLRC based its decision on the premise in evaluating the performance of a probationary employee.
that Alcaraz’s receipt of her job description and Abbott’s Code of Conduct
and Performance Modules was not equivalent to being actually informed of
the performance standards upon which she should have been evaluated
Veritably, a company policy partakes of the nature of an implied contract same, it accords upon itself the obligation to faithfully implement them.
between the employer and employee. In Parts Depot, Inc. v. Beiswenger,68 it Indeed, a contrary interpretation would entail a disharmonious relationship in
has been held that: the work place for the laborer should never be mired by the uncertainty of
flimsy rules in which the latter’s labor rights and duties would, to some extent,
Employer statements of policy . . . can give rise to contractual rights in depend.
employees without evidence that the parties mutually agreed that the policy
statements would create contractual rights in the employee, and, hence, In this light, while there lies due cause to terminate Alcaraz’s probationary
although the statement of policy is signed by neither party, can be unilaterally employment for her failure to meet the standards required for her
amended by the employer without notice to the employee, and contains no regularization, and while it must be further pointed out that Abbott had
reference to a specific employee, his job description or compensation, and satisfied its statutory duty to serve a written notice of termination, the fact that
although no reference was made to the policy statement in pre-employment it violated its own company procedure renders the termination of Alcaraz’s
interviews and the employee does not learn of its existence until after his employment procedurally infirm, warranting the payment of nominal
hiring. Toussaint, 292 N.W .2d at 892. The principle is akin to estoppel. Once damages. A further exposition is apropos.
an employer establishes an express personnel policy and the employee
continues to work while the policy remains in effect, the policy is deemed an Case law has settled that an employer who terminates an employee for a
implied contract for so long as it remains in effect. If the employer unilaterally valid cause but does so through invalid procedure is liable to pay the latter
changes the policy, the terms of the implied contract are also thereby nominal damages.
changed.1âwphi1 (Emphasis and underscoring supplied.)
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the
Hence, given such nature, company personnel policies create an obligation dismissal is for a just cause, the lack of statutory due process should not
on the part of both the employee and the employer to abide by the same. nullify the dismissal, or render it illegal, or ineffectual. However, the employer
should indemnify the employee for the violation of his statutory rights.72 Thus,
Records show that Abbott’s PPSE procedure mandates, inter alia, that the in Agabon, the employer was ordered to pay the employee nominal damages
job performance of a probationary employee should be formally reviewed in the amount of ₱30,000.00.73
and discussed with the employee at least twice: first on the third month and
second on the fifth month from the date of employment. Abbott is also Proceeding from the same ratio, the Court modified Agabon in the case of
required to come up with a Performance Improvement Plan during the third Jaka Food Processing Corporation v. Pacot (Jaka)74 where it created a
month review to bridge the gap between the employee’s performance and distinction between procedurally defective dismissals due to a just cause, on
the standards set, if any.69 In addition, a signed copy of the PPSE form one hand, and those due to an authorized cause, on the other.
should be submitted to Abbott’s HRD as the same would serve as basis for
recommending the confirmation or termination of the probationary
It was explained that if the dismissal is based on a just cause under Article
employment.70
282 of the Labor Code (now Article 296) but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should be
In this case, it is apparent that Abbott failed to follow the above-stated tempered because the dismissal process was, in effect, initiated by an act
procedure in evaluating Alcaraz. For one, there lies a hiatus of evidence that imputable to the employee; if the dismissal is based on an authorized cause
a signed copy of Alcaraz’s PPSE form was submitted to the HRD. It was not under Article 283 (now Article 297) but the employer failed to comply with the
even shown that a PPSE form was completed to formally assess her notice requirement, the sanction should be stiffer because the dismissal
performance. Neither was the performance evaluation discussed with her process was initiated by the employer’s exercise of his management
during the third and fifth months of her employment. Nor did Abbott come up prerogative.75 Hence, in Jaka, where the employee was dismissed for an
with the necessary Performance Improvement Plan to properly gauge authorized cause of retrenchment76 – as contradistinguished from the
Alcaraz’s performance with the set company standards. employee in Agabon who was dismissed for a just cause of neglect of
duty77 – the Court ordered the employer to pay the employee nominal
While it is Abbott’s management prerogative to promulgate its own company damages at the higher amount of ₱50,000.00.
rules and even subsequently amend them, this right equally demands that
when it does create its own policies and thereafter notify its employee of the
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the A judicious perusal of the records show that other than her unfounded
necessity to deter employers from future violations of the statutory due assertions on the matter, there is no evidence to support the fact that the
process rights of employees.78 In similar regard, the Court deems it proper to individual petitioners herein, in their capacity as Abbott’s officers and
apply the same principle to the case at bar for the reason that an employer’s employees, acted in bad faith or were motivated by ill will in terminating
contractual breach of its own company procedure – albeit not statutory in
source – has the parallel effect of violating the laborer’s rights. Suffice it to Alcaraz’s services. The fact that Alcaraz was made to resign and not allowed
state, the contract is the law between the parties and thus, breaches of the to enter the workplace does not necessarily indicate bad faith on Abbott’s
same impel recompense to vindicate a right that has been violated. part since a sufficient ground existed for the latter to actually proceed with
Consequently, while the Court is wont to uphold the dismissal of Alcaraz her termination. On the alleged loss of her personal belongings, records are
because a valid cause exists, the payment of nominal damages on account bereft of any showing that the same could be attributed to Abbott or any of its
of Abbott’s contractual breach is warranted in accordance with Article 2221 of officers. It is a well-settled rule that bad faith cannot be presumed and he
the Civil Code.79 who alleges bad faith has the onus of proving it. All told, since Alcaraz failed
to prove any malicious act on the part of Abbott or any of its officers, the
Anent the proper amount of damages to be awarded, the Court observes that Court finds the award of moral or exemplary damages unwarranted.
Alcaraz’s dismissal proceeded from her failure to comply with the standards
required for her regularization. As such, it is undeniable that the dismissal WHEREFORE, the petition is GRANTED. The Decision dated December 10,
process was, in effect, initiated by an act imputable to the employee, akin to 2009 and Resolution dated June 9, 2010 of the Court of Appeals in CA-G.R.
dismissals due to just causes under Article 296 of the Labor Code. SP No. 101045 are hereby REVERSED and SET ASIDE. Accordingly, the
Therefore, the Court deems it appropriate to fix the amount of nominal Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED with the
damages at the amount of ₱30,000.00, consistent with its rulings in both MODIFICATION that petitioner Abbott Laboratories, Philippines be
Agabon and Jaka. ORDERED to pay respondent Pearlie Ann F. Alcaraz nominal damages in
the amount of ₱30,000.00 on account of its breach of its own company
E. Liability of individual procedure.
petitioners as corporate
officers. SO ORDERED.
It is hornbook principle that personal liability of corporate directors, trustees G.R. No. 79869 September 5, 1991
or officers attaches only when: (a) they assent to a patently unlawful act of
the corporation, or when they are guilty of bad faith or gross negligence in FORTUNATO MERCADO, SR., ROSA MERCADO, FORTUNATO
directing its affairs, or when there is a conflict of interest resulting in damages MERCADO, JR., ANTONIO MERCADO, JOSE CABRAL, LUCIA
to the corporation, its stockholders or other persons; (b) they consent to the MERCADO, ASUNCION GUEVARA, ANITA MERCADO, MARINA
issuance of watered down stocks or when, having knowledge of such MERCADO, JULIANA CABRAL, GUADALUPE PAGUIO, BRIGIDA
issuance, do not forthwith file with the corporate secretary their written ALCANTARA, EMERLITA MERCADO, ROMEO GUEVARA, ROMEO
objection; (c) they agree to hold themselves personally and solidarily liable MERCADO and LEON SANTILLAN, petitioners,
with the corporation; or (d) they are made by specific provision of law vs.
personally answerable for their corporate action.80 NATIONAL LABOR RELATIONS COMMISSION (NLRC), THIRD DIVISION;
LABOR ARBITER LUCIANO AQUINO, RAB-III; AURORA L. CRUZ;
In this case, Alcaraz alleges that the individual petitioners acted in bad faith SPOUSES FRANCISCO DE BORJA and LETICIA DE BORJA; and STO.
with regard to the supposed crude manner by which her probationary NIÑO REALTY, INCORPORATED, respondents.
employment was terminated and thus, should be held liable together with
Abbott. In the same vein, she further attributes the loss of some of her Servillano S. Santillan for petitioners.
remaining belongings to them.81 Luis R. Mauricio for private respondents.
This petition originated from a complaint for illegal dismissal, underpayment Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private
of wages, non-payment of overtime pay, holiday pay, service incentive leave respondents and held that petitioners were not regular and permanent
benefits, emergency cost of living allowances and 13th month pay, filed by workers of the private respondents, for the nature of the terms and conditions
above-named petitioners against private respondents Aurora L. Cruz, of their hiring reveal that they were required to perform phases of agricultural
Francisco Borja, Leticia C. Borja and Sto. Niño Realty Incorporated, with work for a definite period of time after which their services would be available
Regional Arbitration Branch No. III, National Labor Relations Commission in to any other farm owner.4 Respondent Labor Arbiter deemed petitioners'
San Fernando, Pampanga.1 contention of working twelve (12) hours a day the whole year round in the
farm, an exaggeration, for the reason that the planting of lice and sugar cane
Petitioners alleged in their complaint that they were agricultural workers does not entail a whole year as reported in the findings of the Chief of the
utilized by private respondents in all the agricultural phases of work on the 7 NLRC Special Task Force.5 Even the sworn statement of one of the
1/2 hectares of ace land and 10 hectares of sugar land owned by the latter; petitioners, Fortunato Mercado, Jr., the son of spouses Fortunato Mercado,
that Fortunato Mercado, Sr. and Leon Santillan worked in the farm of private Sr. and Rosa Mercado, indubitably show that said petitioners were hired only
respondents since 1949, Fortunato Mercado, Jr. and Antonio Mercado since as casuals, on an "on and off" basis, thus, it was within the prerogative of
1972 and the rest of the petitioners since 1960 up to April 1979, when they private respondent Aurora Cruz either to take in the petitioners to do further
were all allegedly dismissed from their employment; and that, during the work or not after any single phase of agricultural work had been completed
period of their employment, petitioners received the following daily wages: by them.6
From 1962-1963 — P1.50 Respondent Labor Arbiter was also of the opinion that the real cause which
1963-1965 — P2.00 triggered the filing of the complaint by the petitioners who are related to one
1965-1967 — P3.00 another, either by consanguinity or affinity, was the filing of a criminal
1967-1970 — P4.00 complaint for theft against Reynaldo Mercado, son of spouses Fortunate
1970-1973 — P5.00 Mercado, Sr. and Rosa Mercado, for they even asked the help of Jesus
1973-1975 — P5.00 David, Zone Chairman of the locality to talk to private respondent, Aurora
1975-1978 — P6.00 Cruz regarding said criminal case.7 In his affidavit, Jesus David stated under
1978-1979 — P7.00 oath that petitioners were never regularly employed by private respondent
Aurora Cruz but were, on-and-off hired to work and render services when
needed, thus adding further support to the conclusion that petitioners were
Private respondent Aurora Cruz in her answer to petitioners' complaint
not regular and permanent employees of private respondent Aurora Cruz.8
denied that said petitioners were her regular employees and instead averred
that she engaged their services, through Spouses Fortunato Mercado, Sr.
and Rosa Mercado, their "mandarols", that is, persons who take charge in Respondent Labor Arbiter further held that only money claims from years
supplying the number of workers needed by owners of various farms, but 1976-1977, 1977-1978 and 1978-1979 may be properly considered since all
only to do a particular phase of agricultural work necessary in rice production the other money claims have prescribed for having accrued beyond the three
and/or sugar cane production, after which they would be free to render (3) year period prescribed by law.9 On grounds of equity, however,
services to other farm owners who need their services.2 respondent Labor Arbiter awarded petitioners financial assistance by private
respondent Aurora Cruz, in the amount of Ten Thousand Pesos
(P10,000.00) to be equitably divided among an the petitioners except
petitioner Fortunato Mercado, Jr. who had manifested his disinterest in the Employment for a definite period which exceeds one (1) year shall be
further prosecution of his complaint against private respondent. 10 considered re for the duration of the definite period.
Both parties filed their appeal with the National Labor Relations Commissions This concept of re and casual employment is designed to put an end
(NLRC). Petitioners questioned respondent Labor Arbiter's finding that they to casual employment in regular jobs which has been abused by
were not regular and permanent employees of private respondent Aurora many employers to prevent so-called casuals from enjoying the
Cruz while private respondents questioned the award of financial assistance benefits of regular employees or to prevent casuals from joining
granted by respondent Labor Arbiter. unions.
The NLRC ruled in favor of private respondents affirming the decision of the This new concept should be strictly enforced to give meaning to the
respondent Labor Arbiter, with the modification of the deletion of the award constitutional guarantee of employment tenure.16
for financial assistance to petitioners. The dispositive portion of the decision
of the NLRC reads: Tested under the laws invoked, petitioners submit that it would be unjust, if
not unlawful, to consider them as casual workers since they have been doing
WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino all phases of agricultural work for so many years, activities which are
dated March 3, 1983 is hereby modified in that the award of undeniably necessary, desirable and indispensable in the rice and sugar
P10,000.00 financial assistance should be deleted. The said cane production business of the private respondents.17
Decision is affirmed in all other aspects.
In the Comment filed by private respondents, they submit that the decision of
SO ORDERED.11 the Labor Arbiter, as aimed by respondent NLRC, that petitioners were only
hired as casuals, is based on solid evidence presented by the parties and
Petitioners filed a motion for reconsideration of the Decision of the Third also by the Chief of the Special Task Force of the NLRC Regional Office and,
Division of the NLRC dated 8 August 1984; however, the NLRC denied tills therefore, in accordance with the rule on findings of fact of administrative
motion in a resolution dated 17 August 1987.12 agencies, the decision should be given great weight.18 Furthermore, they
contend that the arguments used by petitioners in questioning the decision of
the Labor Arbiter were based on matters which were not offered as evidence
In the present Petition for certiorari, petitioners seek the reversal of the
in the case heard before the regional office of the then Ministry of Labor but
above-mentioned rulings. Petitioners contend that respondent Labor Arbiter
and respondent NLRC erred when both ruled that petitioners are not regular rather in the case before the Social Security Commission, also between the
same parties.19
and permanent employees of private respondents based on the terms and
conditions of their hiring, for said findings are contrary to the provisions of
Article 280 of the Labor Code.13 They submit that petitioners' employment, Public respondent NLRC filed a separate comment prepared by the Solicitor
even assuming said employment were seasonal, continued for so many General. It submits that it has long been settled that findings of fact of
years such that, by express provision of Article 280 of the Labor Code as administrative agencies if supported by substantial evidence are entitled to
amended, petitioners have become regular and permanent employees.14 great weight.20 Moreover, it argues that petitioners cannot be deemed to be
permanent and regular employees since they fall under the exception stated
in Article 280 of the Labor Code, which reads:
Moreover, they argue that Policy Instruction No. 1215 of the Department of
Labor and Employment clearly lends support to this contention, when it
states: The provisions of written agreements to the contrary notwithstanding
and regardless of the oral agreements of the parties, an employment
shall be deemed to be regular where the employee has been
PD 830 has defined the concept of regular and casual employment.
engaged to perform activities which are usually necessary or
What determines regularity or casualness is not the employment
desirable in the usual business or trade of the
contract, written or otherwise, but the nature of the job. If the job is
employer, except where the employment has been fixed for a
usually necessary or desirable to the main business of the employer,
then employment is regular. If not, then the employment is casual. 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 agricultural work has been completed by them. We are of the opinion
and the employment is for the duration of the season.21(emphasis that the real cause which triggered the filing of this complaint by the
supplied) petitioners who are related to one another, either by consanguinity or
affinity was due to the filing of a criminal complaint by the respondent
The Court resolved to give due course to the petition and required the parties Aurora Cruz against Reynaldo Mercado, son of spouses Fortunato
to submit their respective memoranda after which the case was deemed Mercado, Sr. and Rosa Mercado. In April 1979, according to Jesus
submitted for decision. David, Zone Chairman of the locality where the petitioners and
respondent reside, petitioner Fortunato Mercado, Sr. asked for help
The petition is not impressed with merit. regarding the case of his son, Reynaldo, to talk with respondent
Aurora Cruz and the said Zone Chairman also stated under oath that
the petitioners were never regularly employed by respondent Aurora
The invariable rule set by the Court in reviewing administrative decisions of Cruz but were on-and-off hired to work to render services when
the Executive Branch of the Government is that the findings of fact made needed.25
therein are respected, so long as they are supported by substantial evidence,
even if not overwhelming or preponderant;22 that it is not for the reviewing
A careful examination of the foregoing statements reveals that the findings of
court to weigh the conflicting evidence, determine the credibility of the
the Labor Arbiter in the case are ably supported by evidence. There is,
witnesses or otherwise substitute its own judgment for that of the
therefore, no circumstance that would warrant a reversal of the questioned
administrative agency on the sufficiency of the evidence;23 that the
decision of the Labor Arbiter as affirmed by the National Labor Relations
administrative decision in matters within the executive's jurisdiction can only
be set aside upon proof of gross abuse of discretion, fraud, or error of law. 24 Commission.
The contention of petitioners that the second paragraph of Article 280 of the
The questioned decision of the Labor Arbiter reads:
Labor Code should have been applied in their case presents an opportunity
to clarify the afore-mentioned provision of law.
Focusing the spotlight of judicious scrutiny on the evidence on record
and the arguments of both parties, it is our well-discerned opinion
Article 280 of the Labor Code reads in full:
that the petitioners are not regular and permanent workers of the
respondents. The very nature of the terms and conditions of their
hiring reveal that the petitioners were required to perform p of cultural Article 280. Regular and Casual Employment. — The provisions of
work for a definite period, after which their services are available to written agreement to the contrary notwithstanding and regardless of
any farm owner. We cannot share the arguments of the petitioners the oral agreement of the parties, an employment shall be deemed to
that they worked continuously the whole year round for twelve hours be regular where the employee has been engaged to perform
a day. This, we feel, is an exaggeration which does not deserve any activities which are usually necessary or desirable in the usual
serious consideration inasmuch as the plan of rice and sugar cane business or trade of the employer, except where the employment has
does not entail a whole year operation, the area in question being been fixed for a specific project or undertaking the completion or
comparatively small. It is noteworthy that the findings of the Chief of termination of which has been determined at the time of the
the Special Task Force of the Regional Office are similar to this. 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.
In fact, the sworn statement of one of the petitioners Fortunato
Mercado, Jr., the son of spouses Fortunato Mercado, Sr. and Rosa
Mercado, indubitably shows that said petitioners were only hired as An employment shall be deemed to be casual if it is not covered by
casuals, on-and-off basis. With this kind of relationship between the the preceding paragraph: Provided, That, any employee who has
petitioners and the respondent Aurora Cruz, we feel that there is no rendered at least one year of service whether such service is
basis in law upon which the claims of the petitioners should be continuous or broken, shall be considered a regular employee with
sustained, more specially their complaint for illegal dismissal. It is respect to the activity in which he is employed and his employment
within the prerogative of respondent Aurora Cruz either to take in the shall continue while such actually exists.
petitioners to do further work or not after any single phase of
The first paragraph answers the question of who are employees. It states proviso is applicable only to the employees who are deemed "casuals" but
that, regardless of any written or oral agreement to the contrary, an not to the "project" employees nor the regular employees treated in
employee is deemed regular where he is engaged in necessary or desirable paragraph one of Art. 280.
activities in the usual business or trade of the employer, except for project
employees. Clearly, therefore, petitioners being project employees, or, to use the correct
term, seasonal employees, their employment legally ends upon completion of
A project employee has been defined to be one whose employment has the project or the season. The termination of their employment cannot and
been fixed for a specific project or undertaking, the completion or termination should not constitute an illegal dismissal.30
of which has been determined at the time of the engagement of the
employee, or where the work or service to be performed is seasonal in WHEREFORE, the petition is DISMISSED. The decision of the National
nature and the employment is for the duration of the season26 as in the Labor Relations Commission affirming that of the Labor Arbiter, under
present case. review, is AFFIRMED. No pronouncement as to costs.
The second paragraph of Art. 280 demarcates as "casual" employees, all SO ORDERED.
other employees who do not fan under the definition of the preceding
paragraph. The proviso, in said second paragraph, deems as regular
employees those "casual" employees who have rendered at least one year of
service regardless of the fact that such service may be continuous or broken.
G.R. No. 163512 February 28, 2007
Petitioners, in effect, contend that the proviso in the second paragraph of Art.
280 is applicable to their case and that the Labor Arbiter should have DAISY B. TIU, Petitioner
considered them regular by virtue of said proviso. The contention is without vs.
merit. PLATINUM PLANS PHIL., INC., Respondent.
The general rule is that the office of a proviso is to qualify or modify only the DECISION
phrase immediately preceding it or restrain or limit the generality of the
clause that it immediately follows.27 Thus, it has been held that a proviso is to QUISUMBING, J.:
be construed with reference to the immediately preceding part of the
provision to which it is attached, and not to the statute itself or to other For review on certiorari are the Decision1 dated January 20, 2004 of the
sections thereof.28 The only exception to this rule is where the clear Court of Appeals in CA-G.R. CV No. 74972, and its Resolution2 dated May 4,
legislative intent is to restrain or qualify not only the phrase immediately 2004 denying reconsideration. The Court of Appeals had affirmed the
preceding it (the proviso) but also earlier provisions of the statute or even the decision3 dated February 28, 2002 of the Regional Trial Court (RTC) of Pasig
statute itself as a whole.29 City, Branch 261, in an action for damages, ordering petitioner to pay
respondent ₱100,000 as liquidated damages.
Policy Instruction No. 12 of the Department of Labor and Employment
discloses that the concept of regular and casual employees was designed to The relevant facts are as follows:
put an end to casual employment in regular jobs, which has been abused by
many employers to prevent called casuals from enjoying the benefits of Respondent Platinum Plans Philippines, Inc. is a domestic corporation
regular employees or to prevent casuals from joining unions. The same engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu
instructions show that the proviso in the second paragraph of Art. 280 was was its Division Marketing Director.
not designed to stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether agricultural or industrial.
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-
What it seeks to eliminate are abuses of employers against their employees
President and Territorial Operations Head in charge of its Hongkong and
and not, as petitioners would have us believe, to prevent small-scale
Asean operations. The parties executed a contract of employment valid for
businesses from engaging in legitimate methods to realize profit. Hence, the
five years.4
On September 16, 1995, petitioner stopped reporting for work. In November 1. the amount of One Hundred Thousand Pesos (P100,000.00) for
1995, she became the Vice-President for Sales of Professional Pension and as damages, for the breach of the non-involvement provision
Plans, Inc., a corporation engaged also in the pre-need industry. (Item No. 8) of the contract of employment;
Consequently, respondent sued petitioner for damages before the RTC of 2. costs of suit.
Pasig City, Branch 261. Respondent alleged, among others, that petitioner’s
employment with Professional Pension Plans, Inc. violated the non- There being no sufficient evidence presented to sustain the grant of
involvement clause in her contract of employment, to wit: attorney’s fees, the Court deems it proper not to award any.
However, in Del Castillo v. Richmond,10 we upheld a similar stipulation as Article 115914 of the same Code also provides that obligations arising from
legal, reasonable, and not contrary to public policy. In the said case, the contracts have the force of law between the contracting parties and should
employee was restricted from opening, owning or having any connection with be complied with in good faith. Courts cannot stipulate for the parties nor
any other drugstore within a radius of four miles from the employer’s place of amend their agreement where the same does not contravene law, morals,
business during the time the employer was operating his drugstore. We said good customs, public order or public policy, for to do so would be to alter the
that a contract in restraint of trade is valid provided there is a limitation upon real intent of the parties, and would run contrary to the function of the courts
either time or place and the restraint upon one party is not greater than the to give force and effect thereto.15 Not being contrary to public policy, the non-
protection the other party requires. involvement clause, which petitioner and respondent freely agreed upon, has
the force of law between them, and thus, should be complied with in good
Finally, in Consulta v. Court of Appeals,11 we considered a non-involvement faith.16
clause in accordance with Article 130612 of the Civil Code. While the
Thus, as held by the trial court and the Court of Appeals, petitioner is bound Deciding to devote his time and attention to his poultry business in Cavite,
to pay respondent ₱100,000 as liquidated damages. While we have equitably Rivera applied for retirement under the SRP. Solidbank approved the
reduced liquidated damages in certain cases,17 we cannot do so in this case, application and Rivera was entitled to receive the net amount
since it appears that even from the start, petitioner had not shown the least of P963,619.28. This amount included his performance incentive award
intention to fulfill the non-involvement clause in good faith. (PIA), and his unearned medical, dental and optical allowances in the
amount of P1,666.67, minus his total accountabilities to Solidbank amounting
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated to P106,973.00.6 Rivera received the amount and confirmed his separation
January 20, 2004, and the Resolution dated May 4, 2004, of the Court of from Solidbank on February 25, 1995.7
Appeals in CA-G.R. CV No. 74972, are AFFIRMED. Costs against petitioner.
Subsequently, Solidbank required Rivera to sign an undated Release,
SO ORDERED. Waiver and Quitclaim, which was notarized on March 1, 1995.8 Rivera
acknowledged receipt of the net proceeds of his separation and retirement
benefits and promised that "[he] would not, at any time, in any manner
whatsoever, directly or indirectly engage in any unlawful activity prejudicial to
the interest of Solidbank, its parent, affiliate or subsidiary companies, their
G.R. No. 163269 April 19, 2006 stockholders, officers, directors, agents or employees, and their successors-
in-interest and will not disclose any information concerning the business of
ROLANDO C. RIVERA, Petitioner, Solidbank, its manner or operation, its plans, processes, or data of any
vs. kind."9
SOLIDBANK CORPORATION, Respondent.
Aside from acknowledging that he had no cause of action against Solidbank
DECISION or its affiliate companies, Rivera agreed that the bank may bring any action
to seek an award for damages resulting from his breach of the Release,
CALLEJO, SR., J.: Waiver and Quitclaim, and that such award would include the return of
whatever sums paid to him by virtue of his retirement under the
Assailed in this Petition for Review on Certiorari is the Decision1 of the Court SRP.10 Rivera was likewise required to sign an undated Undertaking as a
of Appeals (CA) in CA-G.R. CV No. 52235 as well as its Resolution2 denying supplement to the Release, Waiver and Quitclaim in favor of Solidbank in
the Motion for Partial Reconsideration of petitioner Rolando C. Rivera. which he declared that he received in full his entitlement under the law
(salaries, benefits, bonuses and other emoluments), including his separation
pay in accordance with the SRP. In this Undertaking, he promised that "[he]
Petitioner had been working for Solidbank Corporation since July 1,
will not seek employment with a competitor bank or financial institution within
1977.3 He was initially employed as an Audit Clerk, then as Credit
one (1) year from February 28, 1995, and that any breach of the Undertaking
Investigator, Senior Clerk, Assistant Accountant, and Assistant Manager.
or the provisions of the Release, Waiver and Quitclaim would entitle
Prior to his retirement, he became the Manager of the Credit Investigation
Solidbank to a cause of action against him before the appropriate courts of
and Appraisal Division of the Consumer’s Banking Group. In the meantime,
law.11 Unlike the Release, Waiver and Quitclaim, the Undertaking was not
Rivera and his brother-in-law put up a poultry business in Cavite.
notarized.
In December 1994, Solidbank offered two retirement programs to its
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed
employees: (a) the Ordinary Retirement Program (ORP), under which an
Rivera as Manager of its Credit Investigation and Appraisal Division of its
employee would receive 85% of his monthly basic salary multiplied by the
Consumers’ Banking Group.12 Upon discovering this, Solidbank First Vice-
number of years in service; and (b) the Special Retirement Program (SRP),
President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a
under which a retiring employee would receive 250% of the gross monthly
letter dated May 18, 1995, informing Rivera that he had violated the
salary multiplied by the number of years in service.4 Since Rivera was only
Undertaking. She likewise demanded the return of all the monetary benefits
45 years old, he was not qualified for retirement under the ORP. Under the
he received in consideration of the SRP within five (5) days from receipt;
SRP, he was entitled to receive P1,045,258.95 by way of benefits.5
otherwise, appropriate legal action would be taken against him.13
When Rivera refused to return the amount demanded within the given period, the employment ban provision in the Undertaking was never conveyed to him
Solidbank filed a complaint for Sum of Money with Prayer for Writ of until he was made to sign it on February 28, 1995. He emphasized that, prior
Preliminary Attachment14 before the Regional Trial Court (RTC) of Manila on to said date, Solidbank never disclosed any condition to the retirement
June 26, 1995. Solidbank, as plaintiff, alleged therein that in accepting scheme, nor did it impose such employment ban on the bank officers and
employment with a competitor bank for the same position he held in employees who had previously availed of the SRP. He alleged that the
Solidbank before his retirement, Rivera violated his Undertaking under the undertaking not to "seek employment with any competitor bank or financial
SRP. Considering that Rivera accepted employment with Equitable barely institution within one (1) year from February 28, 1995" was void for being
three months after executing the Undertaking, it was clear that he had no contrary to the Constitution, the law and public policy, that it was
intention of honoring his commitment under said deed. unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman,
and violative of his human rights. He further claimed that the Undertaking
Solidbank prayed that Rivera be ordered to return the net amount was a contract of adhesion because it was prepared solely by Solidbank
of P963,619.28 plus interests therein, and attorney’s fees, thus: without his participation; considering his moral and economic disadvantage, it
must be liberally construed in his favor and strictly against the bank.
WHEREFORE, it is respectfully prayed that:
On August 15, 1995, Solidbank filed a Verified Motion for Summary
Judgment, alleging therein that Rivera raised no genuine issue as to any
1. At the commencement of this action and upon the filing of a bond
material fact in his Answer except as to the amount of damages. It prayed
in such amount as this Honorable Court may fix, a writ of preliminary
that the RTC render summary judgment against Rivera. Solidbank alleged
attachment be forthwith issued against the properties of the
defendant as satisfaction of any judgment that plaintiff may secure; that whether or not the employment ban provision contained in the
Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It
insisted that Rivera signed the Undertaking voluntarily and for valuable
2. After trial, judgment be rendered ordering defendant to pay plaintiff consideration; and under the Release, Waiver and Quitclaim, he was obliged
the following sums: NINE HUNDRED SIXTY-THREE THOUSAND to return the P963,619.28 upon accepting employment from a competitor
SIX HUNDRED NINETEEN AND 28/100 ONLY (P963,619.28) bank within the one-year proscribed period. Solidbank appended to its
PESOS, Philippine Currency, as of 23 May 1995, plus legal interest motion the Affidavit of Villarosa, where she declared that Rivera was
of 12% per annum until fully paid; employed by Equitable on May 1, 1995 for the same position he held before
his retirement from Solidbank.
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for
every appearance by way of attorney’s fees; and Rivera opposed the motion contending that, as gleaned from the pleadings of
the parties as well as Villarosa’s Affidavit, there are genuine issues as to
4. Costs of suit. material facts which call for the presentation of evidence. He averred that
there was a need for the parties to adduce evidence to prove that he did not
PLAINTIFF prays for other reliefs just and equitable under the premises. 15 sign the Undertaking voluntarily. He claimed that he would not have been
allowed to avail of the SRP if he had not signed it, and consequently, his
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa retirement benefits would not have been paid. This was what Ed Nallas,
and a copy of the Release, Waiver and Quitclaim and Undertaking which Solidbank Assistant Vice-President for HRD and Personnel, told him when
Rivera executed.16 he received his check on February 28, 1995. Senior Vice-President Henry
Valdez, his superior in the Consumers’ Banking Group, also did not mention
that he would have to sign such Undertaking which contained the assailed
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
provision. Thus, he had no choice but to sign it. He insisted that the question
Attachment17 ordering Deputy Sheriff Eduardo Centeno to attach all of
of whether he violated the Undertaking is a genuine issue of fact which called
Rivera’s properties not exempt from execution. Thus, the Sheriff levied on a
for the presentation of evidence during the hearing on the merits of the case.
parcel of land owned by Rivera.
He also asserted that he could not cause injury or prejudice to Solidbank’s
interest since he never acquired any sensitive or delicate information which
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted could prejudice the bank’s interest if disclosed.
that he received the net amount of P963,619.28 as separation pay. However,
Rivera averred that he had the right to adduce evidence to prove that he had competition and disclosure of its trade secrets. The substantial monetary
been faithful to the provisions of the Release, Waiver and Quitclaim, and the windfall given the retiring officers was meant to tide them over the one-year
Undertaking, and had not committed any act or done or said anything to period of hiatus, and did not prevent them from engaging in any kind of
cause injury to Solidbank.18 business or bar them from being employed except with competitor
banks/financial institutions.21
Rivera appended to his Opposition his Counter-Affidavit in which he
reiterated that he had to sign the Undertaking containing the employment On December 18, 1995, the trial court issued an Order of Summary
ban provision, otherwise his availment of the SRP would not push through. Judgment.22 The fallo of the decision reads:
There was no truth to the bank’s allegation that, "in exchange for receiving
the larger amount of P1,045,258.95 under the SRP, instead of the very much WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of
smaller amount of P224,875.81 under the ORP, he agreed that he will not plaintiff and against defendant ordering the latter to pay to plaintiff bank the
seek employment in a competitor bank or financial institution within one year amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
from February 28, 1995." It was the bank which conceived the SRP to NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency, as of
streamline its organization and all he did was accept it. He stressed that the May 23, 1995, plus legal interest at 12% per annum until fully paid, and the
decision whether to allow him to avail of the SRP belonged solely to costs of the suit.
Solidbank. He also pointed out that the employment ban provision in the
Undertaking was not a consideration for his availment of the SRP, and that if
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they
he did not avail of the retirement program, he would have continued working
are directed to meet again and sit down to find out how they can finally end
for Solidbank for at least 15 more years, earning more than what he received this rift and litigation, all in the name of equity, for after all, defendant had
under the SRP. He alleged that he intended to go full time into the poultry worked for the bank for some 18 years.23
business, but after about two months, found out that, contrary to his
expectations, the business did not provide income sufficient to support his
family. Being the breadwinner, he was then forced to look for a job, and The trial court declared that there was no genuine issue as to a matter of fact
considering his training and experience as a former bank employee, the job in the case since Rivera voluntarily executed the Release, Waiver and
with Equitable was all he could find. He insisted that he had remained faithful Quitclaim, and the Undertaking. He had a choice not to retire, but opted to do
to Solidbank and would continue to do so despite the case against him, the so under the SRP, and, in fact, received the benefits under it.
attachment of his family home, and the resulting mental anguish, torture and
expense it has caused them.19 According to the RTC, the prohibition incorporated in the Undertaking was
not unreasonable. To allow Rivera to be excused from his undertakings in
In his Supplemental Opposition, Rivera stressed that, being a former bank said deed and, at the same time, benefit therefrom would be to allow him to
employee, it was the only kind of work he knew. The ban was, in fact, enrich himself at the expense of Solidbank. The RTC ruled that Rivera had to
practically absolute since it applied to all financial institutions for one year return the P963,619.28 he received from Solidbank, plus interest of 12% per
from February 28, 1995. He pointed out that he could not work in any other annum from May 23, 1998 until fully paid.
company because he did not have the qualifications, especially considering
his age. Moreover, after one year from February 28, 1995, he would no Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on
longer have any marketable skill, because by then, it would have been June 14, 2002 partially granting the appeal. The fallo of the decision reads:
rendered obsolete by non-use and rapid technological advances. He insisted
that the ban was not necessary to protect the interest of Solidbank, as, in the WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed
first place, he had no access to any "secret" information which, if revealed from is AFFIRMED with the modification that the attachment and levy upon
would be prejudicial to Solidbank’s interest. In any case, he was not one to the family home covered by TCT No. 51621 of the Register of Deeds, Las
reveal whatever knowledge or information he may have acquired during his Piñas, Metro Manila, is hereby SET ASIDE and DISCHARGED.
employment with said bank.20
SO ORDERED.24
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking
from the 1995 SRP is purely a management prerogative. It was not for Rivera The CA declared that there was no genuine issue regarding any material fact
to question and decry the bank’s policy to protect itself from unfair except as to the amount of damages. It ratiocinated that the agreement
between Rivera and Solidbank was the law between them, and that the THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S
interpretation of the stipulations therein could not be left upon the whims of DECISION ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE
Rivera. According to the CA, Rivera never denied signing the Release, AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST
Waiver, and Quitclaim, including the Undertaking regarding the employment OF 12% PER ANNUM UNTIL FULLY PAID.
prohibition. He even admitted joining Equitable as an employee within the
proscribed one-year period. The alleged defenses of Rivera, the CA IV.
declared, could not prevail over the admissions in his
pleadings.1avvphil.net Moreover, Rivera’s justification for taking the job with
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING
Equitable, "dire necessity," was not an acceptable ground for annulling the THE PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER
Undertaking since there were no earmarks of coercion, undue influence, or
TO PAY SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL
fraud in its execution. Having executed the said deed and thereafter
FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
receiving the benefits under the SRP, he is deemed to have waived the right
The issues for resolution are: (1) whether the parties raised a genuine issue
to assail the same, hence, is estopped from insisting or retaining the said in their pleadings, affidavits, and documents, that is, whether the employment
amount of P963,619.28.
ban incorporated in the Undertaking which petitioner executed upon his
retirement is unreasonable, oppressive, hence, contrary to public policy; and
However, the CA ruled that the attachment made upon Rivera’s family home (2) whether petitioner is liable to respondent for the restitution
was void, and, pursuant to the mandate of Article 155, in relation to Article of P963,619.28 representing his retirement benefits, and interest thereon at
153 of the Family Code, must be discharged. 12% per annum as of May 23, 1995 until payment of the full amount.
Hence, this recourse to the Court. On the first issue, petitioner claims that, based on the pleadings of the
parties, and the documents and affidavits appended thereto, genuine issues
Petitioner avers that – as to matters of fact were raised therein. He insists that the resolution of the
issue of whether the employment ban is unreasonable requires the
I. presentation of evidence on the circumstances which led to respondent
bank’s offer of the SRP and ORP, and petitioner’s eventual acceptance and
signing of the Undertaking on March 1, 1995. There is likewise a need to
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF
THE SUMMARY JUDGMENT RENDERED BY THE TRIAL COURT adduce evidence on whether the employment ban is necessary to protect
respondent’s interest, and whether it is an undue restraint on petitioner’s
CONSIDERING THE EXISTENCE OF GENUINE ISSUES AS TO
constitutional right to earn a living to support his family. He further insists that
MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF
respondent is burdened to prove that it sustained damage or injury by reason
EVIDENCE IN A TRIAL ON THE MERITS.
of his alleged breach of the employment ban since neither the Release,
Waiver and Quitclaim, and Undertaking he executed contain any provision
II. that respondent is automatically entitled to the restitution of the P963,619.28.
Petitioner points out that all the deeds provide is that, in case of breach
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR thereof, respondent is entitled to protection before the appropriate courts of
EMPLOYMENT BAN IMPOSED BY RESPONDENT SOLIDBANK UPON law.
HEREIN PETITIONER NULL AND VOID FOR BEING UNREASONABLE
AND OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE On the second issue, petitioner avers that the prohibition incorporated in the
WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR Release, Waiver and Quitclaim barring him as retiree from engaging directly
CONSTITUTION AND LAWS. or indirectly in any unlawful activity and disclosing any information
concerning the business of respondent bank, as well as the employment ban
III. contained in the Undertaking he executed, are oppressive, unreasonable,
cruel and inhuman because of its overbreath. He reiterates that it is against
public policy, an unreasonable restraint of trade, because it prohibits him to
work for one year in the Philippines, ultimately preventing him from improper and oppressive to him and his family. As of July 3, 2002, the
supporting his family. He points out that a breadwinner in a family of four interest alone would amount to P822,609.67, thus doubling the amount to be
minor daughters who are all studying, with a wife who does not work, one returned to respondent bank under the decision of the RTC and the CA. The
would have a very difficult time meeting the financial obligations even with a imposition of interest has no basis because the Release, Waiver and
steady, regular-paying job. He insists that the Undertaking deprives him of Quitclaim, and the Undertaking do not provide for payment of interest. The
the means to support his family, and ultimately, his children’s chance for a deeds only state that breach thereof would entitle respondent to bring an
good education and future. He reiterates that the returns in his poultry action to seek damages, to include the return of the amount that may have
business fell short of his expectations, and unfortunately, the business was been paid to petitioner by virtue thereof. On the other hand, any breach of
totally destroyed by typhoon "Rosing" in November 1995. the Undertaking or the Release, Waiver and Quitclaim would only entitle
respondent to a cause of action before the appropriate courts of law.
Petitioner further maintains that respondent’s management prerogative does Besides, the amount received by petitioner was not a loan and, therefore,
not give it a license to entice its employees to retire at a very young age and should not earn interest pursuant to Article 1956 of the Civil Code.
prohibit them from seeking employment in a so-called competitor bank or
financial institution, thus prevent them from working and supporting their Finally, petitioner insists that he acted in good faith in seeking employment
families (considering that banking is the only kind of work they know). with another bank within one year from February 28, 1995 because he
Petitioner avers that "management’s prerogative must be without abuse of needed to earn a living to support his family and finance his children’s
discretion. A line must be drawn between management prerogative regarding education. Hence, the imposition of interest, which is a penalty, is
business operations per se and those which affect the rights of the unwarranted.
employees. In treating its employees, management should see to it that its
employees are at least properly informed of its decision or modes of action." By way of Comment on the petition, respondent avers that the Undertaking is
the law between it and petitioner. As such, the latter could not assail the
On the last issue, petitioner alleges that the P1,045,258.95 he received was deed after receiving the retirement benefit under the SRP. As gleaned from
his retirement benefit which he earned after serving the bank for 18 years. It the averments in his petition, petitioner admitted that he executed the
was not a mere gift or gratuity given by respondent bank, without the latter Undertaking after having been informed of the nature and consequences of
giving up something of value in return. On the contrary, respondent bank his refusal to sign the same, i.e., he would not be able to receive the
received "valuable consideration," that is, petitioner quit his job at the retirement benefit under the SRP.
relatively young age of 45, thus enabling respondent to effect its
reorganization plan and forego the salary, benefits, bonuses, and promotions Respondent maintains that courts have no power to relieve parties of
he would have received had he not retired early. obligations voluntarily entered into simply because their contracts turned out
to be disastrous deeds. Citing the ruling of this Court in Eastern Shipping
Petitioner avers that, under the Undertaking, respondent would be entitled to Lines, Inc. v. Court of Appeals,26 respondent avers that petitioner is obliged
a cause of action against him before the appropriate courts of law if he had to pay 12% per annum interest of the P963,619.28 from judicial or
violated the employment ban. He avers that respondent must prove its extrajudicial demand.
entitlement to the P963,619.28. The Undertaking contains no provision that
he would have to return the amount he received under the SRP; much less In reply, petitioner asserts that respondent failed to prove that it sustained
does it provide that he would have to pay 12% interest per annum on said damages, including the amount thereof, and that neither the Release, Waiver
amount. On the other hand, the Release, Waiver and Quitclaim does not and Quitclaim nor the Undertaking obliged him to pay interest to respondent.
contain the provision prohibiting him from being employed with any
competitor bank or financial institution within one year from February 28,
The petition is meritorious.
1995. Petitioner insists that he acted in good faith when he received his
retirement benefits; hence, he cannot be punished by being ordered to return
the sum of P963,619.28 which was given to him for and in consideration of Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
his early retirement.
Section 1. Summary judgment for claimant. – A party seeking to recover
Neither can petitioner be subjected to the penalty of paying 12% interest per upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief
annum on his retirement pay of P963,619.28 from May 23, 1995, as it is may, at any time after the pleading in answer thereto has been served, move
with supporting affidavits, depositions or admissions for a summary judgment must come forward with more persuasive evidence demonstrating a genuine
in his favor upon all or any part thereof. issue for trial.35
xxxx Where there are no disputed material facts, the determination of whether a
party breached a contract is a question of law and is appropriate for
Sec. 3. Motion and proceedings thereon. – The motion shall be served at summary judgment.36 When interpreting an ambiguous contract with extrinsic
least ten (10) days before the time specified for the hearing. The adverse evidence, summary judgment is proper so long as the extrinsic evidence
party may serve opposing affidavits, depositions, or admissions at least three presented to the court supports only one of the conflicting
(3) days before the hearing. After the hearing, the judgment sought shall be interpretations.37 Where reasonable men could differ as to the contentions
rendered forthwith if the pleadings, supporting affidavits, depositions, and shown from the evidence, summary judgment might be denied.
admissions on file, show that, except as to the amount of damages, there is
no genuine issue as to any material fact and that the moving party is entitled In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of
to a judgment as a matter of law. Appeals resolved the issue of whether a summary judgment is proper in a
breach of contract action involving the interpretation of such contract, and
For a summary judgment to be proper, the movant must establish two ruled that:
requisites: (a) there must be no genuine issue as to any material fact, except
for the amount of damages; and (b) the party presenting the motion for [A] contract can be interpreted by the court on summary judgment if (a) the
summary judgment must be entitled to a judgment as a matter of contract’s terms are clear, or (b) the evidence supports only one construction
law.27 Where, on the basis of the pleadings of a moving party, including of the controverted provision, notwithstanding some ambiguity. x x x If the
documents appended thereto, no genuine issue as to a material fact exists, court finds no ambiguity, it should proceed to interpret the contract – and it
the burden to produce a genuine issue shifts to the opposing party. If the may do so at the summary judgment stage. If, however, the court discerns an
opposing party fails, the moving party is entitled to a summary judgment. 28 ambiguity, the next step – involving an examination of extrinsic evidence –
becomes essential. x x x Summary judgment may be appropriate even if
A genuine issue is an issue of fact which requires the presentation of ambiguity lurks as long as the extrinsic evidence presented to the court
evidence as distinguished from an issue which is a sham, fictitious, contrived supports only one of the conflicting interpretations.39
or a false claim. The trial court can determine a genuine issue on the basis of
the pleadings, admissions, documents, affidavits or counteraffidavits In this case, there is no dispute between the parties that, in consideration for
submitted by the parties. When the facts as pleaded appear uncontested or his availment of the SRP, petitioner executed the Release, Waiver and
undisputed, then there is no real or genuine issue or question as to any fact Quitclaim, and the Undertaking as supplement thereto, and that he received
and summary judgment called for. On the other hand, where the facts retirement pay amounting to P963,619.28 from respondent. On May 1, 1995,
pleaded by the parties are disputed or contested, proceedings for a summary within the one-year ban and without prior knowledge of respondent, petitioner
judgment cannot take the place of a trial.29 The evidence on record must be was employed by Equitable as Manager of its Credit Investigation and
viewed in light most favorable to the party opposing the motion who must be Appraisal Division, Consumers’ Banking Group. Despite demands, petitioner
given the benefit of all favorable inferences as can reasonably be drawn from failed to return the P963,619.28 to respondent on the latter’s allegation that
the evidence.30 he had breached the one-year ban by accepting employment from Equitable,
which according to respondent was a competitor bank.
Courts must be critical of the papers presented by the moving party and not
of the papers/documents in opposition thereto.31 Conclusory assertions are We agree with petitioner’s contention that the issue as to whether the post-
insufficient to raise an issue of material fact.32 A party cannot create a retirement competitive employment ban incorporated in the Undertaking is
genuine dispute of material fact through mere speculations or compilation of against public policy is a genuine issue of fact, requiring the parties to
differences.33 He may not create an issue of fact through bald assertions, present evidence to support their respective claims.
unsupported contentions and conclusory statements.34 He must do more
than rely upon allegations but must come forward with specific facts in As gleaned from the records, petitioner made two undertakings. The first is
support of a claim. Where the factual context makes his claim implausible, he incorporated in the Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly benefits, after all, are intended to help the employee enjoy the remaining
engage in any unlawful activity prejudicial to the interest of the BANK, its years of his life, releasing him from the burden of worrying for his financial
parent, affiliate or subsidiary companies, their stockholders, officers, support, and are a form of reward for being loyal to the employer.47
directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of the BANK, its manner or In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries
operation, its plans, processes or data of any kind.40 and in the United States and the Philippines:
The second undertaking is incorporated in the Undertaking following By "public policy," as defined by the courts in the United States and England,
petitioner’s execution of the Release, Waiver and Quitclaim which reads: is intended that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against
4. That as a supplement to the Release and Quitclaim, I executed in favor of the public good, which may be termed the "policy of the law," or "public policy
Solidbank on FEBRUARY 28, 1995, I hereby expressly undertake that I will in relation to the administration of the law." (Words & Phrases Judicially
not seek employment with any competitor bank or financial institution within Defined, vol. 6, p. 5813, and cases cited.) Public policy is the principle under
one (1) year from February 28, 1995.41 which freedom of contract or private dealing is restricted by law for the good
of the public. (Id., Id.) In determining whether a contract is contrary to public
In the Release, Waiver and Quitclaim, petitioner declared that respondent policy the nature of the subject matter determines the source from which
may bring "an action for damages which may include, but not limited to the such question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P.
return of whatever sums he may have received from respondent under said Ry. Co., 62 Fed. 904, 906.)
deed if he breaks his undertaking therein."42 On the other hand, petitioner
declared in the Undertaking that "any breach on his part of said Undertaking The foregoing is sufficient to show that there is no difference in principle
or the terms and conditions of the Release, Waiver and Quitclaim will entitle between the public policy (orden publico) in the two jurisdictions (the United
respondent to a cause of action against [petitioner] for protection before the States and the Philippine Islands) as determined by the Constitution, laws,
appropriate courts of law."43 and judicial decisions.49
Article 1306 of the New Civil Code provides that the contracting parties may The Court proceeded to define "trade" as follows:
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, x x x In the broader sense, it is any occupation or business carried on for
public order or public policy. The freedom of contract is both a constitutional subsistence or profit. Anderson’s Dictionary of Law gives the following
and statutory right.44 A contract is the law between the parties and courts definition: "Generally equivalent to occupation, employment, or business,
have no choice but to enforce such contract as long as it is not contrary to whether manual or mercantile; any occupation, employment or business
law, morals, good customs and against public policy. carried on for profit, gain, or livelihood, not in the liberal arts or in the learned
professions." In Abbott’s Law Dictionary, the word is defined as "an
The well-entrenched doctrine is that the law does not relieve a party from the occupation, employment or business carried on for gain or profit." Among the
effects of an unwise, foolish or disastrous contract, entered into with full definitions given in the Encyclopaedic Dictionary is the following: "The
awareness of what he was doing and entered into and carried out in good business which a person has learnt, and which he carries on for subsistence
faith. Such a contract will not be discarded even if there was a mistake of law or profit; occupation; particularly employment, whether manual or mercantile,
or fact. Courts have no jurisdiction to look into the wisdom of the contract as distinguished from the liberal arts or the learned professions and
entered into by and between the parties or to render a decision different agriculture." Bouvier limits the meaning to commerce and traffic, and the
therefrom. They have no power to relieve parties from obligation voluntarily handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to
assailed, simply because their contracts turned out to be disastrous deals. 45 adopt and apply the broader meaning given by the lexicographers. 50
On the other hand, retirement plans, in light of the constitutional mandate of In the present case, the trial court ruled that the prohibition against petitioner
affording full protection to labor, must be liberally construed in favor of the accepting employment with a competitor bank or financial institution within
employee, it being the general rule that pension or retirement plans one year from February 28, 1995 is not unreasonable. The appellate court
formulated by the employer are to be construed against it.46 Retirement held that petitioner was estopped from assailing the post-retirement
competitive employment ban because of his admission that he signed the circumstances of the case and the nature of the particular contract involved
Undertaking and had already received benefits under the SRP. in it, the contract is, or is not, unreasonable.53
The rulings of the trial court and the appellate court are incorrect. In cases where an employee assails a contract containing a provision
prohibiting him or her from accepting competitive employment as against
There is no factual basis for the trial court’s ruling, for the simple reason that public policy, the employer has to adduce evidence to prove that the
it rendered summary judgment and thereby foreclosed the presentation of restriction is reasonable and not greater than necessary to protect the
evidence by the parties to prove whether the restrictive covenant is employer’s legitimate business interests.54 The restraint may not be unduly
reasonable or not. Moreover, on the face of the Undertaking, the post- harsh or oppressive in curtailing the employee’s legitimate efforts to earn a
retirement competitive employment ban is unreasonable because it has no livelihood and must be reasonable in light of sound public policy.55
geographical limits; respondent is barred from accepting any kind of
employment in any competitive bank within the proscribed period. Although Courts should carefully scrutinize all contracts limiting a man’s natural right to
the period of one year may appear reasonable, the matter of whether the follow any trade or profession anywhere he pleases and in any lawful
restriction is reasonable or unreasonable cannot be ascertained with finality manner. But it is just as important to protect the enjoyment of an
solely from the terms and conditions of the Undertaking, or even in tandem establishment in trade or profession, which its employer has built up by his
with the Release, Waiver and Quitclaim. own honest application to every day duty and the faithful performance of the
tasks which every day imposes upon the ordinary man. What one creates by
Undeniably, petitioner retired under the SRP and received P963,619.28 from his own labor is his. Public policy does not intend that another than the
respondent. However, petitioner is not proscribed, by waiver or estoppel, producer shall reap the fruits of labor; rather, it gives to him who labors the
from assailing the post-retirement competitive employment ban since under right by every legitimate means to protect the fruits of his labor and secure
Article 1409 of the New Civil Code, those contracts whose cause, object or the enjoyment of them to himself.56 Freedom to contract must not be
purpose is contrary to law, morals, good customs, public order or public unreasonably abridged. Neither must the right to protect by reasonable
policy are inexistent or void from the beginning. Estoppel cannot give validity restrictions that which a man by industry, skill and good judgment has built
to an act that is prohibited by law or one that is against public policy.51 up, be denied.57
Respondent, as employer, is burdened to establish that a restrictive covenant The Court reiterates that the determination of reasonableness is made on the
barring an employee from accepting a competitive employment after particular facts and circumstances of each case.58 In Esmerson Electric Co.
retirement or resignation is not an unreasonable or oppressive, or in undue v. Rogers,59 it was held that the question of reasonableness of a restraint
or unreasonable restraint of trade, thus, unenforceable for being repugnant to requires a thorough consideration of surrounding circumstances, including
public policy. As the Court stated in Ferrazzini v. Gsell, 52 cases involving the subject matter of the contract, the purpose to be served, the
contracts in restraint of trade are to be judged according to their determination of the parties, the extent of the restraint and the specialization
circumstances, to wit: of the business of the employer. The court has to consider whether its
enforcement will be injurious to the public or cause undue hardships to the
x x x There are two principal grounds on which the doctrine is founded that a employee, and whether the restraint imposed is greater than necessary to
contract in restraint of trade is void as against public policy. One is, the injury protect the employer. Thus, the court must have before it evidence relating to
the legitimate interests of the employer which might be protected in terms of
to the public by being deprived of the restricted party’s industry; and the other
time, space and the types of activity proscribed. 60
is, the injury to the party himself by being precluded from pursuing his
occupation, and thus being prevented from supporting himself and his family.
Consideration must be given to the employee’s right to earn a living and to
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated his ability to determine with certainty the area within which his employment
ban is restituted. A provision on territorial limitation is necessary to guide an
the rule thus:
employee of what constitutes as violation of a restrictive covenant and
whether the geographic scope is co-extensive with that in which the
Public welfare is first considered, and if it be not involved, and the restraint employer is doing business. In considering a territorial restriction, the facts
upon one party is not greater than protection to the other party requires, the and circumstances surrounding the case must be considered.61
contract may be sustained. The question is, whether, under the particular
Thus, in determining whether the contract is reasonable or not, the trial court A post-retirement competitive employment restriction is designed to protect
should consider the following factors: (a) whether the covenant protects a the employer against competition by former employees who may retire and
legitimate business interest of the employer; (b) whether the covenant obtain retirement or pension benefits and, at the same time, engage in
creates an undue burden on the employee; (c) whether the covenant is competitive employment.66
injurious to the public welfare; (d) whether the time and territorial limitations
contained in the covenant are reasonable; and (e) whether the restraint is We have reviewed the Undertaking which respondent impelled petitioner to
reasonable from the standpoint of public policy.62 sign, and find that in case of failure to comply with the promise not to accept
competitive employment within one year from February 28, 1995, respondent
Not to be ignored is the fact that the banking business is so impressed with will have a cause of action against petitioner for "protection in the courts of
public interest where the trust and interest of the public in general is of law." The words "cause of action for protection in the courts of law" are so
paramount importance such that the appropriate standard of diligence must broad and comprehensive, that they may also include a cause of action for
be very high, if not the highest degree of diligence.63 prohibitory and mandatory injunction against petitioner, specific performance
plus damages, or a damage suit (for actual, moral and/or exemplary
We are not impervious of the distinction between restrictive covenants damages), all inclusive of the restitution of the P963,619.28 which petitioner
barring an employee to accept a post-employment competitive employment received from respondent. The Undertaking and the Release, Waiver and
or restraint on trade in employment contracts and restraints on post- Quitclaim do not provide for the automatic forfeiture of the benefits petitioner
retirement competitive employment in pension and retirement plans either received under the SRP upon his breach of said deeds. Thus, the post-
incorporated in employment contracts or in collective bargaining agreements retirement competitive employment ban incorporated in the Undertaking of
between the employer and the union of employees, or separate from said respondent does not, on its face, appear to be of the same class or genre as
contracts or collective bargaining agreements which provide that an that contemplated in Rochester.
employee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the It is settled that actual damages or compensatory damages may be awarded
employer. The strong weight of authority is that forfeitures for engaging in for breach of contracts. Actual damages are primarily intended to simply
subsequent competitive employment included in pension and retirement make good or replace the loss covered by said breach.67 They cannot be
plans are valid even though unrestricted in time or geography. The raison presumed. Even if petitioner had admitted to having breached the
d’etre is explained by the United States Circuit Court of Appeals in Rochester Undertaking, respondent must still prove that it suffered damages and the
Corporation v. W.L. Rochester, Jr.:64 amount thereof.68 In determining the amount of actual damages, the Court
cannot rely on mere assertions, speculations, conjectures or guesswork but
x x x The authorities, though, generally draw a clear and obvious distinction must depend on competent proof and on the best evidence obtainable
between restraints on competitive employment in employment contracts and regarding the actual amount of losses.69 The benefit to be derived from a
in pension plans. The strong weight of authority holds that forfeitures for contract which one of the parties has absolutely failed to perform is of
engaging in subsequent competitive employment, included in pension necessity to some extent a matter of speculation of the injured party.
retirement plans, are valid, even though unrestricted in time or geography.
The reasoning behind this conclusion is that the forfeiture, unlike the restraint On the assumption that the competitive employment ban in the Undertaking
included in the employment contract, is not a prohibition on the employee’s is valid, petitioner is not automatically entitled to return the P963,619.28 he
engaging in competitive work but is merely a denial of the right to participate received from respondent. To reiterate, the terms of the Undertaking clearly
in the retirement plan if he does so engage. A leading case on this point is state that any breach by petitioner of his promise would entitle respondent to
Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a a cause of action for protection in the courts of law; as such, restitution of
forfeiture provision similar to that here, the Court said: the P963,619.28 will not follow as a matter of course. Respondent is still
burdened to prove its entitlement to the aforesaid amount by producing
"A restriction in the contract which does not preclude the employee from the best evidence of which its case is susceptible.70
engaging in competitive activity, but simply provides for the loss of rights or
privileges if he does so is not in restraint of trade." (emphasis added) 65 IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 52235 is SET ASIDE.
Let this case be REMANDED to the Regional Trial Court of Manila for further
proceedings conformably with this decision of the Court.
SO ORDERED. 2. In case of two of our employees (both singles [sic], one male and
another female) developed a friendly relationship during the course
G.R. No. 164774 April 12, 2006 of their employment and then decided to get married, one of them
should resign to preserve the policy stated above. 3
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN
CHUA, Petitioners, Simbol resigned on June 20, 1998 pursuant to the company policy. 4
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. Comia was hired by the company on February 5, 1997. She met Howard
ESTRELLA, Respondents. Comia, a co-employee, whom she married on June 1, 2000. Ongsitco
likewise reminded them that pursuant to company policy, one must resign
DECISION should they decide to get married. Comia resigned on June 30, 2000. 5
PUNO, J.: Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a
co-worker. Petitioners stated that Zuñiga, a married man, got Estrella
pregnant. The company allegedly could have terminated her services due to
We are called to decide an issue of first impression: whether the policy of the
immorality but she opted to resign on December 21, 1999.6
employer banning spouses from working in the same company violates the
rights of the employee under the Constitution and the Labor Code or is a
valid exercise of management prerogative. The respondents each signed a Release and Confirmation Agreement. They
stated therein that they have no money and property accountabilities in the
company and that they release the latter of any claim or demand of whatever
At bar is a Petition for Review on Certiorari of the Decision of the Court of
nature.7
Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the
decision of the National Labor Relations Commission (NLRC) which affirmed
the ruling of the Labor Arbiter. Respondents offer a different version of their dismissal. Simbol and Comia
allege that they did not resign voluntarily; they were compelled to resign in
view of an illegal company policy. As to respondent Estrella, she alleges that
Petitioner Star Paper Corporation (the company) is a corporation engaged in
she had a relationship with co-worker Zuñiga who misrepresented himself as
trading – principally of paper products. Josephine Ongsitco is its Manager of
the Personnel and Administration Department while Sebastian Chua is its a married but separated man. After he got her pregnant, she discovered that
he was not separated. Thus, she severed her relationship with him to avoid
Managing Director.
dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to
The evidence for the petitioners show that respondents Ronaldo D. Simbol recuperate for twenty-one (21) days. She returned to work on December 21,
(Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all 1999 but she found out that her name was on-hold at the gate. She was
regular employees of the company.1 denied entry. She was directed to proceed to the personnel office where one
of the staff handed her a memorandum. The memorandum stated that she
Simbol was employed by the company on October 27, 1993. He met Alma was being dismissed for immoral conduct. She refused to sign the
Dayrit, also an employee of the company, whom he married on June 27, memorandum because she was on leave for twenty-one (21) days and has
1998. Prior to the marriage, Ongsitco advised the couple that should they not been given a chance to explain. The management asked her to write an
decide to get married, one of them should resign pursuant to a company explanation. However, after submission of the explanation, she was
policy promulgated in 1995,2 viz.: nonetheless dismissed by the company. Due to her urgent need for money,
she later submitted a letter of resignation in exchange for her thirteenth
1. New applicants will not be allowed to be hired if in case he/she month pay.8
has [a] relative, up to [the] 3rd degree of relationship, already
employed by the company. Respondents later filed a complaint for unfair labor practice, constructive
dismissal, separation pay and attorney’s fees. They averred that the
aforementioned company policy is illegal and contravenes Article 136 of the
Labor Code. They also contended that they were dismissed due to their 2. x x x respondents’ resignations were far from voluntary.14
union membership.
We affirm.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the
complaint for lack of merit, viz.: The 1987 Constitution15 states our policy towards the protection of labor
under the following provisions, viz.:
[T]his company policy was decreed pursuant to what the respondent
corporation perceived as management prerogative. This management Article II, Section 18. The State affirms labor as a primary social economic
prerogative is quite broad and encompassing for it covers hiring, work force. It shall protect the rights of workers and promote their welfare.
assignment, working method, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations,
xxx
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Except as provided for or limited by special
law, an employer is free to regulate, according to his own discretion and Article XIII, Sec. 3. The State shall afford full protection to labor, local and
judgment all the aspects of employment.9 (Citations omitted.) overseas, organized and unorganized, and promote full employment and
equality of employment opportunities for all.
On appeal to the NLRC, the Commission affirmed the decision of the Labor
Arbiter on January 11, 2002. 10 It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
Respondents filed a Motion for Reconsideration but was denied by the NLRC
tenure, humane conditions of work, and a living wage. They shall also
in a Resolution11 dated August 8, 2002. They appealed to respondent
participate in policy and decision-making processes affecting their rights and
court via Petition for Certiorari.
benefits as may be provided by law.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed
The State shall promote the principle of shared responsibility between
the NLRC decision, viz.:
workers and employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns on
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of investments, and to expansion and growth.
the National Labor Relations Commission is hereby REVERSED and SET
ASIDE and a new one is entered as follows:
The Civil Code likewise protects labor with the following provisions:
(1) Declaring illegal, the petitioners’ dismissal from employment and Art. 1700. The relation between capital and labor are not merely contractual.
ordering private respondents to reinstate petitioners to their former
They are so impressed with public interest that labor contracts must yield to
positions without loss of seniority rights with full backwages from the
the common good. Therefore, such contracts are subject to the special laws
time of their dismissal until actual reinstatement; and
on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.
(2) Ordering private respondents to pay petitioners attorney’s fees
amounting to 10% of the award and the cost of this suit.13
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living for the laborer.
On appeal to this Court, petitioners contend that the Court of Appeals erred
in holding that: The Labor Code is the most comprehensive piece of legislation protecting
labor. The case at bar involves Article 136 of the Labor Code which provides:
1. x x x the subject 1995 policy/regulation is violative of the
constitutional rights towards marriage and the family of employees
Art. 136. It shall be unlawful for an employer to require as a condition of
and of Article 136 of the Labor Code; and
employment or continuation of employment that a woman employee shall not
get married, or to stipulate expressly or tacitly that upon getting married a from hiring wives of male employees, but not husbands of female employees,
woman employee shall be deemed resigned or separated, or to actually is discriminatory on its face.22
dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of her marriage. On the other hand, to establish disparate impact, the complainants must
prove that a facially neutral policy has a disproportionate effect on a
Respondents submit that their dismissal violates the above provision. particular class. For example, although most employment policies do not
Petitioners allege that its policy "may appear to be contrary to Article 136 of expressly indicate which spouse will be required to transfer or leave the
the Labor Code" but it assumes a new meaning if read together with the first company, the policy often disproportionately affects one sex.23
paragraph of the rule. The rule does not require the woman employee to
resign. The employee spouses have the right to choose who between them The state courts’ rulings on the issue depend on their interpretation of the
should resign. Further, they are free to marry persons other than co- scope of marital status discrimination within the meaning of their respective
employees. Hence, it is not the marital status of the employee, per se, that is civil rights acts. Though they agree that the term "marital status"
being discriminated. It is only intended to carry out its no-employment-for- encompasses discrimination based on a person's status as either married,
relatives-within-the-third-degree-policy which is within the ambit of the single, divorced, or widowed, they are divided on whether the term has
prerogatives of management.16 a broader meaning. Thus, their decisions vary.24
It is true that the policy of petitioners prohibiting close relatives from working The courts narrowly25 interpreting marital status to refer only to a person's
in the same company takes the nature of an anti-nepotism employment status as married, single, divorced, or widowed reason that if the legislature
policy. Companies adopt these policies to prevent the hiring of unqualified intended a broader definition it would have either chosen different language
persons based on their status as a relative, rather than upon their or specified its intent. They hold that the relevant inquiry is if one is married
ability.17 These policies focus upon the potential employment problems rather than to whom one is married. They construe marital status
arising from the perception of favoritism exhibited towards relatives. discrimination to include only whether a person is single, married, divorced,
or widowed and not the "identity, occupation, and place of employment of
With more women entering the workforce, employers are also enacting one's spouse." These courts have upheld the questioned policies and ruled
employment policies specifically prohibiting spouses from working for the that they did not violate the marital status discrimination provision of their
same company. We note that two types of employment policies involve respective state statutes.
spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all The courts that have broadly26 construed the term "marital status" rule that it
immediate family members, including spouses, from working in the same encompassed the identity, occupation and employment of one's spouse.
company (anti-nepotism employment policies).18 They strike down the no-spouse employment policies based on the broad
legislative intent of the state statute. They reason that the no-spouse
Unlike in our jurisdiction where there is no express prohibition on marital employment policy violate the marital status provision because it arbitrarily
discrimination,19 there are twenty state statutes20 in the United States discriminates against all spouses of present employees without regard to the
prohibiting marital discrimination. Some state courts21 have been confronted actual effect on the individual's qualifications or work performance.27 These
with the issue of whether no-spouse policies violate their laws prohibiting courts also find the no-spouse employment policy invalid for failure of the
both marital status and sex discrimination. employer to present any evidence of business necessity other than the
general perception that spouses in the same workplace might adversely
In challenging the anti-nepotism employment policies in the United States, affect the business.28 They hold that the absence of such a bona fide
complainants utilize two theories of employment discrimination: occupational qualification29 invalidates a rule denying employment to one
the disparate treatment and the disparate impact. Under the disparate spouse due to the current employment of the other spouse in the same
treatment analysis, the plaintiff must prove that an employment policy is office.30 Thus, they rule that unless the employer can prove that the
discriminatory on its face. No-spouse employment policies requiring an reasonable demands of the business require a distinction based on marital
employee of a particular sex to either quit, transfer, or be fired are facially status and there is no better available or acceptable policy which would
discriminatory. For example, an employment policy prohibiting the employer better accomplish the business purpose, an employer may not discriminate
against an employee based on the identity of the employee’s spouse.31 This
is known as the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification reasonable business necessity. The burden was successfully discharged in
justifies an employer’s no-spouse rule, the exception is interpreted strictly Duncan but not in PT&T.
and narrowly by these state courts. There must be a compelling business
necessity for which no alternative exists other than the discriminatory We do not find a reasonable business necessity in the case at bar.
practice.32 To justify a bona fide occupational qualification, the employer
must prove two factors: (1) that the employment qualification is reasonably
Petitioners’ sole contention that "the company did not just want to have two
related to the essential operation of the job involved; and, (2) that there is a
(2) or more of its employees related between the third degree by affinity
factual basis for believing that all or substantially all persons meeting the and/or consanguinity"38 is lame. That the second paragraph was meant to
qualification would be unable to properly perform the duties of the job.33 give teeth to the first paragraph of the questioned rule39 is evidently not the
valid reasonable business necessity required by the law.
The concept of a bona fide occupational qualification is not foreign in our
jurisdiction. We employ the standard of reasonableness of the company
It is significant to note that in the case at bar, respondents were hired after
policy which is parallel to the bona fide occupational qualification they were found fit for the job, but were asked to resign when they married a
requirement. In the recent case of Duncan Association of Detailman-
co-employee. Petitioners failed to show how the marriage of Simbol, then a
PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we
Sheeting Machine Operator, to Alma Dayrit, then an employee of the
passed on the validity of the policy of a pharmaceutical company prohibiting its
Repacking Section, could be detrimental to its business operations. Neither
employees from marrying employees of any competitor company. We held that
did petitioners explain how this detriment will happen in the case of Wilfreda
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
Comia, then a Production Helper in the Selecting Department, who married
strategies and other confidential programs and information from competitors. We
Howard Comia, then a helper in the cutter-machine. The policy is premised
considered the prohibition against personal or marital relationships with employees
on the mere fear that employees married to each other will be less efficient. If
of competitor companies upon Glaxo’s employees reasonable under the
we uphold the questioned rule without valid justification, the employer can
circumstances because relationships of that nature might compromise the interests of
create policies based on an unproven presumption of a perceived danger at
Glaxo. In laying down the assailed company policy, we recognized that Glaxo only
the expense of an employee’s right to security of tenure.
aims to protect its interests against the possibility that a competitor company will
gain access to its secrets and procedures.35
Petitioners contend that their policy will apply only when one employee
marries a co-employee, but they are free to marry persons other than co-
The requirement that a company policy must be reasonable under the
employees. The questioned policy may not facially violate Article 136 of the
circumstances to qualify as a valid exercise of management prerogative was Labor Code but it creates a disproportionate effect and under the disparate
also at issue in the 1997 case of Philippine Telegraph and Telephone impact theory, the only way it could pass judicial scrutiny is a showing that it
Company v. NLRC.36 In said case, the employee was dismissed in violation is reasonable despite the discriminatory, albeit disproportionate, effect. The
of petitioner’s policy of disqualifying from work any woman worker who failure of petitioners to prove a legitimate business concern in imposing the
contracts marriage. We held that the company policy violates the right questioned policy cannot prejudice the employee’s right to be free from
against discrimination afforded all women workers under Article 136 of the arbitrary discrimination based upon stereotypes of married persons working
Labor Code, but established a permissible exception, viz.:
together in one company.40
[A] requirement that a woman employee must remain unmarried could be Lastly, the absence of a statute expressly prohibiting marital discrimination in
justified as a "bona fide occupational qualification," or BFOQ, where the
our jurisdiction cannot benefit the petitioners. The protection given to labor in
particular requirements of the job would justify the same, but not on the our jurisdiction is vast and extensive that we cannot prudently draw
ground of a general principle, such as the desirability of spreading work in inferences from the legislature’s silence41 that married persons are not
the workplace. A requirement of that nature would be valid provided it reflects protected under our Constitution and declare valid a policy based on a
an inherent quality reasonably necessary for satisfactory job
prejudice or stereotype. Thus, for failure of petitioners to present undisputed
performance.37(Emphases supplied.)
proof of a reasonable business necessity, we rule that the questioned policy
is an invalid exercise of management prerogative. Corollarily, the issue as to
The cases of Duncan and PT&T instruct us that the requirement of whether respondents Simbol and Comia resigned voluntarily has become
reasonableness must be clearly established to uphold the questioned moot and academic.
employment policy. The employer has the burden to prove the existence of a
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling REYES, J.:
on the singular fact that her resignation letter was written in her own
handwriting. Both ruled that her resignation was voluntary and thus valid. The Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College
respondent court failed to categorically rule whether Estrella voluntarily Westgrove (SSCW), a Catholic educational institution, as a non-teaching
resigned but ordered that she be reinstated along with Simbol and Comia. 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
Estrella claims that she was pressured to submit a resignation letter because order. The question that has to be resolved is whether the petitioner's
she was in dire need of money. We examined the records of the case and conduct constitutes a ground for her dismissal.
find Estrella’s contention to be more in accord with the evidence. While
findings of fact by administrative tribunals like the NLRC are generally given Before this Court is a petition for review on certiorari under Rule 45 of the
not only respect but, at times, finality, this rule admits of exceptions, 42 as in Rules of Court seeking to annul and set aside the Decision1 dated
the case at bar. 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
Estrella avers that she went back to work on December 21, 1999 but was Resolutions dated February 28, 20073 and May 21, 20074 of the National
dismissed due to her alleged immoral conduct. At first, she did not want to Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.
sign the termination papers but she was forced to tender her resignation
letter in exchange for her thirteenth month pay. The Facts
The contention of petitioners that Estrella was pressured to resign because SSCW is a catholic and sectarian educational institution in Silang, Cavite. In
she got impregnated by a married man and she could not stand being looked May 2001, SSCW hired the petitioner as an Assistant to SSCW’s Director of
upon or talked about as immoral43 is incredulous. If she really wanted to the Lay Apostolate and Community Outreach Directorate.
avoid embarrassment and humiliation, she would not have gone back to work
at all. Nor would she have filed a suit for illegal dismissal and pleaded for Sometime in 2003, the petitioner and her boyfriend conceived a child out of
reinstatement. We have held that in voluntary resignation, the employee is wedlock. When SSCW learned of the petitioner’s pregnancy, Sr. Edna
compelled by personal reason(s) to dissociate himself from employment. It is
Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to file a
done with the intention of relinquishing an office, accompanied by the act of
resignation letter effective June 1, 2003. In response, the petitioner informed
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a
Sr. Quiambao that she would not resign from her employment just because
complaint for illegal dismissal. Given the lack of sufficient evidence on the she got pregnant without the benefit of marriage.5
part of petitioners that the resignation was voluntary, Estrella’s dismissal is
declared illegal.
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
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP
relations and getting pregnant as a result thereof, which amounts to serious
No. 73477 dated August 3, 2004 is AFFIRMED.1avvphil.net
misconduct and conduct unbecoming of an employee of a Catholic school. 6
SO ORDERED.
In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy
out of wedlock does not amount to serious misconduct or conduct
G.R. No. 187226 January 28, 2015 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
CHERYLL SANTOS LEUS, Petitioner, misconduct and, thus, a ground for dismissal. Further, the petitioner
vs. requested a copy of SSCW’s policy and guidelines so that she may better
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA respond to the charge against her. On June 2, 2003, Sr. Quiambao informed
QUIAMBAO, OSB, Respondents. the petitioner that, pending the promulgation of a "Support Staff Handbook,"
SSCW follows the 1992 Manual of Regulations for Private Schools (1992
DECISION 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 Thereupon, the petitioner filed a complaint for illegal dismissal with the
provided under Article 282 of the Labor Code.8 Regional Arbitration Branch of the NLRC in Quezon City against SSCW and
Sr. Quiambao (respondents). In her position paper,14 the petitioner claimed
On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a that SSCW gravely abused its management prerogative as there was no just
letter,9 which, in part, reads: 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
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 SSCW. Further, the petitioner averred that she and her boyfriend eventually
within the contemplation of "disgraceful or immoral conduct" and "serious got married even prior to her dismissal.
misconduct" of the Manual of Regulations for Private Schools and the Labor
Code of the Philippines. 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
Your argument that what happened to our client would set a bad example to SSCW’s management prerogative. They maintained that engaging in pre-
the students and other employees of your school is speculative and is more 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
imaginary than real. To dismiss her on that sole ground constitutes grave
employee under the 1992 MRPS.
abuse of management prerogatives.
Considering her untarnished service for two years, dismissing her with her They pointed out that SSCW is a Catholic educational institution, which
present condition would also mean depriving her to be more secure in terms 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
of financial capacity to sustain maternal needs.10
inculcates to its students. SSCW further asserted that the petitioner, being an
employee of a Catholic educational institution, should have strived to
In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that maintain the honor, dignity and reputation of SSCW as a Catholic school.15
pre-marital sexual relations, evenif between two consenting adults without
legal impediment to marry, is considered a disgraceful and immoral conduct
The Ruling of the Labor Arbiter
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 On February 28, 2006, the Labor Arbiter (LA) rendered a Decision, 16 in
Catholic Church and expect its employees to abide by the same. They further NLRC Case No. 6-17657-03-C which dismissed the complaint filed by the
asserted that the petitioner’s indiscretion is further aggravated by the fact that petitioner. The LA found that there was a valid ground for the petitioner’s
she is the Assistant to the Director of the Lay Apostolate and Community dismissal; that her pregnancy out of wedlock is considered as a "disgraceful
Outreach Directorate, a position of responsibility that the students look up to and immoral conduct." The LA pointed out that, as an employee of a Catholic
as rolemodel. The petitioner was again directed to submit a written educational institution, the petitioner is expected to live up to the Catholic
explanation on why she should not be dismissed. values taught by SSCW to its students. Likewise, the LA opined that:
On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her Further, a deep analysis of the facts would lead us to disagree with the
counsel’s letter dated June 4, 2003 as her written explanation. 12 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
Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed in the lightof the surrounding circumstances as a whole. We must also take
the petitioner that her employment with SSCW is terminated on the ground of 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
serious misconduct. She stressed that pre-marital sexual relations between
complainant in an environment where her strict adherence to the same is
two consenting adults with no impediment to marry, even if they
called for and where the reputation of the school is at stake. x x x.17
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.
The LA further held that teachers and school employees, both in their official It is a principle of statutory construction that where there are two statutes that
and personal conduct, must display exemplary behavior and act in a manner apply to a particular case, that which was specially intended for the said case
that is beyond reproach. must prevail. Petitioner was employed by respondent private Catholic
institution which undeniably follows the precepts or norms of conduct set
The petitioner appealed to the NLRC, insisting that there was no valid ground forth by the Catholic Church. Accordingly, the Manual of Regulations for
for the termination of her employment. She maintained that her pregnancy Private Schools followed by it must prevail over the Labor Code, a general
out of wedlock cannot be considered as "serious misconduct" under Article statute. The Manual constitutes the private schools’ Implementing Rules and
282 of the Labor Code since the same was not of such a grave and Regulations of Batas Pambansa Blg. 232 or the Education Act of 1982. x x
aggravated character. She asserted that SSCW did not present any evidence x.24
to establish that her pregnancy out of wedlock indeed eroded the moral
principles that it teaches its students.18 The CA further held that the petitioner’s dismissal was a valid exercise of
SSCW’s management prerogative to discipline and impose penalties on
The Ruling of the NLRC 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
On February 28, 2007, the NLRC issued a Resolution, 19 which affirmed the
dismissal under Section 94(e) of the 1992 MRPS. The CA likewise opined
LA Decision dated February 28, 2006. The NLRC pointed out that the
that the petitioner’s pregnancy out of wedlock is scandalous per segiven the
termination of the employment of the personnel of private schools is
work environment and social milieu that she was in, viz:
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. Under Section 94 (e) of the [MRPS], and even under Article 282 (serious
The NLRC held that the petitioner’s pregnancy out of wedlock is a misconduct) of the Labor Code, "disgraceful and immoral conduct" is a basis
"disgraceful or immoral conduct" within the contemplation of Section 94(e) of for termination of employment.
the 1992 MRPS and, thus, SSCW had a valid reason to terminate her
employment. xxxx
The petitioner sought reconsideration20 of the Resolution dated February 28, Petitioner contends that her pre-marital sexual relations with her boyfriend
2007 but it was denied by the NLRC in its Resolution21 dated May 21, 2007. 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
Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging faculty and there is no evidence that her pregnancy scandalized the school
that the NLRC gravely abused its discretion in ruling that there was a valid community.
ground for her dismissal. She maintained that pregnancy out of wedlock
cannot be considered as a disgraceful or immoral conduct; that SSCW failed We are not persuaded. Petitioner’s pregnancy prior to marriage is
to prove that its students were indeed gravely scandalized by her pregnancy scandalous in itself given the work environment and social milieu she was in.
out of wedlock. She likewise asserted that the NLRC erred in applying Respondent school for young ladies precisely seeks to prevent its students
Section 94(e) of the 1992 MRPS. 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
The Ruling of the CA separated. Her admitted pre-marital sexual relations was a violation of
private respondent’s prescribed standards of conduct that views pre-marital
On September 24, 2008, the CA rendered the herein assailed sex as immoral because sex between a man and a woman must only take
place within the bounds of marriage.
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 Finally, petitioner’s dismissal is a valid exercise of the employer-school’s
personnel of private schools, explaining that: 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 arguments belatedly raised would amount to trampling on the basic principles
Resolution27 dated March 2, 2009. of fair play, justice, and due process."28
Hence, the instant petition. 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.
Issues
The 1992 MRPS, the regulation in force at the time of the instant
Essentially, the issues set forth by the petitioner for this Court’s decision are controversy, was issued by the Secretary of Education pursuant to BP 232.
the following: first, whether the CA committed reversible error in ruling that it Section 7029 of BP 232 vests the Secretary of Education with the authority to
is the 1992 MRPS and not the Labor Code that governs the termination of issue rules and regulations to implement the provisions of BP 232.
employment of teaching and non-teaching personnel of private schools; and Concomitantly, Section 5730 specifically empowers the Department of
second, whether the petitioner’spregnancy out of wedlock constitutes a valid Education to promulgate rules and regulations necessary for the
ground to terminate her employment. administration, supervision and regulation of the educational system in
accordance with the declared policy of BP 232.
The Ruling of the Court
The qualifications of teaching and non-teaching personnel of private schools,
The Court grants the petition. 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
First Issue: Applicability of the 1992 MRPS qualified, but competent and efficient as well goes hand in hand with the
declared objective of BP 232 – establishing and maintaining relevant quality
The petitioner contends that the CA, in ruling that there was a valid ground to education.31 It is thus within the authority of the Secretary of Education to
dismiss her, erred in applying Section 94 of the 1992 MRPS. Essentially, she issue a rule, which provides for the dismissal of teaching and non-teaching
claims that the 1992 MRPS was issued by the Secretary of Education as the personnel of private schools based on their incompetence, inefficiency, or
revised implementing rules and regulations of Batas Pambansa Bilang 232 some other disqualification.
(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 Moreover, Section 69 of BP 232 specifically authorizes the Secretary of
and non-teaching personnel of private schools. Thus, Section 94 of the 1992 Education to "prescribe and impose such administrative sanction as he may
MRPS, which provides for the causes of terminating an employment, isinvalid deem reasonable and appropriate in the implementing rules and regulations"
as it "widened the scope and coverage" of BP 232. 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
The Court does not agree. sees no reason to invalidate the provisions of the 1992 MRPS, specifically
Section 94 thereof. Second Issue: Validity of the Petitioner’s Dismissal
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 validity of the petitioner’s dismissal hinges on the determination of
the instant petition for review. Nowhere in the proceedings before the LA, the whether pregnancy out of wedlock by an employee of a catholic educational
NLRC or the CA did the petitioner assail the validity of the provisions of the institution is a cause for the termination of her employment.
1992 MRPS.
In resolving the foregoing question,the Court will assess the matter from a
"It is well established that issues raised for the first time on appeal and not strictly neutral and secular point of view – the relationship between SSCW as
raised in the proceedings in the lower court are barred by estoppel. Points of employer and the petitioner as an employee, the causes provided for by law
law, theories, issues, and arguments not brought to the attention of the trial in the termination of suchrelationship, and the evidence on record. The
court ought not to be considered by a reviewing court, as these cannot be ground cited for the petitioner’s dismissal, i.e., pre-marital sexual relations
raised for the first time on appeal. To consider the alleged facts and 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 CA and the labor tribunals affirmed the validity of the petitioner’s
the 1992 MRPS. dismissal pursuant to Section 94(e) of the 1992 MRPS, which provides that:
The standard of review in a Rule 45 Sec. 94. Causes of Terminating Employment – In addition to the just causes
petition from the CA decision in enumerated in the Labor Code, the employment of school personnel,
labor cases. including faculty, may be terminated for any of the following causes:
In a petition for review under Rule 45 of the Rules of Court, such as the xxxx
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, e. Disgraceful or immoral conduct;
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 xxxx
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 The labor tribunals concluded that the petitioner’s pregnancy out of wedlock,
correct.33 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
The phrase "grave abuse of discretion" is well-defined in the Court’s totality of the circumstances surrounding the same.
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 However, the Court finds no substantial evidence to support the
of discretion does not include an inquiry into the correctness of the evaluation aforementioned conclusion arrived at by the labor tribunals. The fact of the
of evidence, which was the basis of the labor agency in reaching its petitioner’s pregnancy out of wedlock, without more, is not enough to
conclusion.35 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
Nevertheless, while a certiorari proceeding does not strictly include an inquiry
or immoral.
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 The totality of the circumstances
substantial evidence. Indeed, when there is a showing that the findings or surrounding the conduct alleged to
conclusions, drawn from the same pieces of evidence, were arrived at be disgraceful or immoral must be
arbitrarily or in disregard of the evidence on record, they may be reviewed by assessed against the prevailing
the courts. In particular, the CA can grant the petition for certiorariif it finds norms of conduct.
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 In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the
substantial evidence is definitely a decision tainted with grave abuse of circumstances of each particular case must be holistically considered and
discretion.36 evaluated in light of the prevailing norms of conductand applicable
laws.38Otherwise stated, it is not the totality of the circumstances surrounding
The labor tribunals’ respective the conduct per se that determines whether the same is disgraceful or
conclusions that the petitioner’s immoral, but the conduct that is generally accepted by society as respectable
pregnancy is a "disgraceful or or moral. If the conduct does not conform to what society generally views as
immoral conduct" were arrived at respectable or moral, then the conduct is considered as disgraceful or
arbitrarily. 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 or even make it appear that those whose beliefs are disapproved are
involves a two-step process: first, a consideration of the totality of the second-class citizens. Expansive religious freedom therefore requires that
circumstances surrounding the conduct; and second, an assessment of the government be neutral in matters of religion; governmental reliance upon
said circumstances vis-à-visthe prevailing norms of conduct, i.e., what the religious justification is inconsistent with this policy of neutrality.
society generally considers moral and respectable.
In other words, government action, including its proscription of immorality as
That the petitioner was employed by a Catholic educational institution expressed in criminal law like concubinage, must have a secular purpose.
per se does not absolutely determine whether her pregnancy out of That is, the government proscribes this conduct because it is "detrimental (or
wedlock is disgraceful or immoral. There is still a necessity to dangerous) to those conditions upon which depend the existence and
determine whether the petitioner’s pregnancy out of wedlock is progress of human society" and not because the conduct is proscribed by the
considered disgraceful or immoral in accordance with the prevailing beliefs of one religion or the other. Although admittedly, moral judgments
norms of conduct. based on religion might have a compelling influence on those engaged in
public deliberations over what actions would be considered a moral
Public and secular morality should disapprobation punishable by law. After all, they might also be adherents of a
determine the prevailing norms of religion and thus have religious opinions and moral codes with a compelling
conduct, not religious morality. 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
However, determining what the prevailing norms of conduct are considered
disgraceful or immoral is not an easy task. An individual’s perception of what utilitarian in its deepest roots, but it must have an articulable and discernible
is moral or respectable is a confluence of a myriad of influences, such as secular purpose and justification to pass scrutiny of the religion clauses.x x
x.42(Citations omitted and emphases ours)
religion, family, social status, and a cacophony of others. In this regard, the
Court’s ratiocination in Estrada v. Escritor39 is instructive.
Accordingly, when the law speaks of immoral or, necessarily, disgraceful
In Estrada, an administrative case against a court interpreter charged with conduct, it pertains to public and secular morality; it refers to those conducts
which are proscribed because they are detrimental to conditions upon which
disgraceful and immoral conduct, the Court stressed that in determining
depend the existence and progress of human society. Thus, in Anonymous v.
whether a particular conduct can be considered as disgraceful and immoral,
Radam,43 an administrative case involving a court utility worker likewise
the distinction between public and secular morality on the one hand, and
charged with disgraceful and immoral conduct, applying the doctrines laid
religious morality, on the other, should be kept in mind.40 That the distinction
between public and secular morality and religious morality is important down in Estrada, the Court held that:
because the jurisdiction of the Court extends only to public and secular
morality.41 The Court further explained 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,
The morality referred to in the law is public and necessarily secular, not
religiousx x x. "Religious teachings as expressed in public debate may specifically those colored by particular mores. Nor should it be grounded on
influence the civil public order but public moral disputes may be resolved only "cultural" values not convincingly demonstrated to have been recognized in
the realm of public policy expressed in the Constitution and the laws. At the
on grounds articulable in secular terms." Otherwise, if government relies
same time, the constitutionally guaranteed rights (such as the right to
upon religious beliefs in formulating public policies and morals, the resulting
privacy) should be observed to the extent that they protect behavior that may
policies and morals would require conformity to what some might regard as
be frowned upon by the majority.
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. Under these tests, two things may be concluded from the fact that an
Likewise, if government based its actions upon religious beliefs, it would unmarried woman gives birth out of wedlock:
tacitly approve or endorse that belief and thereby also tacitly disapprove
contrary religious or non-religious views that would not support the policy. As (1) if the father of the child is himself unmarried, the woman is not
a result, government will not provide full religious freedom for all its citizens, ordinarily administratively liable for disgraceful and immoral
conduct.It may be a not-so-ideal situation and may cause which depend the existence and progress of human society’ and not because
complications for both mother and child but it does not give cause for the conduct is proscribed by the beliefs of one religion or the other."
administrative sanction. There is no law which penalizes an
unmarried mother under those circumstances by reason of her Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who
sexual conduct or proscribes the consensual sexual activity between had an extra-marital affair with his co-teacher, who is likewise married, on the
two unmarried persons. Neither does the situation contravene any ground of disgraceful and immoral conduct under Section 94(e) of the 1992
fundamental state policy as expressed in the Constitution, a MRPS. The Court pointed out that extra-marital affair is considered as a
document that accommodates various belief systems irrespective of disgraceful and immoral conduct is an afront to the sanctity of marriage,
dogmatic origins. which is a basic institution of society, viz:
(2) if the father of the child born out of wedlock is himself married to a We cannot overemphasize that having an extra-marital affair is an afront to
woman other thanthe mother, then there is a cause for administrative the sanctity of marriage, which is a basic institution of society. Even our
sanction against either the father or the mother. In sucha case, the Family Code provides that husband and wife must live together, observe
"disgraceful and immoral conduct" consists of having extramarital mutual love, respect and fidelity. This is rooted in the fact that both our
relations with a married person. The sanctity of marriage is Constitution and our laws cherish the validity of marriage and unity of the
constitutionally recognized and likewise affirmed by our statutes as a family. Our laws, in implementing this constitutional edict on marriage and
special contract of permanent union. Accordingly, judicial employees the family underscore their permanence, inviolability and solidarity. 47
have been sanctioned for their dalliances with married persons or for
their own betrayals of the marital vow of fidelity. The petitioner’s pregnancy out of
wedlock is not a disgraceful or
In this case, it was not disputed that, like respondent, the father of her child immoral conduct since she and the
was unmarried. Therefore, respondent cannot be held liable for disgraceful father of her child have no
and immoral conduct simply because she gave birth to the child Christian impediment to marry each other.
Jeon out of wedlock.44 (Citations omitted and emphases ours)
In stark contrast to Santos, the Court does not find any circumstance in this
Both Estrada and Radamare administrative cases against employees in the case which would lead the Court to conclude that the petitioner committed a
civil service. The Court, however, sees no reason not to apply the doctrines disgraceful or immoral conduct. It bears stressing that the petitioner and her
enunciated in Estrada and Radamin the instant case. Estrada and boyfriend, at the time they conceived a child, had no legal impediment to
Radamalso required the Court to delineate what conducts are considered marry. Indeed, even prior to her dismissal, the petitioner married her
disgraceful and/or immoral as would constitute a ground for dismissal. More boyfriend, the father of her child. As the Court held in Radam, there is no law
importantly, as in the said administrative cases, the instant case involves an which penalizes an unmarried mother by reason of her sexual conduct or
employee’s security of tenure; this case likewise concerns employment, proscribes the consensual sexual activity between two unmarried persons;
which is not merely a specie of property right, but also the means by which that neither does such situation contravene any fundamental state policy
the employee and those who depend on him live.45 enshrined in the Constitution.
It bears stressing that the right of an employee to security of tenure is Admittedly, the petitioner is employed in an educational institution where the
protected by the Constitution. Perfunctorily, a regular employee may not be teachings and doctrines of the Catholic Church, including that on pre-marital
dismissed unless for cause provided under the Labor Code and other sexual relations, is strictly upheld and taught to the students. That her
relevant laws, in this case, the 1992 MRPS. As stated above, when the law indiscretion, which resulted in her pregnancy out of wedlock, is anathema to
refers to morality, it necessarily pertains to public and secular morality and the doctrines of the Catholic Church. However, viewed against the prevailing
not religious morality. Thus, the proscription against "disgraceful or immoral norms of conduct, the petitioner’s conduct cannot be considered as
conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause disgraceful or immoral; such conduct is not denounced by public and secular
for dismissal, must necessarily refer to public and secular morality. morality. It may be an unusual arrangement, but it certainly is not disgraceful
Accordingly, in order for a conduct tobe considered as disgraceful or or immoral within the contemplation of the law.
immoral, it must be "‘detrimental (or dangerous) to those conditions upon
To stress, pre-marital sexual relations between two consenting adults who moment. There is no separate set of rules for non-teaching personnel.
have no impediment to marry each other, and, consequently, conceiving a Respondents-appellees uphold the teachings of the Catholic Church on pre-
child out of wedlock, gauged from a purely public and secular view of marital sex and that the complainant-appellant as an employee of the school
morality, does not amount to a disgraceful or immoral conduct under Section was expected to abide by this basic principle and to live up with the
94(e) of the 1992 MRPS. 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
Accordingly, the labor tribunals erred in upholding the validity of the respondent-appellee school denounces as the same is opposed to the
petitioner’s dismissal. The labor tribunals arbitrarily relied solely on the teachings and doctrines it espouses.49 (Emphasis ours)
circumstances surrounding the petitioner’s pregnancy and its supposed
effect on SSCW and its students without evaluating whether the petitioner’s Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed
conduct is indeed considered disgraceful or immoral in view of the prevailing to adduce substantial evidence to prove that the petitioner’s indiscretion
norms of conduct. In this regard, the labor tribunals’ respective haphazard indeed caused grave scandal to SSCW and its students. Other than the
evaluation of the evidence amounts to grave abuse of discretion, which the SSCW’s bare allegation, the records are bereft of any evidence that would
Court will rectify. convincingly prove that the petitioner’s conduct indeed adversely affected
SSCW’s integrity in teaching the moral doctrines, which it stands for. The
The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock petitioner is only a non-teaching personnel; her interaction with SSCW’s
despite the absence of substantial evidence is not only arbitrary, but a grave students is very limited. Itis thus quite impossible that her pregnancy out of
abuse of discretion, which should have been set right by the CA. wedlock caused such a grave scandal, as claimed by SSCW, as to
warranther dismissal.
There is no substantial evidence to
prove that the petitioner’s pregnancy Settled is the rule that in termination cases, the burden of proving that the
out of wedlock caused grave scandal dismissal of the employees was for a valid and authorized cause rests on the
to SSCW and its students. 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
SSCW claimed that the petitioner was primarily dismissed because her
justified and therefore illegal.50 "Substantial evidence is more than a mere
pregnancy out of wedlock caused grave scandal to SSCW and its students.
scintilla of evidence. It means such relevant evidence as a reasonable mind
That the scandal brought about by the petitioner’s indiscretion prompted
might accept as adequateto support a conclusion, even if other minds equally
them to dismiss her. The LA upheld the respondents’ claim, stating that:
reasonable mightconceivably opine otherwise."51
In this particular case, an "objective" and "rational evaluation" of the facts and
Indubitably, bare allegations do not amount to substantial evidence.
circumstances obtaining in this case would lead us to focus our attention x x
Considering that the respondents failed to adduce substantial evidence to
x on the impact of the act committed by the complainant. The act of the
prove their asserted cause for the petitioner’s dismissal, the labor tribunals
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 should not have upheld their allegations hook, line and sinker. The labor
the original) 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
On the other hand, the NLRC opined that: speculation of any unclearand nebulous basis."52
In the instant case, when the complainant-appellant was already conceiving The petitioner’s dismissal is not a
a child even before she got married, such is considered a shameful and valid exercise of SSCW’s
scandalous behavior, inimical to public welfare and policy. It eroded the management prerogative.
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 The CA be labored the management prerogative of SSCW to discipline its
its management prerogative. Whether or not she was a teacher is of no employees. The CA opined that the petitioner’s dismissal is a valid exercise
of management prerogative to impose penalties on erring employees Having established that the petitioner was illegally dismissed, the Court now
pursuant to its policies, rules and regulations. determines the reliefs thatshe is entitled to and their extent. Under the law
and prevailing jurisprudence, "an illegally dismissed employee is entitled to
The Court does not agree. 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
The Court has held that "management is free to regulate, according to its
relations between the employer and the employee. In cases of illegal
own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and manner of work, dismissal, the accepted doctrine is that separation pay is available in lieu of
processes to be followed, supervision of workers, working regulations, reinstatement when the latter recourse is no longer practical or in the best
interest of the parties.57
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 In Divine Word High School v. NLRC,58 the Court ordered the employer
regard to the rights of labor." Management cannot exercise its prerogative in Catholic school to pay the illegally dismissed high school teacher separation
a cruel, repressive, or despotic manner.53 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
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 In view of the particular circumstances of this case, it would be more prudent
not considered by law as disgraceful or immoral. Further, the respondents to direct SSCW to pay the petitioner separation pay inlieu of actual
themselves have admitted that SSCW, at the time of the controversy, does reinstatement. The continued employment of the petitioner with SSCW would
not have any policy or rule against an employee who engages in pre-marital only serve to intensify the atmosphere of antipathy and antagonism between
sexual relations and conceives a child as a result thereof. There being no the parties. Consequently, the Court awards separation pay to the petitioner
valid basis in law or even in SSCW’s policy and rules, SSCW’s dismissal of equivalent to one (1) month pay for every year of service, with a fraction of at
the petitioner is despotic and arbitrary and, thus, not a valid exercise of least six (6) months considered as one (1) whole year, from the time of her
management prerogative. illegal dismissal up to the finality of this judgment, as an alternative to
reinstatement.
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 Also, "employees who are illegally dismissed are entitled to full backwages,
adduce substantial evidence to establish that the petitioner’s conduct, i.e., inclusive of allowances and other benefits or their monetary equivalent,
engaging in pre-marital sexual relations and conceiving a child out of computed from the time their actual compensation was withheld from them
wedlock, assessed in light of the prevailing norms of conduct, is considered up to the time of their actual reinstatement but if reinstatement is no longer
disgraceful or immoral. The labor tribunals gravely abused their discretion in possible, the backwages shall be computed from the time of their illegal
upholding the validity of the petitioner’s dismissal as the charge against the termination up to the finality of the decision."60 Accordingly, the petitioner
petitioner lay not on substantial evidence, but on the bare allegations of is entitled to an award of full backwages from the time she was illegally
SSCW. In turn, the CA committed reversible error in upholding the validity of dismissed up to the finality of this decision.
the petitioner’s dismissal, failing torecognize that the labor tribunals gravely
abused their discretion in ruling for the respondents. Nevertheless, the petitioner is not entitled to moral and exemplary damages.
"A dismissed employee isentitled to moral damages when the dismissal is
The petitioner is entitled to attended by bad faith or fraud or constitutes an act oppressive to labor, or is
separation pay, in lieu of actual done in a manner contrary to good morals, good customs or public policy.
reinstatement, full backwages and Exemplary damages may be awarded if the dismissal is effected in a wanton,
attorney’s fees, but not to moral and oppressive or malevolent manner."61
exemplary damages.
"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 SO ORDERED.
motive or interest or ill will that partakes of the nature of fraud."62
[G.R. No. 162994. September 19, 2005]
"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 DUNCAN ASSOCIATION vs. GLAXO
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
SECOND DIVISION
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 Sirs/Mesdames:
manner in dismissing the petitioner. That the petitioner was illegally
dismissed is insufficient to prove bad faith. A dismissal may be contrary to Quoted hereunder, for your information, is a resolution of this Court
law but by itself alone, it does not establish bad faith to entitle the dismissed dated SEP 19 2005.
employee to moral damages. The award of moral and exemplary damages
cannot be justified solely upon the premise that the employer dismissed his G.R. No. 162994 (Duncan Association Of Detailman-PTGWO and
employee without cause.66 Pedro A. Tecson vs. Glaxo Wellcome Philippines, Inc.)
However, the petitioner is entitled to attorney’s fees in the amount of 10% of For resolution is a Motion for Reconsideration dated 8 October 2004,
the total monetary award pursuant to Article 11167 of the Labor Code. "It is
filed by petitioners who seek the reversal of the
settled that where an employee was forced to litigate and, thus, incur
Court's Resolution1 dated 17 September 2004 denying the
expenses to protect his rights and interest, the award of attorney’s fees is
instant Petition for Review.
legally and morally justifiable."68
Finally, legal interest shall be imposed on the monetary awards herein A brief recapitulation of the facts is in order. Petitioner Pedro Tecson
granted at the rate of six percent (6%) per annumfrom the finality of this ("Tecson") was employed in 1995 by respondent Glaxo Wellcome
judgment until fully paid.69 Philippines, Inc. ("Glaxo") as a medical representative. He was
assigned to market Glaxo's products in the Camarines Sur-
WHEREFORE, in consideration of the foregoing disquisitions, the petition is Camarines Norte sales area. Upon his employment, Tecson signed
GRANTED. The Decision dated September 24, 2008 and Resolution dated an employment contract, wherein he agreed, among others, to study
March 2, 2009 of the Court of Appeals in CA-G.R. SP No. 100188 are hereby and abide by existing company rules; to disclose to management
REVERSED and SET ASIDE. any existing or future relationship by consanguinity or affinity with
co-employees or employees of competing drug companies; and if
The respondent, St. Scholastica’s College Westgrove, is hereby declared management found that such relationship posed a possible conflict
guilty of illegal dismissal and is hereby ORDERED to pay the petitioner, of interest, to resign from the company.
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 Nonetheless, Tecson became romantically involved with Bettsy, an
a fraction of at least six (6) months considered as one (1) whole year from employee of a rival pharmaceutical firm Astra Pharmaceuticals
the time of her dismissal up to the finality of this Decision; (b) full backwages ("Astra"). The two eventually married in September of 1998. The
from the time of her illegal dismissal up to the finality of this Decision; and (c) relationship, including the subsequent marriage, was cause for
attorney’s fees equivalent to ten percent (10%) of the total monetary award. consternation to Glaxo. On January 1999, Tecson's superiors
The monetary awards herein granted shall earn legal interest at the rate of informed him that his marriage to Bettsy had given rise to a conflict
six percent (6%) per annumfrom the date of the finality of this Decision of interest. Negotiations ensued, with Tecson adverting to his wife's
untilfully paid. The case is REMANDED to the Labor Arbiter for the possible resignation from Astra, and Glaxo making it known that they
computation of petitioner’s monetary awards.
preferred to retain his services owing to his good performance. Yet
no resolution came to pass. In September 1999, Tecson applied for
a transfer to Glaxo's milk division, but his application was denied in The Resolution cited Abbott Laboratories (Phils.), Inc. v.
view of Glaxo's "least-movement-possible" policy. Then in November NLRC4 wherein the Court upheld the prerogative of a drug company
1999, Glaxo transferred Tecson to the Butuan City-Surigao City- to reassign a medical representative under its employ to a new
Agusan del Sur sales area. Tecson asked Glaxo to reconsider its territory. In the same vein, the Court has consistently affirmed as a
decision, but his request was denied. valid prerogative of the employer the reasonable reassignment or
transfer of an employee. As held in Philippine Japan Active Carbon
The matter was then brought to the Glaxo Grievance Committee, Corp. v. NLRC:5
and subsequently to a voluntary arbitrator. On 15 November 2000,
the National Conciliation and Mediation Board (NCMB) rendered It is the employer's prerogative, based on its assessment and
its Decision declaring as valid Glaxo's policy on relationships perception of its employees' qualifications, aptitudes, and
between its employees and persons employed with competitor competence, to move them around in the various areas of its
companies, and affirming Glaxo's right to transfer Tecson to another business operations in order to ascertain where they will function
sales territory. This Decision was assailed by petitioners before the with maximum benefit to the company. An employee's right to
Court of Appeals and this Court, but for naught. security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change
The present Motion for Reconsideration advances four main his assignment or transfer him where he will be most useful. When
arguments: that the Court erroneously relied on a conjectural his transfer is not unreasonable, nor inconvenient, nor prejudicial to
presumption that Tecson's relationship might compromise the him, and it does not involve a demotion in rank or a diminution of
interest of the company or allow a competitor to gain access to his salaries, benefits, and other privileges, the employee may not
Glaxo's secrets and procedures; that Glaxo's policy regarding the complain that it amounts to a constructive dismissal.6
marriage of its employees to employees of rival companies is
contrary to public policy, morals and good customs; that Glaxo In Philippine Telegraph and Telephone Corp. v. Laplana,7 the Court
violated its own policy which authorized the transfer of the subject again upheld the prerogative of management to reassign an
employee to another department when it denied Tecson's application employee to a different locality, despite the "personal inconvenience
to transfer to the milk division; and that Tecson was constructively or hardship that will be caused to the employee by reason of the
dismissed when he was transferred to the Butuan City-Surigao City- transfer."
Agusan del Sur sales area.
Tecson was not relieved of his employment with Glaxo. Neither was
One of the central anchors of the assailed Resolution was the holding he transferred to a different position of lower rank or remuneration.
that Glaxo's policy on marriage did not violate the equal protection The alleged constructive dismissal pertained to his transfer to Butuan
clause of the Constitution,2 as the constitutional guarantee does not from Naga City, a reassignment that would fall within the ambit of
encompass discriminatory behavior engaged by private management's prerogative to transfer employees.
individuals.3 Petitioners do not challenge this holding of the Court,
and we see no reason to revisit this issue. Petitioners, in their Motion for Reconsideration, purport that
constructive dismissal was proved by the allegation that Tecson's
But before we engage in a renewed discussion on the validity of commissions for January and February were withheld from him, and
Glaxo's policy itself, we should examine the claim that Tecson was that he was forced to surrender his sales paraphernalia. Yet the
constructively dismissed. After all, assuming that the policy itself veracity of these factual allegations were not acknowledged by either
were declared invalid, a finding nonetheless that Tecson was not the voluntary arbitrator or the Court of Appeals. This Court, which is
constructively dismissed would still render this petition futile. The not a trier of facts, could not very well at this late stage reverse the
Court has ruled Tecson was not actually dismissed, and the Motion established factual conclusions on the basis of mere allegations
for Reconsideration adduces no substantial reasons why this holding which have not been previously substantiated but which in fact have
should be reversed. been consistently rebutted by the respondents.8
In case of a constructive dismissal, the employer has the burden of who finds herself prohibited by her employer from contracting
proving that the transfer and demotion of an employee are for valid marriage, or otherwise dismissed or discriminated upon by reason of
and legitimate grounds, i.e., that the transfer is not unreasonable, her marriage, and the employer faces the unenviable burden of
inconvenient, or prejudicial to the employee; nor does it involve a establishing the inapplicability of Article 136.11
demotion in rank or a diminution of his salaries, privileges and other
benefits.9 In this case, Glaxo did not opt to terminate or demote Of more general application is Article 282 of the Labor Code, which
Tecson, but transferred him to a sales region that included the governs the termination by employers for "just causes." Had Tecson
respective home provinces of himself and his wife, and offered been actually terminated in this case, Article 282 would have
monetary assistance to shoulder his family's relocation.10. necessarily found application, since Articles 282 to 284 stand as the
Certainly, the choice of location was not selected with petty malice only basis in law for the valid termination of an employee by an
aforethought, but even designed for the easier palatability of the employer.12
employee.
Under Article 282, the employer may dismiss the employee for any
The fact that the employee may be displaced from established roots of the following causes: (a) serious misconduct or willful
by reason of the transfer is not sufficient to deny the valid disobedience by the employee of the lawful order of his employer or
management prerogative to transfer its employees. Tecson himself representative in connection with his work; (b) gross and habitual
had acknowledged this prerogative when he signed the contract of neglect by the employee of his duties; (c) fraud or willful breach by
employment which expressly agreed "to be assigned any work or the employee of the trust reposed in him by his employer or duly
work station for such periods as may be determined by the company authorized representative; (d) commission of a crime or offense
and whenever the operations require such assignment." against the person of his employer or any immediate member of his
family or his duly authorized representative; and (e) other causes
This finding that Tecson was not actually dismissed is determinative analogous to the foregoing. Assuming that there is a company policy
of this case, especially considering that his transfer by Glaxo from allowing the dismissal, constructive13 or otherwise, of an employee
Naga to Butuan would have been a valid exercise of an employer's by reason of the employee's marriage or choice of spouse, such
prerogative, whether or not the company policy on marriage policy alone cannot justify the dismissal. The employer will have to
subsists. Nonetheless, it would be specious to assume that Tecson's establish not only the existence of the policy, but the presence of
transfer had nothing to do with his marriage to an employee from a any of the grounds enumerated in Article 282. Our Constitution and
rival drug company. Moreover, questions on the validity, if not Labor Code guarantee an employee's security of tenure. For regular
appropriateness of Glaxo's policy itself, has attracted comment on employees as defined under the Labor Code, security of tenure is
the various triers of this case, as well as the public at large. assured by the prohibition against termination except for the causes
enumerated under Articles 282 to 284.
May an employer impose conditions, restrictions or consequences on
an employee by reason of the latter's choice to marry or choice of Thus, the validity of a company policy on marriage such as that
spouse? The answer would really all depend on the particular maintained by Glaxo would not necessarily be determinative of the
circumstances in each case. question of whether an employee who violated such policy may be
terminated. Still, there may be instances wherein the validity of the
The governing legal framework should be established. Under Article policy, whether standing by itself or as incorporated into an
136 of the Labor Code, it is illegal for an employer to prohibit a employment contract, would be the decisive factor. Such may arise
female employee from getting married or to actually dismiss, if for example, the employee is sought to be dismissed on the ground
discharge, discriminate or otherwise prejudice a woman employee of loss of confidence,14 and such loss of confidence developed due
merely by reason of her marriage. This provision addresses a to the marriage to an employee from a rival company. In such cases
concern, particularly gender discrimination, with no direct relevance wherein it is necessary to pass judgment on the employer's policy
to this case. Nonetheless, it can be invoked by a female employee itself, the following points should be considered.
Both the Constitution and our body of statutory laws accord special the new wife are noxious, such as bigotry. The invocation of the
status and protection to the contract of marriage. Our Constitution inviolability of marriage or its protection under law will not suffice to
recognizes that "marriage, as an inviolable social institution, is the legally compel the aunt to extend her largesse to her nephew, for
foundation of the family, and shall be protected by the State,"15 and this act of charity arises solely from private volition. The State may
our Family Code acknowledges that marriage is "a special contract protect marriage, but it cannot compel private persons to give away
of permanent union ... an inviolable social institution whose nature, money out of their pockets to the bride and groom.
consequences and incidents are governed by law."16 It may be
debatable whether these provisions, by themselves, may be the If the prohibitions or restrictions are contained in a private
source of operative and executory rights, but at the very least, they employment policy or contract, the norms that would govern their
establish a pervasive public policy that frowns upon acts that review are such as those contained in the Labor Code, and to an
encumber any person's freedom to marry. extent, the "public policy" clauses of the Civil Code.18 However, the
sanctity of the marital vow should not be the only relevant
Moreover, if such encumbrance is contained in an employment consideration at hand. The considerations which may have impelled
contract, the stipulation can be declared void under Article 1409(1) the employer to impose such conditions on the employee's absolute
of the Civil Code, which provides that a contract whose cause, object right to marry warrant examination as well.
or purpose is contrary to law, morals, good customs, public order or
public policy is inexistent and void from the beginning.17 The We can surmise that if the restrictions or conditions on the
standard is of great utility, as it allows a measure of relief for persons employee's right to marry bear no relevance to any interests that
laboring under private contractual obligations that, while the employer should be concerned with, then they should be voided
insusceptible to the traditional constitutional challenge under the Bill if they are of obligatory import. In that regard, it is difficult to foresee
of Rights, nonetheless stand as onerous to the obligor and noxious an instance wherein an absolute prohibition on any marriage
to our general body of laws. imposed on the employees may be sanctioned.19 Even if the
prohibition is premised on the belief that a married employee would
Still, it would be injudicious, if not irresponsible, to judicially enforce be able to devote less time to the job, whatever causal economic
a universal position that disencumbers marriage from adverse concerns hardly outweigh the right of an individual to get married.
consequences, if the encumbrance stands to protect third persons Employees this day and age have long transcended the yoke of
inevitably affected by an act of marital union. For much as we may serfdom and absolute fealty to master and the expense of the marital
want to see and regard marriage in a vestal state, it may be a source bind.
of negativity for third persons, and not just the jilted. This is
apparent even on the most visceral level, as anybody who dislikes If the prohibition or restriction pertains to the choice of spouse,
an immediate family member's choice of bride or groom can attest rather than the choice to marry at all, there should be an
to. The statutory protections accorded to marriage do not translate examination of the rationale behind the constraint. Again, if the
to a legal compulsion on people to favor another person's choice in restrictions or conditions bear no relevance to any interests that the
spouse. employer should be concerned with, then they should not be upheld.
Restrictions that are nothing more than the enforcement of personal
The thesis is harmless enough if the consequence of such biases, such as prohibitions on marrying members of a particular
disapproval extends merely into the personal sphere and not the race or ethnic group, may be struck down.
legal. Yet, such as in this case, the consequences may be economic
as well. For example, an aunt who voluntarily extends regular Nonetheless, while generalities may be sufficient to strike down the
financial benefits to a nephew may refuse to continue the doleout by most obnoxious of prohibitions, those restrictions that are geared
reason of the relative's marriage or choice of wife. In such a case, towards maintaining valid economic concerns of the employer have
the nephew would have no cause of action to compel his aunt to to be assessed on a case to case basis. Our fundamental law respects
continue the remuneration, even if the aunt's reasons for disliking the right of enterprises to adopt and enforce such a policy to protect
its right to reasonable returns on investments and to expansion and Still, these concerns aside, the steps that Glaxo may employ to avoid
growth.20 the undue divulgence of its trade secrets should be within reason. If
termination is to be considered as an option, it should be only as a
If the rationale in question relates to a consideration so vital to the final resort, if there is no other way to avoid the conflict of interest.
interests of the employer as to warrant legal protection, it should
then be determined whether the means employed by the employer In this case, Glaxo's assailed policy does not call for automatic
are reasonable enough as to allow a measure of balance between termination, providing as it does a process that allows for all the
these key interests of the employer and the fundamental right of the opportunities for a mutually agreeable solution. Per the Employee
employee to marry. Handbook, "every effort shall be made, together by management
and the employee, to arrive at a solution within six (6) months,
Let us pay particular attention to Glaxo's policy. As noted in either by transfer to another department in a non-counter checking
the Resolution, Glaxo belongs to the highly competitive position, or by career preparation toward outside employment after
pharmaceutical industry. The competitive nature of the business is Glaxo Wellcome. Employees must be prepared for possible
further highlighted by the fact that pharmaceutical drugs are resignation within six (6) months, if no other solution is feasible."21
indispensable to modern society, and that the rival companies tend
to produce drugs of like effect but marketed under respective brand This procedure is extremely reasonable under the circumstances,
names. Thus, within the pharmaceutical industry, the hazard of and we have no problems in upholding its validity. As noted in
industrial espionage looms largely, more so than most other the Resolution: "[i]n any event, from the wordings of the contractual
competitive industries. To that end, Glaxo is entitled to guard its provision and the policy in its employee handbook, it is clear that
trade secrets, manufacturing formulas, marketing strategies and Glaxo does not impose an absolute prohibition against relationships
other confidential programs and information from competitors, between its employees and those of competitor companies. Its
concomitant to its right to protect its own economic interests. employees are free to cultivate relationships with and marry persons
of their own choosing."22 It recognizes the concern arising from the
This in mind, it is but reasonable for Glaxo to be cautious about the possible conflict of interest, yet dissuades the enforcement of a
social interaction of its employees with those of companies which it hasty, unilateral solution. It appears from the record of this case that
directly competes with. If the employee goes as far as sharing hearth such a procedure was adopted in good faith by both parties. Tecson
and home with the employee of the rival company, there is greater may find fault with the fact that Glaxo refused his request for
cause of concern on the part of Glaxo. The fear may not so much transfer to the milk division, a step which, if resorted to, may have
arise from the possibility of willful betrayal by its employees of trade resolved the perceived conflict of interest. Yet the procedure
secrets, but from the myriad opportunities in the course of shared involved allows the transfer only if mutually agreed upon, and
lives that one may inadvertently divulge to the spouse confidential besides, employees cannot generally compel the employer to
information that the rival drug company may benefit from. After all, transfer them from one division to another, this being a management
the employer has no control over pillow talk. Neither could it be prerogative.
expected that the employee maintain a higher fidelity to the
employer than to the spouse. And finally, if no mutual resolution is arrived at, termination and
voluntary resignation remain as viable options. Neither obtained in
It may be so, as petitioners argue, much of the fear is hypothetical this case, and we have already ruled that the transfer was valid and
in nature. Yet Glaxo, as with any other industry, is allowed to take did not constitute constructive dismissal. If Glaxo, or any employer
reasonable steps in order to prevent potential damage from with a similarly drawn-out procedure, were to ultimately resort to
becoming actual, especially if the economic consequences are termination, the burden would still fall upon it to establish that such
substantial. Glaxo is hardly a small-scale industry, and the termination is in accordance with the just causes as provided in
pharmaceutical business seldom characterized by old-fashioned Article 282 of the Labor Code. Without such linkage, the termination
rectitude. would be invalid.
The fact that there was no actual termination in this case obviates WHEREFORE, premises considered, We find the termination of the
the need for us to further apply Article 282 or the jurisprudential complainants illegal. Accordingly, respondent is hereby ordered to
rules on illegal termination to this case. pay them their backwages up to November 29, 1999 in the sum of:
Still, should Glaxo retain the said policy, and another employee trek 1. Jenny M. Agabon - P56, 231.93
the same trail as Tecson did, it cannot be foreordained that the Court
would similarly rule for Glaxo and against the said employee. As 2. Virgilio C. Agabon - 56, 231.93
repeatedly emphasized, it all depends on the particular
circumstances of each case. And ultimately, if dismissal, constructive and, in lieu of reinstatement to pay them their separation pay of one
or otherwise, is resorted to, the standards for termination set by the (1) month for every year of service from date of hiring up to
Labor Code must still be complied with. November 29, 1999.
WHEREFORE, petitioner's Motion for Reconsideration is DENIED Respondent is further ordered to pay the complainants their holiday
WITH FINALITY. pay and service incentive leave pay for the years 1996, 1997 and
1998 as well as their premium pay for holidays and rest days and
Virgilio Agabon's 13th month pay differential amounting to TWO
THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND
G.R. No. 158693 November 17, 2004 SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for
Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos
vs. for Virgilio Agabon, as per attached computation of Julieta C.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME Nicolas, OIC, Research and Computation Unit, NCR.
IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.
SO ORDERED.4
YNARES-SANTIAGO, J.:
On appeal, the NLRC reversed the Labor Arbiter because it found that the
This petition for review seeks to reverse the decision1 of the Court of Appeals petitioners had abandoned their work, and were not entitled to backwages
dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of and separation pay. The other money claims awarded by the Labor Arbiter
National Labor Relations Commission (NLRC) in NLRC-NCR Case No. were also denied for lack of evidence.5
023442-00.
Upon denial of their motion for reconsideration, petitioners filed a petition for
Private respondent Riviera Home Improvements, Inc. is engaged in the certiorari with the Court of Appeals.
business of selling and installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board The Court of Appeals in turn ruled that the dismissal of the petitioners was
and cornice installers on January 2, 19922 until February 23, 1999 when they not illegal because they had abandoned their employment but ordered the
were dismissed for abandonment of work. payment of money claims. The dispositive portion of the decision reads:
Petitioners then filed a complaint for illegal dismissal and payment of money WHEREFORE, the decision of the National Labor Relations
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision Commission is REVERSED only insofar as it dismissed petitioner's
declaring the dismissals illegal and ordered private respondent to pay the money claims. Private respondents are ordered to pay petitioners
monetary claims. The dispositive portion of the decision states: holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as
well as their service incentive leave pay for said years, and to pay
the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in
the amount of P2,150.00.
SO ORDERED.6 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
Hence, this petition for review on the sole issue of whether petitioners were (e) other causes analogous to the foregoing.
illegally dismissed.7
Abandonment is the deliberate and unjustified refusal of an employee to
Petitioners assert that they were dismissed because the private respondent resume his employment.14 It is a form of neglect of duty, hence, a just cause
refused to give them assignments unless they agreed to work on for termination of employment by the employer.15 For a valid finding of
a "pakyaw" basis when they reported for duty on February 23, 1999. They did abandonment, these two factors should be present: (1) the failure to report
not agree on this arrangement because it would mean losing benefits as for work or absence without valid or justifiable reason; and (2) a clear
Social Security System (SSS) members. Petitioners also claim that private intention to sever employer-employee relationship, with the second as the
respondent did not comply with the twin requirements of notice and hearing. 8 more determinative factor which is manifested by overt acts from which it
may be deduced that the employees has no more intention to work. The
Private respondent, on the other hand, maintained that petitioners were not intent to discontinue the employment must be shown by clear proof that it
dismissed but had abandoned their work.9 In fact, private respondent sent was deliberate and unjustified.16
two letters to the last known addresses of the petitioners advising them to
report for work. Private respondent's manager even talked to petitioner In February 1999, petitioners were frequently absent having subcontracted
Virgilio Agabon by telephone sometime in June 1999 to tell him about the for an installation work for another company. Subcontracting for another
new assignment at Pacific Plaza Towers involving 40,000 square meters of company clearly showed the intention to sever the employer-employee
cornice installation work. However, petitioners did not report for work relationship with private respondent. This was not the first time they did this.
because they had subcontracted to perform installation work for another In January 1996, they did not report for work because they were working for
company. Petitioners also demanded for an increase in their wage to another company. Private respondent at that time warned petitioners that
P280.00 per day. When this was not granted, petitioners stopped reporting they would be dismissed if this happened again. Petitioners disregarded the
for work and filed the illegal dismissal case.10 warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in
determining the penalty that should be meted out to him.17
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC
are accorded not only respect but even finality if the findings are supported
by substantial evidence. This is especially so when such findings were In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately
affirmed by the Court of Appeals.11 However, if the factual findings of the absented from work without leave or permission from his employer, for the
NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing purpose of looking for a job elsewhere, is considered to have abandoned his
court may delve into the records and examine for itself the questioned job. We should apply that rule with more reason here where petitioners were
findings.12 absent because they were already working in another company.
Accordingly, the Court of Appeals, after a careful review of the facts, ruled The law imposes many obligations on the employer such as providing just
that petitioners' dismissal was for a just cause. They had abandoned their compensation to workers, observance of the procedural requirements of
employment and were already working for another employer. notice and hearing in the termination of employment. On the other hand, the
law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good
To dismiss an employee, the law requires not only the existence of a just and
conduct19 and loyalty. The employer may not be compelled to continue to
valid cause but also enjoins the employer to give the employee the
opportunity to be heard and to defend himself.13 Article 282 of the Labor employ such persons whose continuance in the service will patently be
Code enumerates the just causes for termination by the employer: (a) inimical to his interests.20
serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection with the After establishing that the terminations were for a just and valid cause, we
employee's work; (b) gross and habitual neglect by the employee of his now determine if the procedures for dismissal were observed.
duties; (c) fraud or willful breach by the employee of the trust reposed in him
by his employer or his duly authorized representative; (d) commission of a
The procedure for terminating an employee is found in Book VI, Rule I, From the foregoing rules four possible situations may be derived: (1) the
Section 2(d) of the Omnibus Rules Implementing the Labor Code: dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284,
Standards of due process: requirements of notice. – In all cases of and due process was observed; (2) the dismissal is without just or authorized
termination of employment, the following standards of due process cause but due process was observed; (3) the dismissal is without just or
shall be substantially observed: authorized cause and there was no due process; and (4) the dismissal is for
just or authorized cause but due process was not observed.
I. For termination of employment based on just causes as defined in
Article 282 of the Code: In the first situation, the dismissal is undoubtedly valid and the employer will
not suffer any liability.
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable In the second and third situations where the dismissals are illegal, Article 279
opportunity within which to explain his side; mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from
(b) A hearing or conference during which the employee concerned,
the time the compensation was not paid up to the time of actual
with the assistance of counsel if the employee so desires, is given
reinstatement.
opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
(c) A written notice of termination served on the employee indicating
employer should be held liable for non-compliance with the procedural
that upon due consideration of all the circumstances, grounds have
requirements of due process.
been established to justify his termination.
The present case squarely falls under the fourth situation. The dismissal
In case of termination, the foregoing notices shall be served on the
should be upheld because it was established that the petitioners abandoned
employee's last known address.
their jobs to work for another company. Private respondent, however, did not
follow the notice requirements and instead argued that sending notices to the
Dismissals based on just causes contemplate acts or omissions attributable last known addresses would have been useless because they did not reside
to the employee while dismissals based on authorized causes involve there anymore. Unfortunately for the private respondent, this is not a
grounds under the Labor Code which allow the employer to terminate valid excuse because the law mandates the twin notice requirements to
employees. A termination for an authorized cause requires payment of the employee's last known address.21 Thus, it should be held liable for
separation pay. When the termination of employment is declared illegal, non-compliance with the procedural requirements of due process.
reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust,
A review and re-examination of the relevant legal principles is appropriate
separation pay may be granted.
and timely to clarify the various rulings on employment termination in the light
of Serrano v. National Labor Relations Commission.22
Procedurally, (1) if the dismissal is based on a just cause under Article
282, the employer must give the employee two written notices and a
hearing or opportunity to be heard if requested by the employee before Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
terminating the employment: a notice specifying the grounds for which
National Labor Relations Commission,23 we reversed this long-standing rule
dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss; and held that the dismissed employee, although not given any notice and
and (2) if the dismissal is based on authorized causes under Articles hearing, was not entitled to reinstatement and backwages because the
283 and 284, the employer must give the employee and the Department dismissal was for grave misconduct and insubordination, a just ground for
of Labor and Employment written notices 30 days prior to the effectivity termination under Article 282. The employee had a violent temper and
of his separation. caused trouble during office hours, defying superiors who tried to pacify him.
We concluded that reinstating the employee and awarding backwages "may We believe, however, that the ruling in Serrano did not consider the full
encourage him to do even worse and will render a mockery of the rules of meaning of Article 279 of the Labor Code which states:
discipline that employees are required to observe."24 We further held that:
ART. 279. Security of Tenure. – In cases of regular employment, the
Under the circumstances, the dismissal of the private respondent for employer shall not terminate the services of an employee except for
just cause should be maintained. He has no right to return to his a just cause or when authorized by this Title. An employee who is
former employment. unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
However, the petitioner must nevertheless be held to account for backwages, inclusive of allowances, and to his other benefits or their
failure to extend to private respondent his right to an investigation monetary equivalent computed from the time his compensation was
before causing his dismissal. The rule is explicit as above discussed. withheld from him up to the time of his actual reinstatement.
The dismissal of an employee must be for just or authorized cause
and after due process. Petitioner committed an infraction of the This means that the termination is illegal only if it is not for any of the justified
second requirement. Thus, it must be imposed a sanction for its or authorized causes provided by law. Payment of backwages and other
failure to give a formal notice and conduct an investigation as benefits, including reinstatement, is justified only if the employee was unjustly
required by law before dismissing petitioner from employment. dismissed.
Considering the circumstances of this case petitioner must indemnify
the private respondent the amount of P1,000.00. The measure of this The fact that the Serrano ruling can cause unfairness and injustice which
award depends on the facts of each case and the gravity of the elicited strong dissent has prompted us to revisit the doctrine.
omission committed by the employer.25
To be sure, the Due Process Clause in Article III, Section 1 of the
The rule thus evolved: where the employer had a valid reason to Constitution embodies a system of rights based on moral principles so
dismiss an employee but did not follow the due process requirement, deeply imbedded in the traditions and feelings of our people as to be deemed
the dismissal may be upheld but the employer will be penalized to pay fundamental to a civilized society as conceived by our entire history. Due
an indemnity to the employee. This became known as the Wenphil or process is that which comports with the deepest notions of what is fair and
Belated Due Process Rule. right and just.26 It is a constitutional restraint on the legislative as well as on
the executive and judicial powers of the government provided by the Bill of
On January 27, 2000, in Serrano, the rule on the extent of the sanction was Rights.
changed. We held that the violation by the employer of the notice
requirement in termination for just or authorized causes was not a denial of Due process under the Labor Code, like Constitutional due process, has two
due process that will nullify the termination. However, the dismissal is aspects: substantive, i.e., the valid and authorized causes of employment
ineffectual and the employer must pay full backwages from the time of termination under the Labor Code; and procedural, i.e., the manner of
termination until it is judicially declared that the dismissal was for a just or dismissal. Procedural due process requirements for dismissal are found in
authorized cause. the Implementing Rules of P.D. 442, as amended, otherwise known as the
Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by
The rationale for the re-examination of the Wenphil doctrine in Serrano was Department Order Nos. 9 and 10.27 Breaches of these due
the significant number of cases involving dismissals without requisite notices. process requirements violate the Labor Code. Therefore statutory due
We concluded that the imposition of penalty by way of damages for violation process should be differentiated from failure to comply with constitutional due
of the notice requirement was not serving as a deterrent. Hence, we now process.
required payment of full backwages from the time of dismissal until the time
the Court finds the dismissal was for a just or authorized cause. Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings;
Serrano was confronting the practice of employers to "dismiss now and pay while statutory due process found in the Labor Code and Implementing Rules
later" by imposing full backwages. protects employees from being unjustly terminated without just cause after
notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was The unfairness of declaring illegal or ineffectual dismissals for valid or
for a just and valid cause but the employee was not accorded due process. authorized causes but not complying with statutory due process may have
The dismissal was upheld by the Court but the employer was sanctioned. far-reaching consequences.
The sanction should be in the nature of indemnification or penalty, and
depends on the facts of each case and the gravity of the omission committed This would encourage frivolous suits, where even the most notorious
by the employer. violators of company policy are rewarded by invoking due process. This also
creates absurd situations where there is a just or authorized cause for
In Nath v. National Labor Relations Commission,29 it was ruled that even if dismissal but a procedural infirmity invalidates the termination. Let us take for
the employee was not given due process, the failure did not operate to example a case where the employee is caught stealing or threatens the lives
eradicate the just causes for dismissal. The dismissal being for just of his co-employees or has become a criminal, who has fled and cannot be
cause, albeitwithout due process, did not entitle the employee to found, or where serious business losses demand that operations be ceased
reinstatement, backwages, damages and attorney's fees. in less than a month. Invalidating the dismissal would not serve public
interest. It could also discourage investments that can generate employment
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, in the local economy.
Inc. v. National Labor Relations Commission,30 which opinion he reiterated
in Serrano, stated: The constitutional policy to provide full protection to labor is not meant to be
a sword to oppress employers. The commitment of this Court to the cause of
C. Where there is just cause for dismissal but due process has not labor does not prevent us from sustaining the employer when it is in the right,
been properly observed by an employer, it would not be right to order as in this case.32 Certainly, an employer should not be compelled to pay
either the reinstatement of the dismissed employee or the payment employees for work not actually performed and in fact abandoned.
of backwages to him. In failing, however, to comply with the
procedure prescribed by law in terminating the services of the The employer should not be compelled to continue employing a person who
employee, the employer must be deemed to have opted or, in any is admittedly guilty of misfeasance or malfeasance and whose continued
case, should be made liable, for the payment of separation pay. It employment is patently inimical to the employer. The law protecting the rights
might be pointed out that the notice to be given and the hearing to be of the laborer authorizes neither oppression nor self-destruction of the
conducted generally constitute the two-part due process requirement employer.33
of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain It must be stressed that in the present case, the petitioners committed a
situations where to undertake the above steps would be no more grave offense, i.e., abandonment, which, if the requirements of due process
than a useless formality and where, accordingly, it would not be were complied with, would undoubtedly result in a valid dismissal.
imprudent to apply the res ipsa loquitur rule and award, in lieu of
separation pay, nominal damages to the employee. x x x.31
An employee who is clearly guilty of conduct violative of Article 282 should
not be protected by the Social Justice Clause of the Constitution. Social
After carefully analyzing the consequences of the divergent doctrines in the justice, as the term suggests, should be used only to correct an injustice. As
law on employment termination, we believe that in cases involving dismissals the eminent Justice Jose P. Laurel observed, social justice must be founded
for cause but without observance of the twin requirements of notice and on the recognition of the necessity of interdependence among diverse units
hearing, the better rule is to abandon the Serrano doctrine and to of a society and of the protection that should be equally and evenly extended
follow Wenphil by holding that the dismissal was for just cause but imposing to all groups as a combined force in our social and economic life, consistent
sanctions on the employer. Such sanctions, however, must be stiffer than with the fundamental and paramount objective of the state of promoting the
that imposed in Wenphil. By doing so, this Court would be able to achieve a health, comfort, and quiet of all persons, and of bringing about "the greatest
fair result by dispensing justice not just to employees, but to employers as good to the greatest number."34
well.
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach recognize the employee's right to statutory due process which was violated
to labor-management relations and dispense justice with an even hand in by the employer.39
every case:
The violation of the petitioners' right to statutory due process by the private
We have repeatedly stressed that social justice – or any justice for respondent warrants the payment of indemnity in the form of nominal
that matter – is for the deserving, whether he be a millionaire in his damages. The amount of such damages is addressed to the sound discretion
mansion or a pauper in his hovel. It is true that, in case of reasonable of the court, taking into account the relevant circumstances.40 Considering
doubt, we are to tilt the balance in favor of the poor to whom the the prevailing circumstances in the case at bar, we deem it proper to fix it at
Constitution fittingly extends its sympathy and compassion. But P30,000.00. We believe this form of damages would serve to deter
never is it justified to give preference to the poor simply because they employers from future violations of the statutory due process rights of
are poor, or reject the rich simply because they are rich, for justice employees. At the very least, it provides a vindication or recognition of this
must always be served for the poor and the rich alike, according to fundamental right granted to the latter under the Labor Code and its
the mandate of the law.35 Implementing Rules.
Justice in every case should only be for the deserving party. It should not be Private respondent claims that the Court of Appeals erred in holding that it
presumed that every case of illegal dismissal would automatically be decided failed to pay petitioners' holiday pay, service incentive leave pay and 13th
in favor of labor, as management has rights that should be fully respected month pay.
and enforced by this Court. As interdependent and indispensable partners in
nation-building, labor and management need each other to foster productivity We are not persuaded.
and economic growth; hence, the need to weigh and balance the rights and
welfare of both the employee and employer.
We affirm the ruling of the appellate court on petitioners' money claims.
Private respondent is liable for petitioners' holiday pay, service incentive
Where the dismissal is for a just cause, as in the instant case, the lack of leave pay and 13th month pay without deductions.
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
As a general rule, one who pleads payment has the burden of proving it.
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Even where the employee must allege non-payment, the general rule is that
Commission.36 The indemnity to be imposed should be stiffer to discourage
the burden rests on the employer to prove payment, rather than on the
the abhorrent practice of "dismiss now, pay later," which we sought to deter employee to prove non-payment. The reason for the rule is that the pertinent
in the Serrano ruling. The sanction should be in the nature of indemnification
personnel files, payrolls, records, remittances and other similar documents –
or penalty and should depend on the facts of each case, taking into special
which will show that overtime, differentials, service incentive leave and other
consideration the gravity of the due process violation of the employer.
claims of workers have been paid – are not in the possession of the worker
but in the custody and absolute control of the employer.41
Under the Civil Code, nominal damages is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may be In the case at bar, if private respondent indeed paid petitioners' holiday pay
vindicated or recognized, and not for the purpose of indemnifying the plaintiff
and service incentive leave pay, it could have easily presented documentary
for any loss suffered by him.37
proofs of such monetary benefits to disprove the claims of the petitioners. But
it did not, except with respect to the 13th month pay wherein it presented
As enunciated by this Court in Viernes v. National Labor Relations cash vouchers showing payments of the benefit in the years
Commissions,38 an employer is liable to pay indemnity in the form of nominal disputed.42 Allegations by private respondent that it does not operate during
damages to an employee who has been dismissed if, in effecting such holidays and that it allows its employees 10 days leave with pay, other than
dismissal, the employer fails to comply with the requirements of due process. being self-serving, do not constitute proof of payment. Consequently, it failed
The Court, after considering the circumstances therein, fixed the indemnity at to discharge the onus probandi thereby making it liable for such claims to the
P2,590.50, which was equivalent to the employee's one month salary. This petitioners.
indemnity is intended not to penalize the employer but to vindicate or
Anent the deduction of SSS loan and the value of the shoes from petitioner No costs.
Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional SO ORDERED.
income in the form of the 13th month pay to employees not already receiving
the same43 so as "to further protect the level of real wages from the ravages
G.R. No. 74246 January 26, 1989
of world-wide inflation."44 Clearly, as additional income, the 13th month pay is
included in the definition of wage under Article 97(f) of the Labor Code, to wit:
MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners,
vs.
(f) "Wage" paid to any employee shall mean the remuneration or HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of
earnings, however designated, capable of being expressed in terms Ministry of Labor and Employment judgment, and JOAQUIN A.
of money whether fixed or ascertained on a time, task, piece , or DEQUILA, respondents.
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services Cruz, Agabin, Atienza & Alday for petitioners.
rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or The Solicitor General of public respondent.
other facilities customarily furnished by the employer to the
employee…" Norberto M. Alensuela, Sr. for private respondent.
from which an employer is prohibited under Article 113 45 of the same Code
from making any deductions without the employee's knowledge and consent.
In the instant case, private respondent failed to show that the deduction of NARVASA, J.:
the SSS loan and the value of the shoes from petitioner Virgilio Agabon's
13th month pay was authorized by the latter. The lack of authority to deduct
There is no dispute about the facts in this case, and the only question for the
is further bolstered by the fact that petitioner Virgilio Agabon included the
Court is whether or not, Article 282 of the Labor Code notwithstanding,
same as one of his money claims against private respondent.
probationary employment may validly be extended beyond the prescribed
six-month period by agreement of the employer and the employee.
The Court of Appeals properly reinstated the monetary claims awarded by
the Labor Arbiter ordering the private respondent to pay each of the
Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation
petitioners holiday pay for four regular holidays from 1996 to 1998, in the
by petitioner Mariwasa Manufacturing, Inc. (hereafter, Mariwasa only) as a
amount of P6,520.00, service incentive leave pay for the same period in the
general utility worker on January 10, 1979. Upon the expiration of the
amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month
probationary period of six months, Dequila was informed by his employer that
pay for 1998 in the amount of P2,150.00.
his work had proved unsatisfactory and had failed to meet the required
standards. To give him a chance to improve his performance and qualify for
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision regular employment, instead of dispensing with his service then and there,
of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, with his written consent Mariwasa extended his probation period for another
finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and three months from July 10 to October 9, 1979. His performance, however,
ordering private respondent to pay each of the petitioners holiday pay for four did not improve and on that account Mariwasa terminated his employment at
regular holidays from 1996 to 1998, in the amount of P6,520.00, service the end of the extended period. 1
incentive leave pay for the same period in the amount of P3,255.00 and the
balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of
Dequila thereupon filed with the Ministry of Labor against Mariwasa and its
P2,150.00 is AFFIRMED with the MODIFICATION that private respondent
Vice-President for Administration, Angel T. Dazo, a complaint for illegal
Riviera Home Improvements, Inc. is further ORDERED to pay each of the
dismissal and violation of Presidential Decrees Nos. 928 and 1389.2 His
petitioners the amount of P30,000.00 as nominal damages for non-
complaint was dismissed after hearing by Director Francisco L. Estrella,
compliance with statutory due process.
Director of the Ministry's National Capital Region, who ruled that the
termination of Dequila's employment was in the circumstances justified and 'It is petitioners' submission that probationary employment
rejected his money claims for insufficiency of evidence. 3 On appeal to the cannot exceed six (6) months, the only exception being
Office of the Minister, however, said disposition was reversed. Respondent apprenticeship and learnership agreements as provided in
Deputy Minister Vicente Leogardo, Jr. held that Dequila was already a the Labor Code; that the Policy Instruction of the Minister of
regular employee at the time of his dismissal, therefore, could not have been Labor and Employment nor any agreement of the parties
lawfully dismissed for failure to meet company standards as a probationary could prevail over this mandatory requirement of the law;
worker. He was ordered reinstated to his former position without loss of that this six months prescription of the Labor Code was
seniority and with full back wages from the date of his dismissal until actually mandated to give further efficacy to the constitutionally-
reinstated. 4 This last order appears later to have been amended so as to guaranteed security of tenure of workers; and that the law
direct payment of Dequila's back wages from the date of his dismissal to does not allow any discretion on the part of the Minister of
December 20, 1982 only. 5 Labor and Employment to extend the probationary period for
a longer period except in the aforecited instances. Finally,
Mariwasa and Dazo, now petitioners, thereafter be sought this Court to petitioners maintain that since they are regular employees,
review Hon. Leogardo's decision on certiorari and prohibition, urging its they can only be removed or dismissed for any of the just
reversal for having been rendered with grave abuse of discretion and/or and valid causes enumerated under Article 283. of the Labor
without or in excess of jurisdiction. 6 Code.
The petition, as well as the parties' comments subsequently submitted all We reject petitioners' contentions. They have no basis in
underscore the fact that the threshold issue here is, as first above stated, the law.
legal one of whether employer and employee may by agreement extend the
probationary period of employment beyond the six months prescribed in Art. Generally, the probationary period of employment is limited
282 of the Labor Code, which provides that: to six (6) months. The exception to this general rule is when
the parties to an employment contract may agree otherwise,
Art. 282. Probationary Employment. — Probationary such as when the same is established by company policy or
employment shall not exceed six (6) months from the date when the same is required by the nature of work to be
the employee started working, unless it is covered by an performed by the employee. In the latter case, there is
apprenticeship agreement stipulating a longer period. The recognition of the exercise of managerial prerogatives in
services of an employee who has been engaged on a requiring a longer period of probationary employment, such
probationary basis may be terminated for a just cause or as in the present case where the probationary period was set
when he fails to qualify as a regular employee in accordance for eighteen (18) months, i.e. from May, 1980 to October,
with reasonable standards made known by the employer to 1981 inclusive, especially where the employee must learn a
the employee at the time of his engagement. An employee particular kind of work such as selling, or when the job
who is allowed to work after probationary period shall be requires certain qualifications, skills experience or training.
considered a regular employee.'
xxx
The Court agrees with the Solicitor General, who takes the same position as
the petitioners, that such an extension may lawfully be covenanted, We therefore, hold and rule that the probationary
notwithstanding the seemingly restrictive language of the cited employment of petitioners set to eighteen (18) months is
provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating legal and valid and that the Regional Director and the Deputy
longer probationary periods as constituting lawful exceptions to the statutory Minister of Labor and Employment committed no abuse of
prescription limiting such periods to six months, when it upheld as valid an discretion in ruling accordingly.
employment contract between an employer and two of its employees that
provided for an eigthteen-month probation period. This Court there held: The single difference between Buiser and the present case: that in the former
involved an eighteen-month probationary period stipulated in the original
contract of employment, whereas the latter refers to an extension agreed
upon at or prior to the expiration of the statutory six-month period, is hardly G.R. No. L-63316 July 31, 1984
such as to warrant or even suggest a different ruling here. In both cases the
parties' agreements in fact resulted in extensions of the period prescribed by ILUMINADA VER BUISER, MA. CECILIA RILLOACUÑA and MA.
law. That in this case the inability of the probationer to make the grade MERCEDES P. INTENGAN, petitioners,
became apparent only at or about the end of the six-month period, hence an vs.
extension could not have been pre-arranged as was done in Buiserassumes HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of
no adverse significance, given the lack, as pointed out by the Solicitor the Ministry of Labor & Employment, and GENERAL TELEPHONE
General, of any indication that the extension to which Dequila gave his DIRECTORY, CO., respondents.
agreement was a mere stratagem of petitioners to avoid the legal
consequences of a probationary period satisfactorily completed. Jimenez, Apolo & Leynes Law Office for petitioners.
For aught that appears of record, the extension of Dequila's probation The Solicitor General for respondent Deputy Minister.
was ex gratia, an act of liberality on the part of his employer affording him a
second chance to make good after having initially failed to prove his worth as
an employee. Such an act cannot now unjustly be turned against said Abad, Legayada & Associates for private respondent.
employer's account to compel it to keep on its payroll one who could not
perform according to its work standards. The law, surely, was never meant to
produce such an inequitable result.
GUERRERO, J.:
By voluntarily agreeing to an extension of the probationary period, Dequila in
effect waived any benefit attaching to the completion of said period if he still This is a petition for certiorari seeking to set aside the Order of the Deputy
failed to make the grade during the period of extension. The Court finds Minister of Labor and Employment, affirming the Order of the Regional
nothing in the law which by any fair interpretation prohibits such a waiver. Director, National Capital Region, in Case No. NCR-STF-5-2851-81, which
And no public policy protecting the employee and the security of his tenure is dismissed the petitioners' complainant for alleged illegal dismissal and
served by prescribing voluntary agreements which, by reasonably extending unpaid commission.
the period of probation, actually improve and further a probationary
employee's prospects of demonstrating his fitness for regular employment. Petitioners were employed by the private respondent GENERAL
TELEPHONE DIRECTORY COMPANY as sales representatives and
Having reached the foregoing conclusions, the Court finds it unnecessary to charged with the duty of soliciting advertisements for inclusion in a telephone
consider and pass upon the additional issue raised in the Supplemental directory.
Petition 8 that the back wages adjudged in favor of private respondent
Dequila were erroneously computed. The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P.
Intengan entered into an "Employment Contract (on Probationary Status)" on
WHEREFORE, the petition is granted. The orders of the public respondent May 26, 1980 with private respondent, a corporation engaged in the business
complained of are reversed and set aside. Private respondent's complaint of publication and circulation of the directory of the Philippine Long Distance
against petitioners for illegal dismissal and violation of Presidential Decrees Telephone Company. Petitioner Ma. Cecilia Rillo-Acuna entered into the
928 and 1389 is dismissed for lack of merit, without pronouncement as to same employment contract on June 11, 1980 with the private respondent.
costs.
Among others, the "Employment Contract (On Probationary Status)" included
SO ORDERED. the following common provisions:
The Court agrees with the Solicitor General, who takes the same position as We therefore, hold and rule that the probationary
the petitioners, that such an extension may lawfully be covenanted, employment of petitioners set to eighteen (18) months is
notwithstanding the seemingly restrictive language of the cited legal and valid and that the Regional Director and the Deputy
provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating Minister of Labor and Employment committed no abuse of
longer probationary periods as constituting lawful exceptions to the statutory discretion in ruling accordingly.
prescription limiting such periods to six months, when it upheld as valid an
employment contract between an employer and two of its employees that The single difference between Buiser and the present case: that in the former
provided for an eigthteen-month probation period. This Court there held: involved an eighteen-month probationary period stipulated in the original
contract of employment, whereas the latter refers to an extension agreed
'It is petitioners' submission that probationary employment upon at or prior to the expiration of the statutory six-month period, is hardly
cannot exceed six (6) months, the only exception being such as to warrant or even suggest a different ruling here. In both cases the
apprenticeship and learnership agreements as provided in parties' agreements in fact resulted in extensions of the period prescribed by
the Labor Code; that the Policy Instruction of the Minister of law. That in this case the inability of the probationer to make the grade
Labor and Employment nor any agreement of the parties became apparent only at or about the end of the six-month period, hence an
could prevail over this mandatory requirement of the law; extension could not have been pre-arranged as was done in Buiserassumes
that this six months prescription of the Labor Code was no adverse significance, given the lack, as pointed out by the Solicitor
mandated to give further efficacy to the constitutionally- General, of any indication that the extension to which Dequila gave his
guaranteed security of tenure of workers; and that the law agreement was a mere stratagem of petitioners to avoid the legal
does not allow any discretion on the part of the Minister of consequences of a probationary period satisfactorily completed.
For aught that appears of record, the extension of Dequila's probation COMMISSION, PEFTOK INTEGRATED SERVICES, INC.,
was ex gratia, an act of liberality on the part of his employer affording him a TEODOLFO E. SANTOS, and/or UP-NDC BASILAN
second chance to make good after having initially failed to prove his worth as PLANTATIONS, INC., Respondents.
an employee. Such an act cannot now unjustly be turned against said
employer's account to compel it to keep on its payroll one who could not
perform according to its work standards. The law, surely, was never meant to
produce such an inequitable result.
PANGANIBAN, J.:
By voluntarily agreeing to an extension of the probationary period, Dequila in
effect waived any benefit attaching to the completion of said period if he still As a just and valid cause for dismissal, willful disobedience involves
failed to make the grade during the period of extension. The Court finds the violation of a rule, order or instruction which is (1) reasonable
nothing in the law which by any fair interpretation prohibits such a waiver. and lawful, (2) sufficiently known to the employee, and (3)
And no public policy protecting the employee and the security of his tenure is connected with the duties which the employee has been engaged
served by prescribing voluntary agreements which, by reasonably extending to discharge. Abandonment, on the other hand, requires a showing
the period of probation, actually improve and further a probationary that an employee (1) deliberately and unjustly refuses to resume
employee's prospects of demonstrating his fitness for regular employment. his work and (2) has no intention to return to it.
Having reached the foregoing conclusions, the Court finds it unnecessary to The Case
consider and pass upon the additional issue raised in the Supplemental
Petition 8 that the back wages adjudged in favor of private respondent
The Court reiterates these principles in resolving this petition
Dequila were erroneously computed.
for certiorari under Rule 65 of the Rules of Court assailing the
Resolutions dated September 22, 1993 and December 16, 1993,
WHEREFORE, the petition is granted. The orders of the public respondent which were promulgated by the National Labor Relations
complained of are reversed and set aside. Private respondent's complaint
Commission 1 in NLRC Case No. RAB 09-08-00235-91.
against petitioners for illegal dismissal and violation of Presidential Decrees
928 and 1389 is dismissed for lack of merit, without pronouncement as to
costs. Petitioners filed at the Regional Arbitration Branch No. 09 in
Zamboanga City a Complaint. against private respondents for
SO ORDERED. illegal termination by way of constructive dismissal. After
conciliation proceedings failed to settle the matter, the parties were
ordered to submit their respective position papers. On February 17,
BALLES, ROMEO BELARMINO, ELISEO CODILLA, ELEUTERIO
1992, Labor Arbiter Rhett Julius J. Plagata rendered a Decision in
BENITEZ, ELPIDIO CASINILLO, FERNANDO ABLONG,
favor of petitioners: 2
PRUDENCIO SACRISTAN, RODOLFO BRIONES, PRIMITIVO
CALIXTO, ANDRES FERNANDO, ANGEL AVENIDO, FELIX
GUIPITACIO, TARACIO ABILLA, ANTONIO PATINO, WHEREFORE, in view of the foregoing considerations, judgment is
ANTONIO HELEN, NERIO CANOY, VICENTE FRANCISCO, hereby rendered in the above-entitled case:
TEOFILO TURA, ANTONIO LEDESMA, MARCELINO HIPOLITO,
BENJAMIN FLORES, PABLO LASCOTA, WILFREDO CANTAY, (1) Declaring the [petitioners'] dismissal to be illegal for being
GENARO DELIVERIO, MARCIANO PIOQUINTO, FEDERICK without just cause;
JIMENEZ, VICENTE SM LIM, LUIS TUBIL, ANGEL SUMAYO,
SALVADOR SALCEDO, RIGOBERTO UTOD, FELICIANO (2) Ordering PEFTOK Integrated Security Services, Inc., through its
SALONA, GERONIMO CANETE, MAXIMO AQUILLON, LARRY president or other duly authorized corporate officer, to pay the
TURCO, SR., PORFERIO GARADO, PERFECTO CUEVAS, [petitioners] the following awards in the following sums:
FELICIANO, JUANILLO, ROBERTO TUCAY, SR., and NICOLAS
AMONES, JR., Petitioners, vs. NATIONAL LABOR RELATIONS
Constancio Silagan Attorney's Fees 1,000.00
& Litigation Expenses ----- WHEREFORE, premises considered, the instant motion for
consideration is hereby denied for lack of merit.
Total P33,125.44
Hence, this recourse. 5
Roberto Tucoy, Sr.
The Facts
Backwages P17,088.00
In its Resolution dated September 22, 1993, Respondent NLRC
relates the factual background of this case as follows: 6
Separation Pay 14,724.16
Subsequently, thereafter, PISI issued Office Memorandum No. 4 Late in the day however, on July 1, 1991, complainants wrote PISI
dated February 6, 1991 placing the fifty-nine (59) affected guards General Manager, Teodolfo Santos, saying they had no intention to
under reserved or floating status effective February 1, 1991, abandon their employment, nor to defy fair, reasonable and lawful
subject to be posted or assigned upon notice. orders. In the same letter, they acknowledged receipt of all PISI's
letters to them dated April 8 and May 2, 1991.
After having been terminated, and during the arbitral proceedings The Arbiter, however, found that the procedure for termination of
below, complainants belatedly justified their inability to comply employment had been complied with by respondent PISI. But
with PISI's Order to report to Head Office in Metro-Manila for finding complainants illegally dismissed, the Arbiter held that they
posting, saying: they are residents of Basilan, have families of their are entitled to backwages set at six (6) months pay corresponding
own in Basilan, have never traveled beyond Visayas and Mindanao, to the maximum period a security guard may be placed on floating
not provided by PISI with fare money as they cannot, on their own, status, computed on the basis of their latest salary of P2,848.00.
finance their travel from Basilan to Manila; that to comply with That since complainants opted for separation pay instead of
PISI's Order to report to Head Office for posting under said reinstatement considering that their positions in Basilan are
circumstances was absurd, to say the least. Complainants probably no longer existing, complainants instead [were] awarded
therefore, charged PISI with bad faith in issuing said Order. That in by the Arbiter separation pay at one (1) month pay for every year
truth, complainants said they were constructively dismissed by of service based on their latest salary at the time they were
PISI. For which reason, complainants prayed that the Labor Arbiter illegally dismissed.
declare their dismissal as illegal and consequently they should be
paid separation pay (in lieu of reinstatement), backwages, moral Complainants['] claims for moral and exemplary damages were
and exemplary damages, attorney's fees and litigation costs. denied for lack of factual and legal basis. However, the sum of
P1,000 for each complainant was awarded as attorney's fees and
The Labor Arbiter in deciding this case posed the following issues, litigation costs.
namely:
And finally, the Labor Arbiter absolved respondent UP-NDC Basilan
a) Whether or not complainants were indeed illegally dismissed, Plantations, Inc. from joint and several liability on the monetary
and corollarily, whether or not they are entitled to backwages and awards, noting that joint and several liability of an indirect
separation pay; and employer is limited only to non-payment of labor standards
benefits mandated by the Labor Code. The monetary awards in the
b) Whether or not complainants are entitled to moral and instant case, being in the nature of labor relations benefits, the
exemplary damage's attorney's fees and cost of litigation. same was, thus, ordered as sole liability of respondent PISI.
The Labor Arbiter noted that S/G Winifredo Obedencia and Ignacio Ruling of Respondent NLRC
Antonio did not sign the complaint. They should therefore be
deemed not to have filed their complaints and their names should As earlier stated, Respondent NLRC reversed the labor arbiter's
be deleted as party-complainants in the instant case. Decision, holding that private respondent had no choice but to
place petitioners and other security guards on floating status for
With respect to PISI's Order for complainants to report to their lack of clients to which they could be immediately reassigned. The
head office in Manila, the Arbiter held that this is not a reasonable directive to report to Manila for posting was issued, because
order considering that complainants are residents of Basilan, have private respondent knew that it could place petitioners on reserve
families in Basilan, have never been assigned beyond Mindanao or status for only six months. Petitioners' refusal to comply with said
Visayas, were not provided with fare money. Neither were they Order and their "wanton disregard of the order to explain their
assured of compensation similar to what they used to receive in inability to . . . comply and obey lawful orders from their employer"
Basilan, nor of continued posting while in Manila. That their constituted the "proximate cause for their dismissal." The fact that
transfer would surely entail great inconvenience to complainants petitioners had some reasonable objections to the directive to
and their families. Hence, the validity of their transfer could not be report to Manila did not mitigate their insubordination, because
sustained. Therefore, complainants charged that their refusal to petitioners raised them only during the arbitral proceedings.
report to the head office was justified. Consequently, their
dismissal was illegal.
Under these circumstances, according to Respondent Commission, V
private respondent had "no option left but to charge them with
insubordination and willful disobedience to lawful orders of their The NLRC acted with grave abuse of discretion in denying
employer." In according due process to petitioners, private petitioners' motion for reconsideration.
respondent gave them ample time to explain why no disciplinary
measures should be taken against them, but petitioners still It is undisputed that due process was observed in the dismissal of
refused to comply. Hence, private respondent was justified in petitioners. Hence, the only remaining issues are: (1) whether
dismissing petitioners. petitioners' dismissal was for a valid and just cause; and (2)
whether they are entitled to separation pay, back wages and
Not only did petitioners' insubordination constitute willful damages.
disobedience; it also partook of abandonment. Thus, petitioners
are not entitled to the payment of back wages and separation pay The Court's Ruling
or reinstatement.
The petition is meritorious.
Assignment of Errors
First Issue: No Just Cause
In their Memorandum before us, petitioners impute the following
errors to Respondent Commission: 7
The solicitor general maintains that petitioners' conduct amounted
to clear insubordination and constituted willful disobedience to
I lawful orders given in connection with their work. PISI reduced its
work force in UP-NDC premises as a result of the inclusion of the
The NLRC acted with grave abuse of discretion in ruling that latter's plantation in the government's agrarian reform program.
petitioners committed willful disobedience of lawful orders of their He argues that PISI diligently notified petitioners for three
employer. consecutive times to report to its head office for posting, but
petitioners "wantonly refused receipt of the letters and abjectly
II failed to comply with . . . [the] directive under letters dated April 8,
May 2 and May 29, 1991."
The NLRC acted with grave abuse of discretion in ruling that
petitioners abandoned their work. We disagree. While it is true that petitioners failed to report to
Manila and to respond to private respondent's letters, this is not
III the end-all and be-all of the matter.
The NLRC acted with grave abuse of discretion in reversing the One of the fundamental duties of an employee is to obey all
finding of the labor arbiter that petitioners were illegally dismissed reasonable rules, orders and instructions of the employer.
by way of constructive dismissal. Disobedience, to be a just cause for termination, must be willful or
intentional, willfulness being characterized by a wrongful and
IV perverse mental attitude rendering the employee's act inconsistent
with proper subordination. A willful or intentional disobedience of
such rule, order or instruction justifies dismissal only where such
The NLRC acted with grave abuse of discretion in denying recovery
rule, order or instructions is (1) reasonable and lawful, (2)
of back wages, separation pay, damages, and attorney's fees in
sufficiently known to the employee, and (3) connected with the
favor of petitioners.
duties which the employee has been engaged to discharge. 8 The
assailed Resolution of Respondent Commission and the arguments service. The letter 11 purportedly granting transportation allowance
of the solicitor general failed to prove these requisites. to other security guards was dated August 12, 1991, which was
after petitioners had been dismissed June 28, 1991. 12
On the other hand, petitioners negated the solicitor general's
stance, contending that the instruction to report to the Manila Fourth, no reason was given by private respondent company
office was "inconvenient, unreasonable and prejudicial," as they explaining why it had failed to inform petitioners of their specific
were not given transportation money or, more important, any security assignments prior to their departure from Basilan. If
assurance that work would be available to them once they reached indeed the postings were to be made in Basilan, there would have
Manila. They were not even furnished a copy of the so-called Office been no necessity for petitioners to report to Manila and no
Memorandum No. 4 dated February 6, 1991, which placed them justification for respondent's insistence on their compliance with its
under "floating status." Thus, they aver that their failure to report directive. Since private respondent did not provide transportation
to the Manila office was not characterized by a "wrongful and and living allowances, and since, in the first place, petitioners could
perverse [mental] attitude." They also assert that they have have been easily informed of their new assignments right there in
families which they could not just leave behind. Basilan, there was no reason for petitioners to travel all the way to
Manila.
The reasonableness and lawfulness of a rule, order or instruction
depend on the circumstances availing in each case. Traversing these contentions, Respondent Commission gave this
Reasonableness pertains to the kind or character of directives and statement in its challenged Resolution:13
commands and to the manner in which they are made. 9 In this
case, the order to report to the Manila office fails to meet this Unfortunately, however, for the [petitioners], they kept all these
standard. reasons only to themselves. They did not bother communicating
these objections to their employer, respondent PISI. They chose to
First, it was grossly inconvenient for petitioners, who were remain silent, went to the extent of even refusing to acknowledge
residents and heads of families residing in Basilan, to commute to receipt of the letters and directives sent to them dated April 8, May
Manila. In Yuco Chemical Industries, Inc. vs. Ministry of Labor and 2, and May 29, 1991, although they admit having received the
Employment,10 the transfer to Manila of two workers, who were same. It was already late in the day when complainants raised said
also studying in Tarlac, was held to be grossly inconvenient. The objections after they had been dismissed, and only during the
distance to Manila from Basilan is considerably greater than that arbitral proceedings below.
from Tarlac. Such transfer would have necessarily entailed
separation of the petitioners from their families. Under the circumstances, it was indeed difficult for respondent PISI
to know [petitioners'] predicament considering that they did not
Second, petitioners were not provided with funds to defray their even bother replying to all the directives sent them. . . .
transportation and living expenses. Petitioners, not unknown to
their employer, earned only P1,500 to P2,500 a month before they In contrast, private respondent granted to other similarly situated
were placed on reserve status, after which they remained jobless. security guards a second chance to explain their failure to respond,
Furthermore, being residents of Basilan, petitioners would have an opportunity it denied petitioners. This fact demonstrates that
required living arrangements in Manila which, in turn, would have petitioners' dismissal was not commensurate to their
entailed additional expenses on their part. insubordination which, we reiterate, was neither willful nor
intentional. Respondent Commission also held in its assailed
Third, private respondent argues that it sent transportation money Resolution: "[H]ad their objections been seasonably raised to
to petitioners. However, the recipients of such funds are not parties respondent PISI, they would have been just and reasonable. Their
in this case. Moreover, the alleged transportation allowance was only fault lies in not raising said objections on time before their
given only after petitioners had already been terminated from dismissal." Even private respondent agency said in its
memorandum: "If such order appears to be unreasonable or 1991, and that the directive to make them report to Manila was
inconvenient to the petitioners at least management should have only a ruse to terminate their services. Although a letter 16 dated
been informed why the guards cannot comply with such orders, so September 13, 1991 and signed by a certain Jose E. Fernandez
some remedial means could have been worked out." These declined the offer to work outside Basilan despite the receipt of
ratiocinations are pointless. Private respondent very well knew that transportation allowance, such letter cannot be attributed to
petitioners were not receiving any salary while they were on petitioners because Fernandez did not represent any of them. That
floating status and, thus, also knew that they would hardly be able petitioners did not pray for reinstatement in their pleadings is not
to comply with the directive to report to Manila. In any event, proof of abandonment. In fact, petitioners' contention is that
dismissal was too harsh a penalty for an infraction which appears, private respondent effected constructive dismissal, which is
under the circumstances, to be excusable. 14 incompatible with abandonment. 17
The right to transfer employees from one office to another - No Constructive Dismissal
provided there is no demotion in rank or diminution of salary,
benefits and other privileges - is judicially recognized as a For presuming that they were constructively dismissed, petitioners
prerogative inherent in the employer's right to effectively control are likewise in error. Constructive discharge is an involuntary
and manage the enterprise. But this principle is not at issue here. resignation resorted to when continued employment is rendered
The issue is whether petitioners' alleged disobedience constituted a impossible, unreasonable or unlikely; when there is a demotion in
just and valid cause to dismiss them. rank and/or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the
It is obvious to us that the dismissal was effected with mala fides, employee. 18 In this particular case, petitioners were not
as it was intended to punish petitioners for their refusal to heed constructively dismissed; they were actually dismissed without just
their employer's unreasonable directive. Respondent Commission and valid cause.
therefore committed grave abuse of discretion in holding that
petitioners were dismissed for a just cause. Second Issue: Separation Pay and Back Wages
Abandonment of Work The normal consequences of illegal dismissal are reinstatement and
payment of back wages. 19 These remedies give life to the workers'
Respondent Commission avers in its impugned Resolution: constitutional right to security of tenure. 20
"[Petitioners] are likewise guilty of 'quitting' without just cause
under Article 285 of the Labor Code, as amended. Hence, they are Separation pay is generally not awarded except in instances where
clearly not entitled to any affirmative reliefs under the law. They reinstatement is no longer feasible or appropriate, as in this case.
are 'estopped' from asserting claims against their employer, PISI." As a substitute for immediate and continued reemployment,
Agreeing with Respondent Commission, the solicitor general posits separation pay is meant to provide the employee the "wherewithal
that petitioners "clearly abandoned their work without valid cause." during the period that he is looking for another employment." 21
This contention is untenable. Abandonment, as a just and valid In this particular case, private respondent alleges that there is no
cause for dismissal, requires a deliberate, unjustified refusal of an assignment in Basilan or Zamboanga available to petitioners.
employee to resume his work, coupled with a clear absence of any Transfer to another post outside said areas would have only given
intention of returning to his work. 15 No evidence was presented to rise to the same problems as those entailed by the original
establish that petitioners relinquished their jobs. Denying they directive. Reinstatement presupposes that the previous position
abandoned their work, petitioners contend that it was private from which the employee had been removed still exists, or there is
respondent agency which deserted them by failing to communicate an unfilled position of a similar nature, more or less, as the one
with them for over two months, from February 1, 1991 to April 8, previously occupied by the employee. 22 If no such position is
available, reinstatement becomes a legal impossibility. The law On September 27, 1996, PAL’s Vice President for Flight Operations sent
cannot exact compliance with what is impossible. Almario a letter, the pertinent portions of which read:
The award of attorney's fees in the sum of one thousand pesos is xxxx
reasonable and in accord with Art. 2208 of the Civil
Code. 23 However, no moral and exemplary damages can be 2. Our records show that you have been trained by the Company as A300
granted for lack of factual basis.24 First Officer starting on 04 September 1995 and have completed said training
on 08 February 1996. As you are aware the Company invested heavily on
In sum, we hold that the labor arbiter was correct in awarding your professional training in the estimated amount of PHP786,713.00 on the
basis that you continue to serve the Company for a definite period of time
separation pay, back wages and attorney's fees.
which is approximately three (3) years or thirty-six (36) months.
CARPIO MORALES, J.: On February 11, 1997, PAL filed a Complaint8 against Almario before the
Makati Regional Trial Court (RTC), for reimbursement of ₱851,107 worth of
On October 21, 1988, petitioner, Vicente S. Almario (Almario), was hired by training costs, attorney’s fees equivalent to 20% of the said amount, and
respondent, Philippine Airlines, Inc. (PAL), as a Boeing 747 Systems costs of litigation. PAL invoked the existence of an innominate contract of do
Engineer. ut facias (I give that you may do) with Almario in that by spending for his
training, he would render service to it until the costs of training were
recovered in at least three (3) years.9 Almario having resigned before the 3-
On April 28, 1995, Almario, then about 39 years of age 1 and a Boeing 737
year period, PAL prayed that he should be ordered to reimburse the costs for
(B-737) First Officer at PAL, successfully bid for the higher position of Airbus
his training.
300 (A-300) First Officer.2 Since said higher position required additional
training, he underwent, at PAL’s expense, more than five months of training
consisting of ground schooling in Manila and flight simulation in Melbourne, In his Answer with Special and Affirmative Defenses and Compulsory
Australia.3 Counterclaims,10 Almario denied the existence of any agreement with PAL
that he would have to render service to it for three years after his training
failing which he would reimburse the training costs. He pointed out that the
After completing the training course, Almario served as A-300 First Officer of
1991-1994 Collective Bargaining Agreement (CBA) between PAL and the
PAL, but after eight months of service as such or on September 16, 1996, he
Airline Pilot’s Association of the Philippines (ALPAP), of which he was a
tendered his resignation, for "personal reasons," effective October 15, 1996.4
member,11 carried no such agreement.
Almario thus prayed for the award of actual damages on account of PAL’s benefits (worth US$49,824), it holding that the same had been forfeited as he
withholding of the necessary clearances which he needed in order to obtain did not avail of them within one year from the date of his separation.
his lawful benefits, and moral and exemplary damages for malicious
prosecution and unjust harassment.12 Thus the trial court disposed:
PAL, in its Reply to Defendant’s Answer and Answer to WHEREFORE, in view of the foregoing, the Court hereby renders judgment
Counterclaim,13 argued as follows: in favor of defendant Vicente Almario and against the plaintiff:
The right of PAL to be reimbursed for training expenses is based on Article 1- Dismissing the plaintiff’s complaint;
XXIII, Section 1 of the 1991-1994 Collective Bargaining Agreement (CBA, for
brevity) and which was taken from the decision of the Secretary of Labor.
2- Ordering the plaintiff to pay the defendant:
[The Secretary of Labor] ruled that a pilot should remain in the position where
a- the amount of ₱312,425.00 as actual damages with legal
he is upon reaching the age of fifty-seven (57), irrespective of whether or not
interest from the filing of the counterclaim;
he has previously qualified in the Company’s turbo-jet operations. The
rationale behind this is that a pilot who will be compulsorily retired at age
sixty (60) should no longer be burdened with training for a new position. b- the amount of ₱500,000.00 as exemplary damages;
Thus, Article XXIII, Section 1 of the CBA provide[s]: c- the amount of ₱150,000.00 as attorney’s fees;
"Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots d- the costs of the suit.
who are less than fifty-seven (57) years of age provided they have previously
qualified in any company’s turbo-jet aircraft shall be permitted to occupy any SO ORDERED.17
position in the company’s turbo-jet fleet.
On appeal by both parties,18 the Court of Appeals, by Decision19 dated March
The reason why pilots who are 57 years of age are no longer qualified to bid 31, 2005, reversed the trial court’s decision. It found Almario liable under the
for a higher position is because they have only three (3) years left before the CBA between PAL and ALPAP and, in any event, under Article 22 of the Civil
mandatory retirement age [of 60] and to send them to training at that age, Code. Thus it disposed:
PAL would no longer be able to recover whatever training expenses it will
have to incur. WHEREFORE, the appealed Decision is REVERSED and SET ASIDE. In
lieu thereof, a new judgment is hereby ENTERED, as follows: (a) Appellee
Simply put, the foregoing provision clearly and unequivocally recognizes the Vicente Almario is hereby ordered to pay appellant Philippine Airlines, Inc.
prohibitive training cost principle such that it will take a period of at least the sum of Five Hundred Fifty Nine Thousand, Seven Hundred [T]hirty Nine
three (3) years before PAL could recover from the training expenses it & 9/100 Pesos (₱559, 739.90) with six percent (6%) interest as above-
incurred.14(Emphasis and underscoring supplied) computed; and (b) the award of exemplary damages and attorney’s fees in
favor of appellee is hereby DELETED.20 (Emphasis in the original;
By Decision15 of October 25, 2000, Branch 147 of the Makati RTC, finding no underscoring supplied)
provision in the CBA between PAL and ALPAP stipulating that a pilot who
underwent a training course for the position of A-300 First Officer must serve His Motion for Reconsideration21 having been denied,22 Almario filed the
PAL for at least three years failing which he should reimburse the training instant Petition for Certiorari [sic] (Under Rule 45),23 raising the following
expenses, rendered judgment in favor of Almario. issues:
The trial court denied Almario’s claim for moral damages, however.16 It A. Whether the Court of Appeals committed reversible error
denied too Almario’s claim for the monetary equivalent of his family trip pass in interpreting the Collective Bargaining Agreement between
Philippine Airlines, Inc. (PAL) and the Airline Pilots Association of the
Philippines (ALPAP) as an ordinary civil law contract applying Therefore, since there is a legal ground for the entitlement of the training,
ordinary contract law principles which is contrary to the ruling of the contrary to the ruling of the Court of Appeals, there can be no unjust
Supreme Court in Samahang Manggagawa sa Top Form enrichment;25 (Underscoring supplied)
Manufacturing-United Workers of the Philippines (SMTFM-UWP) v.
NLRC and, therefore, erroneously reading into the CBA a clause that The petition fails.
was not agreed to during the negotiation and not expressly stated in
the CBA;
As reflected in the above-enumerated issues raised by Almario, he cites the
case of Samahang Manggagawa sa Top Form Manufacturing-United
B. Whether the Court of Appeals committed reversible error Workers of the Philippines (SMTFM-UWP) v. NLRC26 (Manggagawa) in
in holding that Article 22 of the Civil Code can be applied to recover support of his claim that the appellate court erred in interpreting the CBA as
training costs which were never agreed to nor included as an ordinary civil law contract and in reading into it "a clause that was not
reimbursable expenses under the CBA; agreed to during the negotiation and not expressly stated in the CBA."
C. Whether the availing by petitioner of a required training is a legal On the contrary, the ruling in Manggagawa supports PAL’s position. Thus
ground justifying the entitlement to a benefit and therefore, negating this Court held:
claims of unjust enrichment;
The CBA is the law between the contracting parties – the collective
D. Whether the failure of private respondent to honor and provide the bargaining representative and the employer-company. Compliance with a
Family Trip Pass Benefit in the equivalent amount of US$ 49,824.00 CBA is mandated by the expressed policy to give protection to labor. In the
which petitioner and his family were not able to avail of within the one same vein, CBA provisions should be "construed liberally rather than
(1) year from date of separation due to the actions of PAL amounts narrowly and technically, and the courts must place a practical and realistic
to unjust enrichment; construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve." This is founded on the
E. Whether or not respondent is liable for malicious dictum that a CBA is not an ordinary contract but one impressed with public
prosecution[.]24 (Underscoring supplied) interest. It goes without saying, however, that only provisions embodied in
the CBA should be so interpreted and complied with. Where a proposal
Almario insists on the absence of any written contract or explicit provision in raised by a contracting party does not find print in the CBA, it is not a part
the CBA obliging him to reimburse the costs incurred by PAL for his training. thereof and the proponent has no claim whatsoever to its
And he argues: implementation.27 (Emphasis and underscoring supplied)
[T]here can be no unjust enrichment because petitioner was entitled to the In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine Airlines,
benefit of training when his bid was accepted, and x x x PAL did not suffer Inc.," the Secretary of the Department of Labor and Employment (DOLE),
any injury because the failure to include a reimbursement provision in the passing on the failure of PAL and ALPAP to agree on the terms and
CBA was freely entered into by the negotiating parties; conditions for the renewal of their CBA which expired on December 31, 1987
and construing Section 1 of Article XXIII of the 1985-1987 CBA, held:
xxxx
xxxx
It is not disputed that the petitioner merely entered a bid for a higher position,
and that when he was accepted based on seniority and qualification, the Section 1, Article XXIII of the 1985-1987 CBA provides:
position was awarded to him. It is also not disputed that petitioner [had] not
asked, requested, or demanded for the training. It came when his bid was Pilots fifty-five (55) years of age or over who have not previously qualified in
accepted by PAL; any Company turbo-jet aircraft shall not be permitted to bid into the
Company’s turbo-jet operations. Pilots fifty-five (55) years of age or over who
Because the training was provided when the bid was accepted, the have previously qualified in the company’s turbo-jet operations may be by-
acceptance of the bid was the basis and legal ground for the training; passed at Company option, however, any such pilot shall be paid the by-
pass pay effective upon the date a junior pilot starts to occupy the bidded Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots who
position. are less than fifty-seven (57) years of age provided they have previously
qualified in any company’s turbo-jet aircraft shall be permitted to occupy any
x x x PAL x x x proposed to amend the provision in this wise: position in the company’s turbo-jet fleet.30
The compulsory retirement age for all pilots is sixty (60) years. Pilots who The same section of Article XXIII of the 1991-1994 CBA was reproduced in
reach the age of fifty-five (55) years and over without having previously the 1994-2000 CBA.31
qualified in any Company turbo-jet aircraft shall not be permitted to occupy
any position in the Company’s turbo-jet fleet. Pilots fifty-four (54) years of age Arturo Gabanton, PAL’s Senior Vice President for Flight Operations,
and over are ineligible for promotion to any position in Group I. Pilots testifying on PAL’s "policy or practice" on underwriting the training costs of its
reaching the age of fifty-five (55) shall be frozen in the position they currently pilots at the time Almario was trained, with the "expectation" of benefiting
occupy at that time and shall be ineligible for any further movement to any therefrom "in order to recover the cost of training," explained:
other positions.
Atty. Parinas:
PAL’s contention is basically premised on prohibitive training costs. The
return on this investment in the form of the pilot promoted is allegedly five (5) Q: At the time the defendant was accepted for training as A300 First Officer,
years. Considering the pilot’s age, the chances of full recovery [are] asserted would you know what was the governing policy or practice of Philippine
to be quite slim. Airlines that was being employed regarding the training cost[s] for the pilots?
ALPAP opposed the proposal and argued that the training cost is offset by Witness:
the pilot’s maturity, expertise and experience.
A: The company has to spend for the training of the pilots and after that
By way of compromise, we rule that a pilot should remain in the position the company expecting that services will be rendered in order to recover the
where he is upon reaching age fifty-seven (57), irrespective of whether or not cost[s] of training.
he has previously qualified in the Company’s turbo-jet operations. The
rationale behind this is that a pilot who will be compulsorily retired at age
Atty. Parinas:
sixty (60) should no longer be burdened with training for a new position. But if
a pilot is only at age fifty-five (55), and promotional positions are available, he
should still be considered and promoted if qualified, provided he has Q: You stated that the pilot must serve the company after completing the
previously qualified in any company turbo-jet aircraft. In the latter case, training, for how long after completing the training?
the prohibitive training costs are more than offset by the maturity, expertise,
and experience of the pilot. Witness:
Thus, the provision on age limit should now read: A: At least for three (3) years.
Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots Atty. Parinas:
fifty-five (55) [sic] years of age provided they have previously qualified in any
company turbo-jet aircraft shall be permitted to occupy any position in the Q: What is your basis in saying that a pilot must serve the company after
company’s turbo-jet fleet.28 (Emphasis and underscoring supplied) completing the training?
Less: Accrued Benefits 102,240.22 The antecedent facts of this case are as follows:
Net Reimbursable Amount or Petitioner Helmut Dosch an American citizen, married to a Filipina, was the
P559,739.9036
Appellee's Outstanding Account resident Manager of Northwest Airlines, Inc. (Northwest, for short) in the
*****************
Philippines. He has to his credit eleven (11) years of continuous service with
the company, including nine (9) years as Northwest Manager with station at
Almario must pay PAL the sum of ₱559,739.90, to bear the legal interest rate Manila. On August 18, 1975 he received an inter-office communication from
of 6% per annum from the filing of PAL’s complaint on February 11, 1997 R.C. Jenkins, Northwest's Vice President for Orient Region based in Tokyo,
until the finality of this decision. promoting him to the position of Director of International Sales and
transferring him to Northwest's General Office in Minneapolis, U.S.A.,
effective the same day. The full text of the inter-office communication is
In light of the foregoing discussions on the main issue, the Court finds it
reproduced below:
unnecessary to dwell on the other issues raised by Almario. Suffice it to state
that the appellate court’s disposition thereof is, as its decision reflects, well-
taken. NORTHWEST ORIENT Interoffice Communication
WHEREFORE, the petition is DENIED and the decision appealed from To: H. Dosch Manager-Philippines
is AFFIRMED. From: Vice-President, Orient Region
Subject: Transfer
Date: August 18,1975
G.R. No. L-51182 July 5, 1983
Location: Tokyo
HELMUT DOSCH, petitioner,
Dear Helmut:
vs.
NATIONAL LABOR RELATIONS COMMISSION and NORTHWEST
AIRLINES, INC., respondents. You have completed nine (9) years of service in the Orient,
and in accordance with usual practice, it is now the
Company's intention to transfer you to the General Office in
Minneapolis to broaden your experience base considering
that your assignment in the Philippines has continued for
several years longer than is normal for our overseas
managers.
TRANSFER V
e
r
This is to acknowledge receipt of your memo of August 18,
1975, on theysubject.
t
r
While I sincerely appreciate the company's confidence in my
abilities as aumanager, which reflects itself in my promotion
l of Director of International Sales, I regret that
to the position
y
at this time, for personal reasons and reasons involving my
y
family, I am unable to accept a transfer from the Philippines.
o
u
I would, therefore,
r prefer to remain in my position of
Manager-Philippines until such time that my services in that
capacity are no longer required by Northwest Airlines.
(
S
g
d
.
)
H
.
Telegrams wereD also sent by petitioner to Mr. Nightingale,
O
Director for Finance and to Mr. Jenkins, clearly stating
S
petitioner's desire to remain as Manager-Philippines of
Northwest. C
H
On September 9, 1975, the Vice-President for the Orient
Petitioner tried to resume his duties as Manager, through a Region of Northwest advised petitioner that "in view of the
memorandum to the Manila Staff which reads: foregoing, your status as an employee of the company
ceased on the close of business on August 31, 1975" and
"the company therefore considers your letter of August 28,
MANILA STAFF Sept. 4, 1975 1975, to be a resignation without notice."
1. Illegal dismissal.
2. x x x
3. x x x
4. x x x
5. x x x
1. x x x
February 3, 1976.
2. x x x
After hearing, Labor Arbiter Sofronio A. Ona rendered the
decision dated December 29, 1976, the dispositive portion of
3. x x x which reads:
Assuming for the sake of argument that the communication or letter of Mr. Neither is the other ground alleged by Northwest in dismissing petitioner
Jenkins was basically a transfer, under the particular and peculiar facts which is loss of confidence, supported by evidence. On the contrary, the fact
obtaining in the case at bar, petitioner's inability or his refusal to be that Northwest wanted to promote petitioner to Director of International Sales
transferred was not a valid cause for dismissal. as "the Company feels there is need for an executive of (his) experience to
fill the position of Director of International Sales" as well as its Manifestation
While it may be true that the right to transfer or reassign an employee is an dated March 23, 1976 that Northwest "offered to rehire petitioner as Director
employer's exclusive right and the prerogative of management, such right is of International Sales with office at Minneapolis, U.S.A." clearly indicate that
not absolute. The right of an employer to freely select or discharge his Northwest had full confidence in petitioner. And so We hold and rule that
employee is limited by the paramount police power (Phil. Air Lines, Inc. vs. respondent Commission committed grave abuse of discretion in sustaining
Phil. Airlines Employees Association, L-24626, June 28, 1974, 57 SCRA the dismissal of petitioner on the ground of insubordination and loss of
489) for the relations between capital and labor are not merely contractual confidence.
but impressed with public interest (Article 1700, New Civil Code). And neither
capital nor labor shall act oppressively against each other (Article 1701, New Indeed, the outright dismissal of petitioner from his position as Manager-
Civil Code). Philippines of Northwest Airlines is much too severe, considering the length
of service that petitioner has rendered for eleven (11) fruitful and loyal years,
There can be no dispute that the constitutional guarantee of security of a strong and vital factor that must be taken into account in labor law
tenure mandated under Section 9, Article 2, 1973 Constitution applies to all determinations which this Court, speaking thru Chief Justice Fernando
employees and laborers, whether in the government service or in the private in Meracap vs. International Ceramics Manufacturing Co., Inc., L-48235-36,
sector. The fact that petitioner is a managerial employee does not by itself July 30, 1979, 92 SCRA 412 emphasized should not only be secundum
exclude him from the protection of the constitutional guarantee of security of rationem but also secundum caritatem, to wit:
tenure. Even a manager in a private concern has the right to be secure in his
position, to decline a promotion where, although the promotion carries an It would imply at the very least that where a penalty less
increase in his salary and rank but results in his transfer to a new place of punitive would suffice, whatever missteps may be committed
assignment or station and away from his family. Such an order constitutes by labor ought not to be visited with a consequence so
removal without just cause and is illegal. Nor can the removal be justified on severe. It is not only because of the law's concern for the
the ground of loss of confidence as now claimed by private respondent workingman. There is, in addition, his family to consider.
Northwest, insisting as it does that by petitioner's alleged contumacious Unemployment brings untold hardships and sorrows on
refusal to obey the transfer order, said petitioner was guilty of those dependent on the wage-earner. The misery and pain
insubordination. attendant on the loss of jobs then could be avoided if there
be acceptance of the view that under all the circumstances
We cannot agree to Northwest's submission that petitioner was guilty of of this case, petitioners should not be deprived of their
disobedience and insubordination which respondent Commission sustained. means of livelihood. Nor is this to condone what had been
The only piece of evidence on which Northwest bases the charge of done by them. For all this to condone what had been done
contumacious refusal is petitioner's letter dated August 28, 1975 to R. C. by them. For all this while, since private respondent
Jenkins wherein petitioner acknowledged receipt of the former's considered them separated from the service, they had not
memorandum dated August 18, 1975, appreciated his promotion to Director been paid. For the strictly juridical standpoint, it cannot be
of International Sales but at the same time regretted " that at this time for too strongly stressed, to follow Davis in his masterly work,
personal reasons and reasons of my family, I am unable to accept the Discretionary Justice, that where a decision may be made to
transfer from the Philippines" and thereafter expressed his preference to rest on informed judgment rather than rigid rules, all the
remain in his position, saying. " I would, therefore, prefer to remain in my equities of the case must be accorded their due weight.
position of Manager-Philippines until such time that my services in that Finally, labor law determinations, to quote from Bultmann,
capacity are no longer required by Northwest Airlines." From this evidence, should be not only secundum rationem but also secundum
caritatem. (This excerpt was cited in Almira vs B.F. Goodrich case decided last December 15, 1982, Justice de Castro
Philippines, Inc., 58 SCRA 120,131.) speaking for the Court in Acda v. Minister of Labor. Thus:
'The findings of the Labor Arbiter on this point, as upheld by
The trend of recent decisions of this Court as pointed out by Chief Justice the National Labor Relations Commission, are quite clear,
Fernando in the recent case of Johnny Bustillos us. Amado Inciong and and We find no reversible error therein the same being
Cummins Diesel Sales and Service Corporation of the Philippines, G.R. substantiated by evidence of record, aside from the fact that
1,45396, January 27, 1983 has been "to vitalize the constitutional mandate of said findings had already attained the character of finality by
security of tenure as an aspect of the protection accorded labor. For its the non-perfection of a proper appeal.' The opinion goes on
forceful and authoritative weight, We quote lengthily the careful and clear to state: 'With the charges against petitioner found to be
review of Our decisions as follows: unsubstantiated, We are left with no other alternative but to
hold that the so-called 'loss of confidence' is without basis
1. Meracap v. International Ceramics Mfg- Co., Inc. explains and may not be successfully invoked as ground for dismissal
which requires some basis therefor, such ground never
why the appeal should be disposed in that manner. Thus: 'In
a number of decisions, Philippine Air Lines, Inc. v. Philippine having been intended to afford an occasion for abuse by the
Airlines Employees Association, Almira v. B.F. Goodrich employer of its prerogative, as it can easily be subject to
Philippines, Central Textile Mills v. National Labor Relations abuse because of its subjective nature, to dismiss
Commission, and Genconsu Free Workers Union v. employees in contravention with the 'protection of labor'
Inciong, this Court has sought to vitalize the constitutional clause of the Constitution. It is this Constitutional guaranty
that accords even to employees employed on a probationary
mandate of security of tenure as an aspect of the protection
accorded labor.' We do so again in this case. basis the protection that their services may be terminated
only for a just cause or when authorized by existing laws, or
when he fails to qualify as a regular employee in accordance
2. The decision reached not only by a labor arbitrator who with reasonable standards prescribed by the employer.'
heard the case but also by the National Labor Relations
Commission was the reinstatement of petitioner with back
pay. The challenged order reversed it. Thus: 'In effect, 3. There is likewise this excerpt from Meracap which calls for
the reversal of the assailed order of the Secretary of Labor.
complainant has no involvement in the alleged pilferage.
Thus: 'In this suit for certiorari to review the dismissal of an
However, since complainant no longer enjoys the trust and
appeal from a decision of the then Acting Secretary of Labor
confidence reposed upon him by respondent as a Service
Amado G. Inciong by respondent Ronaldo Zamora,
Supervisor, and hence, a managerial employee, respondent
has every right to terminate him. Since the termination is not Presidential Assistant on Legal Affairs, ordering the
for a justifiable cause, complainant is entitled to separation dismissal of petitioner Faustino Meracap, the relevance of
such a provision becomes apparent. It was alleged by
pay.' No case has gone that far. Moreover, the ruling
in Central Textile Mills, Inc. v. National Relations petitioner that while the termination of his services was
Commission is squarely in point. Thus: 'The weakness of the based on his unauthorized absences, the real reason was
due to his union activities. Respondent Zamora ruled
petition to repeat, is thus indisputable. Petitioner,
(management) however, would try to impart a semblance of otherwise. Such a finding of fact must be accorded
plausibility by alleging that even on the assumption that no deference. Nonetheless, considering that petitioner Meracap
has been in the employ of the International Ceramics
theft was committed, still there was loss of confidence
Manufacturing Company, Inc. for eighteen years, it would
sufficient to cause his dismissal In the Philippine Airlines
appear that the punishment was much too severe. Dismissal
decision referred to, the accusation that theft was committed
was not warranted. Suspension would suffice. To that extent,
by the employee was likewise not borne out by the evidence.
To justify a dismissal, management relied on the allegation certiorari lies.' Dismissal as pointed out in the latest case in
point, decided fourteen days after Acda, in
that there was breach of trust, a ground analogous to loss of
the ponencia of Justice Melencio- Herrera in Visperas v.
confidence. The Court of Industrial Relations did not agree.
Inciong, 'is too harsh a penalty. A penalty less punitive
Neither did this Court. Reinstatement was ordered. So it
should have been proper.' In this case, upon mere suspicion,
must be in this case.' The above ruling is reinforced by a
later found to be unsubstantiated, he was immediately retirement plan. If petitioner accepted the cash value representing the
suspended. A two-year suspension would have sufficed, not adjustment in the peso amount of petitioner's dollar base, the money was
the loss of his job. The length of service was accorded due legitimately and legally due to the petitioner; they are not benefits or
consideration in decisions of this Tribunal ordering privileges granted by the airline to the dismissed petitioner. There can be no
reinstatement, twenty years in De Leon v. National Labor estoppel against petitioner's acceptance of the refund of monies legitimately
Relations Commission and Reyes v. Philippine Duplicators his own, nor a waiver of his right to question the termination of his services.
and twenty-two years in Union of Supervisors v. Secretary of (Urgelio vs. Osmeña, Jr., 10 SCRA 253). Even employees who receive their
Labor. Here he was in the service for eleven years when separation pay are not barred from contesting the legality of their dismissal.
suspended. The acceptance of those benefits would not amount to estoppel as held in
the leading case of Mercury Drug Company vs. CIR as aptly cited in the
Accordingly, We must emphasize here the long and faithful years of service decision of the Labor Arbiter. (De Leon vs. NLRC, 100 SCRA 691).
that petitioner had rendered to respondent company, eleven good years, nine
of which as Manager with station at Manila. It is plainly abusive of the In Cariño vs. Agricultural Credit and Cooperative Financing
company and oppressive to the petitioner that the latter is peremptorily Administration, 18 SCRA 183, the rationale of the Court's ruling rejecting the
dismissed on the shallow claim of " resignation without notice," and thereafter argument that acceptance of separation pay and terminal leave benefits by
converted to alleged loss of confidence. This unjustified dismissal of the the employees illegally dismissed by their employer constitutes estoppel, is
petitioner calls for Our specific ruling in the cited case of De Leon vs. stated thus, which We re-echo as follows:
National Labor Relations Commission, 100 SCRA 691, 700, wherein the
Court speaking through Justice De Castro said: Acceptance of those benefits would not amount to estoppel
The reason is plain. Employer and employee, obviously, do
While a Managerial employee may be dismissed merely on not stand on the same footing. The employer drove the
the ground of loss of confidence the matter of determining employee to the wall The latter must have to get hold of
whether the cause for dismissing an employee is justified on money. Because, out of job, he had to face the harsh
ground of loss of confidence, cannot be left entirely to the necessities of life. He thus found himself in no position to
employer. Impartial tribunals do not rely only on the resist money proferred. His, then, is a case of adherence,
statement made by employer that there is 'loss of not of choice. One thing sure, however, is that petitioner did
confidence' unless duly proved or sufficiently substantiated. not relent on their claim. They pressed it. They are deemed
We find no reason to disturb the findings of the Labor Arbiter not to have waived any of their rights. Renuntiatio non
that the charges against petitioner were not fully praesumitur.
substantiated, and 'there can be no valid reason for said loss
of confidence. ... WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the
National Labor Relations Commission in Case No. RB-4220 is hereby
So must this Court re-enforce the constitutional protection afforded labor and REVERSED and SET ASIDE, and the decision of the Labor Arbiter dated
assure the right of workers to security of tenure. Justice and equity call for December 29, 1976 in RB-IV-4220-76 ordering petitioner's reinstatement to
petitioner's reinstatement. It should be so not only secundum rationem but his former position with full backwages for three (3) years without loss of
also secundum caritatem. seniority rights and other benefits recognized by law, including attorney's
fees equivalent to 10% of the total monetary benefits which the petitioner
One last point. We reject the holding of the respondent Commission that may recover, is hereby REINSTATED. Costs against the respondent
petitioner's act in accepting from the respondent airline several pay checks Northwest.
relative to his pension fund and the cash value representing an adjustment in
the peso amount of his dollar base by reason of currency fluctuation Petition granted.
constitutes an admission if not a conformity, of his lawful separation from
office on August 31, 1975. It appears indubitably that the several pay checks SO ORDERED.
mentioned by respondent NLRC were only refunds of petitioner's contribution
to the pension fund of respondent airline. The money refunded was
[G.R. No. 129843. September 14, 1999]
petitioner's own money, that which he personally contributed to the
BLUE DAIRY CORPORATION and/or EDISON T. AVIGUETERO I would like to inform you that I will no longer report for work
and PEDRO G. MIGUEL, Petitioners, v. NATIONAL LABOR because of your drastic and oppressive action. And besides, I have
RELATIONS COMMISSION and ELVIRA R. already filed a case against BLUE DAIRY CORPORATION and/or
RECALDE, Respondents. EDISON T. AVIGUETERO, PEDRO G. MIGUEL x x x x2
(a) Motion for Reconsideration of the Resolution of October 2, 2009 Costs against respondent PAL.
and Second Motion for Reconsideration of the Decision of July 22,
2008 filed by respondents Philippine Airlines, Inc. (PAL) and Patria SO ORDERED. 5
Chiong;1 and
The Third Division thereby differed from the decision of the Court of Appeals
(b) Motion for Reconsideration [Re: The Honorable Court’s (CA), which had pronounced in its appealed decision promulgated on August
Resolution dated 13 March 2012 ]2 of petitioner Flight Attendants and 23, 20066 that the remaining issue between the parties concerned the
Stewards Association of the Philippines (FASAP). manner by which PAL had carried out the retrenchment program.7 Instead,
the Third Division disbelieved the veracity of PAL’s claim of severe financial
Antecedents losses, and concluded that PAL had not established its severe financial
losses because of its non-presentation of audited financial statements. It
further concluded that PAL had implemented the retrenchment program in
bad faith, and had not used fair and reasonable criteria in selecting the The Special Third Division was unconvinced by PAL’s change of theory in
employees to be retrenched. urging the June 1998 Association of Airline Pilots of the Philippines (ALP AP)
pilots' strike as the reason behind the immediate retrenchment; and observed
After PAL filed its Motion for Reconsideration, 8 the Court, upon motion,9 held that the strike was a temporary occurrence that did not require the immediate
oral arguments on the following issues: and sweeping retrenchment of around 1,400 cabin crew.
I Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of
October 2, 2009 and Second Motion for Reconsideration of the Decision of
July 22, 2008.14
WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED
No further pleadings will be entertained. To summarize all the developments that brought about the present dispute--
expressed in a format that can more readily be appreciated in terms of the
SO ORDERED.13 Court en bane's ruling to recall the September 7, 2011 ruling - the F ASAP
case, as it developed, was attended by special and unusual circumstances
that saw:
(a) the confluence of the successive retirement of three assignment of cases after the 2nd MR was accepted, as advocated by some
Justices (in a Division of five Justices) who actually Members within the ruling Division, as against the general rule on inhibition
participated in the assailed Decision and Resolution; under Section 3, Rule 8. The underlying constitutional reason, of course, is
the requirement of Section 4(3), Article VIII of the Constitution already
(b) the change in the governing rules-from the A.M.s to the referred to above.
IRSC regime-which transpired during the pendency of the
case; The general rule on statutory interpretation is that apparently conflicting
provisions should be reconciled and harmonized, as a statute must be so
(c) the occurrence of a series of inhibitions in the course of construed as to harmonize and give effect to all its provisions whenever
the case (Justices Ruben Reyes, Leonardo-De Castro, possible. Only after the failure at this attempt at reconciliation should one
Corona, Velasco, and Carpio), and the absences of Justices provision be considered the applicable provision as against the other.
Sereno and Reyes at the critical time, requiring their
replacement; notably, Justices Corona, Carpio, Velasco and Applying these rules by reconciling the two provisions under
Leonardo-De Castro are the four most senior Members of consideration, Section 3, Rule 8 of the IRSC should be read as the
the Court; general rule applicable to the inhibition of a Member-in-Charge. This
general rule should, however, yield where the inhibition occurs at the
(d) the three re-organizations of the divisions, which all took late stage of the case when a decision or signed resolution is assailed
place during the pendency of the case, necessitating the through an MR. At that point, when the situation calls for the review of the
transfer of the case from the Third Division, to the First, then merits of the decision or the signed resolution made by a ponente (or writer
to the Second Division; of the assailed ruling), Section 3, Rule 8 no longer applies and must yield
to Section 7, Rule 2 of the IRSC which contemplates a situation when
the ponente is no longer available, and calls for the referral of the case
(e) the unusual timing of Atty. Mendoza’s letters, made after
for raffle among the remaining Members of the Division who acted on
the ruling Division had issued its Resolution of September 7,
the decision or on the signed resolution. This latter provision should
2011, but before the parties received their copies of the said
rightly apply as it gives those who intimately know the facts and merits of the
Resolution; and
case, through their previous participation and deliberations, the chance to
take a look at the decision or resolution produced with their participation.
(t) finally, the time constraint that intervened, brought about
by the parties’ receipt on September 19, 2011 of the Special
Division’s Resolution of September 7, 2011, and the To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition,
but it must yield to the more specific Section 7, Rule 2 of the IRSC where the
consequent running of the period for finality computed from
obtaining situation is for the review on the merits of an already issued
this latter date; and the Resolution would have lapsed to
decision or resolution and the ponente or writer is no longer available to act
finality after October 4, 2011, had it not been recalled by that
on the matter. On this basis, the ponente, on the merits of the case on
date.
review, should be chosen from the remaining participating Justices, namely,
Justices Peralta and Bersamin.25
All these developments, in no small measure, contributed in their own
peculiar way to the confusing situations that attended the September 7, 2011
This last resolution impelled F ASAP to file the Motion for Reconsideration
Resolution, resulting in the recall of this Resolution by the Court en banc.24
[Re: The Honorable Court’s Resolution dated 13 March 2012], praying that
the September 7, 2011 resolution in G.R. No. 178083 be reinstated.26
In the same resolution of March 13, 2012, the Court En Banc directed the re-
raffle of G.R. No. 178083 to the remaining Justices of the former Special
We directed the consolidation of G.R. No. 178083 and A.M. No. 11- 10-1-SC
Third Division who participated in resolving the issues pursuant to Section 7,
Rule 2 of the Internal Rules of the Supreme Court, explaining: on April 17, 2012.27
Issues
On deeper consideration, the majority now firmly holds the view that Section
7, Rule 2 of the IRSC should have prevailed in considering the raffle and
PAL manifests that the Motion for Reconsideration of the Resolution of with respect and finality;31 that its being placed under suspension of
October 2, 2009 and Second Motion for Reconsideration of the Decision of payments and corporate rehabilitation and receivership already sufficiently
July 22, 2008 is its first motion for reconsideration vis-a-vis the October 2, indicated its grave financial condition;32 and that the Court should have also
2009 resolution, and its second as to the July 22, 2008 decision. It states taken judicial notice of the suspension of payments and monetary claims filed
therein that because the Court did not address the issues raised in its against PAL that had reached and had been consequently resolved by the
previous motion for reconsideration, it is re-submitting the same, viz.: Court.33
I PAL describes the Court's conclusion that it was not suffering from
tremendous financial losses because it was on the road to recovery a year
xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO after the retrenchment as a mere obiter dictum that was relevant only in
THE FOLLOWING COMPELLING EVIDENCE AND CIRCUMSTANCES rehabilitation proceedings; that whether or not its supposed "stand-alone"
CLEARLY SHOWING PALS; DIRE FINANCIAL CONDITION AT THE TIME rehabilitation indicated its ability to recover on its own was a technical issue
OF THE RETRENCHMENT: (A) PETITIONER'S ADMISSIONS OF PAL'S that the SEC was tasked to determine in the rehabilitation proceedings; that
FINANCIAL LOSSES; (B) THE UNANIMOUS FINDINGS OF THE at any rate, the supposed track to recovery in 1999 and the capital infusion of
SECURITIES AND EXCHANGE COMMISSION (SEC), THE LABOR $200,000,000.00 did not disprove the enormous losses it was sustaining;
ARBITER, THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) that, on the contrary, the capital infusion accented the severe financial losses
AND THE COURT OF APPEALS CONFIRMING PAL'S FINANCIAL CRISIS; suffered because the capital infusion was a condition precedent to the
(C) PREVIOUS CASES DECIDED BY THE HONORABLE COURT approval of the amended and restated rehabilitation plan by the Securities
RECOGNIZING PAL'S DIRE FINANCIAL STATE; AND (D) PAL BEING and Exchange Commission (SEC) with the conformity of PAL's creditors; and
PLACED BY THE SEC UNDER SUSPENSION OF PAYMENTS AND that PAL took nine years to exit from rehabilitation.34
CORPORATE REHABILITATION AND RECEIVERSHIP
As regards the implementation of the retrenchment program in good faith,
II PAL argues that it exercised sound management prerogatives and business
judgment despite its critical financial condition; that it did not act in due haste
in terminating the services of the affected employees considering that
xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S
FASAP was being consulted thereon as early as February 17, 1998; that it
CONCLUSION THAT PAL DID NOT EXERCISE GOOD FAITH [IN] ITS
abandoned "Plan 14" due to intervening events, and instead proceeded to
PREROGATIVE TO RETRENCH EMPLOYEES
implement "Plan 22" which led to the recall/rehire of some of the retrenched
employees;35 and that in selecting the employees to be retrenched, it
III adopted a fair and reasonable criteria pursuant to the collective bargaining
agreement (CBA) where performance efficiency ratings and inverse seniority
THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND were basic considerations.36
REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE
RETRENCHED IS CONTRARY TO ESTABLISHED FACTS, EVIDENCE ON With reference to the Court's resolution of October 2, 2009, PAL maintains
RECORD AND THE FINDINGS OF THE NLRC AND THE COURT OF that:
APPEALS28
I
PAL insists that FASAP, while admitting PAL’s serious financial condition,
only questioned before the Labor Arbiter the alleged unfair and unreasonable
measures in retrenching the employees;29 that F ASAP categorically PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF
PAL'S LABOR FORCE OF ABOUT 5,000 EMPLOYEES, INCLUDING THE
manifested before the NLRC, the CA and this Court that PAL’s financial
1,423 FASAP MEMBERS, WAS THE RESULT OF A CONFLUENCE OF
situation was not the issue but rather the manner of terminating the 1,400
EVENTS, THE EXPANSION OF PAL’S FLEET, THE ASIAN FINANCIAL
cabin crew; that the Court's disregard of FASAP's categorical admissions
CRISIS OF 1997, AND ITS CONSEQUENCES ON PAL'S OPERATIONS,
was contrary to the dictates of fair play;30 that considering that the Labor
Arbiter, the NLRC and the CA unanimously found PAL to have experienced AND THE PILOT’S STRIKE OF JUNE 1998, AND THAT PAL SURVIVED
financial losses, the Court should have accorded such unanimous findings BECAUSE OF THE IMPLEMENTATION OF ITS REHABILITATION PLAN
(LATER "AMENDED AND RESTATED REHABILITATION PLAN") WHICH facing closure in 18 days due to serious financial hemorrhage; hence, the
INCLUDED AMONG ITS COMPONENT ELEMENTS, THE REDUCTION OF strike came as the final blow.
LABOR FORCE
PAL posits that its business decision to downsize was far from being a hasty,
II knee-jerk reaction; that the reduction of cabin crew personnel was an integral
part of its corporate rehabilitation, and, such being a management decision,
THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION the Court could not supplant the decision with its own judgment’ and that the
OF THE NUMBER OF CABIN CREW IN ACCORD WITH ITS ENTRY INTO inaccurate depiction of the strike as a temporary disturbance was lamentable
REHABILITATION AND THE CONSEQUENT TERMINATION OF in light of its imminent financial collapse due to the concerted action.39
EMPLOYMENT OF CABIN CREW PERSONNEL AS A VALID EXERCISE
OF MANAGEMENT PREROGATIVE PAL submits that the Court’s declaration that PAL failed to prove its financial
losses and to explore less drastic cost-cutting measures did not at all jibe
III with the totality of the circumstances and evidence presented; that the
consistent findings of the Labor Arbiter, the NLRC, the CA and even the
SEC, acknowledging its serious financial difficulties could not be ignored or
PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS
disregarded; and that the challenged rulings of the Court conflicted with the
FINANCIAL LOSSES, SO AS TO JUSTIFY THE ENTRY INTO
pronouncements made in Garcia v. Philippine Airlines, Inc. 40 and related
REHABILITATION AND THE CONSEQUENT REDUCTION OF CABIN
CREW PERSONNEL cases41 that acknowledged PAL’s grave financial distress.
V FASAP stresses that the October 4, 2011 resolution recalling the September
7, 2011 decision was void for failure to comply with Section 14, Article VIII of
UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF the 1987 Constitution; that the participation of Chief Justice Renato C.
LESS DRASTIC COST-CUTTING MEASURES WAS NO LONGER Corona who later on inhibited from G.R. No. 178083 had further voided the
POSSIBLE AND SHOULD NOT BE REQUIRED FOR A VALID proceedings; that the 1987 Constitution did not require that a case should be
RETRENCHMENT; IN ANY EVENT, PAL HAD IMPLEMENTED LESS raffled to the Members of the Division who had previously decided it; and that
DRASTIC COST-CUTTING MEASURES BEFORE IMPLEMENTING THE there was no error in raffling the case to Justice Brion, or, even granting that
DOWNSIZING PROGRAM there was error, such error was merely procedural.
PAL contends that the October 2, 2009 resolution focused on an entirely new I
basis - that of PAL’s supposed change in theory. It denies having changed its
theory, however, and maintains that the reduction of its workforce had IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10- 1-SC
resulted from a confluence of several events, like the flight expansion; the (RECALLING THE SEPTEMBER 7, 2011 RESOLUTION) VOID FOR FAIL
1997 Asian financial crisis; and the ALP AP pilots’ strike.38 PAL explains that URE TO COMPLY WITH SECTION 14, RULE VIII OF THE 1987
when the pilots struck in June 1998, it had to decide quickly as it was then CONSTITUTION?
II Accordingly, we REVERSE the July 22, 2008 decision and the October 2,
2009 resolution; and AFFIRM the decision promulgated on August 23, 2006
MAY THE COURT ENTERTAIN THE SECOND MOTION FOR by the CA.
RECONSIDERATION FILED BY THE RESPONDENT PAL?
I
Substantive
The resolution of October 4, 2011
I was a valid issuance of the Court
DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW PERSONNEL? The petitioner urges the Court to declare as void the October 4, 2011
resolution promulgated in A.M. No. 11-10-1-SC for not citing any legal basis
A in recalling the September 7, 2011 resolution of the Second Division.
DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE Section 14. No decision shall be rendered by any court without expressing
RETRENCHMENT PROGRAM? therein clearly and distinctly the facts and the law on which it is based.
As the narration in this Resolution shows, the Court acted on its own
pursuant to its power to recall its own orders and resolutions before
their finality. The October 4, 2011 Resolution was issued to determine Court likewise highlighted the importance of referring the case to
the propriety of the September 7, 2011 Resolution given the facts that the remaining Members who had actually participated in the deliberations, for
came to light after the ruling Division's examination of the records. To not only did such participating Justices intimately know the facts and merits
point out the obvious, the recall was not a ruling on the merits and did of the parties' arguments but doing so would give to such Justices the
not constitute the reversal of the substantive issues already decided opportunity to review their decision or resolution in which they had taken part.
upon by the Court in the FASAP case in its previously issued Decision As it turned out, only Justice Diosdado M. Peralta and Justice Lucas P.
(of July 22, 2008) and Resolution (of October 2, 2009). In short, the Bersamin were the remaining Members of the Special Third Division, and the
October 4, 2011 Resolution was not meant and was never intended to favor task of being in charge procedurally fell on either of them.48 As such, it is
either party, but to simply remove any doubt about the validity of the ruling fallacious for FASAP to still insist that the previous raffle had complied with
Division's action on the case. The case, in the ruling Division's view, could be Section 4(3), Article VIII of the 1987 Constitution just because the Members
brought to the Court en banc since it is one of "sufficient importance"; at the of the Division actually took part in the deliberations.
very least, it involves the interpretation of conflicting provisions of the IRSC
with potential jurisdictional implications. FASAP is further wrong to insist on the application of the harmless error rule.
The rule is embodied in Section 6, Rule 51 of the Rules of Court, which
At the time the Members of the ruling Division went to the Chief Justice to states:
recommend a recall, there was no clear indication of how they would
definitively settle the unresolved legal questions among themselves. The only Section 6. Harmless error. No error in either the admission or the exclusion
matter legally certain was the looming finality of the September 7, 2011 of evidence and no error or defect in any ruling or order or in anything done
Resolution if it would not be immediately recalled by the Court en banc or omitted by the trial court or by any of the parties is ground for granting a
by October 4, 2011. No unanimity among the Members of the ruling Division new trial or for setting aside, modifying, or otherwise disturbing a judgment or
could be gathered on the unresolved legal questions; thus, they concluded order, unless refusal to take such action appears to the court inconsistent
that the matter is best determined by the Court en banc as it potentially with substantial justice. The court at every stage of the proceedings must
involved questions of jurisdiction and interpretation of conflicting provisions of disregard any error or defect which does not affect the substantial rights of
the IRSC. To the extent of the recommended recall, the ruling Division was the parties.
unanimous and the Members communicated this intent to the Chief Justice in
clear and unequivocal terms.44 (Bold underscoring for emphasis) The harmless error rule obtains during review of the things done by either the
trial court or by any of the parties themselves in the course of trial, and any
It should further be clear from the same March 13, 2012 resolution that the error thereby found does not affect the substantial rights or even the merits of
factual considerations for issuing the recall order were intentionally omitted the case. The Court has had occasions to apply the rule in the correction of a
therefrom in obeisance to the prohibition against public disclosure of the misspelled name due to clerical error;49 the signing of the decedents' names
internal deliberations of the Court.45 in the notice of appeal by the heirs;50 the trial court's treatment of the
testimony of the party as an adverse witness during cross-examination by his
Still, F ASAP assails the impropriety of the recall of the September 7, 2011 own counsel;51 and the failure of the trial court to give the plaintiffs the
resolution. It contends that the raffle of G.R. No. 178083 to the Second opportunity to orally argue against a motion.52 All of the errors extant in the
Division had not been erroneous but in "full and complete consonance with mentioned situations did not have the effect of altering the dispositions
Section 4(3) Article VIII of the Constitution;"46 and that any error thereby rendered by the respective trial courts. Evidently, therefore, the rule had no
committed was only procedural, and thus a mere "harmless error" that did not appropriate application herein.
invalidate the prior rulings made in G.R. No. 178083.47
The Court sees no justification for the urging of FASAP that the participation
The contention of F ASAP lacks substance and persuasion. of the late Chief Justice Corona voided the recall order. The urging derives
from FASAP’s failure to distinguish the role of the Chief Justice as the
The Court carefully expounded in the March 13, 2012 resolution on the Presiding Officer of the Banc. In this regard, we advert to the March 13, 2012
resulting jurisdictional conflict that arose from the raffling of G.R. No. 178083 resolution, where the Court made the following observation:
resulting from the successive retirements and inhibitions by several Justices
who at one time or another had been assigned to take part in the case. The
A final point that needs to be fully clarified at this juncture, in light of the motions for reconsideration of Philippine Airlines, Inc., addressing our
allegations of the Dissent is the role of the Chief Justice in the recall of the July 22, 2008 Decision and October 2, 2009 Resolution; and that the
September 7, 2011 Resolution. As can be seen from the xxx narration, September 7, 2011 ruling of the Second Division has been effectively
the Chief Justice acted only on the recommendation of the ruling recalled. This case should now be raffled either to Justice Lucas P.
Division, since he had inhibited himself from participation in the case Bersamin or Justice Diosdado M. Peralta (the remaining members of the
long before. The confusion on this matter could have been brought case) as Member-in-Charge in resolving the merits of these motions.
about by the Chief Justice's role as the Presiding Officer ofthe Court en
banc (particularly in its meeting of October 4, 2011), and the fact that xxxx
the four most senior Justices of the Court (namely, Justices Corona,
Carpio, Velasco and Leonardo-De Castro) inhibited from participating in
The Flight Attendants and Stewards Association of the Philippines’
the case. In the absence of any clear personal malicious participation, it
Motion for Reconsideration of October 17, 2011 is hereby denied; the
is neither correct nor proper to hold the Chief Justice personally
recall of the September 7, 2011 Resolution was made by the Court on
accountable for the collegial ruling of the Court en banc.53 (Bold
its own before the ruling’s finality pursuant to the Court’s power of
underscoring supplied for emphasis) control over its orders and resolutions. Thus, no due process issue
ever arose.
To reiterate, the Court, whether sitting En Banc or in Division, acts as a
collegial body. By virtue of the collegiality, the Chief Justice alone cannot SO ORDERED.
promulgate or issue any decisions or orders. In Complaint of Mr. Aurelio
Jndencia Arrienda Against SC Justices Puna, Kapunan, Pardo,
YnaresSantiago, 54 the Court has elucidated on the collegial nature of the II
Court in relation to the role of the Chief Justice, viz.:
PAL's Second Motion for Reconsideration
The complainant’s vituperation against the Chief Justice on account of what | of the Decision of July 22, 2008
he perceived was the latter's refusal "to take a direct positive and favorable | could be allowed in the higher interest of justice
action" on his letters of appeal overstepped the limits of proper conduct. It
betrayed his lack of understanding of a fundamental principle in our system FASAP asserts that PAL’s Second Motion for Reconsideration of the
of laws. Although the Chief Justice is primus inter pares, he cannot legally Decision of July 22, 2008 was a prohibited pleading; and that the July 22,
decide a case on his own because of the Court's nature as a collegial body. 2008 decision was not anymore subject to reconsideration due to its having
Neither can the Chief Justice, by himself, overturn the decision of the Court, already attained finality.
whether of a division or the en banc.
FASAP’s assertions are unwarranted.
There is only one Supreme Court from whose decisions all other courts are
required to take their bearings.While most of the Court's work is performed With the Court’s resolution of January 20, 2010 granting PAL’s motion for
by its three divisions, the Court remains one court-single, unitary, complete leave to file a second motion for reconsideration,56 PAL's Second Motion for
and supreme. Flowing from this is the fact that, while individual justices may Reconsideration of the Decision of July 22, 2008 could no longer be
dissent or only partially concur, when the Court states what the law is, it challenged as a prohibited pleading. It is already settled that the granting of
speaks with only one voice. Any doctrine or principle of law laid down by the the motion for leave to file and admit a second motion for reconsideration
court may be modified or reversed only by the Court en banc.55 authorizes the filing of the second motion for reconsideration.57 Thereby, the
second motion for reconsideration is no longer a prohibited pleading, and the
Lastly, any lingering doubt on the validity of the recall order should be Court cannot deny it on such basis alone.58
dispelled by the fact that the Court upheld its issuance of the order through
the March 13, 2012 resolution, whereby the Court disposed: Nonetheless, we should stress that the rule prohibiting the filing of a second
motion for reconsideration is by no means absolute. Although Section 2, Rule
WHEREFORE, premises considered, we hereby confirm that the Court en 52 of the Rules of Court disallows the filing of a second motion for
bane has assumed jurisdiction over the resolution of the merits of the reconsideration,59 the Internal Rules of the Supreme Court (IRSC) allows an
exception, to wit:
Section 3. Second motion for reconsideration. - The Court shall not entertain reconsideration would negate whatever financial progress it had achieved
a second motion for reconsideration, and any exception to this rule can during its rehabilitation.65
only be granted in the higher interest of justice by the Court en
bane upon a vote of at least two-thirds of its actual membership. There These arguments of PAL sufficed to show that the assailed decision
is reconsideration "in the higher interest of justice" when the assailed contravened settled jurisprudence on PAL’s precarious financial condition. It
decision is not only legally erroneous, but is likewise patently unjust and cannot be gainsaid that there were other businesses undergoing
potentially capable of causing unwarranted and irremediable injury or rehabilitation that would also be bound or negatively affected by the July 22,
damage to the parties. A second motion for reconsideration can only be 2008 decision. This was the higher interest of justice that the Court sought to
entertained before the ruling sought to be reconsidered becomes final address, which the dissent by Justice Leonen is adamant not to
by operation of law or by the Court's declaration. accept.66 Hence, we deemed it just and prudent to allow PAL’s Second
Motion for Reconsideration of the Decision of July 22, 2008.
In the Division, a vote of three Members shall be required to elevate a
second motion for reconsideration to the Court en banc. It is timely to note, too, that the July 22, 2008 decision did not yet attain
finality. The October 4, 2011 resolution recalled the September 7, 2011
The conditions that must concur in order for the Court to entertain a second resolution denying PAL’s first motion for reconsideration. Consequently, the
motion for reconsideration are the following, namely: July 22, 2008 decision did not attain finality.
1. The motion should satisfactorily explain why granting the same The dissent by Justice Leonen nonetheless proposes a contrary view- that
would be in the higher interest of justice; both the July 22, 2008 decision and the October 2, 2009 resolution had
become final on November 4, 2009 upon the lapse of 15 days following
2. The motion must be made before the ruling sought to be PAL’s receipt of a copy of the resolution. To him, the grant of leave to PAL to
reconsidered attains finality; file the second motion for reconsideration only meant that the motion was no
longer prohibited but it did not stay the running of the reglementary period of
3. If the ruling sought to be reconsidered was rendered by the Court 15 days. He submits that the Court’s grant of the motion for leave to file the
second motion for reconsideration did not stop the October 2, 2009
through one of its Divisions, at least three members of the Division
should vote to elevate the case to the Court En Banc; and resolution from becoming final because a judgment becomes final by
operation of law, not by judicial declaration.67
4. The favorable vote of at least two-thirds of the Court En
Bane’s actual membership must be mustered for the second motion The proposition of the dissent is unacceptable.
for reconsideration to be granted.60
In granting the motion for leave to file the second motion for reconsideration,
Under the IRSC, a second motion for reconsideration may be allowed to the Court could not have intended to deceive the movants by allowing them
prosper upon a showing by the movant that a reconsideration of the previous to revel in some hollow victory. The proposition manifestly contravened the
basic tenets of justice and fairness.
ruling is necessary in the higher interest of justice. There is higher interest of
justice when the assailed decision is not only legally erroneous, but is
likewise patently unjust and potentially capable of causing unwarranted and As we see it, the dissent must have inadvertently ignored the procedural
irremediable injury or damage to the parties.61 effect that a second motion for reconsideration based on an allowable
ground suspended the running of the period for appeal from the date of the
filing of the motion until such time that the same was acted upon and
PAL maintains that the July 22, 2008 decision contravened prevailing
granted.68 Correspondingly, granting the motion for leave to file a second
jurisprudence62 that had recognized its precarious financial condition;63 that
motion for reconsideration has the effect of preventing the challenged
the decision focused on PAL’s inability to prove its financial losses due to its
decision from attaining finality. This is the reason why the second motion for
failure to submit audited financial statements; that the decision ignored the
common findings on the serious financial losses suffered by PAL made by reconsideration should present extraordinarily persuasive reasons. Indeed,
allowing pro forma motions would indefinitely avoid the assailed judgment
the Labor Arbiter, the NLRC, the CA and even the SEC;64 and that the
from attaining finality.69
decision and the subsequent resolution denying PAL’s motion for
By granting PAL’s motion for leave to file a second motion for In the March 13, 2012 resolution, the Court recounted the exigencies that
reconsideration, the Court effectively averted the July 22, 2008 decision and had prompted the Banc to take cognizance of the matter, to wit:
the October 2, 2009 resolution from attaining finality. Worthy of reiteration,
too, is that the March 13, 2012 resolution expressly recalled the September On September 28, 2011, the Letters dated September 13 and 20, 2011 of
7, 2011 resolution. Atty. Mendoza to Atty. Vidal (asking that his inquiry be referred to the
relevant Division Members who took part on the September 7, 2011
Given the foregoing, the conclusion stated in the dissent that the Banc was Resolution) were "NOTED" by the regular Second Division. The Members of
divested of the jurisdiction to entertain the second motion for reconsideration the ruling Division also met to consider the queries posed by Atty. Mendoza.
for being a "third motion for reconsideration;"70 and the unfair remark in the Justice Brion met with the Members of the ruling Division (composed of
dissent that "[t]he basis of the supposed residual power of the Court En Banc Justices Brion, Peralta, Perez, Bersamin, and Mendoza), rather than with the
to, take on its own, take cognizance of Division cases is therefore regular Second Division (composed of Justices Carpio, Brion, Perez, and
suspect"71 are immediately rejected as absolutely legally and factually Sereno), as the former were the active participants in the September 7, 2011
unfounded. Resolution.
To start with, there was no "third motion for reconsideration" to speak of. The In these meetings, some of the Members of the ruling Division saw the
September 11, 2011 resolution denying PAL’s second motion for problems pointed out above, some of which indicated that the ruling Division
reconsideration had been recalled by the October 4, 2011 resolution. Hence, might have had no authority to rule on the case. Specifically, their
PAL’s motion for reconsideration remained unresolved, negating the discussions centered on the application of A.M. No. 99-8-09-SC for the
assertion of the dissent that the Court was resolving the second motion for incidents that transpired prior to the effectivity of the IRSC, and on the
reconsideration "for the second time."72 conflicting rules under the IRSC - - Section 3, Rule 8 on the effects of
inhibition and Section 7, Rule 2 on the resolution of MRs.
Also, the dissent takes issue against our having assumed jurisdiction over
G.R. No. 178083 despite the clear reference made in the October 4, 2011 A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be
resolution to Sections 3(m) and (n), Rule 2 of the IRSC. Relying largely on made among the other Members of the san1e Division who participated in
the Court's construction of Section 4(3), Article VIII of the 1987 Constitution rendering the decision or resolution and who concurred therein, which should
in Fortich v. Corona,73 the dissent opines that the Banc could not act as an now apply because the ruling on the case is no longer final after the case
appellate court in relation to the decisions of the Division;74 and that had been opened for review on the merits. In other words, after acceptance
the Banc could not take cognizance of any case in the Divisions except upon by the Third Division, through Justice Velasco, of the 2nd MR, there should
a prior consulta from the ruling Division pursuant to Section 3(m), in relation have been a referral to raffle because the excepting qualification that the
to Section 3(1), Rule 2 of the IRSC.75 Clerk of Court cited no longer applied; what was being reviewed were the
merits of the case and the review should be by the same Justices who had
The Court disagrees with the dissent’s narrow view respecting the residual originally issued the original Decision and the subsequent Resolution, or by
powers of the Banc. whoever of these Justices are still left in the Court, pursuant to the same
A.M. No. 99-8-09- SC.
Fortich v. Corona, which has expounded on the authority of the Banc to
accept cases from the Divisions, is still the prevailing jurisprudence regarding On the other hand, the raffle to Justice Brion was made by applying AC No.
the construction of Section 4(3), Article VIII of the 1987 Constitution. 84-2007 that had been superseded by Section 3, Rule 8 of the IRSC. Even
However, Fortich v. Corona does not apply herein. It is notable that Fortich v. the use of this IRSC provision, however, would not solve the problem, as its
Corona sprung from the results of the voting on the motion for use still raised the question of the provision that should really apply in the
reconsideration filed by the Sumilao Farmers. The vote ended in an equally resolution of the MR: should it be Section 3, Rule 8 on the inhibition of a
divided Division ("two-two"). From there, the Sumilao Farmers sought to Member-in-Charge, or Section 7, Rule 2 of the IRSC on the inhibition of
elevate the matter to the Banc based on Section 4(3), Article VIII because the ponente when an MR of a decision and a signed resolution was filed. xxx
the required three-member majority vote was not reached. However, the
factual milieu in Fortich v. Coronais not on all fours with that in this case. xxx xxx xxx
A comparison of these two provisions shows the semantic sources of the Resolution be recalled at the very latest on October 4, 2011, and that the
seeming conflict: Section 7, Rule 2 refers to a situation where case be referred to the Court en bane for a ruling on the questions Atty.
the ponente has retired, is no longer a Member of the Court, is disqualified, Mendoza asked. The consequence, of course, of a failure to recall their ruling
or has inhibited himself from acting on the case; while Section 3, Rule 8 was for that Resolution to lapse to finality. After finality, any recall for lack of
generally refers to the inhibition of a Member-in-Charge who does not need jurisdiction of the ruling Division might not be understood by the parties and
to be the writer of the decision or resolution under review. could lead to a charge of flip-flopping against the Court. The basis for the
referral is Section 3(n), Rule 2 of the IRSC, which provides:
Significantly, Section 7, Rule 2 expressly uses the word ponente (not
Member-in-Charge) and refers to a specific situation where the ponente (or RULE 2.
the writer of the Decision or the Resolution) is no longer with the Court or is
otherwise unavailable to review the decision or resolution he or she wrote. OPERATING STRUCTURES
Section 3, Rule 8, on the other hand, expressly uses the term Member-in-
Charge and generally refers to his or her inhibition, without reference to the Section 3. Court en bane matters and eases.-The Court en bane shall act on
stage of the proceeding when the inhibition is made. the following matters and cases:
Under Section 7, Rule 2, the case should have been re-raffled and assigned
xxxx
to anyone of Justices Nachura (who did not retire until June 13, 2011),
Peralta, or Bersamin, either (1) after the acceptance of the 2nd MR (because
the original rulings were no longer final); or (2) after Justice Velasco's (n) cases that the Court en bane deems of sufficient importance to merit its
inhibition because the same condition existed, i.e., the need for a review by attention[.]"
the same Justices who rendered the decision or resolution. As previously
mentioned, Justice Nachura participated in both the original Decision and the Ruling positively, the Court en bane duly issued its disputed October 4, 2011
subsequent Resolution, and all three Justices were the remaining Members Resolution recalling the September 7, 2011 Resolution and ordering the re-
who voted on the October 2, 2009 Resolution. On the other hand, if Section raffle of the case to a new Member-in-Charge. Later in the day, the Court
3, Rule 8 were to be solely applied after Justice Velasco' s inhibition, the received PAL's Motion to Vacate (the September 7, 2011 ruling) dated
Clerk of Court would be correct in her assessment and the raffle to Justice October 3, 2011. This was followed by FASAP's MR dated October 17, 2011
Brion, as a Member outside of Justice Velasco’s Division, was correct. addressing the Court Resolution of October 4, 2011. The F ASAP MR mainly
invoked the violation of its right to due process as the recall arose from the
These were the legal considerations that largely confronted the ruling Court’s ex parte consideration of mere letters from one of the counsels of the
Division in late September 2011 when it deliberated on what to do with Atty. parties.
Mendoza’s letters.
As the narration in this Resolution shows, the Court acted on its own
The propriety of and grounds for pursuant to its power to recall its own orders and resolutions before their
finality. The October 4, 2011 Resolution was issued to determine the
propriety of the September 7, 2011 Resolution given the facts that came to
the recall of the September 7,
light after the ruling Division’s examination of the records. To point out the
2011 Resolution
obvious, the recall was not a ruling on the merits and did not constitute the
reversal of the substantive issues already decided upon by the Court in the F
Most unfortunately, the above unresolved questions were even further ASAP case in its previously issued Decision (of July 22, 2008) and
compounded in the course of the deliberations of the Members of the ruling Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution
Division when they were informed that the parties received the ruling on was not meant and was never intended to favor either party, but to simply
September 19, 2011, and this ruling would lapse to finality after the 15th day, remove any doubt about the validity of the ruling Division's action on the
or after October 4, 2011. case. The case, in the ruling Division's view, could be brought to the Court en
banc since it is one of "sufficient importance"; at the very least, it involves the
Thus, on September 30, 2011 (a Friday), the Members went to Chief Justice interpretation of conflicting provisions of the IRSC with potential jurisdictional
Corona and recommended, as a prudent move, that the September 7, 2011 implications.
At the time the Members of the ruling Division went to the Chief Justice to It is argued that the assailed Resolutions in the present cases have already
recommend a recall, there was no clear indication of how they would become final, since a second motion for reconsideration is prohibited except
definitively settle the unresolved legal questions among themselves. The only for extraordinarily persuasive reasons and only upon express leave first
matter legally certain was the looming finality of the September 7, 2011 obtained; and that once a judgment attains finality, it thereby becomes
Resolution if it would not be immediately recalled by the Court en bane by immutable and unalterable, however unjust the result of error may appear.
October 4, 2011. No unanimity among the Members of the ruling Division
could be gathered on the unresolved legal questions; thus, they concluded The contention, however, misses an important point. The doctrine
that the matter is best determined by the Court en bane as it potentially of immutability of decisions applies only to final and executory decisions.
involved questions of jurisdiction and interpretation of conflicting provisions of Since the present cases may involve a modification or reversal of a Court-
the IRSC. To the extent of the recommended recall, the ruling Division was ordained doctrine or principle, the judgment rendered by the Special Third
unanimous and the Members communicated this intent to the Chief Justice in Division may be considered unconstitutional, hence, it can never become
clear and unequivocal terms.76 (Bold scoring supplied for emphasis) final. It finds mooring in the deliberations of the framers of the Constitution:
It is well to stress that the Banc could not have assumed jurisdiction were it On proposed Section 3(4), Commissioner Natividad asked what the effect
not for the initiative of Justice Arturo V. Brion who consulted the Members of would be of a decision that violates the proviso that "no doctrine or principle
the ruling Division as well as Chief Justice Corona regarding the jurisdictional of law laid down by the court in a decision rendered en bane or in division
implications of the successive retirements, transfers, and inhibitions by the may be modified or reversed except by the court en bane." The answer given
Members of the ruling Division. This move by Justice Brion led to the referral was that such a decision would be invalid. Following up, Father Bernas
of the case to the Banc in accordance with Section 3(1), Rule 2 of the IRSC asked whether the decision, if not challenged, could become final and
that provided, among others, that any Member of the Division could request binding at least on the parties. Romulo answered that, since such a
the Court En Banc to take cognizance of cases that fell under paragraph (m). decision would be in excess of jurisdiction, the decision on the case
This referral by the ruling Division became the basis for the Banc to issue its could be reopened anytime. (emphasis and underscoring supplied)
October 4, 2011 resolution.
A decision rendered by a Division of this Court in violation of this
For sure, the Banc, by assuming jurisdiction over the case, did not seek to constitutional provision would be in excess of jurisdiction and, therefore,
act as appellate body in relation to the acts of the ruling Division, contrary to invalid. Any entry of judgment may thus be said to be "inefficacious" since the
the dissent's position.77 The Bane's recall of the resolution of September 7, decision is void for being unconstitutional.
2011 should not be so characterized, considering that the Banc did not
thereby rule on the merits of the case, and did not thereby reverse the July While it is true that the Court en bane exercises no appellate jurisdiction over
22, 2008 decision and the October 2, 2009 resolution. The referral of the its Divisions, Justice Minerva Gonzaga-Reyes opined in Firestone and
case to the Banc was done to address the conflict among the provisions of
concededly recognized that "[t]he only constraint is that any doctrine or
the IRSC that had potential jurisdictional implications on the ruling made by principle of law laid down by the Court, either rendered en bane or in division,
the Second Division. may be overturned or reversed only by the Court sitting en banc."
At any rate, PAL constantly raised in its motions for reconsideration that the That a judgment must become final at some definite point at the risk of
ruling Division had seriously erred not only in ignoring the consistent findings
occasional error cannot be appreciated in a case that embroils not only a
about its precarious financial situation by the Labor Arbiter, the NLRC, the
general allegation of "occasional error" but also a serious accusation of a
CA and the SEC, but also in disregarding the pronouncements by the Court violation of the Constitution, viz., that doctrines or principles of law were
of its serious fiscal condition. To be clear, because the serious challenge by
modified or reversed by the Court's Special Third Division August 4, 2009
PAL against the ruling of the Third Division was anchored on the Third Resolution.
Division’s having ignored or reversed settled doctrines or principles of law,
only the Banc could assume jurisdiction and decide to either affirm, reverse
or modify the earlier decision. The rationale for this arrangement has been The law allows a determination at first impression that a doctrine or principle
expressed in Lu v. Lu Ym78 thuswise: laid down by the court en bane or in division may be modified or reversed in
a case which would warrant a referral to the Court En Banc. The use of the
word "may" instead of "shall" connotes probability, not certainty, of
modification or reversal of a doctrine, as may be deemed by the Court. endeavor; her dissent from the Court's conclusions in the case in question is
Ultimately, it is the entire Court which shall decide on the acceptance of the likely to be dense with insight into these aspects of her judicial persona. 84
referral and, if so, "to reconcile any seeming conflict, to reverse or modify an
earlier decision, and to declare the Court's doctrine." III
The Court has the power and prerogative to suspend its own rules and to PAL implemented a valid retrenchment program
exempt a case from their operation if and when justice requires it, as in the
present circumstance where movant filed a motion for leave after the prompt Retrenchment or downsizing is a mode of terminating employment initiated
submission of a second motion for reconsideration but, nonetheless, still
by the employer through no fault of the employee and without prejudice to
within15 days from receipt of the last assailed resolution.79
the latter, resorted to by management during periods of business recession,
industrial depression or seasonal fluctuations or during lulls over shortage of
Lastly, the dissent proposes that a unanimous vote is required to grant materials. It is a reduction in manpower, a measure utilized by an employer
PAL’s Second Motion for Reconsideration of the Decision of July 22, to minimize business losses incurred in the operation of its business. 85
2008.80 The dissent justifies the proposal by stating that "[a] unanimous court
would debate and deliberate more fully compared with a non-unanimous
Anent retrenchment, Article 29886 of the Labor Code provides as follows:
court. "81
Article 298. Closure of Establishment and Reduction of Personnel. - The
The radical proposal of the dissent is bereft of legal moorings. Neither the employer may also terminate the employment of any employee due to
1987 Constitution nor the IRSC demands such unanimous vote. Under the installation of labor saving devices, redundancy, retrenchment to
Section 4(2), Article VIII of the 1987 Constitution, decisions by the Banc shall
prevent losses or the closing or cessation of operation of the establishment
be attained by a "concurrence of a majority of the Members who actually took
or undertaking unless the closing is for the purpose of circumventing the
part in the deliberations on the issues in the case and voted thereon." As a
provisions of this Title, by serving a written notice on the workers and the
collegial body, therefore, the Court votes after deliberating on the case, and Ministry of Labor and Employment at least one (1) month before the intended
only a majority vote is required,82 unless the 1987 Constitution specifies
date thereof. In case of termination due to the installation of labor saving
otherwise. In all the deliberations by the Court, dissenting and concurring
devices or redundancy, the worker affected thereby shall be entitled to a
opinions are welcome, they being seen as sound manifestations of "the
separation pay equivalent to at least his one (1) month pay or to at least one
license of individual Justices or groups of Justices to separate themselves
(1) month pay for every year of service, whichever is higher. In case of
from "the Court’s" adjudication of the case before them,"83 thus: retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business
[C]oncurring and dissenting opinions serve functions quite consistent with a losses or financial reverses, the separation pay shall be equivalent to one (1)
collegial understanding of the Court. Internally within the Court itself---dissent month pay or to at least one-half (1/2) month pay for every year of service,
promotes and improves deliberation and judgment. Arguments on either side whichever is higher. A fraction of at least six (6) months shall be considered
of a disagreement test the strength of their rivals and demand attention and one (1) whole year.
response. The opportunity for challenge and response afforded by the
publication of dissenting and concurring opinions is a close and sympathetic
Accordingly, the employer may resort to retrenchment in order to avert
neighbor of the obligation of reasoned justification.
serious business losses. To justify such retrenchment, the following
conditions must be present, namely:
Externally for lower courts, the parties, and interested bystanders-concurring
and dissenting opinions are important guides to the dynamic "meaning" of a 1. The retrenchment must be reasonably necessary and likely to
decision by the Court. From a collegial perspective, dissenting and
prevent business losses;
concurring opinions offer grounds for understanding how individual Justices,
entirely faithful to their Court's product, will interpret that product. The
meaning each Justice brings to the product of her Court will inevitably be 2. The losses, if already incurred, are not merely de minimis, but
shaped by elements of value and judgment she brings to the interpretive substantial, serious, actual and real, or, if only expected, are
reasonably imminent;
3. The expected or actual losses must be proved by sufficient and PAL’s financial troubles; and that it was only questioning the manner and
convincing evidence; lack of standard in carrying out the retrenchment, thus:
4. The retrenchment must be in good faith for the advancement of its At the outset, it must be pointed out that complainant was never opposed to
interest and not to defeat or circumvent the employees' right to the retrenchment program itself, as it understands respondent PAL’s financial
security of tenure; and troubles. In fact, complainant religiously cooperated with respondents in their
quest for a workable solution to the company-threatening problem. Attached
5. There must be fair and reasonable criteria m ascertaining who herewith as Annexes "A" to "D" are the minutes of its meetings with
would be dismissed and who would be retained among the respondent PAL’s representatives showing complainant's active participation
employees, such as status, efficiency, seniority, physical fitness, age, in the deliberations on the issue.
and financial hardship for certain workers.87
What complainant vehemently objects to are the manner and the lack of
Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial criteria or standard by which the retrenchment program was implemented or
losses because it did not submit its audited financial statements as evidence; carried out, despite the fact that there are available criteria or standard that
(2) observe good faith in implementing the retrenchment program; and (3) respondents could have utilized or relied on in reducing its workforce. In
apply a fair and reasonable criteria in selecting who would be terminated. adopting a retrenchment program that was fashioned after the evil prejudices
and personal biases of respondent Patria Chiong, respondent PAL grossly
Upon a critical review of the records, we are convinced that PAL had met all violated at least two important provisions of its CBA with complainant - Article
the standards in effecting a valid retrenchment. VII, Section 23 and Article IX, Sections 31and 32. 89
In Philippine Airlines v. Kurangking; Philippine Airlines v. Court of Appeals, SEC. 5. In addition to the regulatory and adjudicative functions of THE
Philippine Airlines v. PALEA and Philippine Airlines v. National Labor SECURITIES AND EXCHANGE COMMISSION over corporations,
Relations Commission, the Court uniformly upheld the suspension of partnerships and other forms of associations registered with it as expressly
monetary claims against PAL because of the SEC’s order placing it under granted under existing laws and decrees, it shall have original and exclusive
receivership. The Court emphasized the need to suspend the payment of the jurisdiction to hear and decide cases involving:
claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring xxx xxx xxx
and rehabilitation. Philippine Airlines v. Zamorareiterated this rule and
deferred to the prior judicial notice taken by the Court in suspending the
monetary claims of illegally dismissed employees.112 (d) Petitions of corporations, partnerships or associations declared in
the state of suspension of payments in cases where the corporation,
partnership or association possesses sufficient property to cover all
Through these rulings, the Court consistently recognized PAL’s financial debts but foresees the impossibility of meeting them when they
troubles while undergoing rehabilitation and suspension of payments. respectively fall due or in cases where the corporation, partnership,
Considering that the ruling related to conditions and circumstances that had association has no sufficient assets to cover its liabilities, but is under
occurred during the same period as those obtaining in G.R. No. 178083, the the management of a Rehabilitation Receiver or Management
Court cannot take a different view. Committee created pursuant to this Decree.
It is also proper to indicate that the Court decided the other cases long before
SEC. 6. In order to effectively exercise such jurisdiction, the Commission
the promulgation of the assailed July 22, 2008 decision. Hence, the Special
shall possess the following powers:
Third Division should not have regarded the financial losses as an issue that
still required determination. Instead, it should have just simply taken judicial
notice of the serious financial losses being suffered by PAL.113 To still rule xxx xxx xxx
that PAL still did not prove such losses certainly conflicted with the
antecedent judicial pronouncements about PAL’s dire financial state. (c) To appoint one or more receivers of the property, real and personal,
which is the subject of the action pending before the Commission in
As such, we cannot fathom the insistence by the dissent that the Court had accordance with the provisions of the Rules of Court in such other cases
not taken judicial notice but merely "recognized" that PAL was under whenever necessary in order to preserve the rights of the parties-litigants
corporate rehabilitation. Judicial notice is the cognizance of certain facts that and/or protect the interest of the investing public and creditors:
judges may properly take and act on without proof because they already Provided, however, That the Commission may in
know them. It is the manner of recognizing and acknowledging facts that no appropriate cases, appoint a rehabilitation receiver of corporations,
longer need to be proved in court. In other words, when the Court partnerships or other associations not supervised or regulated by other
"recognizes" a fact, it inevitably takes judicial notice of it. government agencies who shall have, in addition to powers of the
regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph petition for certiorari, the Court Resolved to DISMISS the petition
(d) hereof: ... for certiorari (Underscoring supplied).
(d) To create and appoint a management committee, board or body upon The parties in G.R. No. 145977 having sought, and this Court having
petition or motupropio to undertake the management of corporations, granted, the dismissal of the appeal of the therein petitioners including
partnership or other associations not supervised or regulated by other CLARION, the CA decision which affirmed in toto the September 14, 1999
government agencies in appropriate cases when there is imminent danger Order of the SEC, the dispositive portion of which SEC Order reads:
of dissipation,· loss, wastage or destruction of assets or other
properties or paralization of business operations of such corporations WHEREFORE, premises considered, the appeal is as it is hereby, granted
or entities which may be prejudicial to the interest of minority and the Order dated 18 December 1998 is set aside. The Petition to be
stockholders, parties-litigants of the general public: ... (Emphasis and Declared in State of Suspension of payments is hereby disapproved and the
underscoring supplied). SAC Plan terminated. Consequently, all committee, conservator/receivers
created pursuant to said Order are dissolved and discharged and all acts and
From the above-quoted provisions of P.D. No. 902-A, as amended, the orders issued therein are vacated.
appointment of a receiver or management committee by the SEC
presupposes a finding that, inter alia, a company possesses sufficient The Commission, likewise, orders the liquidation and dissolution of the
property to cover all its debts but "foresees the impossibility of meeting them appellee corporations.The case is hereby remanded to the hearing panel
when they respectively fall due" and "there is imminent danger of dissipation, below for that purpose.
loss, wastage or destruction of assets of other properties or paralization of
business operations."
xxx xxx x x x (Emphasis and underscoring supplied),
That the SEC, mandated by law to have regulatory functions over has now become final and executory. Ergo, the SEC's disapproval of the
corporations, partnerships or associations, appointed an interim receiver for
EYCO Group of Companies' "Petition for the Declaration of Suspension of
the EYCO Group of Companies on its petition in light of, as quoted above, Payment ... " and the order for the liquidation and dissolution of these
the therein enumerated "factors beyond the control and anticipation of the
companies including CLARION, must be deemed to have been unassailed.
management" rendering it unable to meet its obligation as they fall due, and
thus resulting to "complications and problems ... to arise that would impair
and affect [its] operations ... " shows that CLARION, together with the other That judicial notice can be taken of the above-said case of Nikon Industrial
member-companies of the EYCO Group of Companies, was suffering Corp. et al. v. PNB et al.,there should be no doubt.
business reverses justifying, among other things, the retrenchment of its
employees. As provided in Section 1, Rule 129 of the Rules of Court:
This Court in fact takes judicial notice of the Decision of the Court of Appeals SECTION 1. Judicial notice, when mandatory. - A court shall take judicial
dated June 11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp., notice, without the introduction of evidence, of the existence and territorial
Nikolite Industrial Corp., et al. [including CLARION], otherwise known as the extent of states, their political history, forms of government and symbols of
EYCO Group of Companies v. Philippine National Bank, Solidbank nationality, the law of nations, the admiralty and maritime courts of the world
Corporation, et al., collectively known and referred as the 'Consortium of and their seals, the political constitution and history of the Philippines,
Creditor Banks,"' which was elevated to this Court via Petition the official acts of thelegislative, executive and judicial departments of the
for Certiorari and docketed as G.R. No. 145977, but which petition this Court Philippines, the laws of nature, the measure of time, and the geographical
dismissed by Resolution dated May 3, 2005: divisions. (Emphasis and underscoring supplied)
Considering the joint manifestation and motion to dismiss of petitioners and which Mr. Justice Edgardo L. Paras interpreted as follows:
respondents dated February 24, 2003, stating that the parties have reached
a final and comprehensive settlement of all the claims and counterclaims A court will take judicial notice of its own acts and records in the same
subject matter of the case and accordingly, agreed to the dismissal of the case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties, of constantly present, in greater or lesser degree, in the carrying on of business
the files of related cases in the same court, and of public records on file operations, since some, indeed many, of the factors which impact upon the
in the same court. In addition judicial notice will be taken of the record, profitability or viability of such operations may be substantially outside the
pleadings or judgment of a case in another court between the same parties control of the employer.
or involving one of the same parties, as well as of the record of another case
between different parties in the same court. Judicial notice will also be taken On the bases of these consideration, it follows that the employer bears the
of court personnel. (Emphasis and underscoring supplied) burden to prove his allegation of economic or business reverses with clear
and satisfactory evidence, it being in the nature of an affirmative defense. As
In fine, CLARION's claim that at the time it terminated Miclat it was earlier discussed, we are fully persuaded that the private respondent has
experiencing business reverses gains more light from the SEC's disapproval been and is besieged by a continuing downtrend in both its business
of the EYCO Group of Companies' petition to be declared in state of operations and financial resources, thus amply justifying its resort to drastic
suspension of payment, filed before Miclat’stermination, and of the SEC’s cuts in personnel and costs.118
consequent order for the group of companies’ dissolution and liquidation. 115
B
At any rate, even assuming that serious business losses had not been
proved by PAL, it would still be justified under Article 298 of the Labor PAL retrenched in good faith
Code to retrench employees to prevent the occurrence of losses or its
closing of the business, provided that the projected losses were not
The employer is burdened to observe good faith in implementing a
merely de minimis, but substantial, serious, actual, and real, or, if only
retrenchment program. Good faith on its part exists when the retrenchment is
expected, were reasonably imminent as perceived objectively and in good
intended for the advancement of its interest and is not for the purpose of
faith by the employer.116 In the latter case, proof of actual financial losses
defeating or circumventing the rights of the employee under special laws or
incurred by the employer would not be a condition sine qua non for
under valid agreements.119
retrenchment,117 viz.:
The July 22, 2008 decision branded the recall of the retrenched employees
Third, contrary to petitioner’s asseverations, proof of actual financial losses
and the implementation of "Plan 22" instead of "Plan 14" as badges of bad
incurred by the company is not a condition sine qua non for retrenchment.
faith on the part of PAL. On the other hand, the October 2, 2009 resolution
Retrenchment is one of the economic grounds to dismiss employees, which
condemned PAL for changing its theory by attributing the cause of the
is resorted to by an employer primarily to avoid or minimize business losses. retrenchment to the ALP AP pilots’ strike.
The law recognize this under Article 283 of the Labor Code x x x
PAL refutes the adverse observations, and maintains that its position was
xxxx
clear and consistent - that the reduction of its labor force was an act of
survival and a less drastic measure as compared to total closure and
In its ordinary connotation, the phrase "to prevent losses" means that liquidation that would have otherwise resulted; that downsizing had been an
retrenchment or termination of the services of some employees is authorized option to address its financial losses since 1997;120that the reduction of
to be undertaken by the employer sometime before the anticipated losses personnel was necessary as an integral part of the means to ensure the
are actually sustained or realized. It is not, in other words, the intention of the success of its corporate rehabilitation plan to restructure its business; 121 and
lawmaker to compel the employer to stay his hand and keep all his that the downsizing of its labor force was a sound business decision
employees until after losses shall have in fact materialized. If such an intent undertaken after an assessment of its financial situation and the remedies
were expressly written into the law, that law may well be vulnerable to available to it.122
constitutional attack as unduly taking property from one man to be given to
another.
A hard look at the records now impels the reconsideration of the July 22,
2008 decision and the resolution of October 2, 2009.
At the other end of the spectrum, it seems equally clear that not every
asserted possibility of loss is sufficient legal warrant for the reduction of PAL could not have been motivated by ill will or bad faith when it decided to
personnel. In the nature of things, the possibility of incurring the losses is
terminate FASAP’s affected members. On the contrary, good faith could be
justly inferred from PAL’s conduct before, during and after the termination of probationary cabin attendant, and work-
implementation of the retrenchment plan. rotations).125 Obviously, the dissent missed this part as it stuck to the belief
that PAL did not implement other cost-cutting measures prior to
Notable in this respect was PAL’s candor towards FASAP regarding its plan retrenchment.126
to implement the retrenchment program. This impression is gathered from
PAL’s letter dated February 11, 1998 inviting FASAP to a meeting to discuss Given PAL’s dire financial predicament, it becomes understandable that PAL
the matter, thus: was constrained to finally implement the retrenchment program when the
ALPAP pilots strike crippled a major part of PAL’s operations.127 In Rivera v.
Roberto D. Anduiza Espiritu, 128 we observed that said strike wrought "serious losses to the
President financially beleaguered flag carrier;" that "PAL’s financial situation went from
bad to worse;" and that "[f]aced with bankruptcy, PAL adopted a
rehabilitation plan and downsized its labor force by more than one-
Flight Attendants’ and Stewards' Association of the Philippines (FASAP)
third." Such observations sufficed to show that retrenchment became a last
resort, and was not the rash and impulsive decision that F ASAP would make
xxxx it out to be now.
Mr. Anduiza: As between maintaining the number of its flight crew and PAL’s survival, it
was reasonable for PAL to choose the latter alternative. This Court cannot
Due to critical business losses and in view of severe financial reverses, legitimately force PAL as a distressed employer to maintain its manpower
Philippine Airlines must undertake drastic measures to strive at survival. In despite its dire financial condition. To be sure, the right of PAL as the
order to meet maturing obligations amidst the present regional crisis, the employer to reasonable returns on its investments and to expansion and
Company will implement major cost-cutting measures in its fleet plan, growth is also enshrined in the 1987 Constitution.129 Thus, although labor is
operating budget, routes and frequencies. These moves include the closure entitled to the right to security of tenure, the State will not interfere with the
of stations, downsizing of operations and reducing the workforce through employer's valid exercise of its management prerogative.
layoff/retrenchment or retirement.
Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation
In this connection, the Company would like to meet with the Flight Receiver and Approval of a Rehabilitation Plan with the SEC on June 19,
Attendants' and Stewards’ Association of the Philippines (FASAP) to discuss 1998, before the retrenchment became effective.130 PAL likewise manifested
the implementation of the lay-off/retrenchment or retirement of F ASAP- that:
covered employees. The meeting shall be at the Allied Bank Center (81h
Floor-Board Room) on February 12, 1998 at 4:00 p.m. x x x The Rehabilitation Plan and Amended Rehabilitation Plan submitted by
PAL in pursuance of its corporate rehabilitation, and which obtained the joint
This letter serves as notice in compliance with Article 283 of the Labor Code, approval of PAL’s creditors and the SEC, had as a primary component, the
as amended and DOLE Orders Nos[.] 9 and 10, Series of 1997. downsizing of PAL’s labor force by at least 5,000, including the 1,400
flight attendants. As conceptualized by a team of industry experts, the
Very truly yours, cutting down of operations and the consequent reduction of work force,
along with the restructuring of debts with significant "haircuts" and the
(Sgd.) capital infusion of Mr. Lucio Tan amounting to US$200 million, were the
JOSE ANTONIO GARCIA key components of PAL's rehabilitation. The Interim Rehabilitation
President & Chief Operating Officer123 Receiver was replaced by a Permanent Rehabilitation Receiver on June 7,
1999.131 (Bold underscoring supplies for emphasis)
The records also show that the parties met on several occasions 124 to
explore cost-cutting measures, including the implementation of the Being under a rehabilitation program, PAL had no choice but to implement
retrenchment program. PAL likewise manifested that the retrenchment plan the measures contained in the program, including that of reducing its
was temporarily shelved while it implemented other measures (like manpower. Far from being an impulsive decision to defeat its employees’
right to security of tenure, retrenchment resulted from a meticulous plan Finally, all the efforts of PAL to preserve the employment of its
primarily aimed to resuscitate PAL’s operations. personnel were shattered by the illegal strike of its pilots which has
cause irreparable damage to the company's cash flow. Consequently,
Good faith could also be inferred from PAL’s compliance with the basic the company is now no longer able to meet its maturing obligations and
requirements under- Article 298 of the Labor Code prior to laying-off its is not about to go into default in all its major loans. It is presently under
affected employees. Notably, the notice of termination addressed to the threat of receiving a barrage of suits from its creditors who will go after
Department of Labor and Employment (DOLE) identified the reasons behind the assets of the corporation.
the massive termination, as well as the measures PAL had undertaken to
prevent the situation, to wit: Under the circumstances, PAL is left with no recourse but to reduce its fleet
and its flight frequencies both in the domestic and international sectors to
June 15, 1998 ensure its survival. Consequently, a reduction of personnel is inevitable.
HON. MAXIMO B. LIM All affected employees in the attached list will be given the corresponding
THE REGIONAL DIRECTOR benefits which they may be entitled to.
Department of Labor and Employment
Regional Office No. NCR Very truly yours,
This is to inform you that Philippine Air Lines, Inc. (PAL) will be implementing JOSE ANTONIO GARCIA
a retrenchment program one (1) month from notice hereof in order to prevent
bankruptcy. President & Chief Operating Officer132
PAL is forced to take this action because of continuous losses it has As regards the observation made in the decision of July 22, 2008 to the
suffered over the years which losses were aggravated by the PALEA effect that the recall of the flight crew members indicated bad faith, we hold
strike in October 1996, peso depreciation, Asian currency crisis, to the contrary.
causing a serious drop in our yield and the collapse of passenger
traffic in the region. Specifically, PAL suffered a net loss of ₱2.18 Billion
PAL explained how the recall process had materialized, as follows:
during the fiscal year 1995-1996, ₱2.50 Billion during the fiscal year
1996-1997 and ₱8.08 Billion for the period starting April 1, 1997 to
March 31, 1998. During this time, the Company was slowly but steadily recovering. Its
finances were improving and additional planes were flying. Because of the
Company's steady recovery, necessity dictated more employees to man and
These uncontrolled heavy losses have left PAL with no recourse but to
service the additional planes and flights. Thus, instead of taking in new hires,
reduce its fleet and its flight frequencies both in the domestic and
the Company first offered employment to employees who were previously
international sectors to ensure its survival.
retrenched. A recall/rehire plan was initiated.
In selecting the employees to be dismissed, the employer is required to In this connection, we adopt the following cogent observations by the CA on
adopt fair and reasonable criteria, taking into consideration factors the matter for being fully in accord with law and jurisprudence:
like: (a) preferred status; (b) efficiency; and (c) seniority, among
others.141 The requirement of fair and reasonable criteria is imposed on the FASAP insists that several CBA provisions have been violated by the
employer to preclude the occurrence of arbitrary selection of employees to retrenchment. They are the provisions on seniority, performance appraisal,
be retrenched. Absent any showing of bad faith, the choice of who should be reduction in personnel and downgrading and pem1anent OCARs. Seniority
retrenched must be conceded to the employer for as long as a basis for the and performance stand out because these were the main considerations of
retrenchment exists.142 PAL in selecting workers to be retrenched. Under the CBA, seniority is
defined "to mean a measure of a regular Cabin Attendant’s claim in relation
We have found arbitrariness in terminating the employee under the guise of a to other regular Cabin Attendants holding similar positions, to preferential
retrenchment program wherein the employer discarded the criteria it adopted consideration whatever the Company exercises its right to promote to a
in terminating a particular employee;143 when the termination discriminated higher paying position of lay-off of any Cabin Attendant." Seniority,
the employees on account of their union membership without regard to their however, is not the sole determinant of retention. This is clear under
years of service;144 the timing of the retrenchment was made a day before Article XIII on performance appraisal of the CBA provisions.
the employee may be regularized;145 when the employer disregarded
altogether the factor of seniority and choosing to retain the newly hired Under the CBA, several factors are likewise taken into consideration
employees;146 that termination only followed the previous retrenchment of like performance and professionalism in addition to the seniority factor.
two non-regular employees;147 and when there is no appraisal or criteria However, the criteria for performance and professionalism are not
applied in the selection.148 indicated in the CBA but are to be formulated by PAL in consultation
with FASAP. Where there is retrenchment, cabin attendants who fail to
On the other hand, we have considered as valid the retrenchment of the attain at least 85% of the established criteria shall be demoted
employee based on work efficiency,149 or poor performance;150 or the progressively. Domestic cabin attendants, the occupants of lowest rung
margins of contribution of the consultants to the income of the company; 151 or of the organizational hierarchy, are to be retrenched once they fail to
absenteeism, or record of disciplinary action, or efficiency and work meet the required percentage.
attitude;152 or when the employer exerted efforts to solicit the employees'
participation in reviewing the criteria to be used in selecting the workers to be We have painstakingly examined the records and We find no indication
laid off.153 that these provisions have been grossly disregarded as to taint the
retrenchment with illegality. PAL relied on specific categories of
In fine, the Court will only strike down the retrenchment of an employee as criteria, such as merit awards, physical appearance, attendance
capricious, whimsical, arbitrary, and prejudicial in the absence of a clear-cut and checkrides,to guide its selection of employees to be removed. We
and uniform guideline followed by the employer in selecting him or her from do not find anything legally objectionable in the adoption of the
the work pool. Following this standard, PAL validly implemented its foregoing norms. On the contrary, these norms are most relevant to the
retrenchment program. nature of a cabin attendant's work.
However, the contention of FASAP that these criteria required its prior signing the waiver or quitclaim, they are forfeiting or relinquishing their right
conformity before adoption is not supported by Section 30, Article VIII to receive the benefits which are due them under the law; and
of the CBA. Note should be taken that this provision only mandates
PAL to "meet and consult" the Association (FASAP) in the formulation 4. A statement that the employees signed and executed the document
of the Performance and Professionalism Appraisal System." By the voluntarily, and had fully understood the contents of the document and
ordinary import of this provision, PAL is only required to confer with that their consent was freely given without any threat, violence, duress,
FASAP; it is not at all required to forge an addendum to the CBA, which intimidation, or undue influence exerted on their person.157 (Bold supplied for
will concretize the appraisal system as basis for retrenchment or emphasis)
retention.155
The release and quitclaim signed by the affected employees substantially
To require PAL to further limit its criteria would be inconsistent with satisfied the aforestated requirements. The consideration was clearly
jurisprudence and the principle of fairness. Instead, we hold that for as long indicated in the document in the English language, including the benefits that
as PAL followed a rational criteria defined or set by the CBA and existing the employees would be relinquishing in exchange for the amounts to be
laws and jurisprudence in determining who should be included in the received. There is no question that the employees who had occupied the
retrenchment program., it sufficiently met the standards of fain1ess and position of flight crew knew and understood the English language. Hence,
reason in its implementation of its retrenchment program. they fully comprehended the terms used in the release and quitclaim that
they signed.
D
Indeed, not all quitclaims are per se invalid or against public
The retrenched employees signed valid quitclaims policy.1a\^/phi1 A quitclaim is invalid or contrary to public policy only: (1)
where there is clear proof that the waiver was wrangled from an
The July 22, 2008 decision struck down as illegal the quitclaims executed by unsuspecting or gullible person; or (2) where the terms of settlement are
the retrenched employees because of the mistaken conclusion that the unconscionable on their face.158 Based on these standards, we uphold the
retrenchment had been unlawfully executed. release and quitclaims signed by the retrenched employees herein.
In EDI Staffbuilders International, Inc. v. National Labor Relations (a) GRANTS the Motion for Reconsideration of the Resolution of
Commission, 156 we laid down the basic contents of valid and effective October 2, 2009 and Second Motion for Reconsideration of the
quitclaims and waivers, to wit: Decision of July 22, 2008 filed by the respondents Philippine Airlines,
Inc. and Patria Chiong;
In order to prevent disputes on the validity and enforceability of quitclaims
and waivers of employees under Philippine laws, said agreements should (b) DENIES the Motion for Reconsideration (Re: The Honorable
contain the following: Court's Resolution dated March 13, 2012)filed by the petitioner Flight
Attendants and Stewards Association of the Philippines;
1. A fixedamount as full and final compromise settlement;
(c) SETSASIDE the decision dated July 22, 2008 and resolution
2. The benefits of the employees if possible with the corresponding dated October 2, 2009; and
amounts, which the employees arc giving up in consideration of the
fixed compromise amount; (d) AFFIRMS the decision of the Court of Appeals dated August 23,
2006.
3. A statement that the employer has dearly explained to the employee
in English, Filipino, or in the dialect known to the employees - that by No pronouncement on costs of still.
SO ORDERED. next TWO (2) years thereafter, engage in or be involved with any
corporation, association or entity, whether directly or indirectly, engaged in
the same business or belonging to the same pre-need industry as the
EMPLOYER. Any breach of the foregoing provision shall render the
G.R. No. 163512 February 28, 2007 EMPLOYEE liable to the EMPLOYER in the amount of One Hundred
Thousand Pesos (P100,000.00) for and as liquidated damages.5
DAISY B. TIU, Petitioner
vs. Respondent thus prayed for ₱100,000 as compensatory damages; ₱200,000
PLATINUM PLANS PHIL., INC., Respondent. as moral damages; ₱100,000 as exemplary damages; and 25% of the total
amount due plus ₱1,000 per counsel’s court appearance, as attorney’s fees.
DECISION
Petitioner countered that the non-involvement clause was unenforceable for
being against public order or public policy: First, the restraint imposed was
QUISUMBING, J.: much greater than what was necessary to afford respondent a fair and
reasonable protection. Petitioner contended that the transfer to a rival
For review on certiorari are the Decision1 dated January 20, 2004 of the company was an accepted practice in the pre-need industry. Since the
Court of Appeals in CA-G.R. CV No. 74972, and its Resolution2 dated May 4, products sold by the companies were more or less the same, there was
2004 denying reconsideration. The Court of Appeals had affirmed the nothing peculiar or unique to protect. Second, respondent did not invest in
decision3 dated February 28, 2002 of the Regional Trial Court (RTC) of Pasig petitioner’s training or improvement. At the time petitioner was recruited, she
City, Branch 261, in an action for damages, ordering petitioner to pay already possessed the knowledge and expertise required in the pre-need
respondent ₱100,000 as liquidated damages. industry and respondent benefited tremendously from it. Third, a strict
application of the non-involvement clause would amount to a deprivation of
The relevant facts are as follows: petitioner’s right to engage in the only work she knew.
Respondent Platinum Plans Philippines, Inc. is a domestic corporation In upholding the validity of the non-involvement clause, the trial court ruled
engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu that a contract in restraint of trade is valid provided that there is a limitation
was its Division Marketing Director. upon either time or place. In the case of the pre-need industry, the trial court
found the two-year restriction to be valid and reasonable. The dispositive
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice- portion of the decision reads:
President and Territorial Operations Head in charge of its Hongkong and
Asean operations. The parties executed a contract of employment valid for WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
five years.4 against the defendant, ordering the latter to pay the following:
On September 16, 1995, petitioner stopped reporting for work. In November 1. the amount of One Hundred Thousand Pesos (P100,000.00) for
1995, she became the Vice-President for Sales of Professional Pension and as damages, for the breach of the non-involvement provision
Plans, Inc., a corporation engaged also in the pre-need industry. (Item No. 8) of the contract of employment;
Consequently, respondent sued petitioner for damages before the RTC of 2. costs of suit.
Pasig City, Branch 261. Respondent alleged, among others, that petitioner’s
employment with Professional Pension Plans, Inc. violated the non- There being no sufficient evidence presented to sustain the grant of
involvement clause in her contract of employment, to wit: attorney’s fees, the Court deems it proper not to award any.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
Subsequently, Solidbank required Rivera to sign an undated Release,
January 20, 2004, and the Resolution dated May 4, 2004, of the Court of Waiver and Quitclaim, which was notarized on March 1, 1995.8 Rivera
Appeals in CA-G.R. CV No. 74972, are AFFIRMED. Costs against petitioner.
acknowledged receipt of the net proceeds of his separation and retirement
benefits and promised that "[he] would not, at any time, in any manner
SO ORDERED. whatsoever, directly or indirectly engage in any unlawful activity prejudicial to
the interest of Solidbank, its parent, affiliate or subsidiary companies, their
G.R. No. 163269 April 19, 2006 stockholders, officers, directors, agents or employees, and their successors-
in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any 1. At the commencement of this action and upon the filing of a bond
kind."9 in such amount as this Honorable Court may fix, a writ of preliminary
attachment be forthwith issued against the properties of the
Aside from acknowledging that he had no cause of action against Solidbank defendant as satisfaction of any judgment that plaintiff may secure;
or its affiliate companies, Rivera agreed that the bank may bring any action
to seek an award for damages resulting from his breach of the Release, 2. After trial, judgment be rendered ordering defendant to pay plaintiff
Waiver and Quitclaim, and that such award would include the return of the following sums: NINE HUNDRED SIXTY-THREE THOUSAND
whatever sums paid to him by virtue of his retirement under the SIX HUNDRED NINETEEN AND 28/100 ONLY (P963,619.28)
SRP.10 Rivera was likewise required to sign an undated Undertaking as a PESOS, Philippine Currency, as of 23 May 1995, plus legal interest
supplement to the Release, Waiver and Quitclaim in favor of Solidbank in of 12% per annum until fully paid;
which he declared that he received in full his entitlement under the law
(salaries, benefits, bonuses and other emoluments), including his separation 3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for
pay in accordance with the SRP. In this Undertaking, he promised that "[he] every appearance by way of attorney’s fees; and
will not seek employment with a competitor bank or financial institution within
one (1) year from February 28, 1995, and that any breach of the Undertaking
4. Costs of suit.
or the provisions of the Release, Waiver and Quitclaim would entitle
Solidbank to a cause of action against him before the appropriate courts of
law.11 Unlike the Release, Waiver and Quitclaim, the Undertaking was not PLAINTIFF prays for other reliefs just and equitable under the premises. 15
notarized.
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed and a copy of the Release, Waiver and Quitclaim and Undertaking which
Rivera as Manager of its Credit Investigation and Appraisal Division of its Rivera executed.16
Consumers’ Banking Group.12 Upon discovering this, Solidbank First Vice-
President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
letter dated May 18, 1995, informing Rivera that he had violated the Attachment17 ordering Deputy Sheriff Eduardo Centeno to attach all of
Undertaking. She likewise demanded the return of all the monetary benefits Rivera’s properties not exempt from execution. Thus, the Sheriff levied on a
he received in consideration of the SRP within five (5) days from receipt; parcel of land owned by Rivera.
otherwise, appropriate legal action would be taken against him.13
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted
When Rivera refused to return the amount demanded within the given period, that he received the net amount of P963,619.28 as separation pay. However,
Solidbank filed a complaint for Sum of Money with Prayer for Writ of the employment ban provision in the Undertaking was never conveyed to him
Preliminary Attachment14 before the Regional Trial Court (RTC) of Manila on until he was made to sign it on February 28, 1995. He emphasized that, prior
June 26, 1995. Solidbank, as plaintiff, alleged therein that in accepting to said date, Solidbank never disclosed any condition to the retirement
employment with a competitor bank for the same position he held in scheme, nor did it impose such employment ban on the bank officers and
Solidbank before his retirement, Rivera violated his Undertaking under the employees who had previously availed of the SRP. He alleged that the
SRP. Considering that Rivera accepted employment with Equitable barely undertaking not to "seek employment with any competitor bank or financial
three months after executing the Undertaking, it was clear that he had no institution within one (1) year from February 28, 1995" was void for being
intention of honoring his commitment under said deed. contrary to the Constitution, the law and public policy, that it was
unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman,
Solidbank prayed that Rivera be ordered to return the net amount and violative of his human rights. He further claimed that the Undertaking
of P963,619.28 plus interests therein, and attorney’s fees, thus: was a contract of adhesion because it was prepared solely by Solidbank
without his participation; considering his moral and economic disadvantage, it
must be liberally construed in his favor and strictly against the bank.
WHEREFORE, it is respectfully prayed that:
On August 15, 1995, Solidbank filed a Verified Motion for Summary
Judgment, alleging therein that Rivera raised no genuine issue as to any
material fact in his Answer except as to the amount of damages. It prayed Undertaking was not a consideration for his availment of the SRP, and that if
that the RTC render summary judgment against Rivera. Solidbank alleged he did not avail of the retirement program, he would have continued working
that whether or not the employment ban provision contained in the for Solidbank for at least 15 more years, earning more than what he received
Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It under the SRP. He alleged that he intended to go full time into the poultry
insisted that Rivera signed the Undertaking voluntarily and for valuable business, but after about two months, found out that, contrary to his
consideration; and under the Release, Waiver and Quitclaim, he was obliged expectations, the business did not provide income sufficient to support his
to return the P963,619.28 upon accepting employment from a competitor family. Being the breadwinner, he was then forced to look for a job, and
bank within the one-year proscribed period. Solidbank appended to its considering his training and experience as a former bank employee, the job
motion the Affidavit of Villarosa, where she declared that Rivera was with Equitable was all he could find. He insisted that he had remained faithful
employed by Equitable on May 1, 1995 for the same position he held before to Solidbank and would continue to do so despite the case against him, the
his retirement from Solidbank. attachment of his family home, and the resulting mental anguish, torture and
expense it has caused them.19
Rivera opposed the motion contending that, as gleaned from the pleadings of
the parties as well as Villarosa’s Affidavit, there are genuine issues as to In his Supplemental Opposition, Rivera stressed that, being a former bank
material facts which call for the presentation of evidence. He averred that employee, it was the only kind of work he knew. The ban was, in fact,
there was a need for the parties to adduce evidence to prove that he did not practically absolute since it applied to all financial institutions for one year
sign the Undertaking voluntarily. He claimed that he would not have been from February 28, 1995. He pointed out that he could not work in any other
allowed to avail of the SRP if he had not signed it, and consequently, his company because he did not have the qualifications, especially considering
retirement benefits would not have been paid. This was what Ed Nallas, his age. Moreover, after one year from February 28, 1995, he would no
Solidbank Assistant Vice-President for HRD and Personnel, told him when longer have any marketable skill, because by then, it would have been
he received his check on February 28, 1995. Senior Vice-President Henry rendered obsolete by non-use and rapid technological advances. He insisted
Valdez, his superior in the Consumers’ Banking Group, also did not mention that the ban was not necessary to protect the interest of Solidbank, as, in the
that he would have to sign such Undertaking which contained the assailed first place, he had no access to any "secret" information which, if revealed
provision. Thus, he had no choice but to sign it. He insisted that the question would be prejudicial to Solidbank’s interest. In any case, he was not one to
of whether he violated the Undertaking is a genuine issue of fact which called reveal whatever knowledge or information he may have acquired during his
for the presentation of evidence during the hearing on the merits of the case. employment with said bank.20
He also asserted that he could not cause injury or prejudice to Solidbank’s
interest since he never acquired any sensitive or delicate information which In its Reply, Solidbank averred that the wisdom of requiring the Undertaking
could prejudice the bank’s interest if disclosed. from the 1995 SRP is purely a management prerogative. It was not for Rivera
to question and decry the bank’s policy to protect itself from unfair
Rivera averred that he had the right to adduce evidence to prove that he had competition and disclosure of its trade secrets. The substantial monetary
been faithful to the provisions of the Release, Waiver and Quitclaim, and the windfall given the retiring officers was meant to tide them over the one-year
Undertaking, and had not committed any act or done or said anything to period of hiatus, and did not prevent them from engaging in any kind of
cause injury to Solidbank.18 business or bar them from being employed except with competitor
banks/financial institutions.21
Rivera appended to his Opposition his Counter-Affidavit in which he
reiterated that he had to sign the Undertaking containing the employment On December 18, 1995, the trial court issued an Order of Summary
ban provision, otherwise his availment of the SRP would not push through. Judgment.22 The fallo of the decision reads:
There was no truth to the bank’s allegation that, "in exchange for receiving
the larger amount of P1,045,258.95 under the SRP, instead of the very much WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of
smaller amount of P224,875.81 under the ORP, he agreed that he will not plaintiff and against defendant ordering the latter to pay to plaintiff bank the
seek employment in a competitor bank or financial institution within one year amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
from February 28, 1995." It was the bank which conceived the SRP to NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency, as of
streamline its organization and all he did was accept it. He stressed that the May 23, 1995, plus legal interest at 12% per annum until fully paid, and the
decision whether to allow him to avail of the SRP belonged solely to costs of the suit.
Solidbank. He also pointed out that the employment ban provision in the
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they However, the CA ruled that the attachment made upon Rivera’s family home
are directed to meet again and sit down to find out how they can finally end was void, and, pursuant to the mandate of Article 155, in relation to Article
this rift and litigation, all in the name of equity, for after all, defendant had 153 of the Family Code, must be discharged.
worked for the bank for some 18 years.23
Hence, this recourse to the Court.
The trial court declared that there was no genuine issue as to a matter of fact
in the case since Rivera voluntarily executed the Release, Waiver and Petitioner avers that –
Quitclaim, and the Undertaking. He had a choice not to retire, but opted to do
so under the SRP, and, in fact, received the benefits under it.
I.
SO ORDERED.24
III.
The CA declared that there was no genuine issue regarding any material fact
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S
except as to the amount of damages. It ratiocinated that the agreement
DECISION ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE
between Rivera and Solidbank was the law between them, and that the
AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST
interpretation of the stipulations therein could not be left upon the whims of OF 12% PER ANNUM UNTIL FULLY PAID.
Rivera. According to the CA, Rivera never denied signing the Release,
Waiver, and Quitclaim, including the Undertaking regarding the employment
prohibition. He even admitted joining Equitable as an employee within the IV.
proscribed one-year period. The alleged defenses of Rivera, the CA
declared, could not prevail over the admissions in his MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING
pleadings.1avvphil.net Moreover, Rivera’s justification for taking the job with THE PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER
Equitable, "dire necessity," was not an acceptable ground for annulling the TO PAY SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL
Undertaking since there were no earmarks of coercion, undue influence, or FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
fraud in its execution. Having executed the said deed and thereafter
receiving the benefits under the SRP, he is deemed to have waived the right The issues for resolution are: (1) whether the parties raised a genuine issue
in their pleadings, affidavits, and documents, that is, whether the employment
to assail the same, hence, is estopped from insisting or retaining the said ban incorporated in the Undertaking which petitioner executed upon his
amount of P963,619.28. retirement is unreasonable, oppressive, hence, contrary to public policy; and
(2) whether petitioner is liable to respondent for the restitution
of P963,619.28 representing his retirement benefits, and interest thereon at employees. In treating its employees, management should see to it that its
12% per annum as of May 23, 1995 until payment of the full amount. employees are at least properly informed of its decision or modes of action."
On the first issue, petitioner claims that, based on the pleadings of the On the last issue, petitioner alleges that the P1,045,258.95 he received was
parties, and the documents and affidavits appended thereto, genuine issues his retirement benefit which he earned after serving the bank for 18 years. It
as to matters of fact were raised therein. He insists that the resolution of the was not a mere gift or gratuity given by respondent bank, without the latter
issue of whether the employment ban is unreasonable requires the giving up something of value in return. On the contrary, respondent bank
presentation of evidence on the circumstances which led to respondent received "valuable consideration," that is, petitioner quit his job at the
bank’s offer of the SRP and ORP, and petitioner’s eventual acceptance and relatively young age of 45, thus enabling respondent to effect its
signing of the Undertaking on March 1, 1995. There is likewise a need to reorganization plan and forego the salary, benefits, bonuses, and promotions
adduce evidence on whether the employment ban is necessary to protect he would have received had he not retired early.
respondent’s interest, and whether it is an undue restraint on petitioner’s
constitutional right to earn a living to support his family. He further insists that Petitioner avers that, under the Undertaking, respondent would be entitled to
respondent is burdened to prove that it sustained damage or injury by reason a cause of action against him before the appropriate courts of law if he had
of his alleged breach of the employment ban since neither the Release, violated the employment ban. He avers that respondent must prove its
Waiver and Quitclaim, and Undertaking he executed contain any provision entitlement to the P963,619.28. The Undertaking contains no provision that
that respondent is automatically entitled to the restitution of the P963,619.28. he would have to return the amount he received under the SRP; much less
Petitioner points out that all the deeds provide is that, in case of breach does it provide that he would have to pay 12% interest per annum on said
thereof, respondent is entitled to protection before the appropriate courts of amount. On the other hand, the Release, Waiver and Quitclaim does not
law. contain the provision prohibiting him from being employed with any
competitor bank or financial institution within one year from February 28,
On the second issue, petitioner avers that the prohibition incorporated in the 1995. Petitioner insists that he acted in good faith when he received his
Release, Waiver and Quitclaim barring him as retiree from engaging directly retirement benefits; hence, he cannot be punished by being ordered to return
or indirectly in any unlawful activity and disclosing any information the sum of P963,619.28 which was given to him for and in consideration of
concerning the business of respondent bank, as well as the employment ban his early retirement.
contained in the Undertaking he executed, are oppressive, unreasonable,
cruel and inhuman because of its overbreath. He reiterates that it is against Neither can petitioner be subjected to the penalty of paying 12% interest per
public policy, an unreasonable restraint of trade, because it prohibits him to annum on his retirement pay of P963,619.28 from May 23, 1995, as it is
work for one year in the Philippines, ultimately preventing him from improper and oppressive to him and his family. As of July 3, 2002, the
supporting his family. He points out that a breadwinner in a family of four interest alone would amount to P822,609.67, thus doubling the amount to be
minor daughters who are all studying, with a wife who does not work, one returned to respondent bank under the decision of the RTC and the CA. The
would have a very difficult time meeting the financial obligations even with a imposition of interest has no basis because the Release, Waiver and
steady, regular-paying job. He insists that the Undertaking deprives him of Quitclaim, and the Undertaking do not provide for payment of interest. The
the means to support his family, and ultimately, his children’s chance for a deeds only state that breach thereof would entitle respondent to bring an
good education and future. He reiterates that the returns in his poultry action to seek damages, to include the return of the amount that may have
business fell short of his expectations, and unfortunately, the business was been paid to petitioner by virtue thereof. On the other hand, any breach of
totally destroyed by typhoon "Rosing" in November 1995. the Undertaking or the Release, Waiver and Quitclaim would only entitle
respondent to a cause of action before the appropriate courts of law.
Petitioner further maintains that respondent’s management prerogative does Besides, the amount received by petitioner was not a loan and, therefore,
not give it a license to entice its employees to retire at a very young age and should not earn interest pursuant to Article 1956 of the Civil Code.
prohibit them from seeking employment in a so-called competitor bank or
financial institution, thus prevent them from working and supporting their Finally, petitioner insists that he acted in good faith in seeking employment
families (considering that banking is the only kind of work they know). with another bank within one year from February 28, 1995 because he
Petitioner avers that "management’s prerogative must be without abuse of needed to earn a living to support his family and finance his children’s
discretion. A line must be drawn between management prerogative regarding education. Hence, the imposition of interest, which is a penalty, is
business operations per se and those which affect the rights of the unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is documents appended thereto, no genuine issue as to a material fact exists,
the law between it and petitioner. As such, the latter could not assail the the burden to produce a genuine issue shifts to the opposing party. If the
deed after receiving the retirement benefit under the SRP. As gleaned from opposing party fails, the moving party is entitled to a summary judgment. 28
the averments in his petition, petitioner admitted that he executed the
Undertaking after having been informed of the nature and consequences of A genuine issue is an issue of fact which requires the presentation of
his refusal to sign the same, i.e., he would not be able to receive the evidence as distinguished from an issue which is a sham, fictitious, contrived
retirement benefit under the SRP. or a false claim. The trial court can determine a genuine issue on the basis of
the pleadings, admissions, documents, affidavits or counteraffidavits
Respondent maintains that courts have no power to relieve parties of submitted by the parties. When the facts as pleaded appear uncontested or
obligations voluntarily entered into simply because their contracts turned out undisputed, then there is no real or genuine issue or question as to any fact
to be disastrous deeds. Citing the ruling of this Court in Eastern Shipping and summary judgment called for. On the other hand, where the facts
Lines, Inc. v. Court of Appeals,26 respondent avers that petitioner is obliged pleaded by the parties are disputed or contested, proceedings for a summary
to pay 12% per annum interest of the P963,619.28 from judicial or judgment cannot take the place of a trial.29 The evidence on record must be
extrajudicial demand. viewed in light most favorable to the party opposing the motion who must be
given the benefit of all favorable inferences as can reasonably be drawn from
In reply, petitioner asserts that respondent failed to prove that it sustained the evidence.30
damages, including the amount thereof, and that neither the Release, Waiver
and Quitclaim nor the Undertaking obliged him to pay interest to respondent. Courts must be critical of the papers presented by the moving party and not
of the papers/documents in opposition thereto.31 Conclusory assertions are
The petition is meritorious. insufficient to raise an issue of material fact.32 A party cannot create a
genuine dispute of material fact through mere speculations or compilation of
differences.33 He may not create an issue of fact through bald assertions,
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
unsupported contentions and conclusory statements.34 He must do more
than rely upon allegations but must come forward with specific facts in
Section 1. Summary judgment for claimant. – A party seeking to recover support of a claim. Where the factual context makes his claim implausible, he
upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief must come forward with more persuasive evidence demonstrating a genuine
may, at any time after the pleading in answer thereto has been served, move issue for trial.35
with supporting affidavits, depositions or admissions for a summary judgment
in his favor upon all or any part thereof.
Where there are no disputed material facts, the determination of whether a
party breached a contract is a question of law and is appropriate for
xxxx summary judgment.36 When interpreting an ambiguous contract with extrinsic
evidence, summary judgment is proper so long as the extrinsic evidence
Sec. 3. Motion and proceedings thereon. – The motion shall be served at presented to the court supports only one of the conflicting
least ten (10) days before the time specified for the hearing. The adverse interpretations.37 Where reasonable men could differ as to the contentions
party may serve opposing affidavits, depositions, or admissions at least three shown from the evidence, summary judgment might be denied.
(3) days before the hearing. After the hearing, the judgment sought shall be
rendered forthwith if the pleadings, supporting affidavits, depositions, and In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of
admissions on file, show that, except as to the amount of damages, there is Appeals resolved the issue of whether a summary judgment is proper in a
no genuine issue as to any material fact and that the moving party is entitled breach of contract action involving the interpretation of such contract, and
to a judgment as a matter of law. ruled that:
For a summary judgment to be proper, the movant must establish two [A] contract can be interpreted by the court on summary judgment if (a) the
requisites: (a) there must be no genuine issue as to any material fact, except contract’s terms are clear, or (b) the evidence supports only one construction
for the amount of damages; and (b) the party presenting the motion for of the controverted provision, notwithstanding some ambiguity. x x x If the
summary judgment must be entitled to a judgment as a matter of court finds no ambiguity, it should proceed to interpret the contract – and it
law.27 Where, on the basis of the pleadings of a moving party, including
may do so at the summary judgment stage. If, however, the court discerns an or the terms and conditions of the Release, Waiver and Quitclaim will entitle
ambiguity, the next step – involving an examination of extrinsic evidence – respondent to a cause of action against [petitioner] for protection before the
becomes essential. x x x Summary judgment may be appropriate even if appropriate courts of law."43
ambiguity lurks as long as the extrinsic evidence presented to the court
supports only one of the conflicting interpretations.39 Article 1306 of the New Civil Code provides that the contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem
In this case, there is no dispute between the parties that, in consideration for convenient, provided they are not contrary to law, morals, good customs,
his availment of the SRP, petitioner executed the Release, Waiver and public order or public policy. The freedom of contract is both a constitutional
Quitclaim, and the Undertaking as supplement thereto, and that he received and statutory right.44 A contract is the law between the parties and courts
retirement pay amounting to P963,619.28 from respondent. On May 1, 1995, have no choice but to enforce such contract as long as it is not contrary to
within the one-year ban and without prior knowledge of respondent, petitioner law, morals, good customs and against public policy.
was employed by Equitable as Manager of its Credit Investigation and
Appraisal Division, Consumers’ Banking Group. Despite demands, petitioner The well-entrenched doctrine is that the law does not relieve a party from the
failed to return the P963,619.28 to respondent on the latter’s allegation that effects of an unwise, foolish or disastrous contract, entered into with full
he had breached the one-year ban by accepting employment from Equitable, awareness of what he was doing and entered into and carried out in good
which according to respondent was a competitor bank. faith. Such a contract will not be discarded even if there was a mistake of law
or fact. Courts have no jurisdiction to look into the wisdom of the contract
We agree with petitioner’s contention that the issue as to whether the post- entered into by and between the parties or to render a decision different
retirement competitive employment ban incorporated in the Undertaking is therefrom. They have no power to relieve parties from obligation voluntarily
against public policy is a genuine issue of fact, requiring the parties to assailed, simply because their contracts turned out to be disastrous deals.45
present evidence to support their respective claims.
On the other hand, retirement plans, in light of the constitutional mandate of
As gleaned from the records, petitioner made two undertakings. The first is affording full protection to labor, must be liberally construed in favor of the
incorporated in the Release, Waiver and Quitclaim that he signed, to wit: employee, it being the general rule that pension or retirement plans
formulated by the employer are to be construed against it.46 Retirement
4. I will not, at any time, in any manner whatsoever, directly or indirectly benefits, after all, are intended to help the employee enjoy the remaining
engage in any unlawful activity prejudicial to the interest of the BANK, its years of his life, releasing him from the burden of worrying for his financial
parent, affiliate or subsidiary companies, their stockholders, officers, support, and are a form of reward for being loyal to the employer.47
directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of the BANK, its manner or In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries
operation, its plans, processes or data of any kind.40 and in the United States and the Philippines:
The second undertaking is incorporated in the Undertaking following By "public policy," as defined by the courts in the United States and England,
petitioner’s execution of the Release, Waiver and Quitclaim which reads: is intended that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against
4. That as a supplement to the Release and Quitclaim, I executed in favor of the public good, which may be termed the "policy of the law," or "public policy
Solidbank on FEBRUARY 28, 1995, I hereby expressly undertake that I will in relation to the administration of the law." (Words & Phrases Judicially
not seek employment with any competitor bank or financial institution within Defined, vol. 6, p. 5813, and cases cited.) Public policy is the principle under
one (1) year from February 28, 1995.41 which freedom of contract or private dealing is restricted by law for the good
of the public. (Id., Id.) In determining whether a contract is contrary to public
policy the nature of the subject matter determines the source from which
In the Release, Waiver and Quitclaim, petitioner declared that respondent
such question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P.
may bring "an action for damages which may include, but not limited to the
Ry. Co., 62 Fed. 904, 906.)
return of whatever sums he may have received from respondent under said
deed if he breaks his undertaking therein."42 On the other hand, petitioner
declared in the Undertaking that "any breach on his part of said Undertaking
The foregoing is sufficient to show that there is no difference in principle from assailing the post-retirement competitive employment ban since under
between the public policy (orden publico) in the two jurisdictions (the United Article 1409 of the New Civil Code, those contracts whose cause, object or
States and the Philippine Islands) as determined by the Constitution, laws, purpose is contrary to law, morals, good customs, public order or public
and judicial decisions.49 policy are inexistent or void from the beginning. Estoppel cannot give validity
to an act that is prohibited by law or one that is against public policy. 51
The Court proceeded to define "trade" as follows:
Respondent, as employer, is burdened to establish that a restrictive covenant
x x x In the broader sense, it is any occupation or business carried on for barring an employee from accepting a competitive employment after
subsistence or profit. Anderson’s Dictionary of Law gives the following retirement or resignation is not an unreasonable or oppressive, or in undue
definition: "Generally equivalent to occupation, employment, or business, or unreasonable restraint of trade, thus, unenforceable for being repugnant to
whether manual or mercantile; any occupation, employment or business public policy. As the Court stated in Ferrazzini v. Gsell,52 cases involving
carried on for profit, gain, or livelihood, not in the liberal arts or in the learned contracts in restraint of trade are to be judged according to their
professions." In Abbott’s Law Dictionary, the word is defined as "an circumstances, to wit:
occupation, employment or business carried on for gain or profit." Among the
definitions given in the Encyclopaedic Dictionary is the following: "The x x x There are two principal grounds on which the doctrine is founded that a
business which a person has learnt, and which he carries on for subsistence contract in restraint of trade is void as against public policy. One is, the injury
or profit; occupation; particularly employment, whether manual or mercantile, to the public by being deprived of the restricted party’s industry; and the other
as distinguished from the liberal arts or the learned professions and is, the injury to the party himself by being precluded from pursuing his
agriculture." Bouvier limits the meaning to commerce and traffic, and the occupation, and thus being prevented from supporting himself and his family.
handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to
adopt and apply the broader meaning given by the lexicographers.50 And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated
the rule thus:
In the present case, the trial court ruled that the prohibition against petitioner
accepting employment with a competitor bank or financial institution within Public welfare is first considered, and if it be not involved, and the restraint
one year from February 28, 1995 is not unreasonable. The appellate court upon one party is not greater than protection to the other party requires, the
held that petitioner was estopped from assailing the post-retirement contract may be sustained. The question is, whether, under the particular
competitive employment ban because of his admission that he signed the circumstances of the case and the nature of the particular contract involved
Undertaking and had already received benefits under the SRP. in it, the contract is, or is not, unreasonable.53
The rulings of the trial court and the appellate court are incorrect. In cases where an employee assails a contract containing a provision
prohibiting him or her from accepting competitive employment as against
There is no factual basis for the trial court’s ruling, for the simple reason that public policy, the employer has to adduce evidence to prove that the
it rendered summary judgment and thereby foreclosed the presentation of restriction is reasonable and not greater than necessary to protect the
evidence by the parties to prove whether the restrictive covenant is employer’s legitimate business interests.54 The restraint may not be unduly
reasonable or not. Moreover, on the face of the Undertaking, the post- harsh or oppressive in curtailing the employee’s legitimate efforts to earn a
retirement competitive employment ban is unreasonable because it has no livelihood and must be reasonable in light of sound public policy.55
geographical limits; respondent is barred from accepting any kind of
employment in any competitive bank within the proscribed period. Although Courts should carefully scrutinize all contracts limiting a man’s natural right to
the period of one year may appear reasonable, the matter of whether the follow any trade or profession anywhere he pleases and in any lawful
restriction is reasonable or unreasonable cannot be ascertained with finality manner. But it is just as important to protect the enjoyment of an
solely from the terms and conditions of the Undertaking, or even in tandem establishment in trade or profession, which its employer has built up by his
with the Release, Waiver and Quitclaim. own honest application to every day duty and the faithful performance of the
tasks which every day imposes upon the ordinary man. What one creates by
Undeniably, petitioner retired under the SRP and received P963,619.28 from his own labor is his. Public policy does not intend that another than the
respondent. However, petitioner is not proscribed, by waiver or estoppel, producer shall reap the fruits of labor; rather, it gives to him who labors the
right by every legitimate means to protect the fruits of his labor and secure between the employer and the union of employees, or separate from said
the enjoyment of them to himself.56 Freedom to contract must not be contracts or collective bargaining agreements which provide that an
unreasonably abridged. Neither must the right to protect by reasonable employee who accepts post retirement competitive employment will forfeit
restrictions that which a man by industry, skill and good judgment has built retirement and other benefits or will be obliged to restitute the same to the
up, be denied.57 employer. The strong weight of authority is that forfeitures for engaging in
subsequent competitive employment included in pension and retirement
The Court reiterates that the determination of reasonableness is made on the plans are valid even though unrestricted in time or geography. The raison
particular facts and circumstances of each case. 58 In Esmerson Electric Co. d’etre is explained by the United States Circuit Court of Appeals in Rochester
v. Rogers,59 it was held that the question of reasonableness of a restraint Corporation v. W.L. Rochester, Jr.:64
requires a thorough consideration of surrounding circumstances, including
the subject matter of the contract, the purpose to be served, the x x x The authorities, though, generally draw a clear and obvious distinction
determination of the parties, the extent of the restraint and the specialization between restraints on competitive employment in employment contracts and
of the business of the employer. The court has to consider whether its in pension plans. The strong weight of authority holds that forfeitures for
enforcement will be injurious to the public or cause undue hardships to the engaging in subsequent competitive employment, included in pension
employee, and whether the restraint imposed is greater than necessary to retirement plans, are valid, even though unrestricted in time or geography.
protect the employer. Thus, the court must have before it evidence relating to The reasoning behind this conclusion is that the forfeiture, unlike the restraint
the legitimate interests of the employer which might be protected in terms of included in the employment contract, is not a prohibition on the employee’s
time, space and the types of activity proscribed. 60 engaging in competitive work but is merely a denial of the right to participate
in the retirement plan if he does so engage. A leading case on this point is
Consideration must be given to the employee’s right to earn a living and to Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a
his ability to determine with certainty the area within which his employment forfeiture provision similar to that here, the Court said:
ban is restituted. A provision on territorial limitation is necessary to guide an
employee of what constitutes as violation of a restrictive covenant and "A restriction in the contract which does not preclude the employee from
whether the geographic scope is co-extensive with that in which the engaging in competitive activity, but simply provides for the loss of rights or
employer is doing business. In considering a territorial restriction, the facts privileges if he does so is not in restraint of trade." (emphasis added) 65
and circumstances surrounding the case must be considered.61
A post-retirement competitive employment restriction is designed to protect
Thus, in determining whether the contract is reasonable or not, the trial court the employer against competition by former employees who may retire and
should consider the following factors: (a) whether the covenant protects a obtain retirement or pension benefits and, at the same time, engage in
legitimate business interest of the employer; (b) whether the covenant competitive employment.66
creates an undue burden on the employee; (c) whether the covenant is
injurious to the public welfare; (d) whether the time and territorial limitations We have reviewed the Undertaking which respondent impelled petitioner to
contained in the covenant are reasonable; and (e) whether the restraint is sign, and find that in case of failure to comply with the promise not to accept
reasonable from the standpoint of public policy.62 competitive employment within one year from February 28, 1995, respondent
will have a cause of action against petitioner for "protection in the courts of
Not to be ignored is the fact that the banking business is so impressed with law." The words "cause of action for protection in the courts of law" are so
public interest where the trust and interest of the public in general is of broad and comprehensive, that they may also include a cause of action for
paramount importance such that the appropriate standard of diligence must prohibitory and mandatory injunction against petitioner, specific performance
be very high, if not the highest degree of diligence.63 plus damages, or a damage suit (for actual, moral and/or exemplary
damages), all inclusive of the restitution of the P963,619.28 which petitioner
We are not impervious of the distinction between restrictive covenants received from respondent. The Undertaking and the Release, Waiver and
barring an employee to accept a post-employment competitive employment Quitclaim do not provide for the automatic forfeiture of the benefits petitioner
or restraint on trade in employment contracts and restraints on post- received under the SRP upon his breach of said deeds. Thus, the post-
retirement competitive employment in pension and retirement plans either retirement competitive employment ban incorporated in the Undertaking of
incorporated in employment contracts or in collective bargaining agreements respondent does not, on its face, appear to be of the same class or genre as
that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded In its decision promulgated on August 31, 2006,1 the Court of Appeals (CA)
for breach of contracts. Actual damages are primarily intended to simply declared that the respondent and his three brothers were the rightful owners
make good or replace the loss covered by said breach.67 They cannot be of the land in litis, and directed the Office of the Register of Deeds of Las
presumed. Even if petitioner had admitted to having breached the Piñas City to cancel the transfer certificate of title (TCT) registered under the
Undertaking, respondent must still prove that it suffered damages and the name of petitioner Casimiro Development Corporation (CDC) and to issue in
amount thereof.68 In determining the amount of actual damages, the Court its place another TCT in favor of the respondent and his three brothers.
cannot rely on mere assertions, speculations, conjectures or guesswork but Thereby, the CA reversed the judgment of the Regional Trial Court (RTC)
must depend on competent proof and on the best evidence obtainable rendered on May 9, 2000 (dismissing the respondent’s complaint for quieting
regarding the actual amount of losses.69 The benefit to be derived from a of title and reconveyance upon a finding that CDC had been a buyer in good
contract which one of the parties has absolutely failed to perform is of faith of the land in litis and that the respondent’s suit had already been time-
necessity to some extent a matter of speculation of the injured party. barred).
On the assumption that the competitive employment ban in the Undertaking Aggrieved, CDC brought its petition for review on certiorari.
is valid, petitioner is not automatically entitled to return the P963,619.28 he
received from respondent. To reiterate, the terms of the Undertaking clearly Antecedents
state that any breach by petitioner of his promise would entitle respondent to
a cause of action for protection in the courts of law; as such, restitution of
The subject of this case is a registered parcel of land (property) with an area
the P963,619.28 will not follow as a matter of course. Respondent is still
of 6,693 square meters, more or less, located in Barrio Pulang Lupa, Las
burdened to prove its entitlement to the aforesaid amount by producing the Piñas City, that was originally owned by Isaias Lara,2 the respondent’s
best evidence of which its case is susceptible.70 maternal grandfather. Upon the death of Isaias Lara in 1930, the property
passed on to his children, namely: Miguela, Perfecta and Felicidad, and a
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The grandson, Rosauro (son of Perfecta who had predeceased Isaias in 1920). In
Decision of the Court of Appeals in CA-G.R. CV No. 52235 is SET ASIDE. 1962, the co-heirs effected the transfer of the full and exclusive ownership to
Let this case be REMANDED to the Regional Trial Court of Manila for further Felicidad (whose married surname was Lara-Mateo) under an agreement
proceedings conformably with this decision of the Court. denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman.
SO ORDERED. Felicidad Lara-Mateo had five children, namely: Laura, respondent Renato,
Cesar, Candido, Jr. and Leonardo. With the agreement of the entire Lara-
Mateo family, a deed of sale covering the property was executed in favor of
Laura, who, in 1967, applied for land registration. After the application was
G.R. No. 175485 July 27, 2011 granted, Original Certificate of Title (OCT) No. 6386 was issued in Laura’s
sole name.
CASIMIRO DEVELOPMENT CORPORATION, Petitioner,
vs. In due course, the property now covered by OCT No. 6386 was used as
RENATO L. MATEO, Respondent. collateral to secure a succession of loans. The first loan was obtained from
Bacoor Rural Bank (Bacoor Bank). To repay the loan to Bacoor Bank and
secure the release of the mortgage, Laura borrowed funds from Parmenas
DECISION
Perez (Perez), who, however, required that the title be meanwhile transferred
to his name. Thus, OCT No. 6386 was cancelled and Transfer Certificate of
BERSAMIN, J.: Title (TCT) No. 438959 was issued in the name of Perez. Subsequently,
Laura recovered the property by repaying the obligation with the proceeds of
The focus of this appeal is the faith that should be accorded to the Torrens another loan obtained from Rodolfo Pe (Pe), resulting in the cancellation of
title that the seller holds at the time of the sale. TCT No. 438595, and in the issuance of TCT No. S-91595 in Laura’s name.
She later executed a deed of sale in favor of Pe, leading to the issuance of
TCT No. S-91738 in the name of Pe, who in turn constituted a mortgage on
the property in favor of China Banking Corporation (China Bank) as security System is indefeasible and imprescriptible. As between two persons
for a loan. In the end, China Bank foreclosed the mortgage, and consolidated claiming possession, one having a [T]orrens title and the other has
its ownership of the property in 1985 after Pe failed to redeem. Thus, TCT none, the former has a better right.
No. (99527) T-11749-A was issued in the name of China Bank.
3. On the issue of the nullity of the Certificate of Title.
In 1988, CDC and China Bank negotiated and eventually came to terms on
the purchase of the property, with China Bank executing a deed of The defense of the defendants that the subject property was a forest
conditional sale for the purpose. On March 4, 1993, CDC and China Bank land when the same was originally registered in 1967 and hence, the
executed a deed of absolute sale over the property. Resultantly, on March registration is void[,] is not for this Court to decide[,] for lack of
29, 1993, CDC was issued TCT No. T-34640 in its own name. jurisdiction. The certificate of title over the property must be
respected by this Court until it has been nullified by a competent
In the meanwhile, on February 28, 1991, Felicidad died intestate. Court.
On June 6, 1991, CDC brought an action for unlawful detainer in the WHEREFORE, premises considered, judgment is hereby rendered in favor
Metropolitan Trial Court (MeTC) in Las Piñas City against the respondent’s of the plaintiff[,] ordering the defendants
siblings, namely: Cesar, Candido, Jr., and Leonardo, and the other
occupants of the property. Therein, the defendants maintained that the MeTC 1. [sic] and all persons claiming right[s] under it to vacate the subject
did not have jurisdiction over the action because the land was classified as premises located at Pulang Lupa I, Las Piñas, Metro Manila and
agricultural; that the jurisdiction belonged to the Department of Agrarian surrender the possession of the same to herein plaintiff;
Reform Adjudication Board (DARAB); that they had been in continuous and
open possession of the land even before World War II and had presumed
2. to pay the plaintiff reasonable compensation for the use and
themselves entitled to a government grant of the land; and that CDC’s title
occupation of the subject premises hereby fixed at (₱100.00) one
was invalid, considering that the land had been registered before its being hundred pesos a month starting November 22, 1990 (the time when
declared alienable.3 the demand letter to vacate was given) until defendants actually
vacate the property;
On October 19, 1992, the MeTC ruled in favor of CDC, viz:
No pronouncement as to costs and attorney’s fees.
The Court, after careful consideration of the facts and the laws applicable to
this case[,] hereby resolves:
SO ORDERED.4
1. On the issue of jurisdiction. The decision of the MeTC was assailed in the RTC via petition for certiorari
and prohibition. The RTC resolved against CDC, and held that the MeTC had
The defendants alleged that the land in question is an agricultural acted without jurisdiction because the land, being a fishpond, was
land by presenting a Tax Declaration Certificate classifying the land agricultural; hence, the dispute was within the exclusive jurisdiction of the
as "FISHPOND." The classification of the land in a tax declaration DARAB pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform
certificate as a "fishpond" merely refers to the use of the land in Law of 1988).5
question for the purpose of real property taxation. This alone would
not be sufficient to bring the land in question under the operation of
CDC appealed to the CA, which, on January 25, 1996, found in favor of
the Comprehensive Agrarian Reform Law.
CDC, declaring that the MeTC had jurisdiction. As a result, the CA reinstated
the decision of the MeTC.6
2. On the issue of open and adverse possession by the defendants.
On appeal (G.R. No. 128392), the Court affirmed the CA’s decision in favor
It should be noted that the subject land is covered by a Transfer of CDC, ruling thusly:
Certificate of Title in the name of plaintiffs’ predecessor-in-interest
China Banking Corporation. Certificates of Title under the Torrens
WHEREFORE, the petition is DENIED and the Court of Appeals’ Decision (2) Ordering the Register of Deeds of Las Piñas City, Metro-Manila to
and Resolution in CA- G.R. SP No. 34039, dated January 25, 1996 and cancel Transfer Certificate of Title No. T-34640 under the name of
February 21, 1997 respectively, are AFFIRMED. No costs. appellee Casimiro Development Corporation, and that a new one be
issued in favor of the appellant and his co-heirs and siblings,
SO ORDERED.7 mentioned above as co-owners pro indiviso of the said parcel.
The decision in G.R. No. 128392 became final. (3) No pronouncement as to cost.
Nonetheless, on June 29, 1994, the respondent brought an action for SO ORDERED.9
quieting of title, reconveyance of four-fifths of the land, and damages against
CDC and Laura in the RTC in Las Piñas City entitled Renato L. Mateo v. The CA denied CDC’s motion for reconsideration.
Casimiro Development Corporation and Laura Mateo de Castro. In
paragraph 4 of his complaint, he stated that he was "bringing this action to Hence, this appeal, in which CDC urges that the CA committed serious
quiet title on behalf of himself and of his three (3) brothers – Cesar, errors of law,10 as follows:
Leonardo, and Candido, Jr., all surnamed MATEO – in his capacity as one of
the co-owners of a parcel of land situated at Barrio Pulang Lupa, Municipality
(A) xxx in failing to rule that the decree of registration over the
of Las Piñas, Metro Manila." Subject Property is incontrovertible and no longer open to review or
attack after the lapse of one (1) year from entry of such decree of
On May 9, 2001, the RTC held in favor of CDC, disposing: registration in favor of Laura Mateo de Castro.
WHEREFORE, and by strong preponderance of evidence, judgment is (B) xxx in failing to rule that the present action is likewise barred by
hereby rendered in favor of the defendant Casimiro Development res judicata.
Corporation and against the plaintiff Renato L. Mateo by (1) Dismissing the
complaint, and upholding the validity and indefeasibility of Transfer
(C) xxx in failing to rule that the instant action for quieting of title and
Certificate of Title No. T-34640 in the name of Casimiro Development
reconveyance under PD No. 1529 cannot prosper because the
Corporation; (2) Ordering the plaintiff Renato Mateo to pay defendant
Subject Property had already been conveyed and transferred to third
Casimiro Development Corporation the sum of [a] ₱200,000.00 as parties who claimed adverse title for themselves.
compensatory damages; [b] ₱200,000.00 as attorney’s fees; and [c] to pay
the costs.
(D) xxx in failing to rule that the action of respondent for "quieting of
title, reconveyance and damages" is barred by laches.
SO ORDERED.8
(E) xxx in ruling that the Subject Property must be reconveyed to
On appeal (C.A.-G.R. CV No. 71696), the CA promulgated its decision on
respondent because petitioner Casimiro Development Corporation is
August 31, 2006, reversing the RTC and declaring CDC to be not a buyer in
not a "purchaser in good faith."
good faith due to its being charged with notice of the defects and flaws of the
title at the time it acquired the property from China Bank, and decreeing:
CDC argues that it was a buyer in good faith; and that the CA did not rule on
matters that fortified its title in the property, namely: (a) the incontrovertibility
WHEREFORE, the Decision dated May 9, 2001 of Branch 225, Regional
of the title of Laura; (b) the action being barred by laches and res judicata;
Trial Court, Las Piñas City in Civil Case No. 94-2045 is hereby REVERSED
and (c) the property having been conveyed to third parties who had then
and SET ASIDE and a new one rendered:
claimed adverse title.
(1) Declaring appellant Renato Mateo and his brothers and co-
The respondent counters that CDC acquired the property from China Bank in
owners Cesar, Candido, Jr., and Leonardo, all surnamed Mateo as
bad faith, because it had actual knowledge of the possession of the property
well as his sister, Laura Mateo de Castro as the rightful owners of the
by the respondent and his siblings; that CDC did not actually accept delivery
parcel of land, subject of this case; and
of the possession of the property from China Bank; and that CDC ignored the merely an evidence of ownership or title in the particular property described
failure of China Bank to warrant its title. therein.15 In that sense, the issuance of the certificate of title to a particular
person does not preclude the possibility that persons not named in the
Ruling certificate may be co-owners of the real property therein described with the
person named therein, or that the registered owner may be holding the
property in trust for another person.16
We grant the petition.
Moreover, the respondent’s suit is exposed as being, in reality, a collateral Second. Unpaid real estate taxes levied and assessed within two years
attack on the title in the name of Laura, and for that reason should not immediately preceding the acquisition of any right over the land by an
prosper. Registration of land under the Torrens System, aside from innocent purchaser for value, without prejudice to the right of the government
perfecting the title and rendering it indefeasible after the lapse of the period to collect taxes payable before that period from the delinquent taxpayer
allowed by law, also renders the title immune from collateral attack. 19 A alone.
collateral attack occurs when, in another action to obtain a different relief and
as an incident of the present action, an attack is made against the judgment Third. Any public highway or private way established or recognized by law, or
granting the title. This manner of attack is to be distinguished from a direct any government irrigation canal or lateral thereof, if the certificate of title does
attack against a judgment granting the title, through an action whose main not state that the boundaries of such highway or irrigation canal or lateral
objective is to annul, set aside, or enjoin the enforcement of such judgment if thereof have been determined.
not yet implemented, or to seek recovery if the property titled under the
judgment had been disposed of.20 Fourth. Any disposition of the property or limitation on the use thereof by
virtue of, or pursuant to, Presidential Decree No. 27 or any other law or
2. regulations on agrarian reform.
CDC was an innocent purchaser for value In short, considering that China Bank’s TCT No. 99527 was a clean title, that
is, it was free from any lien or encumbrance, CDC had the right to rely, when
The CA found that CDC acquired the property in bad faith because CDC had it purchased the property, solely upon the face of the certificate of title in the
knowledge of defects in the title of China Bank, including the adverse name of China Bank.24
possession of the respondent’s siblings and the supposed failure of China
Bank to warrant its title by inserting an as-is, where-is clause in its contract of The CA’s ascribing of bad faith to CDC based on its knowledge of the
sale with CDC. adverse possession of the respondent’s siblings at the time it acquired the
property from China Bank was absolutely unfounded and unwarranted. That
The CA plainly erred in so finding against CDC. possession did not translate to an adverse claim of ownership that should
have put CDC on actual notice of a defect or flaw in the China Bank’s title, for
To start with, one who deals with property registered under the Torrens the respondent’s siblings themselves, far from asserting ownership in their
system need not go beyond the certificate of title, but only has to rely on the own right, even characterized their possession only as that of mere
certificate of title.21 He is charged with notice only of such burdens and agricultural tenants. Under no law was possession grounded on tenancy a
claims as are annotated on the title.22 The pertinent law on the matter of status that might create a defect or inflict a flaw in the title of the owner.
burdens and claims is Section 44 of the Property Registration Consequently, due to his own admission in his complaint that the
Decree,23 which provides: respondent’s own possession was not any different from that of his siblings,
there was really nothing – factually or legally speaking – that ought to have
alerted CDC or, for that matter, China Bank and its predecessors-in-interest, The respondent shall pay the costs of suit.
about any defect or flaw in the title.
SO ORDERED.
The vendee’s notice of a defect or flaw in the title of the vendor, in order for it
to amount to bad faith, should encompass facts and circumstances that G.R. No. 82511 March 3, 1992
would impel a reasonably cautious person to make further inquiry into the
vendor’s title,25 or facts and circumstances that would induce a reasonably GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner,
prudent man to inquire into the status of the title of the property in vs.
litigation.26 In other words, the presence of anything that excites or arouses NATIONAL LABOR RELATIONS COMMISSION and IMELDA
suspicion should then prompt the vendee to look beyond the certificate and SALAZAR, respondents.
to investigate the title of the vendor appearing on the face of said
certificate.27
Castillo, Laman, Tan & Pantaleon for petitioner.
And, secondly, the CA grossly erred in construing the as-is, where-is clause
contained in the deed of sale between CDC (as vendee) and China Bank (as Gerardo S. Alansalon for private respondent.
vendor) as proof or manifestation of any bad faith on the part of CDC. On the
contrary, the as-is, where-is clause did not affect the title of China Bank
because it related only to the physical condition of the property upon its
purchase by CDC. The clause only placed on CDC the burden of having the ROMERO, J.:
occupants removed from the property. In a sale made on an as-is, where-is
basis, the buyer agrees to take possession of the things sold "in the condition For private respondent Imelda L. Salazar, it would seem that her close
where they are found and from the place where they are located," because association with Delfin Saldivar would mean the loss of her job. In May 1982,
the phrase as-is, where-is pertains solely "to the physical condition of the private respondent was employed by Globe-Mackay Cable and Radio
thing sold, not to its legal situation" and is "merely descriptive of the state of Corporation (GMCR) as general systems analyst. Also employed by
the thing sold" without altering the seller’s responsibility to deliver the petitioner as manager for technical operations' support was Delfin Saldivar
property sold to the buyer.28 with whom private respondent was allegedly very close.
What the foregoing circumstances ineluctably indicate is that CDC, having Sometime in 1984, petitioner GMCR, prompted by reports that company
paid the full and fair price of the land, was an innocent purchaser for value, equipment and spare parts worth thousands of dollars under the custody of
for, according to Sandoval v. Court of Appeals:29 Saldivar were missing, caused the investigation of the latter's activities. The
report dated September 25, 1984 prepared by the company's internal auditor,
A purchaser in good faith is one who buys property of another, without notice Mr. Agustin Maramara, indicated that Saldivar had entered into a partnership
that some other person has a right to, or interest in, such property and pays a styled Concave Commercial and Industrial Company with Richard A.
full and fair price for the same, at the time of such purchase, or before he has Yambao, owner and manager of Elecon Engineering Services (Elecon), a
notice of the claim or interest of some other persons in the property. He buys supplier of petitioner often recommended by Saldivar. The report also
the property with the belief that the person from whom he receives the thing disclosed that Saldivar had taken petitioner's missing Fedders airconditioning
was the owner and could convey title to the property. A purchaser cannot unit for his own personal use without authorization and also connived with
close his eyes to facts which should put a reasonable man on his guard and Yambao to defraud petitioner of its property. The airconditioner was
still claim he acted in good faith. recovered only after petitioner GMCR filed an action for replevin against
Saldivar.1
WHEREFORE, we grant the petition for review on certiorari; set aside the
decision of the Court of Appeals in CA-GR. CV No. 71696; dismiss the It likewise appeared in the course of Maramara's investigation that Imelda
complaint in Civil Case No. 94-2045; and declare Transfer Certificate of Title Salazar violated company reglations by involving herself in transactions
No. T-34640 in the name of Casimiro Development Corporation valid and conflicting with the company's interests. Evidence showed that she signed as
subsisting. a witness to the articles of partnership between Yambao and Saldivar. It also
appeared that she had full knowledge of the loss and whereabouts of the property pending investigation any alleged malfeasance or misfeasance
Fedders airconditioner but failed to inform her employer. committed by the employee.5
Consequently, in a letter dated October 8, 1984, petitioner company placed Thus, it is not correct to conclude that petitioner GMCR had violated
private respondent Salazar under preventive suspension for one (1) month, Salazar's right to due process when she was promptly suspended. If at all,
effective October 9, 1984, thus giving her thirty (30) days within which to, the fault, lay with private respondent when she ignored petitioner's
explain her side. But instead of submitting an explanations three (3) days memorandum of October 8, 1984 "giving her ample opportunity to present
later or on October 12, 1984 private respondent filed a complaint against (her) side to the Management." Instead, she went directly to the Labor
petitioner for illegal suspension, which she subsequently amended to include Department and filed her complaint for illegal suspension without giving her
illegal dismissal, vacation and sick leave benefits, 13th month pay and employer a chance to evaluate her side of the controversy.
damages, after petitioner notified her in writing that effective November 8,
1984, she was considered dismissed "in view of (her) inability to refute and But while we agree with the propriety of Salazar's preventive suspension, we
disprove these findings. 2 hold that her eventual separation from employment was not for cause.
After due hearing, the Labor Arbiter in a decision dated July 16, 1985, What is the remedy in law to rectify an unlawful dismissal so as to "make
ordered petitioner company to reinstate private respondent to her former or whole" the victim who has not merely lost her job which, under settled
equivalent position and to pay her full backwages and other benefits she Jurisprudence, is a property right of which a person is not to be deprived
would have received were it not for the illegal dismissal. Petitioner was also without due process, but also the compensation that should have accrued to
ordered to pay private respondent moral damages of P50,000.00. 3 her during the period when she was unemployed?
On appeal, public respondent National Labor Relations, Commission in the Art. 279 of the Labor Code, as amended, provides:
questioned resolution dated December 29, 1987 affirmed the aforesaid
decision with respect to the reinstatement of private respondent but limited Security of Tenure. — In cases of regular employment, the
the backwages to a period of two (2) years and deleted the award for moral employer shall not terminate the services of an employee
damages. 4 except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be
Hence, this petition assailing the Labor Tribunal for having committed grave entitled to reinstatement without loss of seniority rights and
abuse of discretion in holding that the suspension and subsequent dismissal other privileges and to his full backwages, inclusive of
of private respondent were illegal and in ordering her reinstatement with two allowances, and to his other benefits or their monetary
(2) years' backwages. equivalent computed from the time his compensation was
withheld from him up to the time of his actual
On the matter of preventive suspension, we find for petitioner GMCR. reinstatement. 6 (Emphasis supplied)
The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's Corollary thereto are the following provisions of the Implementing Rules and
acts in conflict with his position as technical operations manager, Regulations of the Labor Code:
necessitated immediate and decisive action on any employee closely,
associated with Saldivar. The suspension of Salazar was further impelled by Sec. 2. Security of Tenure. — In cases of regular
th.e discovery of the missing Fedders airconditioning unit inside the employments, the employer shall not terminate the services
apartment private respondent shared with Saldivar. Under such of an employee except for a just cause as provided in the
circumstances, preventive suspension was the proper remedial recourse Labor Code or when authorized by existing laws.
available to the company pending Salazar's investigation. By itself,
preventive suspension does, not signify that the company has adjudged the Sec. 3. Reinstatement. — An employee who is unjustly
employee guilty of the charges she was asked to answer and explain. Such dismissed from work shall by entitled to reinstatement
disciplinary measure is resorted to for the protection of the company's without loss of seniority rights and to
backwages."7 (Emphasis supplied)
Before proceeding any furthers, it needs must be recalled that the present primacy to the rights of labor and afford the sector "full protection," at least
Constitution has gone further than the 1973 Charter in guaranteeing vital greater protection than heretofore accorded them, regardless of the
social and economic rights to marginalized groups of society, including labor. geographical location of the workers and whether they are organized or not.
Given the pro-poor orientation of several articulate Commissioners of the
Constitutional Commission of 1986, it was not surprising that a whole new It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who
Article emerged on Social Justice and Human Rights designed, among other substantially contributed to the present formulation of the protection to labor
things, to "protect and enhance the right of all the people to human dignity, provision and proposed that the same be incorporated in the Article on Social
reduce social, economic and political inequalities, and remove cultural Justice and not just in the Article on Declaration of Principles and State
inequities by equitably diffusing wealth and political power for the common Policies "in the light of the special importance that we are giving now to social
good." 8 Proof of the priority accorded to labor is that it leads the other areas justice and the necessity of emphasizing the scope and role of social justice
of concern in the Article on Social Justice, viz., Labor ranks ahead of such in national development." 12
topics as Agrarian and Natural Resources Reform, Urban Land Roform and
Housing, Health, Women, Role and Rights of Poople's Organizations and
If we have taken pains to delve into the background of the labor provisions in
Human Rights.9 our Constitution and the Labor Code, it is but to stress that the right of an
employee not to be dismissed from his job except for a just or authorized
The opening paragraphs on Labor states cause provided by law has assumed greater importance under the 1987
Constitution with the singular prominence labor enjoys under the article on
The State shall afford full protection to labor, local and Social Justice. And this transcendent policy has been translated into law in
overseas, organized and unorganized, and promote full the Labor Code. Under its terms, where a case of unlawful or unauthorized
employment and equality of employment opportunities for all. dismissal has been proved by the aggrieved employee, or on the other hand,
the employer whose duty it is to prove the lawfulness or justness of his act of
It shall guarantee the rights of all workers to self- dismissal has failed to do so, then the remedies provided in Article 279
organization, collective bargaining and negotiations, and should find, application. Consonant with this liberalized stance vis-a-vis labor,
peaceful concerted activities, including the right to strike in the legislature even went further by enacting Republic Act No. 6715 which
accordance with law. They shall be entitled to security of took effect on March 2, 1989 that amended said Article to remove any
tenure, humane conditions of work, and a living wage. They possible ambiguity that jurisprudence may have generated which watered
shall also participate in policy and decision-making down the constitutional intent to grant to labor "full protection." 13
processes affecting their rights and benefits is may be
provided by law.10(Emphasis supplied) To go back to the instant case, there being no evidence to show an
authorized, much less a legal, cause for the dismissal of private respondent,
Compare this with the sole.provision on Labor in the 1973 Constitution under she had every right, not only to be entitled to reinstatement, but ay well, to
the Article an Declaration of Principles and State Policies that provides: full backwages." 14
Sec. 9. The state shall afford protection to labor, promote full The intendment of the law in prescribing the twin remedies of reinstatement
employment and equality in employment, ensure equal work and payment of backwages is, in the former, to restore the dismissed
opportunities regardless of sex, race, or creed, and regulate employee to her status before she lost her job, for the dictionary meaning of
the relations between workers and employers. The State the word "reinstate" is "to restore to a state, conditione positions etc. from
shall ensure the rights of workers to self-organization, which one had been removed"15 and in the latter, to give her back the income
collective baegaining, security of tenure, and just and lost during the period of unemployment. Both remedies, looking to the past,
humane conditions of work. The State may provide for would perforce make her "whole."
compulsory arbitration. 11
Sadly, the avowed intent of the law has at times been thwarted when
To be sure, both Charters recognize "security of tenure" as one of the rights reinstatement has not been forthcoming and the hapless dismissed
of labor which the State is mandated to protect. But there is no gainsaying employee finds himself on the outside looking in.
the fact that the intent of the framers of the present Constitution was to give
Over time, the following reasons have been advanced by the Court for an organizer of a union who was in a position to sabotage the union's efforts
denying reinstatement under the facts of the case and the law applicable to organize the workers in commercial and industrial establishments; 30 or is
thereto; that reinstatement can no longer be effected in view of the long a warehouseman of a non-profit organization whose primary purpose is to
passage of time (22 years of litigation) or because of the realities of the facilitate and maximize voluntary gifts. by foreign individuals and
situation; 16 or that it would be "inimical to the employer's interest; " 17 or that organizations to the Philippines; 31 or is a manager of its Energy Equipment
reinstatement may no longer be feasible; 18 or, that it will not serve the best Sales. 32
interests of the parties involved; 19 or that the company would be prejudiced
by the workers' continued employment; 20 or that it will not serve any prudent Obviously, the principle of "strained relations" cannot be applied
purpose as when supervening facts have transpired which make execution indiscriminately. Otherwisey reinstatement can never be possible simply
on that score unjust or inequitable 21 or, to an increasing extent, due to the because some hostility is invariably engendered between the parties as a
resultant atmosphere of "antipathy and antagonism" or "strained relations" or result of litigation. That is human nature. 33
"irretrievable estrangement" between the employer and the employee. 22
Besides, no strained relations should arise from a valid and legal act of
In lieu of reinstatement, the Court has variously ordered the payment of asserting one's right; otherwise an employee who shall assert his right could
backwages and separation pay 23 or solely separation pay. 24 be easily separated from the service, by merely paying his separation pay on
the pretext that his relationship with his employer had already become
In the case at bar, the law is on the side of private respondent. In the first strained. 34
place the wording of the Labor Code is clear and unambiguous: "An
employee who is unjustly dismissed from work shall be entitled to Here, it has not been proved that the position of private respondent as
reinstatement. . . . and to his full backwages. . . ." 25 Under the principlesof systems analyst is one that may be characterized as a position of trust and
statutory construction, if a statute is clears plain and free from ambiguity, it confidence such that if reinstated, it may well lead to strained relations
must be given its literal meaning and applied without attempted between employer and employee. Hence, this does not constitute an
interpretation. This plain-meaning rule or verba legis derived from the exception to the general rule mandating reinstatement for an employee who
maxim index animi sermo est (speech is the index of intention) rests on the has been unlawfully dismissed.
valid presumption that the words employed by, the legislature in a statute
correctly express its intent or will and preclude the court from construing it
On the other hand, has she betrayed any confidence reposed in her by
differently. 26 The legislature is presumed to know the meaning of the words,
engaging in transactions that may have created conflict of interest situations?
to:have used words advisedly, and to have expressed its intent by the use of
Petitioner GMCR points out that as a matter of company policy, it prohibits its
such words as are found in the statute.27 Verba legis non est recedendum, or
employees from involving themselves with any company that has business
from the words of a statute there should be no departure. Neither does the dealings with GMCR. Consequently, when private respondent Salazar signed
provision admit of any qualification. If in the wisdom of the Court, there may
as a witness to the partnership papers of Concave (a supplier of Ultra which
be a ground or grounds for non-application of the above-cited provision, this
in turn is also a supplier of GMCR), she was deemed to have placed. herself
should be by way of exception, such as when the reinstatement may be
in an untenable position as far as petitioner was concerned.
inadmissible due to ensuing strained relations between the employer and the
employee.
However, on close scrutiny, we agree with public respondent that such a
circumstance did not create a conflict of interests situation. As a systems
In such cases, it should be proved that the employee concerned occupies a
analyst, Salazar was very far removed from operations involving the
position where he enjoys the trust and confidence of his employer; and that it
procurement of supplies. Salazar's duties revolved around the development
is likely that if reinstated, an atmosphere of antipathy and antagonism may
of systems and analysis of designs on a continuing basis. In other words,
be generated as to adversely affect the efficiency and productivity of the Salazar did not occupy a position of trust relative to the approval and
employee concerned. purchase of supplies and company assets.
A few examples, will suffice to illustrate the Court's application of the above
In the instant case, petitioner has predicated its dismissal of Salazar on loss
principles: where the employee is a Vice-President for Marketing and as
of confidence. As we have held countless times, while loss of confidence or
such, enjoys the full trust and confidence of top management; 28 or is the breach of trust is a valid ground for terminations it must rest an some basis
Officer-In-Charge of the extension office of the bank where he works; 29 or is
which must be convincingly established. 35 An employee who not be CALLEJO, SR., J.:
dismissed on mere presumptions and suppositions. Petitioner's allegation
that since Salazar and Saldivar lived together in the same apartment, it This is a petition for review of the Resolution1 of the Court of Appeals (CA) in
"presumed reasonably that complainant's sympathy would be with Saldivar" CA-G.R. SP No. 63658, dismissing the petition for certiorari before it for
and its averment that Saldivar's investigation although unverified, was being insufficient in form and the subsequent resolution denying the motion
probably true, do not pass this Court's test. 36 While we should not condone for reconsideration thereof.
the acts of disloyalty of an employee, neither should we dismiss him on the
basis of suspicion derived from speculative inferences. The undisputed antecedent facts are as follows:
The complainants averred that they were dismissed without cause. They Since Baluyot no longer appealed the decision, complainants Dominguez
accepted the separation package upon the assurance that they would be and Cagasan filed a Partial Appeal on the ground of prima facie abuse of
given their former work and assignments once the Food and Beverage discretion on the part of the Labor Arbiter and serious errors in his findings of
Department of Wack Wack resumes its operations. On the other hand, the facts and law. Their claims were anchored on the Agreement between the
respondents therein alleged that the dismissal of the complainants were Union and management, that they were promised to be rehired upon the full
made pursuant to a study and evaluation of the different jobs and positions resumption of operations of Wack Wack. They asserted that Wack Wack and
and found them to be redundant. BSMI should not avoid responsibility to their employment, by conniving with
each other to render useless and meaningless the Agreement.
In a Decision20 dated January 25, 2000, the Labor Arbiter found that the
dismissal of Dominguez and Cagasan was for a valid and authorized cause, BSMI also appealed to the NLRC, alleging that the Labor Arbiter committed
and dismissed their complaints. grave abuse of discretion in finding Baluyot’s dismissal to be illegal, when in
fact his position as Chief Porter was abolished pursuant to a bona
The position of personnel manager occupied by Martina Cagasan was fidereorganization of Wack Wack. It was not motivated by factors other than
redundated as it is allegedly not necessary, because her functions will be the promotion of the interest and welfare of the company.
taken over [by] the field superintendent and the company’s personnel and
operations manager. The work of Carmencita Dominguez on the other hand On September 27, 2000, the NLRC rendered its Decision24 ordering Wack
as telephone operator will be taken over by the accounting department Wack to reinstate Carmencita F. Dominguez and Martina Cagasan to their
personnel. Such move really are intended to streamline operations. While positions in respondent Wack Wack Golf & Country Club with full backwages
admittedly, they are still necessary in the operations of Wack Wack, their and other benefits from the date of their dismissal until actually reinstated. It
jobs can be assigned to some other personnel, who will be performing dual anchored its ruling on the Agreement dated June 16, 1997 reached between
functions and does save Wack Wack money. This is feasible on account of the Union and Wack Wack, particularly Section 425 thereof. The NLRC
the fact that they are functions pertaining to administrative work. 21 directed Wack Wack to reinstate the respondents and pay their backwages
since "Business Staffing and Management, Inc. (BSMI) is a contractor who
As to Baluyot, however, the Labor Arbiter found that while the position of [merely] supplies workers to respondent Wack Wack. It has nothing to do
chief porter had been abolished, the caddie master aide had been created. with the grievance of the complainants with their employer, respondent Wack
Their functions were one and the same. The porters, upon instructions from Wack."
the chief porter, are the ones who bring down the golf bags of the players
Wack Wack and BSMI filed a motion for reconsideration which was denied in be the duly-authorized representative of the petitioner, but did not show any
the Resolution26 dated December 15, 2000. proof of authority, i.e., a board resolution, to the effect.
Wack Wack, now the petitioner, consequently filed a petition for certiorari A motion for reconsideration was, consequently, filed appending thereto the
with the Court of Appeals, docketed as CA-G.R. SP No. 63658 alleging the requisite documents of proof of authority. It asserted that in the interest of
following: substantial justice, the CA should decide the case on its merits.
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION BSMI filed a Comment30 to the Motion for Reconsideration of the petitioner,
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF also urging the CA to set aside technicalities and to consider the legal issues
DUE PROCESS IN HOLDING THAT RESPONDENTS CAGASAN AND involved: (a) whether or not there is a guaranty of employment in favor of the
DOMINGUEZ HAVE REGAINED THEIR JOBS OR EMPLOYMENT complainants under the Agreement between the petitioner and the Union; (b)
PURSUANT TO THE AGREEMENT BETWEEN PETITIONER AND WACK whether or not the termination of the employment of the complainants, based
WACK GOLF EMPLOYEES UNION. on redundancy, is legal and valid; and (c) who are the parties liable for the
reinstatement of the complainants and the payment of backwages. It further
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION added that it shares the view of the petitioner, that the assailed resolutions of
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF the NLRC are tainted with legal infirmities. For this reason, it was also
DUE PROCESS IN RULING THAT RESPONDENT BSMI IS NOT AN constrained to file its own petition for certiorari with the CA, docketed as CA-
INDEPENDENT CONTRACTOR BUT A MERE SUPPLIER OF WORKERS G.R. SP No. 63553 pending with the Special Fourth Division, just to stress
TO THE PETITIONER. that there is no guaranty of perpetual employment in favor of the
complainants.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF On August 31, 2001, the CA denied petitioner’s motion for reconsideration.
DUE PROCESS IN HOLDING PETITIONER LIABLE FOR THE
REINSTATEMENT OF RESPONDENTS CAGASAN AND DOMINGUEZ The petitioner is now before the Court, assailing the twin resolutions of the
AND FOR THE PAYMENT OF THEIR SUPPOSED BACKWAGES DESPITE CA. It points out that BSMI has filed its petition for certiorari before the CA
THE ABSENCE OF EMPLOYER-EMPLOYEE RELATION BETWEEN one day late and yet, the Special Fourth Division admitted the petition in the
THEM.27 interest of substantial justice, and directed the respondents to file a comment
thereon;31 whereas, in the instant case, the mere lack of proof of authority of
Likewise, BSMI also assailed the resolutions of the NLRC and filed its own Wack Wack’s General Manager to sign the certificate of non-forum shopping
petition for certiorari with the CA, docketed as CA-G.R. SP No. 63553.28 A was considered fatal by the CA’s Twelfth Division. It further asserts that its
perusal of the petition which is attached to the records reveal that BSMI petition for certiorari is meritorious, considering that the NLRC committed
ascribes grave abuse of discretion on the part of the NLRC in ruling that: (a) grave abuse of discretion in ordering Wack Wack to reinstate the
the private respondents have regained their employment pursuant to the respondents Cagasan and Dominguez, and to pay their backwages when
Agreement between Wack Wack and the Wack Wack Golf Employees Union; indubitable evidence shows that the said respondents were no longer
(b) the dismissal of private respondents was made pursuant to the employees of Wack Wack when they filed their complaints with the Labor
petitioner’s exercise of its management prerogatives; and (c) the petitioner Arbiter.
(BSMI) is liable for the reinstatement of private respondents and the payment
of their backwages.29 There is merit in the petition.
On April 3, 2001, the CA (Twelfth Division) dismissed the petition on the In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the
ground that the petitioner therein failed to attach an Affidavit of Service as authority of the general manager to sue on behalf of the corporation and to
required in Section 11, Rule 13 of the 1997 Rules of Civil Procedure. sign the requisite verification and certification of non-forum shopping. The
Moreover, the verification and certification against forum shopping was general manager is also one person who is in the best position to know the
insufficient for having been executed by the general manager who claimed to state of affairs of the corporation. It was also error for the CA not to admit the
requisite proof of authority when in the Novelty case, the Court ruled that the
subsequent submission of the requisite documents constituted substantial arrangement, I hereby register my desire to be separated from the Club and
compliance with procedural rules. There is ample jurisprudence holding that receive the benefits under the above stated package.36
the subsequent and substantial compliance of an appellant may call for the
relaxation of the rules of procedure in the interest of justice.33 While it is true Thereafter, the respondents signed their respective release and quitclaims
that rules of procedure are intended to promote rather than frustrate the ends after receiving their money benefits.
of justice, and while the swift unclogging of court dockets is a laudable
objective, it nevertheless must not be met at the expense of substantial
It cannot be said that the respondents in the case at bar did not fully
justice.34 It was, therefore, reversible error for the CA to have dismissed the comprehend and realize the consequences of their acts. Herein respondents
petition for certiorari before it. The ordinary recourse for us to take is to are not unlettered persons who need special protection. They held
remand the case to the CA for proper disposition on the merits; however,
responsible positions in the petitioner-employer, so they presumably
considering that the records are now before us, we deem it necessary to
understood the contents of the documents they signed. There is no showing
resolve the instant case in order to ensure harmony in the rulings and
that the execution thereof was tainted with deceit or coercion. Further, the
expediency.
respondents were paid hefty amounts of separation pay indicating that their
separation from the company was for a valuable consideration. Where the
Indeed, the merits of the case constitute special or compelling reasons for us person making the waiver has done so voluntarily, with a full understanding
to overlook the technical rules in this case. With the dismissal of its petition thereof, and the consideration for the quitclaim is credible and reasonable,
for certiorari before the CA, the petitioner by virtue of the NLRC decision is the transaction must be recognized as being a valid and binding
compelled to reinstate respondents Cagasan and Dominguez and pay their undertaking.37 As in contracts, these quitclaims amount to a valid and binding
full backwages from the time of their dismissal until actual reinstatement compromise agreement between the parties which deserve to be
when the attendant circumstances, however, show that the respondents had respected.38
no cause of action against the petitioner for illegal dismissal and damages.
We reiterate what was stated in the case of Periquet v. NLRC 39 that:
It must be recalled that said respondents availed of the special separation
package offered by the petitioner. This special separation package was Not all waivers and quitclaims are invalid as against public policy. If the
thought of and agreed by the two parties (Wack Wack and the Union) after a
agreement was voluntarily entered into and represents a reasonable
series of discussions and negotiations to avert any labor unrest due to the
settlement, it is binding on the parties and may not later be disowned simply
closure of Wack Wack.35 Priority was given to the employees of the F & B
because of a change of mind. It is only where there is clear proof that the
Department, but was, likewise, offered to the other employees who may wish
waiver was wangled from an unsuspecting or gullible person, or the terms of
to avail of the separation package due to the reconstruction of Wack Wack. settlement are unconscionable on its face, that the law will step in to annul
Respondents do not belong to the F & B Department and yet, on their own the questionable transaction. But where it is shown that the person making
volition opted to avail of the special separation package. The applications
the waiver did so voluntarily, with full understanding of what he was doing,
which were similarly worded read as follows:
and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. … 40
TO : WACK WACK GOLF & COUNTRY CLUB
When the respondents voluntarily signed their quitclaims and accepted the
BOARD OF DIRECTORS AND MANAGEMENT separation package offered by the petitioner, they, thenceforth, already
ceased to be employees of the petitioner. Nowhere does it appear in the
Based on the information that the Club and the employees’ Union have Agreement that the petitioner assured the respondents of continuous
reached an agreement on a special separation benefit package equivalent to employment in Wack Wack. Qualified employees were given priority in being
one-and-one-half months salary for every year of service, regardless of the hired by its concessionaires and/or contractors such as BSMI when it entered
number of years of service, for employees who have been affected and may into a management contract with the petitioner.
be affected by ongoing as well as forthcoming Club renovation, construction
and related activities and reportedly even for those who may not be affected This brings us to the threshold issue on whether or not BSMI is an
but wish to avail of an early retirement under the above package independent contractor or a labor-only contractor. The NLRC posits that
BSMI is merely a supplier of workers or a labor-only contractor; hence, the
petitioner remains to be the principal employer of the respondents and liable This right to hire and fire is another element of the employer-employee
for their reinstatement and payment of backwages. relationship45 which actually existed between the respondents and BSMI, and
not with Wack Wack.
The ruling of the NLRC is wrong. An independent contractor is one who
undertakes "job contracting," i.e., a person who: (a) carries on an There being no employer-employee relationship between the petitioner and
independent business and undertakes the contract work on his own account respondents Cagasan and Dominguez, the latter have no cause of action for
under his own responsibility according to his own manner and method, free illegal dismissal and damages against the petitioner. Consequently, the
from the control and direction of his employer or principal in all matters petitioner cannot be validly ordered to reinstate the respondents and pay
connected with the performance of the work except as to the results thereof; them their claims for backwages.
and (b) has substantial capital or investment in the form of tools, equipments,
machineries, work premises and other materials which are necessary in the WHEREFORE, the petition is GRANTED. The Resolutions of the Court of
conduct of the business. Jurisprudential holdings are to the effect that in Appeals and the NLRC are SET ASIDE and REVERSED. The complaints of
determining the existence of an independent contractor relationship, several respondents Cagasan and Dominguez are DISMISSED. No costs.
factors may be considered, such as, but not necessarily confined to, whether
or not the contractor is carrying on an independent business; the nature and
SO ORDERED.
extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work;
the control and supervision of the work to another; the employer’s power with G.R. No. 202996 June 18, 2014
respect to the hiring, firing, and payment of the contractor’s workers; the
control of the premises; the duty to supply premises, tools, appliances, MARLO A. DEOFERIO, Petitioner,
materials and labor; and the mode, manner and terms of payment.41 vs.
INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE
There is indubitable evidence showing that BSMI is an independent WENTLING, Respondents.
contractor, engaged in the management of projects, business operations,
functions, jobs and other kinds of business ventures, and has sufficient DECISION
capital and resources to undertake its principal business. It had provided
management services to various industrial and commercial business BRION, J.:
establishments. Its Articles of Incorporation proves its sufficient capitalization.
In December 1993, Labor Secretary Bienvenido Laguesma, in the case of In We resolve the petition for review on certiorari1 filed by petitioner Marlo A.
re Petition for Certification Election Among the Regular Rank-and-File Deoferio to challenge the February 24, 2012 decision2 and the August 2,
Employees Workers of Byron-Jackson (BJ) Services International 2012 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 115708.
Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services
Employees Chapter,42 recognized BSMI as an independent contractor. As a
The Factual Antecedents
legitimate job contractor, there can be no doubt as to the existence of an
employer-employee relationship between the contractor and the workers.43
On February 1, 1996, respondent Intel Technology Philippines, Inc.
(Intel)employed Deoferio as a product quality and reliability engineer with a
BSMI admitted that it employed the respondents, giving the said retired
monthly salary of ₱9,000.00. In July2001, Intel assigned him to the United
employees some degree of priority merely because of their work experience
States as a validation engineer for an agreed period of two years and with a
with the petitioner, and in order to have a smooth transition of operations.44 In
monthly salary of US$3,000.00. On January 27, 2002, Deoferio was
accordance with its own recruitment policies, the respondents were made to
repatriated to the Philippines after being confined at Providence St. Vincent
sign applications for employment, accepting the condition that they were
Medical Center for major depression with psychosis.4 In the Philippines, he
hired by BSMI as probationary employees only. Not being contrary to law,
worked as a product engineer with a monthly salary of ₱23,000.00.5
morals, good custom, public policy and public order, these employment
contracts, which the parties are bound are considered valid. Unfortunately,
after a study and evaluation of its personnel organization, BSMI was impelled Deoferio underwent a series of medical and psychiatric treatment at Intel’s
to terminate the services of the respondents on the ground of redundancy. expense after his confinement in the United States. In 2002, Dr. Elizabeth
Rondain of Makati Medical Center diagnosed him to be suffering from mood entitled to moral and exemplary damages, as well as attorney’s fees,
disorder, major depression, and auditory hallucination. 6 He was also referred because the respondents faithfully relied on Dr. Lee’s certification that he
to Dr. Norieta Balderrama, Intel’s forensic psychologist, and to a certain Dr. was not fit to work as a product engineer.20
Cynthia Leynes who both confirmed his mental condition.7 On August 8,
2005, Dr. Paul Lee, a consultant psychiatrist of the Philippine General The Labor Arbitration Ruling
Hospital, concluded that Deoferio was suffering from schizophrenia. After
several consultations, Dr. Lee issued a psychiatric report dated January
In a decision21 dated March 6, 2008,the Labor Arbiter (LA) ruled that Deoferio
17,2006 concluding and stating that Deoferio’s psychotic symptoms are not had been validly dismissed. The LA gave weight to Dr. Lee’s certification that
curable within a period of six months and "will negatively affect his work and Deoferio had been suffering from schizophrenia and was not fit for
social relation with his co-worker[s]."8 Pursuant to these findings, Intel issued
employment. The evidence on record shows that Deoferio’s continued
Deoferio a notice of termination on March 10, 2006.9
employment at Intel would pose a threat to the health of his co-employees.
The LA further held that the Labor Code and its IRR do not require the
Deoferio responded to his termination of employment by filing a complaint for employer to comply with the twin-notice requirement in dismissals due to
illegal dismissal with prayer for money claims against respondents Intel and disease. The LA also found unmeritorious Deoferio’s money claims against
Mike Wentling (respondents). He denied that he ever had mental illness and Intel.22
insisted that he satisfactorily performed his duties as a product engineer. He
argued that Intel violated his statutory right to procedural due process when it
On appeal by Deoferio, the National Labor Relations Commission (NLRC)
summarily issued a notice of termination. He further claimed that he was
wholly affirmed the LA’s ruling.23 The NLRC also denied24 Deoferio’s motion
entitled to a salary differential equivalent to the pre-terminated period of his for reconsideration,25 prompting him to seek relief from the CA through a
assignment in the United States minus the base pay that he had already petition for certiorari under Rule 65 of the Rules of Court.
received. Deoferio also prayed for backwages, separation pay, moral and
exemplary damages, as well as attorney’s fees.10
The CA’s Ruling
In defense, the respondents argued that Deoferio’s dismissal was based on
Dr. Lee’s certification that: (1) his schizophrenia was not curable within a On February 24, 2012, the CA affirmed the NLRC decision. It agreed with the
period of six months even with proper medical treatment; and (2) his lower tribunals’ findings that Deoferio was suffering from schizophrenia and
continued employment would be prejudicial to his and to the other that his continued employment at Intel would be prejudicial to his health and
employees’ health.11 The respondents also insisted that Deoferio’s presence to those of his co-employees. It ruled that the only procedural requirement
at Intel’s premises would pose an actual harm to his co-employees as shown under the IRR is the certification by a competent public health authority on
by his previous acts. On May 8, 2003, Deoferio emailed an Intel employee the non-curability of the disease within a period of six months even with
with this message: "All soul’s day back to work Monday WW45.1." On proper medical treatment. It also concurred with the lower tribunals that Intel
January 18, 2005, he cut the mouse cables, stepped on the keyboards, and was justified in not paying Deoferio separation pay as required by Article 284
disarranged the desks of his co-employees.12 The respondents also of the Labor Code because this obligation had already been offset by the
highlighted that Deoferio incurred numerous absences from work due to his matured car loan that Deoferio owed Intel.26
mental condition, specifically, from January 31, 2002 until February 28,
2002,13 from August 2002 until September 2002,14 and from May 2003 until Deoferio filed the present petition after the CA denied his motion for
July 2003.15 Deoferio also took an administrative leave with pay from January reconsideration.27
2005 until December 2005.16
The Petition
The respondents further asserted that the twin-notice requirement in
dismissals does not apply to terminations under Article 284 of the Labor In the present petition before the Court, Deoferio argues that the uniform
Code.17 They emphasized that the Labor Code’s implementing rules (IRR) finding that he was suffering from schizophrenia is belied by his subsequent
only requires a competent public health authority’s certification to effectively employment at Maxim Philippines Operating Corp. and Philips
terminate the services of an employee.18They insisted that Deoferio’s Semiconductors Corp., which both offered him higher compensations. He
separation and retirement payments for ₱247,517.35 were offset by his also asserts that the Labor Code does not exempt the employer from
company car loan which amounted to ₱448,132.43.19 He was likewise not complying with the twin-notice requirement in terminations due to disease.28
The Respondents’ Position We find the petition partly meritorious.
In their Comment,29 the respondents posit that the petition raises purely Intel had an authorized cause to dismiss Deoferio from employment
questions of fact which a petition for review on certiorari does not allow. They
submit that Deoferio’s arguments have been fully passed upon and found Concomitant to the employer’s right to freely select and engage an employee
unmeritorious by the lower tribunals and by the CA. They additionally argue is the employer’s right to discharge the employee for just and/or authorized
that Deoferio’s subsequent employment in other corporations is irrelevant in causes. To validly effect terminations of employment, the discharge must be
determining the validity of his dismissal; the law merely requires the non- for a valid cause in the manner required by law. The purpose of these two-
curability of the disease within a period of six months even with proper pronged qualifications is to protect the working class from the employer’s
medical treatment. arbitrary and unreasonable exercise of its right to dismiss. Thus, in
termination cases, the law places the burden of proof upon the employer to
The respondents also maintain that Deoferio’s claim for salary differential is show by substantial evidence that the termination was for a lawful cause and
already barred by prescription under Article 291 of the Labor Code.30 Even in the manner required by law.
assuming that the claim for salary differential has been timely filed, the
respondents assert that the parties expressly agreed in the International In concrete terms, these qualifications embody the due process requirement
Assignment Relocation Agreement that "the assignment length is only an in labor cases - substantive and procedural due process. Substantive due
estimate and not a guarantee of employment for any particular length of process means that the termination must be based on just and/or authorized
time."31Moreover, his assignment in the United States was merely temporary causes of dismissal. On the other hand, procedural due process requires the
and did not change his salary base, an amount which he already received. employer to effect the dismissal in a manner specified in the Labor Code and
its IRR.32
The Issues
The present case involves termination due to disease – an authorized cause
This case presents to us the following issues: for dismissal under Article 284 of the Labor Code. As substantive
requirements, the Labor Code and its IRR33 require the presence of the
(1) Whether Deoferio was suffering from schizophrenia and whether following elements:
his continued employment was prejudicial to his health, as well as to
the health of his co-employees; (1) An employer has been found to be suffering from any disease.
(2) Whether the twin-notice requirement in dismissals applies to (2) His continued employment is prohibited by law or prejudicial to
terminations due to disease; and his health, as well as to the health of his co-employees.
As part of the second issue, the following issues are raised: (3) A competent public health authority certifies that the disease is of
such nature or at such a stage that it cannot be cured within a period
(a) Whether Deoferio is entitled to nominal damages for violation of of six months even with proper medical treatment. With respect to
his right to statutory procedural due process; and the first and second elements, the Court liberally construed the
phrase "prejudicial to his health as well as to the health of his co-
(b) Whether the respondents are solidarily liable to Deoferio for employees" to mean "prejudicial to his health or to the health of his
co-employees." We did not limit the scope of this phrase to
nominal damages.
contagious diseases for the reason that this phrase is preceded by
the phrase "any disease" under Article 284 of the Labor Code, to wit:
(3) Whether Deoferio is entitled to salary differential, backwages,
separation pay, moral and exemplary damages, as well as attorney’s
fees. Art. 284. Disease as ground for termination. – An employer may terminate
the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is
The Court’s Ruling prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month The twin-notice requirement applies
salary or to one-half (1/2) month salary for every year of service, whichever is to terminations under Article 284 of
greater, a fraction of at least six (6) months being considered as one (1) the Labor Code
whole year. [underscores, italics and emphases ours]
The Labor Code and its IRR are silent on the procedural due process
Consistent with this construction, we applied this provision in resolving illegal required in terminations due to disease. Despite the seeming gap in the law,
dismissal cases due to non-contagious diseases such as stroke, heart attack, Section 2, Rule 1, Book VI of the IRR expressly states that the employee
osteoarthritis, and eye cataract, among others. In Baby Bus, Inc. v. Minister should be afforded procedural due process in all cases of dismissals. 38
of Labor,34 we upheld the labor arbitration’s finding that Jacinto Mangalino’s
continued employment – after he suffered several strokes – would be In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong,
prejudicial to his health. In Duterte v. Kingswood Trading Co., Inc.,35 we Jr.,40 promulgated in 2003 and 2005, respectively, the Court finally
recognized the applicability of Article 284 of the Labor Code to heart attacks. pronounced the rule that the employer must furnish the employee two written
In that case, we held that the employer- company’s failure to present a notices in terminations due to disease, namely: (1) the notice to apprise the
certification from a public health authority rendered Roque Duterte’s employee of the ground for which his dismissal is sought; and (2) the notice
termination due to a heart attack illegal. We also applied this provision in Sy informing the employee of his dismissal, to be issued after the employee has
v. Court of Appeals36 to determine whether Jaime Sahot was illegally been given reasonable opportunity to answer and to be heard on his
dismissed dueto various ailments such as presleyopia, hypertensive defense. These rulings reinforce the State policy of protecting the workers
retinopathy, osteoarthritis, and heart enlargement, among others. In Manly from being terminated without cause and without affording them the
Express, Inc. v. Payong, Jr.,37 we ruled that the employer-company’s non- opportunity to explain their side of the controversy.
presentment of a certification from a public health authority with respect to
Romualdo Payong Jr.’s eye cataract was fatal to its defense.
From these perspectives, the CA erred in not finding that the NLRC gravely
abused its discretion when it ruled that the twin-notice requirement does not
The third element substantiates the contention that the employee has indeed apply to Article 284 of the Labor Code. This conclusion is totally devoid of
been suffering from a disease that: (1) is prejudicial to his health as well as to any legal basis; its ruling is wholly unsupported by law and jurisprudence. In
the health of his co-employees; and (2) cannot be cured within a period of six other words, the NLRC’s unprecedented, whimsical and arbitrary ruling,
months even with proper medical treatment. Without the medical certificate, which the CA erroneously affirmed, amounted to a jurisdictional error.
there can be no authorized cause for the employee’s dismissal. The absence
of this element thus renders the dismissal void and illegal.
Deoferio is entitled to nominal
damages for violation of his right to
Simply stated, this requirement is not merely a procedural requirement, but a statutory procedural due process
substantive one.1âwphi1 The certification from a competent public health
authority is precisely the substantial evidence required by law to prove the
Intel’s violation of Deoferio’s right to statutory procedural due process
existence of the disease itself, its non-curability within a period of six months
warrants the payment of indemnity in the form of nominal damages. In Jaka
even with proper medical treatment, and the prejudice that it would cause to Food Processing Corp. v. Pacot,41 we distinguished between terminations
the health of the sick employee and to those of his co-employees. based on Article 282 of the Labor Code42 and dismissals under Article 283 of
the Labor Code.43 We then pegged the nominal damages at ₱30,000.00 if
In the current case, we agree with the CA that Dr. Lee’s psychiatric report the dismissal is based on a just cause but the employer failed to comply with
substantially proves that Deoferio was suffering from schizophrenia, that his the twin-notice requirement. On the other hand, we fixed the nominal
disease was not curable within a period of six months even with proper damages at ₱50,000.00 if the dismissal is due to an authorized cause under
medical treatment, and that his continued employment would be prejudicial to Article 283 of the Labor Code but the employer failed to comply with the
his mental health. This conclusion is further substantiated by the unusual and notice requirement. The reason is that dismissals for just cause imply that the
bizarre acts that Deoferio committed while at Intel’s employ. employee has committed a violation against the employer, while terminations
under Article 283 of the Labor Code are initiated by the employer in the
exercise of his management prerogative.
With respect to Article 284 of the Labor Code, terminations due to disease do Deoferio is not entitled to salary
not entail any wrongdoing on the part of the employee. It also does not purely differential, backwages, separation
involve the employer’s willful and voluntary exercise of management pay, moral and exemplary damages,
prerogative – a function associated with the employer's inherent right to as well as attorney's fees
control and effectively manage its enterprise.44 Rather, terminations due to
disease are occasioned by matters generally beyond the worker and the Deoferio's claim for salary differential is already barred by prescription. Under
employer's control. Article 291 of the Labor Code, all money claims arising from employer-
employee relations shall be filed within three years from the time the cause of
In fixing the amount of nominal damages whose determination is addressed action accrued. In the current case, more than four years have elapsed from
to our sound discretion, the Court should take into account several factors the pre-termination of his assignment to the United States until the filing of
surrounding the case, such as: (1) the employer’s financial, medical, and/or his complaint against the respondents. We thus see no point in further
moral assistance to the sick employee; (2) the flexibility and leeway that the discussing this matter. His claim for backwages, separation pay, moral and
employer allowed the sick employee in performing his duties while attending exemplary damages, as well as attorney's fees must also necessarily fail as
to his medical needs; (3) the employer’s grant of other termination benefits in a consequence of our finding that his dismissal was for an authorized cause
favor of the employee; and (4) whether there was a bona fide attempt on the and that the respondents acted in good faith when they terminated his
part of the employer to comply with the twin-notice requirement as opposed services.
to giving no notice at all.
WHEREFORE, premises considered, we partially grant the petition; the
We award Deoferio the sum of ₱30,000.00 as nominal damages for violation assailed February 24, 2012 decision and the August 2, 2012 resolution of the
of his statutory right to procedural due process. In so ruling, we take into Court of Appeals stand but respondent Intel Technology Philippines, Inc. is
account Intel’s faithful compliance with Article 284 of the Labor Code and ordered to pay petitioner Marlo A. Deoferio nominal damages in the amount
Section 8, Rule 1, Book 6 of the IRR. We also note that Deoferio’s separation of ₱30,000.00. We totally deny the petition with respect to respondent Mike
pay equivalent to one-half month salary for every year of service45 was Wending.
validly offset by his matured car loan. Under Article 1278 of the Civil Code, in
relation to Article 1706 of the Civil Code46 and Article 113(c) of the Labor SO ORDERED.
Code,47 compensation shall take place when two persons are creditors and
debtors of each other in their own right. We likewise consider the fact that
Intel exhibited real concern to Deoferio when it financed his medical
expenses for more than four years. Furthermore, prior to his termination, Intel
liberally allowed Deoferio to take lengthy leave of absences to allow him to
attend to his medical needs.
Intel shall be solely liable to Deoferio for the satisfaction of nominal damages.
Wentling, as a corporate officer, cannot be held liable for acts done in his
official capacity because a corporation, by legal fiction, has a personality
separate and distinct from its officers, stockholders, and members. There is
also no ground for piercing the veil of corporate fiction because Wentling
acted in good faith and merely relied on Dr. Lee’s psychiatric report in
carrying out the dismissal.48